Birkenstock Holding plc — Form 6-K Summary
Business context and reporting period
Form 6-K furnished for May 2024, containing unaudited interim condensed consolidated financial statements as of March 31, 2024 and for the three and six months ended March 31, 2024, compared with the corresponding 2023 periods. Birkenstock manufactures and sells footbed-based footwear, skincare and accessories through business-to-business (B2B) and direct-to-consumer (DTC) channels. Reportable segments are the Americas, Europe and APMA (Asia Pacific, Middle East and Africa).
The company completed its initial public offering in October 2023. Its fiscal year ends September 30. Revenue is seasonal, with B2B demand generally increasing in the spring and DTC demand increasing during the summer and warmer months.
Financial results and key metrics
| Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | Six months ended March 31, 2024 | Six months ended March 31, 2023 |
|---|---|---|---|---|
| Revenue | €481.2 million | €395.7 million | €784.2 million | €644.2 million |
| Gross profit | €271.2 million | €235.5 million | €456.0 million | €388.8 million |
| Gross margin | 56.3% | 59.5% | 58.2% | 60.4% |
| Profit from operations | €132.5 million | €103.3 million | €168.1 million | €117.6 million |
| Net profit | €71.7 million | €49.4 million | €64.5 million | €40.2 million |
| Basic and diluted EPS | €0.38 | €0.27 | €0.34 | €0.22 |
| Adjusted EBITDA | €162.3 million | €152.0 million | €243.7 million | €224.4 million |
| Adjusted EBITDA margin | 33.7% | 38.4% | 31.1% | 34.8% |
For the three-month period, revenue increased 22% on a reported basis and 23% on a constant-currency basis. For the six-month period, revenue increased 22% on a reported basis and 24% on a constant-currency basis.
- Three-month B2B revenue increased 19% to €362.5 million; DTC revenue increased 30% to €117.8 million.
- Six-month B2B revenue increased 19% to €502.9 million; DTC revenue increased 27% to €278.4 million.
- Three-month segment revenue increased 19% in the Americas, 22% in Europe and 39% in APMA.
- Six-month segment revenue increased 17% in the Americas, 25% in Europe and 42% in APMA.
- Three-month net profit margin was 14.9%, compared with 12.5% in the prior year; six-month net profit margin was 8.2%, compared with 6.2%.
- Adjusted net profit was €77.0 million for the quarter, up 3%, and €93.7 million for the six-month period, down 8%. Adjusted EPS was €0.41 for the quarter and €0.50 for the six-month period.
Cash flow, liquidity and capital structure
- Cash and cash equivalents were €175.7 million at March 31, 2024, compared with €344.4 million at September 30, 2023.
- Six-month cash flow from operating activities was €4.6 million, compared with €4.1 million in the prior-year period. The filing’s MD&A separately reports quarterly operating cash flow of €50.0 million, compared with €57.3 million.
- Six-month investing cash flow was negative €26.3 million, including €34.9 million of property, plant and equipment purchases and €8.7 million of government-grant proceeds.
- Six-month financing cash flow was negative €146.1 million, reflecting €525.3 million of debt repayments, €449.2 million of net IPO proceeds, interest payments and lease payments.
- Loans and borrowings totaled €1.328 billion, including interest payable and the senior-note embedded derivative, at March 31, 2024, compared with €1.853 billion at September 30, 2023.
- During the period, the company repaid €100.0 million of the Vendor Loan and $450.0 million of the USD term loan facility.
- At March 31, 2024, inventory was €651.0 million and trade and other receivables were €200.2 million. Working-capital investment, particularly receivables and inventory, materially reduced operating cash flow.
Material changes and unusual items
- Gross margin declined 320 basis points for the quarter and 220 basis points for the six-month period. Management attributed the reduction primarily to temporary under-absorption from production-capacity expansion, inflation-related wage increases and employee bonuses, with unfavorable currency translation also affecting the six-month comparison.
- Adjusted EBITDA margin declined 470 basis points for the quarter and 370 basis points for the six-month period, reflecting lower gross margin, higher public-company and administrative costs, retail expansion and increased DTC-related selling and distribution costs.
- Foreign-exchange losses declined to €5.5 million for the quarter and €17.1 million for the six-month period, compared with €16.9 million and €47.8 million, respectively, in the prior-year periods.
- Six-month finance costs increased to €63.4 million from €54.7 million, primarily because €10.5 million of capitalized transaction costs were released following early repayment of the USD term loan facility. Quarterly finance costs decreased to €27.4 million from €29.6 million.
- The company refined its intercompany-profit-elimination calculation. It states that applying the prior methodology would have increased six-month cost of sales by €10.6 million, while quarterly cost of sales would have been €2.9 million lower under the prior method.
- The company recorded a €345.3 million tax receivable agreement liability at March 31, 2024. Future undiscounted payments are estimated at approximately $554.7 million over 13 years, with the first payment expected in the second half of fiscal 2025.
- The management investment plan fully vested following the IPO. The company paid €11.4 million of employee personal income taxes on the awards during the period and expects reimbursement; €6.8 million related to key management personnel remained recorded as a non-current receivable.
Outlook, risks and contingencies
Management expects to finance operations and working-capital needs for the next 12 months from cash generated through operations. The filing does not provide clear formal revenue or earnings guidance. Management emphasizes continued expansion of DTC, retail, APMA and production capacity, while noting that DTC and selling expenses are expected to increase as the channel expands.
Key risks include seasonality and weather, consumer spending and inflation, foreign-exchange movements, production-capacity expansion, inventory and working-capital management, supply-chain and labor costs, dependence on wholesale partners, competition, brand protection and counterfeiting, e-commerce and cybersecurity, retail execution, indebtedness, tax matters, litigation and the ability to remediate material weaknesses. The filing states that there were no material changes to the risk factors in the prior Form 20-F.
The company is defending a French distributor claim for €94.7 million. A commercial court ruled in the company’s favor on January 25, 2024, but the plaintiff appealed on March 14, 2024. Management has recorded a provision for its best estimate of probable outflow and states that no current legal proceedings are expected to have a material adverse effect on the business or financial position.
On May 28, 2024, after the reporting date, the company signed a new syndicated credit facility consisting of a €375.0 million euro term loan, a $280.0 million U.S. dollar term loan and a €225.0 million revolving credit facility. The facility is intended to replace existing term loans and the undrawn ABL facility.
Important facts for investors to verify
- Whether temporary capacity-expansion and wage-related margin pressure reverses as production facilities ramp.
- Conversion of strong revenue growth into operating cash flow, particularly collection of wholesale receivables and inventory levels.
- Terms, pricing, maturity and covenant requirements of the new syndicated credit facility.
- Future cash payments and valuation sensitivity under the tax receivable agreement.
- Progress and cost of DTC, retail and APMA expansion, including the effect on selling and distribution expenses.
- Resolution and potential financial impact of the French distributor litigation.
- Reconciliation of quarterly and six-month cash-flow disclosures and the effects of the revised intercompany-profit-elimination estimate.
- Impact of currency movements, higher depreciation and amortization, taxes and IPO-related adjustments on reported versus adjusted earnings.