Birkenstock Holding plc — Form 6-K Summary
Business context and reporting period
Birkenstock manufactures and sells footbed-based footwear, skincare and accessories through business-to-business (B2B) and direct-to-consumer (DTC) channels. The company operates in the Americas, Europe and APMA regions and manufactures products in the European Union.
The filing presents unaudited interim IFRS financial statements as of December 31, 2023 and for the three months ended December 31, 2023, compared with the three months ended December 31, 2022. Birkenstock's fiscal year ends September 30. The Form 6-K was dated February 29, 2024.
Financial performance and key metrics
| Metric | Three months ended Dec. 31, 2023 | Prior comparable period | Change |
|---|---|---|---|
| Revenue | €302.9 million | €248.5 million | +22%; +26% constant currency |
| Gross profit | €184.9 million | €153.3 million | +21% |
| Gross margin | 61.0% | 61.7% | Down 0.7 percentage points |
| Operating profit | €35.6 million | €14.2 million | +150% |
| Profit/(loss) before tax | (€0.5) million | (€10.9) million | Improved by €10.4 million |
| Net profit/(loss) | (€7.2) million | (€9.2) million | Improved by €2.0 million |
| Adjusted EBITDA | €81.4 million | €72.4 million | +12% |
| Adjusted EBITDA margin | 26.9% | 29.1% | Down 2.2 percentage points |
| Operating cash flow | (€45.4) million | (€53.2) million | Improved by €7.7 million |
| Capital expenditures | €18.1 million | €25.7 million | Lower by €7.6 million |
| Cash and equivalents at period end | €169.4 million | €171.1 million | Comparable period-end cash basis |
DTC revenue increased 24% to €160.7 million and represented 53% of revenue, compared with 52% in the prior period. B2B revenue increased 19% to €140.4 million. Revenue grew 14% in the Americas, 32% in Europe and 47% in APMA on a reported basis.
Adjusted profit before tax was €32.6 million, with an adjusted margin of 10.8%, unchanged from the prior period. Adjusted net profit was €16.7 million, down from €26.5 million, and adjusted EPS was €0.09 versus €0.15. Reported basic and diluted EPS were both negative €0.04, compared with negative €0.05.
Liquidity, debt and balance-sheet changes
- Cash and cash equivalents declined from €344.4 million at September 30, 2023 to €169.4 million at December 31, 2023.
- Net cash used in operating, investing and financing activities was €173.8 million, including €119.8 million used in financing activities.
- Loans and borrowings totaled €1.316 billion, including interest payable and related adjustments, compared with €1.853 billion at September 30, 2023. The carrying value of loans and borrowings was €1.316 billion including current amounts.
- During the quarter, Birkenstock repaid €100.0 million of its Vendor Loan and $450.0 million of its USD term loan facility, funded primarily with IPO proceeds and cash on hand.
- The October 2023 IPO generated €449.3 million of net cash proceeds after underwriting commissions and related costs. The company issued 10,752,688 shares at an IPO price of $46.00 per share.
- Inventory increased to €644.4 million from €595.1 million at September 30, 2023. Inventory write-downs were €2.7 million, compared with none in the prior comparable period.
- A €333.2 million non-current Tax Receivable Agreement liability was recognized. Future undiscounted payments are estimated at approximately $554.7 million over about 13 years, with the first payment expected in the second half of fiscal 2025.
Material changes and unusual items
- Revenue growth was broad-based, but margins were pressured by unfavorable currency translation, temporary under-absorption from production-capacity expansion, higher materials and personnel costs, and increased fulfillment costs.
- General and administrative expenses increased 55% to €34.4 million, driven in part by €7.3 million of IPO-related costs, €3.2 million of management investment plan costs and incremental public-company expenses.
- Finance costs increased 44% to €36.1 million, including a €10.5 million release of capitalized transaction costs associated with the early repayment of the USD term loan facility.
- The management investment plan fully vested following the IPO, resulting in €3.6 million of share-based compensation expense and €11.4 million of employee personal income tax paid by the company, subject to reimbursement by employees.
- The company replaced its inventory intercompany-profit-elimination methodology with a more detailed product-level approach. Management states that using the prior methodology would have resulted in an incremental €13.5 million cost-of-sales expense for the quarter.
- The company received an €8.7 million government grant related to its Pasewalk, Germany production facility.
Outlook, commentary and risks
Management expects to fund operations and working-capital needs for the next 12 months from cash generated through operations. The filing does not provide explicit full-year revenue, earnings or margin guidance.
Management continues to emphasize DTC expansion, selective wholesale distribution, pricing and product mix, capacity expansion and growth in APMA. It expects selling costs to increase modestly as the DTC channel expands, while general and administrative expenses are expected to benefit from scale over time.
Key risks include brand reputation and competition, execution of the DTC and e-commerce strategy, inventory management, production-capacity expansion, supply-chain and logistics disruptions, seasonality and weather, foreign-exchange volatility, inflation and consumer spending, indebtedness and interest costs, tax obligations under the TRA, cybersecurity, litigation, regulatory matters and the ability to manage growth.
The company is defending a €94.7 million claim by a former French distributor. On January 25, 2024, the commercial court of Nancy ruled in Birkenstock's favor; the plaintiff may appeal. Management states that no current legal proceedings are expected to have a material adverse effect on the business or financial position.
Investor verification points
- Verify the sustainability of revenue growth and whether DTC expansion can continue without further margin pressure.
- Monitor production-capacity expansion, temporary under-absorption, inventory growth and inventory write-downs.
- Assess cash generation after the quarter's negative operating cash flow and the impact of seasonality on working capital.
- Reconcile reported results with non-IFRS measures, particularly Adjusted EBITDA, adjusted net profit and constant-currency revenue.
- Review remaining debt maturities, interest costs, foreign-currency exposure and the effect of future debt repayments.
- Evaluate the expected timing and cash burden of the €333.2 million TRA liability and estimated $554.7 million of undiscounted payments.
- Track the French distributor litigation and any appeal following the favorable January 2024 ruling.
- Confirm that no material changes have occurred to the risk factors disclosed in the company's September 30, 2023 Form 20-F.