The Platform Group SE & Co. KGaA (TPG0) Earnings Call Transcript & Summary

Welcome, everybody, to our Q1 result call and our overview of the full year guidance for 2024. So just to give you a short background of our group, here you can see the person which are also in this call today. It's my pleasure as a CEO; Laura Vogelsang is also since many years in the group; and Reinhard Hetkamp is the CFO, he's guiding through our financials today. Let me give you a short introduction and overview about the latest developments in the last 3 months. So first, we acquired a company which is completely focused on the B2B sector. That means they make B2B platform businesses for retailers, for online retailers, and they run several platforms and B2B shops. They are located in Germany, and they are a pretty strong company, a family business background, and we acquired them and expect to make the closing by August '24. Additionally, as you might know, we also acquired in the first quarter, Avocadostore. This is a company, a platform which is focusing on sustainable products. So only sustainable products are available there, and they have more than 1,400 partners listed on their platform. And as you can see on the right side, we acquired HOOD Media GmbH. This company is also located in Germany. They are a platform for consumer products. They have a lot of partners. As you can see here, they have more than 4,900 live partners connected to their platform. And as you can see, we have a great increase of our partner numbers from last year to this year. And very important, as you can see on the right side, we also gained more than 3 million product SKUs with these 2 acquisitions, and that's quite important for us because as you get more partners, usually, you also have more products and with more products, you make more revenue. What else happened? Here, you can see that we also have a very successful path to reduce our minority shareholders. That means when we acquire a company, we are always very risk averse, and we try to focus always to acquire with 50.1% in the new co, new company. And after some time, and if we have a very positive development and we have enough self-confidence, then we increase our share there. And as you can see here, we increased it this year for Möbelfirst. This is a luxury furniture platform, very successful. We are invested now for more than 3 years there. ViveLaCar, almost 2 years in our company, also successful. And on the right side, Lott Carparts, they are also more than 2 years in our group. And we also increased our share to 100%. Also, we make a reduction of the minority shareholders for ApoNow. ApoNow is a pharmaceutical and drug platform. More than 40,000 stores are connected with them. And they also have more than 400 manufacturers for pharmacies. And this platform is a small platform, but very successful and very profitable, and we also increased it to now 80% of the group. On the right side, I would hand over to Laura.

Correct. Thank you so much. Yes. And we do also some changes in our group structure as it was a bit complicated to understand from outside in the last or in the past after The Platform Group took over the Fashionette AG. So as for now, we are having The Platform Group AG as a holding on top of everything. And under that, we have The Platform Group GmbH & Co. KG, where our subsidiaries are located as well as the Fashionette GmbH as an independent company and the Brandfield in the Netherlands, which was a daughter of the Fashionette AG in the past. We also hired there 2 new COOs for the different GmbH of The Platform Group and The Fashionette. The new COO of The Platform Group KG and Wiesbaden is Christoph Wilhelmy and the new COO of the Fashionette GmbH is now Stefan Miebach. All started in the last -- in the past 2 months. Yes. Here, you can see again our group structure where we are reported in. So we are reporting in 4 different sections or sectors. We are having the most share in the consumer goods. We have also a lot of subsidiaries in our freight goods segment as well as in the industrial goods and the service and retail goods segment. And yes, as we reported before, this is the structure we are reporting in our financials. And yes, this is the structure where we put all our subsidiaries here.

All right. Let's continue with the financials. Reinhard, our CFO, will take over.

Yes. Good morning, I would like to give you an overview about the Q1 results compared to the Q1 of the prior year based on the pro forma calculation so that you can see very well the difference and the increases of the various sections compared to last year. Most of you may know that traditionally Q1 is the lowest quarter in the fiscal year. So the business is starting, we are out of the Christmas time, now the new year is starting up. Our GMV increased in the first quarter of '24 up to EUR 190 million, which is an increase of 18.3% compared to the pro forma calculation of the prior year's comparable quarter. The net revenue increased from EUR 84.2 million last year first quarter to EUR 107.9 million this year. So when you compare both figures, we can say that the GMV grows by 18% and the net -- the revenue grows 28%, both increases are much more higher than we have internally forecast so that our expectations were overtaken. When we now look to the respective expenses, we can say that most of them were well calculated by us and were already forecasted in that way as it's developed. Nevertheless, the distribution cost ratio is a little bit too high. By 7.9%, it is over our internal forecast and our own target that depends to an increase in the carrier cost first quarter of '24. Nevertheless, we could result in adjusted EBITDA by EUR 8.5 million compared to EUR 6.8 million in the prior year. And the reported EBITDA results to EUR 16.7 million compared to EUR 13.3 million prior year on a pro forma basis. This EBITDA adjusted as well as the EBITDA reported is by 25%, respective 26%, higher than we had expected, and that shows very well that the effectiveness of the cost-reduction program started in '23 is now efficiently coming up and shows already it's results. Last but not least, the net profit in '24 first quarter results to EUR 12.9 million compared to EUR 9.7 million, a comparable quarter of '23. This results also by 35% -- or 34%, which is again above internal forecast and our own expectations in this. Now breaking down these results to the earnings per share. You can see that coming from the net profit, continuing operations, we have some corrections regarding the noncontinuing operations so that overall, the net profit, by EUR 11.4 million, is again higher than the compared quarter '23. And if we calculate now the earnings per share, overall, we can see that the -- based on the continuing operations, the earnings results to EUR 0.65, which is a growth by 33%. And this is again an increase or a higher result than we had internally forecasted in advance. Now here, you see the rev, which shows much more better the development of the strong GMV and revenue growth. So you see in the first 3 months in '24, we have an increase by 18% year-over-year coming from EUR 161 million to EUR 190 million. And the revenue growth results by 28% increase coming from EUR 84.2 million, resulting to EUR 107.9 million in '24 first quarter. And coming out of these relations, the profitability -- yes, next page. The profitability increased by 25% based on the adjusted EBITDA and the reported EBITDA, as in profitability, increased by 26%, so that we finally result as an adjusted EBITDA by EUR 8.5 million and the reported EBITDA by EUR 16.7 million in the first quarter of '24. And to show the bridge between adjusted and reported EBITDA, we have prepared this slide here. You can see the EUR 8.5 million adjusted EBITDA. There are a few adjustments considered which do not belong to the continuing operations. Additionally, you can see the purchase price allocation results are coming out of the 2 acquisitions we have made in the first quarter of '24 and the respective deferred tax effects out of these considerations. We are coming to the EUR 16.7 million EBITDA reported, so that you have here a proper overview of outcome from the adjusted figures to the finally reported figures in the first quarter of '24. Dominik, you're on mute?

All right. So as you can see here, we now switch to our nonfinancial KPIs. We increased the number of orders by, we think, a pretty good number, from 750,000 to almost 940,000 in the first quarter each year. And additionally, the average order value increased to EUR 115. And this is corresponding to our higher number of active customers. We always show the number of active customers for a 12-month perspective. And this number increased from 3.6 million to 4.4 million active customers in this period. The number of employees, it decreased a little bit and the decrease was a result of our cost-reduction program and also 2 subsidiaries where we reduced the staff in a total perspective. The number of partners was for us the biggest success in our first quarter because -- not only because of 2 acquisitions, but also because of organic growth. We have a high number there, and we are very happy about this development because this is a background how we can grow faster and how we can get better numbers in our financial results. When we go to the next slide, here, you can see the revenues by segment. So in the first quarter, we have almost the same picture as you can see it in the full year report 2023. That means we have a total revenue in the consumer goods segment of EUR 61 million and in the freight goods segment, we have EUR 17 million compared to industrial goods with almost EUR 21 million. Our smaller segment, service and retail goods, it was a little bit more than EUR 8 million, so quite a small segment, but quite profitable, and we are very happy to have it. So having shown you all our financial figures and the Q1 results, 2024, we also want to inform you that we have to increase our full year guidance for 2024, and this has some reasons. So first, the Q1 results in 2024 were better than expected and were better than we internally forecasted it. So we had a pretty good development. And over all subsidiaries, we can be very happy about this development in the first 3 months. Additionally, our cost-efficiency program, which we started last year, lead to a higher profitability and this is almost in all segments, so we can also be happy about this. The only segment where we are not happy and where we want to get higher margins is the industrial goods segment. As you know, we also mentioned it in the full year presentation, 2023. We did some actions to improve the cost efficiencies there. And I think we are on a pretty good track to manage it. But again, we really want to improve that also in the industrial goods segment. And on the positive side, we also see a very good development about the market tailwinds because when you look at B2B and B2C spending in our niche segments where we operate in, we see spending grow. And we see that consumers and also B2B customers spend more. They are not affected by negative developments here in our small segments. And this is also a very important development here, which we want to communicate to our shareholders. Last but not least, we have excellent conditions for make new acquisitions. That means in the last year, we already had great, really good companies, and we acquired it for very fair values and the same we see in 2024. So the average price we pay between is 3x and 5x EBIT, and that will also result to badwill expectations. That means, we see in a lot of acquisitions -- not in all, but in a lot of acquisitions result in badwills. And this is a positive impact for our balance sheet because we do not build any goodwills. We do not have the risk of any goodwill corrections. And this is, from our perspective, on a very good background how we can make more acquisitions in this year and how we can ramp up our path for our midterm goal. And the last point, we made 3 acquisitions in the first month. The latest acquisition was announced this week. And all of these 3 acquisitions will boost our GMV, will boost our revenue and also our EBITDA and net profit in a positive way. And so this was the decision and the background, why we as a management board said, we have to increase our guidance for 2024. When we have a closer look on what we changed in our guidance, there you can see that we increased the GMV guidance for this year. So now we expect GMV of more than EUR 840 million. We always make it with a range. So as you can see here, we expect EUR 840 million to EUR 870 million. And on the right side, you see the same for the revenue guidance. You will see a range of a new guidance between EUR 480 million and EUR 500 million. As we go on, you see the EBITDA adjusted. So EBITDA adjusted means we expect a higher EBITDA, around EUR 26 million to EUR 30 million. And also the numbers of our partners is getting up, so we expect around 1,000 more partners this year, and we think that we will achieve it by end of 2024. When you have a closer look on the long-term perspective, you see that this is not a hockey stick case or something like this. TPG is growing every year. We are not dramatically growing. We cannot grow by 100%. It's not possible, but we grow on a very good path. And I think with the new guidance from today, we have a pretty good track record over the last years. The same is for the revenue development. Our revenue development is quite successful. We think that we can achieve the EUR 500 million this year. And we are -- coming back from the Q1 results, we are very optimistic to have good tailwinds there. The EBITDA, as you know, our adjusted EBITDA is much lower than the reported EBITDA. And here, you can see the development over time. Just to mention, in 2021, so you see the left chart, we combined Fashionette and TPG. Fashionette at this time, it was not part of our group, but we have to combine it in this graphic here. And that is the result why it is so low. All right. So next point, we want to invite you to our Capital Markets Day because we really want to give you a deeper insight perspective in our group. We want to show you in a much better understanding in a much more detailed way how we acquire companies, how we manage our software development and our software road map. And we also want to show you some case studies on how we make our value creation. And we make our Capital Markets Day by June 11 here in Frankfurt, and we also invited some of our management people, for example, our Head of M&A and our CEO and of course, our CFO, will also attend to this meeting, and we will also make a deep dive in their own divisions and their own developments here in the group. So I just want to give you some examples what we show at the Capital Markets Day. First, we make some strategic developments and say, how we can make value creation and what kind of M&A player we are and how we manage our M&A cases. Yes? We also made a very empirical study on what kind of M&A way is successful and what is not really successful. And I think it will be very interesting for you and what we found out there. We also make a comparison between private equity investors and acquisition-driven compounders and want to give you some insights how we think about these different points and how we create the value because we make a lot of things in a different way, and we are completely the difference to private equity players. And I think this will also give you better understanding how we manage all transactions here. And again, here you see our sources. That means we show you how we make the capital allocation, how we make the decentralization management and how we manage the people in the new companies which we acquire. And last but not least, you can see how we focus on our software, how we expand our software road map and how we also integrate our software when we acquire a new company. And we will give you 3 examples how we manage our cases and our new companies and show how they develop over the time. We will present you in the Capital Markets Day 3 different specific case studies. One of them is Möbelfirst. We acquired them in 2020. And in the last 3 years, it was a very successful platform. They are in the niche of luxury, luxury furniture, and they make a pretty good job there. And I think it's quite interesting for you how we show you the figures and how the numbers went up in this time and what we changed in the company. Okay. So last part -- last of our presentation today is the outlook. So the full year outlook guidance by May 2024, is the revenue from EUR 480 million to EUR 500 million. We expect the GMV of at least EUR 840 million and an EBITDA adjusted by more than EUR 26 million. Our reported EBITDA will be higher. We do not make a guidance on that because it's very difficult to guide the reported EBITDA because of the PPA effects regarding our M&A acquisitions. In the midterm perspective, we did not make any changes. Our leverage structure will always be between 1.5x and 2.3x EBITDA. And also our EBITDA adjusted margin should be in the range between 7% and 10%. Our midterm goal for next year will be EUR 1 billion GMV, and we are more than optimistic to achieve this goal. Looking for our future strategy, we have 4 important and things where we want to go on the strategic path for TPG. One is the leading position. So first, we want to become the #1 platform in Europe; means that we also grow organically in our market and get better and more market shares in our niche segments. Second, we want to expand up to 30 industries by 2025. Right now, we are operating in 21 industries. We make 3 to 8 acquisitions per year. And that means in this year, we also -- we already made 3 acquisitions, and we expect another 5 acquisitions in the next month. So we are also optimistic that we will achieve this goal. And very important, we never want to grow only by acquisition. We always have to grow in an organic path. And that means that our growth perspective should always be relying on a very good organic growth. On the right side, we already mentioned in further presentations. It is very important that we have a more non-European perspective because right now, we are just focused on Western Europe, especially on Germany and Netherlands and Austria and Switzerland. And this is -- we think it is not a very good perspective. We have to enter new markets, but we enter these markets in a very cost-efficient way. So we will not spend millions over millions and see what's going to happen. We will really focus on very low and small steps, but we see it in a long-term perspective. Maybe you can expect also some messages regarding the U.S. and Indian market entry this next year. All right. Thank you for the presentations and looking forward for your questions.

[Operator Instructions] And we received the first virtual hand by [ Russell ].

A couple of questions. First of all, could you just talk about trends in your relative revenue take versus GMV? The reason I ask you, you had a very good increase Q1 versus Q1 last year. But those numbers are there lower than the similar numbers you get for the annual numbers. So I guess there's some seasonality. I appreciate there's some difference in the relative take of GMV to revenue in the different 4 verticals you're in. So could you just talk about what moved that in Q1? My second question is on staff costs. The ratio of staff cost to revenue was pretty stable, but you had a 28% increase in staff costs, I think, but number of staff was down. So could you just talk about what's driving that? It's obviously higher cost per employee. Are you effectively gearing up staff ahead of greater revenues while there's a greater cost in the first quarter? And third one, probably a bit more difficult here, but could you give some idea of organic growth revenue and EBITDA because obviously, the acquisitions will affect that growth over the last year?

Thank you for the questions. So first, yes, you are right. When you look at the GMV and the net revenue, you see a relation which is not the same relation as you can see it in the full year perspective. But as you can see here, it is always very similar in the first quarter because traditionally, the first quarter is the lowest quarter in the full year perspective. The return rates are higher. Also because a lot of clients order things from December and some people always make it in January and return it and so on, so there's a higher discrepancy between these 2 numbers. Your second question is HR costs. Yes, you're right. We have a little less total number. But all in all, we have some increase. Our increase was 3.5% inflation increase for our existing employees. And that is the reason why our HR cost ratio is more or less the same level. It's a little bit decreasing from 4.8% to 4.7%. But all in all, it is not going down completely. It is going less up than the revenue. But yes, it is higher than compared to last quarter. And your third question is organic growth. As we've shown you on the last page, we think that organic growth is very important for us. We never want to rely only on M&A. And that means for us that we have our own target of getting 50% of our growth rate by organic growth. And we do not report these numbers. What we can tell you in this conference call here that we achieved this gold -- goal with 50% organic growth of the total growth number in the first quarter. So we are quite happy about that.

So, [ Russell ], are your questions answered?

Yes. That's fine.

All right. So then let's move over to the questions from [indiscernible].

So first of all, congratulations to your Q1 figures and also the increased guidance for the full year. And also, thank you for giving us an appetizer for your CMD, which sounds quite promising. I have some questions on the financing of your acquisitions. Do you pay them in cash or in equity? Or have your -- I mean, you showed us a lot of P&L figures and ratios and -- but not really balance sheet, financial position and so on. I remember also that there are -- I think there are inventories in the cars you still have on your balance. So could you give us some flavor how your financial profile developed in Q1?

Yes, sure. So maybe I'll start with your first questions, how we pay our acquisitions. So generally, we have 3 ways how to pay an acquisition -- or we have 4 ways. So first, we pay by cash. In every acquisitions we did in the last years, we made some cash payments either in the company or either to the seller, but we made cash payments. Second, we can make loans. Sometimes we make loans for acquisitions. For example, we make a finance round of 30% to 50% of the enterprise value or equity value, and we make it with a classical bank loan. Third, we can make some share agreements with the seller. We don't make it in any case, and we are very careful about that because, as you might know, I'm also the majority shareholder, and I don't want to dilute my own shares every time. So I'm happy that I can stay on a high level. Right now, I have 70% of the group. And I really would appreciate if I can stay more or less on this level and participate on this good value creation. And fourth, the fourth way how we pay our price for an acquisition is also our own service and our software. Because when you acquire a company and they have to make investments in future for software and for the IT, they have a CapEx plan. And we say, you know what? You don't need this CapEx plan. We take our software; you get it for free. And this is part of the payment price for the acquisition. So almost in all of our contracts, you see our services, our people and our software as a part of the M&A purchase price. Your second question was about -- let me...

Financial profile.

Yes. Financial profiles of the balance sheet. Fashionette had always had in a traditional way that for the quarter result, they do not show any balance sheet. They show it in the half year result. So we have no figures in the quarter presentations. But all in all, you can see that -- you asked for the car sales and the debt situation for the car sales. It is very much decreasing because we sold all the cars in the last month, and it was successful. So we reduced all the external liabilities there. And on the total debt level, we also think that we will achieve 2.3x, 2.5x this year on a leverage for the EBITDA. So we are exactly in the range which we focus on this year. And for the next year, we expect lower numbers, so 2.3x or less for 2025.

So let's now move over to the questions from Robert-Jan. So I guess we cannot hear you. So -- but we will move over later to -- oh no.

Sorry, I was still on mute, my fault. So I have a question on the acquisition that you published a press release on yesterday. Can you just -- I mean, as I understand it, it's wholesale and the product profile is quite similar to what we saw in Avocadostore and HOOD Media. And I think it also includes a B2C platform, TRIBELLIUM. So just is there -- could you give me any thoughts on the strategic background? Do you see synergies between like the wholesale's like lower-priced products with the acquisitions we already saw this year? What was your idea behind the acquisition? What made that interesting strategically?

Yes. On our Capital Markets Day, we will show you this example also why we acquired this company. And this is -- OEGE Group is a platform, which only is operating for B2B clients. Indeed, they have, I think, a small subsidiary where they also offer some products directly to customer, but I think it's 2% of the revenue. But all in all, it is a B2B platform. What is our strategic rationale behind it? So first, we will get a lot of partners because they have a lot of -- 100 partners working together with them. They buy products from them, and they have a very close relationship with them. And these are all e-commerce partners. And when you think on what we acquired also this year, it is HOOD, the plant from HOOD and HOOD has a very similar product range. And a lot of the B2B partners from OEGE Group, they are also a partner of HOOD, as of 40% are already cooperating together, but 60% of the partners of the new company, of OEGE Group, they are not for example, working with HOOD together. And this is a great potential perspective because we can bring them together, we can merge these businesses from a sales perspective, and this has a big impact for the partners. So this is our strategic background why we did it. And we also have a very attractive price background here. And we think that we can really create a value for them and grow with them together.

Perfect. That's very helpful. Just a quick follow-up on that. I think that this company also has its own fulfillment center. In the past, you kind of usually got rid of the inventories of your acquisitions to get it close to your business model, which is basically no working capital. Is this different? Would you like to benefit also from like the logistic capabilities? Or is that something that you will also try to reduce as you did with acquisitions in the past?

Well, what you have to know about this company is that they have the logistic capacities mainly for their partners, means you can make your fulfillment there; you can put your own inventory there and they manage it for you. So it means that for our B2B partner, they can use the cities and make it for a very affordable price in terms of logistic costs, and that is a very good background why we can operate with them. Their own inventory is really low. So we are already talking about very low numbers. I don't have a specific number, but it is around EUR 3 million, EUR 4 million, EUR 5 million, but all the returns where you get also for the partners at this moment at the, for example, last day of December, you have to take it on your balance sheet in the next week, you put it to your partners. So this has some statistic effects in the balance sheet. But all in all, the inventory is very low, and it's perfect for our strategy.

So let's now move over to the questions from [ Olof ].

I'm pretty near to the company, so I hope we can all ready one. Could you explain that [ DB ] purchase on the 26th of April? Because I mean you had a stellar run now, which is -- was excellent. But even then, the chart shows the price of the share is like 750-ish, while the purchase of 100,000 share was rather 440-ish and that kind of puts a question mark in my mind. So could you comment on that?

Well, I'm a major shareholder, and I buy at any time, shares. So last year, I bought shares. This year, I also will buy shares and I also made these acquisitions. I always have to make it public, of course. And in this time, it was a special case. There was one seller of new shares, which are not listed and which are not traded on the stock exchange because they are new shares and you have to wait until the next AGM is coming up. And I think he asked several shareholders if they want to buy the shares in a very quick modus. So he wants the money right now. And I don't know the reason for this. I don't know what was a strategic background, but we said we will buy it, and we took a direct payment for that.

Okay. But they are not restricted or something like that. I mean it's a pretty steep discount.

Well, again, they are restricted now because these are new shares, though these shares are not traded right now. These are not TPG shares right now. They are new shares. And after the AGM, they become to regular shares, yes? And this is what you have to understand. If you have an asset which you cannot sell or which you cannot trade, maybe sometimes it has no worth for you because maybe you need the money at the right time. And maybe this was the background, but I will not comment on this person who got the shares and who sold it.

So let's now -- again, if you'll enter our chat box. So we have there a couple of questions as well. So one question is mid the head count, you said Q1 is seasonally the weakest quarter in the year. The adjusted EBITDA is already EUR 8.5 million and extrapolation would be EUR 34 million. Why is the guidance for adjusted EBITDA, EUR 26 million to EUR 30 million, far below the simple extrapolation?