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Ladies and gentlemen, good day and welcome to the home24 Q4 and Full Year 2020 Trading Update Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Marc Appelhoff, CEO. Please go ahead.
Thank you very much and welcome to our Q4 and full year 2020 earnings call. I'm being joined today by Philipp, our CFO as of 1st of January, who will present the financial part of the presentation. But let me start again before we go into any of the details by reiterating how grateful and proud we are of the entire home24 team that has continued to work hard together and also together with our suppliers and industry partners to best support our customers in the midst of the pandemic. We nevertheless remain very vigilant in terms of health and safety and keep everyone as protected as possible, especially in most recent days. So let's hope we all can speak about post-COVID-era topics when we meet for the next time. So now without further delays, let's dive into the details. We today present the preliminary unaudited financials of the year 2020. One important note is that we will share segment financial information only at the time of the annual report end of March as we are still in the silent period in Brazil post our local IPO last week. But I'm very sure that you agree that looking at group financials will suffice to note that 2020 has been an outstanding year for home24. We accelerated growth post reaching the milestone of last 12 months' adjusted EBITDA breakeven midyear, of course reaching the Q4 adjusted EBITDA breakeven last year. We then reached the next milestone at the end of Q3 with the last 12-month cash flow breakeven. And last but not least, now in Q4, we also secured crucial funds for capital increase to derisk our balance sheet. And if we just look at the share growth numbers in Q4, the order intake growth has accelerated further versus the previous quarter's and has reached 58% in Q4. And we also see that positive momentum prevail in January and first days of February where we see above 70% constant currency growth. In terms of IFRS, the translation into revenues is slightly delayed due to delivery times. Philipp will speak about that. But nevertheless, full year 2020 at 42% has turned up at the upper end of the guidance, and that guidance was last upgraded on November 11. And as a consequence also, our Q4 adjusted EBITDA at 4% and the full year at 3% show a very significant performance compared to the previous year, following the same pattern of the first 3 quarters already reported. We have demonstrated that our business model delivers very strong efficiencies as we scale, and you see that with the more than 10% improvement in profitability year-over-year in percentage points. In terms of cash flow, also excluding the capital increase of EUR 46 million gross that we did in December, we would have been cash flow positive. So including that capital increase but excluding the Mobly IPO, the year-end cash level ended at EUR 103 million. And with the public listing of our Brazilian business, Mobly, last week, we have generated another approximately EUR 120 million for Mobly. And depending on the full allocation of the Greenshoe post stabilization period, we'll generate another up to EUR 24 million for home24 SE so that post this event, both Europe and Brazil, we'll stand with approximately EUR 120 million cash balance to tackle the coming challenges and the still massive growth potential in our home and living e-commerce verticals. The Mobly IPO was a huge success. We demonstrated that the Mobly business is of significant value. The local markets obviously were ripe and the pricing of EUR 21 (sic) [ BRL 21 ] per share was a 4x sales multiple on the last 12 months on the last published figures. And on the first day of trading on Friday, shares increased 25%, so we do see continued strong demand in the first days of trading. And we are very glad of having secured independent funding through a local public market listing for Mobly. Now turning at 2021, we'll give a bit more details in the outlook. But what we've decided is that we will only give concrete guidance for revenue and adjusted EBITDA targets for the year when we communicate our audited financials end of March because we want to -- that reflect not only the pandemic-related uncertainty, both on the demand and the supply side, predominantly on the supply side at the moment, but also want to reflect the key initiatives that we will now initiate with the successful IPO and capital increase and best reflect that into our guidance as well. Now let's turn into the business update before we then jump into the financials. And today, obviously, the predominant recap we want to give is the rationale and the background of the 2 capital measures we've taken in the last 2 months. So I think it's fair to say that we've not only resolved our balance sheet risk because pre capital increase, we had already a very positive development of profitable growth. And we had turned last 12-month cash breakeven, but at a cash level of around EUR 50 million, there were still concerns in the capital markets whether that will be sufficient. And I'm proud to say that we are now certain that we've turned that last weakness of home24 into strength given that the 2 capital measures were successful. We did do a capital increase of 10% of the share capital on the 9th of December in Europe at an offering price of EUR 17.60, and we did the IPO of Mobly last week and obviously a very significantly higher pricing. Why did we do the capital increase in combination and knowingly that the IPO was likely and was in preparation? It was primarily to tactically derisk and use the market momentum and to enable us to focus on the best long-term outcome for the IPO and for Mobly. So that we were independently looking at maximizing value but also to have sufficient funds, both in Europe and in Brazil, to now scale the businesses profitably going forward. The Mobly IPO is also unlocking the true value of our Brazilian business as we believe and it's also expected to be a signal reflecting positively on the EU business, obviously, given we will report the group financials in a consolidated way the same way we've done in the past because we will continue to hold the majority of Mobly at minimum 51% depending on the full allocation of the greenshoe the end of the stabilization period, and we will hold between 51% and 56%. Now the -- in terms of use of proceeds, they will primarily go into the profitable growth that we have established already pre capital measures. So raising our working capital, bringing down delivery times but also focusing on what sets us apart from competition in terms of customer experience both on the website and post order with [indiscernible] enhancing with a broader distribution network and also with an omnichannel strategy in Brazil, where I actually want to give you a bit more of a deep dive now. So for everyone who's not as familiar with Mobly yet with our Brazilian business, let's spend a minute there. Because in a sense, the European and the Latin American business are the very same home24 2-pillar business model approaches to markets that, likewise, significantly large but also significantly early in terms of e-commerce with a low online penetration and huge catch-up potential and multiyear growth opportunity. In terms of unit economics and customer acquisition and profitability and efficiencies, the businesses are also very comparable, just with a few local adaptations and specializations that Mobly has worked on over the last 10 years and really built the best model to tackle the Brazilian market environment. And apart from those similarities, let's zoom in on some of those specific parameters that make Mobly even the best local adaptation of the home24 model. For one, it's already today but in the future even more so embracing a true omnichannel approach. So we already do around about 10% of revenues with a locally called phygital stores. So we do have screens everywhere. We do offer the entire assortment of the web shop in those stores as well. But in São Paulo, they're significantly larger and therefore also are doing more revenue, and you can also collect accessories and small items directly in the stores and, in the same way like some of the omnichannel leaders in Brazil like Magalu, is doing that very successfully because consumers demand it. We will, in a very focused way, also grow this phygital strategy and expand our offline presence as well, not just strengthen the online presence. In terms of the complementing assortment, we do have a third-party assortment through the local marketplace on our website. But also, home24 in Brazil, so Mobly, turns to third-party marketplaces when it comes to customer acquisition. Google is not the main traffic acquisition channel in Brazil. Some of the large marketplaces like MercadoLibre or Magalu actually are a very valid source of traffic, and, therefore, we also list a selected portion of our assortment on those marketplaces and acquire customers there. In terms of the assortment, as already mentioned, a marketplace in particular for smaller pick-and-take items but also a slightly broader assortment approach means that we already today have a significantly larger SKU reach and breadth than we do in Europe, which then also reflects a slightly still lower private label business. Especially, that private label penetration, bringing that up from the just around 40% today towards the beyond 50% where we stand as the group is also one of the use of funds of the IPO. And in terms of logistics, there is the specialization that -- also because we had to link to nonexisting offerings. We have already expanded our own last-mile offering significantly in Brazil. And today, around about 39% of our deliveries go through our own last-mile network, obviously focused on the metropolitan areas in São Paulo and Rio, but also here, we will do focused investments to continue to strengthen our service offering to the Brazilian market. Now having done the deep dive on Mobly, I want to switch topics entirely. But I think it's also a very important milestone. Well, we are not only focusing on the financial milestones and the advancements in Brazil. I want to share with you the great news that in the meantime, we have not only advanced financial goals and progress there very successfully, but also in terms of our climate action plan, we have gone CO2 neutral in Europe, and we're committed to cut emissions and not only compensate emissions further. And we've set a quite ambitious goal for the scope 1 and 2 emissions, of reducing those by 75% until 2024. So this is obviously a huge goal, but also, we're very proud of the team that we haven't just stopped at measuring our CO2 footprints, making everyone and the team now aware of where most of our emissions occur. And not surprisingly, most of those occur actually between the collection of the goods in our factories globally, transporting them through our warehouse network and then to the customers and for the 10% returns we have also back. So if you look at the CO2 tonnes listed on this page, you see the 12,000 tonnes actually, and therefore, the largest part stem from logistics. And obviously, that will be also the biggest lever we will have going forward. But also, the external service providers, the servers we run and obviously all the locations, including our employees coming to the office are emitting significant CO2, and we will be focusing on, again, not only creating great offsetting projects, as we've done already with the 5 listed projects here, that perfectly fit our brand image and brand values but also now start the work to bring this number down. And obviously, Mobly now being an independently listed company will work on their own efforts, but they will also, in parallel, define their own climate action and ambitious goals. Now with that, let me pass on to Philipp to take you through the financial results in detail.
Yes. Thank you, Marc. As Marc already said, the financial section this time is providing less detail than usual as we do not provide information on segment level today due to the silent period into the recent IPO of Mobly in Brazil. If we look at the order intake, home24 continues to thrive in a very positive online market environment with GOV growth rate of plus 58% in Q4, bringing full year growth to plus 46%. Next to the positive order intake, we're also very happy to announce that we significantly surpassed the threshold of 2 million active customers to a level of almost 2.2 million, which is corresponding to an uplift of 44% year-over-year. And this builds a very solid foundation for our future revenue potential as we, of course, aim to keep those customers engaged on the website. And just as a reminder, we always communicate real currency as well as constant currency figures as the FX rate continues to have a relevant impact on our financials due to the devaluation of the Brazilian reais and the currency effect is also the main driver why we see a declining basket size on group level even though the general trend is very stable. Turning to revenues on the next page. Our Q4 revenue growth of plus 50% in constant currency brings the full year with year-over-year plus 42%, at the upper end of our latest guidance, with both segments broadly contributing in a strong way to the full year growth. Inventory levels, as Marc indicated already, remain low due to the very high demands. And combining this with, in general, longer supplier lead times across the industry and also across, yes, all regions, whether it's Asia, Eastern Europe, domestic or Brazil, this leads to an increased average web shop delivery time and thus the spillover of IFRS revenues into Q1 or probably even Q2 depending on when the revenue realization pattern will eventually normalize. And therefore, you will notice a relevant gap of 8 percentage points between the order intake of plus 58% and the IFRS revenue in Q4 of plus 50%. Looking at profitability. Our Q4 adjusted EBITDA stabilizes at a high level with EUR 6 million positive or a 4% positive adjusted EBITDA margin, leading to full year adjusted EBITDA of plus EUR 17 million, an improvement of EUR 45 million compared to the prior year. And to us, this is, yes, the most remarkable aspect about 2020 as we did not only grow more than 40% year-over-year revenue but also improved profitability in parallel by more than 10 percentage points in adjusted EBITDA margin. And assuming we don't steer for terminal margin achievement but rather market share in the next year, this gives valid leeway to increase customer acquisition aggressiveness. The year-over-year profitability improvement is seen from all line items to a similar extent. So we see 2 to 4 percentage points improvement each in COGS, fulfillment expenses, marketing expenses and SG&A. Turning to the cash position. The positive operating cash flow in all quarters in 2020 was at very solid basis for the improved cash position. And now paired with the capital increase in December 2020 that we performed on group level, the level of cash and cash equivalents reached a level of more than EUR 100 million even pre proceeds from the Mobly IPO. And nevertheless, we also want to point out that the cash inflows from working capital, mainly in Europe, significantly increased and are above target levels as stock levels are below target and longer average delivery times lead to a higher level of customer prepayments received. And therefore, the working capital cash inflow is higher than what we originally aimed for. Once the growth trajectory post COVID normalizes, this should partly reverse in 2021. And with that, let me hand over back to Marc for an updated outlook.
Thank you, Philipp. So I think it's fair to say, and we also have our team to congratulate, that home24 has laid the foundation of both further profitable growth but also the ability to invest into significantly stepping up deliberate investments into acquiring customers more aggressively in the future through not only reaching the milestones of EBITDA and cash flow breakeven but also achieving those 2 capital increases. And while we see our terminal margin profile of low double-digit adjusted EBITDA margin as very well confirmed by the most recent profitability improvements and we are very confident we could steer there quite soon if we wanted, we believe the current market environment is so attractive that we rather will focus on accelerating growth and taking share. And obviously, our performance continues to be closely linked with the development of consumer demand and supply chains in the context of the COVID-19 pandemic and therefore fraught with significant degree of uncertainty. And also, again, our key priority remains the health and safety of our customers, employees, partners, so most of our showrooms are still closed. We are having separate shifts in the warehouses with FFP2 masks in place, and we would always sacrifice health over growth. Nevertheless, we also believe that the catalyst of growth in terms of an increased online penetration will prevail post the pandemic, and we already prepare now to best fulfill consumer demand not only during the remaining uncertain times but also afterwards. And the main uncertainty that prevails is that the fact that replenishment lead times remain on an elevated level not only as a result of challenges around freight shortages in Asia but also continued fluctuations in our manufacturing partners, raw material shortages and also the high demand fluctuations from various global regions. So we are very, very close. And as a result -- or close to our suppliers. And obviously, as a result of the significant strong demand, inventory levels are still low and will probably likely remain low for quite a few months until we're back in a more normalized trading environment, yes? But also, as we've shared with you, with a strong January order intake, we're off to a very good start into 2021. And as a result, we will very likely see Q1 growth in line or possibly even above what we have seen in the last 3 quarters. I think we've stated a few times now in this call that we're not only proud of the achievements of 2020 but that the capital measures realized in the last 2 months are springboard of initiating further growth and taking share even in a much more normalized demand environment. So once we are hopefully soon out and traveling again and enjoying life as we should do, there is the fact that we don't need to improve profitability again another 10 percentage points in 2021. We can now reinvest every euro we generate in contribution margin again into growth. And for the next year, growth and profitable growth will rather be our focus while obviously we remain committed on a combination of strong growth with overall positive adjusted EBITDA, just being able a bit more flexibly to invest some of that liquidity we have collected in the last capital 2 increases, yes? So let me close by giving again the fact that the guidance will move to 31st of March. I hope you understand. We just want to give us a bit more time to read the market and also to now ascertain which of the growth initiatives we want to focus on in 2021, yes? so yes, already tradition, as in the last few calls, I will, yes, close our speech and turn to Q&A with the page that summarizes that not only backed by the 2.2 million customer base that we now have as active customers and not only the fact that we have [ corporate ] even in our business and a strong cash position, but just zooming out again, home24 remains uniquely positioned to exploit a vast home and living growth opportunity for the many -- for many years to come, even more so than before the COVID pandemic because the market is still huge and it's still relatively and comparatively low in online penetration with a huge catch-up potential. And our customer value proposition has become clear, especially in the last 3 quarters. Consumers have more and more time to us. They found great selection. Our NPS, as we shared in the last update call, has even increased. And we are now in a position to continue to invest into assortment, into customer-centric shopping experience, both online and off-line, and we will use the data and technology that we've already put in place with a fulfillment platform in the last couple of years. And we will continue to actually set ourselves apart, especially from the off-line peers that don't have those data and technology levers in place, yes? And last but not least, our value chain in 2020 has proven that it's highly scalable, that it's highly efficient and that is -- it is generating significant operating leverage for us to reinvest into further profitable growth. So with that, thank you very much for listening and happy to take your questions. And please, once asking questions, state whether you'd rather want Philipp as the CFO to answer financial-related questions or myself on strategic or general questions. Thank you very much.
[Operator Instructions] We'll take our first question from Christian Salis from Hauck & Aufhäuser.
Yes. Marc and Philipp, it's Christian speaking from H&A. First of all, congrats to the strong Q4 trading and also the successful Mobly IPO. So I would have 3 questions, please. First of all, the profitability improvement in Q4, I think this was lower than in the previous quarters if you look at a year-over-year comparison. So what's really behind it? Could you maybe provide a little bit of color regarding the individual cost line developments, i.e. in terms of gross margins and also marketing? And then the second question would be on new customer growth in Q4. And the third question is just could you give an update on the current cash position after the Mobly IPO, please?
Yes. So I guess let me take them, at least the first one. And then Philipp, you can do the customer growth and cash position. So I think we will give the detailed financials when we do the full year release also on the segments. As mentioned, we can't give more details at this stage because of the silent period in Brazil. I think it was clear that having reached Q4 EBITDA breakeven already in Q4 2019, the improvements eventually will ease off as we will already start generating room for growth investments post that, yes? So as mentioned already in the call, we don't want to steer to terminal margin as of yet. We believe that the market environment is there to go for growth and for market share gains, and we have slowly started doing that towards the end of the year with -- you can also see that GOV growth was higher than IFRS growth, so also giving quite some tailwind for Q1. Now new customer growth, Philipp?
Yes. So the new customer growth was -- in Q4 was on a similar level of what we've seen already in Q2 or in Q3. And in our Q3 earnings call, we indicated that the development in the 2 quarters in 2020, so Q2 and Q3, was equivalent to the development of the 2 years ahead, and if we now add 1 more quarter in Q4, this, yes, corresponds to another huge step forward. And looking at the order intake that we provided for January, I think we're in a good position to make the active customer base grow even further. And therefore, yes, you really get an idea and impression how much the trading of the past 3 quarters. And if we include now Q1, the fourth quarter has leapfrogged the development in terms of yes, online penetration but especially in terms of growth potential for home24. So it's one thing that we also agree is very positive, and it's now the, yes, the goal to keep the customers engaged on the website and to also profit from that customer base in the long run. In terms of cash, we already indicated that post the capital measures on group level, we reached a cash position of more than EUR 100 million by the end of the year. And now if we look at the proceeds from the Mobly IPO, we see roughly EUR 120 million flowing into Mobly, and we see at least EUR 5 million in the base case scenario going to the, yes, to the group, and that could go up to EUR 24 million. And that is now gross proceeds. So pre taxes or capital gain taxes that we have to pay to a certain portion on group level and also pre bank fees that will be deducted afterwards.
Okay. Maybe just a quick follow-up on the first question on the cost line. Maybe -- I understand that you don't want to give us too much detail with the prelims today, but maybe could you talk nevertheless a little bit about whether you opted more for pricing or more for marketing? That will be extremely helpful.
Yes, I think we can go -- without going into the segments, we can confirm that there was a weak -- structural weakness in the market and in the circumstances that -- around the supply shortage at the moment. You can -- I think it's fair to assume that it wasn't a discounting but rather an increased speed of -- or an increased level of customer acquisition, especially towards the end of Q4, that will fuel future growth, yes, given we have a time lag between first visit to the website and then conversion. But I think it's fair to assume that, that effect also was linked to marketing investments. But again, we can't go into any line item detail because then we would very likely also need to speak about the specific differences in the 2 segments. And given we're still in the silent period, we are not allowed to speak about the segment details yet.
[Operator Instructions] We'll take our next from Matthew Garland from Citi.
Congrats on the results. I understand, obviously, that you're not giving guidance for next year, but I wonder if you could kind of give a bit more color around how you're thinking about competing against more online competitors, particularly in Europe, such as Wayfair and how you're looking to differentiate your offer versus them and how you might focus your customer acquisition cost differently to maybe what they're focusing on? And as a second question, I was wondering if you could give any further details around how the -- your kind of new active customer cohorts are developing versus previous customer cohorts and maybe giving a bit more information around that.
Yes. Sure. So on Wayfair, we've been competing with them on 1 of our 8 active markets and 1 of our 7 active European markets for the last 10 years. Now they've been active in Europe since in 2009, I think. And they go a very different approach, and they rather follow the Otto or Amazon approach with listing as many SKUs as possible, not controlling stock levels themselves, and then playing the data or logistics, say, to offer a very, very broad offering to our consumers in 1 of the 8 markets we're active in. So we haven't seen them heads-on in the last years because we have a differentiated customer acquisition approach, yes? With our home24 2-pillar model, we complement not only a broad offering driven by a broad third-party selection, and we complement that with more than 50% revenue share of private label sales where we do have a true manufacturer margin advantage. And we use that manufacturer margin advantage for 2 elements. One is value-for-money pricing to consumers, and it's true value for money. So if you compare our private label offering with those of our peers', it's definitely sustainable. And now if you go to our showrooms and then go to our peers' showrooms, you will see that, yes, we have a very valid differentiation there. And the second is that we can actually be a bit more aggressive in customer acquisition and still be profitably in LTV-to-CAC, yes? So if you go and compare LTV-to-CAC of our main online peers with home24, we are more profitable in acquiring new customers, having focused primarily also on the large and bulky furniture items, yes? And so there is still a lot of potential we will be able to tap into once we complement the assortment more with the -- yes, more impulse purchase-driven selection in home and living. So we're very confident that, yes, the industry dynamics will remain the same. There is the broad generalist marketplaces, Wayfair, Otto, Amazon, that differentiate or that go to market primarily with a very, very broad assortment. And in home and living, in the absence of consumer brands, broad assortment is not the main purchase criteria for consumers, yes? They don't care about having the fifth -- thousands wide coffee table to choose from, and they rather want to be told which one of 100 that they like is the best one. And we rather focus on competing with the -- conceptually around about 90% of our market that is still off-line and that is struggling now in corona times and was struggling pre corona times with a channel conflict. And we'll probably see the goods players emerge strong from the crisis, but also, the bottom end of the off-line space will suffer post crisis. And we are in there to take share from the mass market generalists that are primarily active offline, yes? So we're confident that we will be able to continue to drive our customer acquisition strategy just like in the last 10 years. In terms of new customer cohorts, obviously only time will tell because also, we don't have a crystal ball on how that will evolve. But so far, those new customer cohorts are very happy, as we've disclosed in the NPS numbers shared in the last earnings update. Plus, they're structurally at least as healthy as the cohorts we had before. All the rest, we will only learn once the consumer environment has turned to a bit more normal circumstances post corona.
We'll take our next question from the line of [ Rob Wissler ] from home24.
I have a question. If you could give us an idea what does the end of the lockdown periods and the end of the -- hopefully soon end of corona mean for your business, the business of home24, regarding revenues and EBITDA. Or if you don't want to be too detailed, can you speak about online trading in general?
Yes. So, I mean, we've mentioned that we won't give guidance on this call today. We've also laid out our strategy that we are not in there for reaching capital -- terminal margin anytime soon but rather are focusing on grabbing the market opportunity that's out there at the moment. And again, on the future, -- only the future will tell. We feel very well prepared on having reached profitability and being in a strong position to compete, and we look forward to that time, yes? So please accept that we don't give any forward-looking statement at this stage.
[Operator Instructions] It appears we have no further question at this time. Please go ahead, sir.
Well, thank you very much, and I look forward to speaking to all of you again end of March when we then will be able to also give the guidance. Thank you very much.
That concludes today's conference call. Thank you, everyone, for your participation. You may now disconnect.