Global Blue Introduces Financial Guidance and Long-term Targets

Market leadership and technology differentiation drives robust revenue growth, profit margins, and cash flow

• Adjusted EBITDA guidance for the fiscal year ending March 2024 (FY23/24) of €145-165m (85-115% YoY growth), building on strong proof points during the first months of FY23/24 on the back of travel recovery and technology initiatives.

• Adjusted EBITDA guidance for fiscal year ending March 2025 (FY24/25) of more than €200m, benefiting from a continued recovery in spend from Asian shoppers and further product investments.

• Global Blue expects a normalization in growth starting in FY25/26 and is targeting a long-term revenue growth of 8-12% and ‘Revenue-to-Adjusted EBITDA drop-through’ of more than 50%, supporting a net leverage target of less than 2.5x Net Debt / LTM Adjusted EBITDA.

Global Blue Group Holding AG announced its new financial guidance and long-term targets.

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Global Blue’s CEO, Jacques Stern, commented: “We recently reported a strong start to our financial year, with 68% YoY growth in Revenue and 300%+ YoY growth in Adjusted EBITDA in Q1 FY23/24. We have positioned the business to outperform the ongoing international travel recovery, thanks in particular to key investments in digitalization and new products, as well as continued cost management.

“As such, as the effects of Covid on our business wane and in line with listed company practices, we are introducing financial guidance. We expect to achieve Adjusted EBITDA for FY23/24 of between €145-165m (85-115% YoY growth) and for FY24/25 of more than €200m. Thereafter, we are targeting a normalized long-term revenue growth of 8-12% and ‘Revenue-to-Adjusted EBITDA drop-through’⁽¹⁾ of more than 50%.

“Our focus on continuing to digitalize and enhance the Tax Free Shopping journey is driving a better experience for merchants, international shoppers, and all other stakeholders in the ecosystem; this is also delivering demonstrable financial benefits to Global Blue and supporting new merchant wins, allowing us to maintain our leadership position.

“We believe our investments in Added Value Payment Solutions and Retail Tech Solutions are gaining traction, increasing our relevance to retailers, merchant acquirers, and hoteliers as they serve not only international travellers but also domestic consumers. We are excited to announce the successful launch of three new technology solutions in these areas: hospitality & retail payments gateway, data analytics, and digital marketing.”

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As this is the first time Global Blue is publicly providing its financial outlook and long-term targets, the Company is providing additional details and metrics below to aid investors, analysts and other market participants in evaluating the Company’s guidance, and the Company may not disclose such additional details and metrics in future periods. In addition, Global Blue is providing guidance through FY24/25 as the Company expects that its business will continue to recover from the effects of the pandemic through FY24/25, and it does not expect to provide multi-year guidance thereafter.

Actual results may differ materially from the Company’s guidance as a result of, among other things, the factors described under “Forward-Looking Statements” below.

FY23/24 Guidance: Adjusted EBITDA of €145-165m

Q1 FY23/24 results showed a significant increase in both growth and profitability – 68% YoY on Revenue and 300%+ YoY on Adjusted EBITDA – on the back of travel recovery, technology-driven initiatives, and cost discipline.

Global Blue expects the travel recovery to be solid for the rest of year, especially with the progressive return of Mainland Chinese to Asian destinations first and Europe thereafter. Because the Company’s revenues are based on the aggregate value of transactions (as opposed to number of transactions), inflation continues to be a tailwind for Global Blue, with luxury goods selling at a nominal average price premium of 25% versus 2019 levels. Global Blue’s technology investments have further supported its top-line performance:

• Digitalization: Investment in payments integration, allowing for eligibility detection and credit card capture at point of sale, and other technologies have supported a 4ppt step-up versus FY19/20 in the Issue Ratio⁽²⁾ (64% in FY22/23), especially for travellers coming from the United States (+22ppt to 63% in FY22/23 vs. FY19/20).

• Commercial Gains: Net Retention Rate⁽³⁾ in the last 4 years (FY19/20-FY22/23) for Tax Free Shopping Solutions of 103.0% (versus 100.3% in the 5 years before Covid, FY14/15-FY18/19) and for Added Value Payment Solutions of 104.7%, supported by a new data-driven account management approach.

Based on those assumptions, Global Blue is guiding to an Adjusted EBITDA of between €145m and €165m for FY23/24, reflecting a strong YoY growth of 85-115% when comparing to €78m Adjusted EBITDA in FY22/23.

FY24/25 Guidance: Adjusted EBITDA of >€200M

Management believes Global Blue is well-positioned to continue to benefit from the return of Asian shoppers in FY24/25 towards 2019 levels, in particular Mainland Chinese (Q1 FY23/24 revenue from Mainland Chinese shoppers was still only 38% of 2019 levels), driven by a clear willingness to travel, an increase in air capacity, and an increase in average spend versus 2019.

In parallel, Global Blue expects the demand from non-Asian travelers to normalize, with air capacity still expected to improve, but “pent-up demand” triggered by the end of Covid period expected to progressively fade. In addition, Global Blue expects to see the continued benefit from its technology investments, in the form of greater digitalization and further commercial gains.

Based on those assumptions, and consistent with the sensitivity table provided during Q1 FY23/24 results showing Adjusted EBITDA guidance for various recovery levels of Mainland Chinese shoppers revenue, Global Blue expects to achieve an Adjusted EBITDA of more than €200m in FY24/25.

Long-Term Targets: Normalized Revenue growth of 8-12% and a ‘Revenue-to-Adjusted EBITDA drop-through’⁽¹⁾ of >50%

Long-Term Volume & Revenue Growth Targets

Tax Free Shopping Solutions

In the long-term, Global Blue is targeting a yearly growth of Tax Free Shopping Sales in Store ⁽⁵⁾ between 10% to 14% as a result of the following five drivers, consisting of market drivers and technology-driven management initiatives:

• Luxury Market: The Global Personal Luxury Market is a large, resilient, and consistent compounder, growing at a 6.7% CAGR during 2009-2019, and expected to grow broadly in line at 5.5% to 6.5%⁽⁴⁾ during 2022-2030.

• Overseas Luxury Market Premium: In line with historical track-record, Global Blue expects the Overseas Market growth to outpace that of the broader Luxury Market. Global Blue is targeting a long-term CAGR of 6.0% to 8.0%⁽⁴⁾ (vs. 10.0% in 2009-2019), adjusting for the potential effects of repatriation of a portion of Chinese luxury spend back to China.

• New Countries Adopting Tax Free Shopping Scheme: As the leading global Tax Free Shopping provider, Global Blue has a track-record of opening in new countries, with 7 opened between 2009 and 2019 (contributing 2.4% in Sales in Store⁽⁵⁾ CAGR over that period) and 3 during Covid. Today, over 100 countries with VAT have not yet introduced a Tax Free Shopping scheme for tourists. In that context, Global Blue is expecting to open in at least 4 new countries over the medium-term, with a target contribution of 1.5% to 2.0% to the CAGR.

• Digitalization: Digitalization simplifies the Tax Free Shopping process, such that more transactions are issued and refunded. This effect has contributed 2.0% to the 2009-2019 Sales in Store⁽⁵⁾ CAGR. Global Blue is targeting a similar contribution going forward of 2.0% to 2.5%, expected to be driven by the increased take-up of Global Blue’s new technology, e.g., eligibility detection, in-store or in-mobile credit card capture, and Mobile Customer Care.

• Commercial Gains: Global Blue’s first mover advantage in digitalization, combined with a new data-driven account management approach, has enabled Global Blue to deliver a Net Retention Ratio⁽³⁾ of 103.0% in the last 4 years. In the long-term, Global Blue is targeting market share gains that would add 0.5% to 1.5% to the Sales in Store⁽⁵⁾ CAGR, which would imply a Net Retention Rate⁽³⁾ of 100.5% to 101.5%.

Global Blue is targeting Tax Free Shopping Revenue growth over the long-term of 7.0% to 11.0%. The growth differential between Sales in Store and Revenue is attributable to pricing evolution (inherent to a volume-based take-rate model) and mix effects (country, merchant, and service). Global Blue is targeting pricing evolution and mix effects to result in an impact of 125bps p.a. and of 175bps p.a., respectively, or a total of 300 bps p.a. differential between Sales in Store⁽⁵⁾ and Revenue growth. From 2009-2019, this metric was 400 bps p.a.

Added Value Payment Solutions

Global Blue is targeting a long-term CAGR Sales in Store⁽⁵⁾ growth of its FX solution of 9.0% to 13.0%, as a result of the following three drivers:

• Cross-border Digital Payments: The cross-border digital payment market, of which FX Solutions is a subset, is expected to grow between 5 to 7%.

• Commercial Gains: Global Blue expects to continue to drive market share gain and is targeting a long-term contribution of 3% to 5% to the Sales in Store⁽⁵⁾ CAGR, or a Net Retention Rate⁽³⁾ of 103% to 105% compared to 104.7% in the last 4 years.

• Digitalization & Penetration: Enhanced technology at point of interaction and continued merchant training are expected to drive more penetration of FX Solutions. Global Blue is targeting a contribution of c.1% to the Sales in Store⁽⁵⁾ CAGR in the long-term, a conservative assumption compared to the 3.8% contribution to the Sales in Store⁽⁵⁾ CAGR delivered between 2009 and 2019.

Based on the above Sales in Store⁽⁵⁾ drivers, Global Blue is targeting an FX Solutions Revenue growth between 9.0% to 13.0%.

In parallel, in the long-term, Global Blue is targeting a CAGR Sales in Store⁽⁵⁾ and Revenue growth of its acquiring business in Australia to be in line with the Australian GDP.

Retail Tech Solutions

In 2021, Global Blue made the strategic decision to increase its scope of technology services to retailers and introduce solutions that extend to both domestic and e-commerce shoppers. Global Blue invested ~$100M to acquire three companies specializing in post-purchase solutions, two in the e-commerce space (ZigZag and Ship-up) and one in-store (Yocuda)⁽⁶⁾. Global Blue’s unique access to its retail partners’ C-suite, driven by Tax Free Shopping Solutions and Added Value Payment Solutions, provides the Company with an efficient go-to-market for such solutions.

Retail Tech Solutions is targeting continued high Revenue growth (at least 15%), as it is still in the scale-up phase and a clear beneficiary of cross-sell within the Global Blue ecosystem. Global Blue is targeting the Retail Tech Solutions segment to reach Adjusted EBITDA breakeven in the next 2 or 3 fiscal years.

Additional Growth Drivers

In furtherance of the above strategic decision, in the past four years, Global Blue has launched three products that were developed in-house to unlock new growth opportunities. At this stage, the contribution to growth has not been factored in the above targets:

• Hospitality & Retail Payments Gateway: The Hospitality and Retail sector is increasingly shifting towards an omni-channel customer journey, with a focus on the payment experience. As such, building on its deep payment capabilities, Global Blue has recently developed an integrated payment software for the Hospitality and Retail sector, which Global Blue is cross-selling into its 50+ merchant acquirer partners that are already using its FX Solutions technology.

• Data Analytics: More companies are basing their strategy and action plan decisioning on data. Through the Tax Free Shopping process, Global Blue collects an average of 50 data points per transaction, e.g., “who” through passport information, “what” through SKU-level itemized collected, and “where / when”. From this extensive dataset, Global Blue has built a comprehensive data offering for retailers and non-retailers to better understand and improve their performance.

• International Shoppers Digital Marketing: While the Overseas Luxury Market accounts for nearly one-third of the Luxury Market, Digital Marketing targeting this segment of client is largely an unpenetrated market. Due to Global Blue’s differentiated and proprietary database of 3m+ enrolled international shoppers and its 70% Tax Free Shopping market share, Global Blue has successfully launched Digital Marketing campaigns for its affiliated retailers to drive consumers to their e-commerce websites when at home, or their store when they shop abroad.

Profit & Cash Flow Targets

Group Adjusted EBITDA Margin

Global Blue is targeting ‘Revenue-to-Adjusted EBITDA drop-through’⁽¹⁾ of more than 50% p.a., reflecting the revenue dynamics described above and the cost structure articulated below for reference.

Contribution margin (defined as revenue less variable costs for any given period, divided by revenue for such period) by line of business is:

• Tax Free Shopping Solutions: 80% to 85% contribution margin; variable costs mainly relate to airport refunding (airport and agent fees).

• Added Value Payment Solutions: 60% to 65% contribution margin; variable costs mainly relate to payment network fees and interchange.

• Retail Tech Solutions: 60% to 65% contribution margin; variable costs mainly relate to logistics carriers costs at ZigZag.

Fixed costs represent 65% of the total costs today, with the benefit of a long-term savings plan implemented during the Covid-impacted period in 2020-2021, during which Global Blue reduced its fixed costs by ~20%, or ~€35 million. Global Blue is targeting fixed costs to increase at a rate of approximately 1pt above inflation, due to ongoing investments in Opex to support its growth drivers.

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