MYT Netherlands Parent B.V. Price & Performance (MYTE)

And welcome everyone to MyTreesa's Investor Conference Call for the second Quarter of Fiscal Year twenty twenty five. With me today is our CEO, Michael Kiger. Before we begin, we'd like to remind you that our discussions today will include forward looking statements. Any comments we make about expectations are forward looking statements and are subject to risks and uncertainties. Including the risks and uncertainties described in our annual report. Many factors could cause actual results to differ materially. We are in a no duty to update forward looking statements. [indiscernible] In addition, we will refer to certain financial measures not reported in accordance with IFRS on this call. You can find reconciliations of these non IFRS financial measures In our earnings press release, which is available on our Investor Relations website at investors.mytrisa.com MYT. I will now turn the call over to Michael. Thank you, Martin. Also from my side, a very warm welcome to all of you and thank you for joining our call. Today, we will comment on the results and performance of our second quarter fiscal year twenty twenty five. We are very pleased with our results in a still volatile macro With strong accelerating revenue growth, and positive significantly improved adjusted EBITDA in the second quarter, we continued our very positive business momentum from the previous quarter and have achieved significant step up in financial performance.

In H1 of fiscal year twenty twenty five, compared to H1 of fiscal year twenty twenty four. We believe that there are clear signals for an improving overall luxury market while, of course, concerns remain for the macro environment. We have reaffirmed our leadership position in terms of financial performance and reputation in digital luxury. Our clear focus on the high spending, wardrobe building top customers sets us apart and allows us to win market share and grow profitably. Strong top customer revenue growth, and outstanding average order value and excellent customer satisfaction score demonstrate our relentless customer focus. Which is a key success factor for MyTeresa. We continue to be very excited about the expected acquisition of YNAB. This acquisition will allow us to create a global digital luxury platform across multiple highly distinguished [indiscernible] We believe we will be able to generate significant synergies in using a joint backbone but most importantly, we will have one of the most relevant overall value and brands. We continue to expect closing of the transaction in the first half of calendar year twenty twenty five. Today, I wish to highlight three key messages to you that set us apart in the second quarter and clearly demonstrate the continued success for MYT tourism business despite the ongoing macro uncertainty.

First, with our distinctive business model focusing on big spending, wardrobe building, luxury shoppers we showed that we are fully on track for strong profitable growth for full fiscal year 2025. [indiscernible] Second, we are clearly demonstrated again that MyTERRISA builds a community for true luxury enthusiasts and creates desirability through digital and physical experiences which makes us highly attractive for true luxury brands to partner. Third, we are well positioned and equipped to create leading global ditching. Luxury group of enormous reach and relevance with the expected acquisition of Wiener. We Let me now comment in more detail on these three messages. First, the second quarter demonstrated again our unique ability to generate profitable growth based on our distinctive business model focusing on the water building big spenders. In Q2 of fiscal year twenty twenty five, we grew our GMV Buy it. Plus 11.9% compared to Q2, fiscal year 'twenty four. We achieved a strong net sales growth of plus 13.4% in Q2 of fiscal year twenty twenty five compared to Q2 fiscal year twenty twenty four.

We are fully on track to achieve our outlook the full fiscal year twenty twenty five. United States continues to be a significant growth driver for our business. We saw again a double digit net sales growth of plus 17.6%. In Q2 fiscal year 'twenty five compared to Q2 fiscal year 'twenty four. In The U. S, accounted for 20.6% of total net sales of our business in the second quarter of this year twenty five. Our highly curated selection of true luxury brands resonates very well with the big spending U. S. Luxury customers looking for multi brand inspiration. And we continue to see the market as a major source for future growth. In Europe, including Germany and The UK, we also experienced a strong double digit net sales growth of plus 12.8% the second quarter of this year twenty five, compared to the Second Quarter Of The Previous Year. While Results In China and Asia continue to be impacted by the ongoing macro headwinds and uncertainties. Our clear focus on big spending, water building, is the fundamental driver of our continued success. Our GMV with our top customers grew by plus 9.1% compared to Q2 of fiscal year 'twenty four.

This was largely driven by an increase of the average spend in terms of GMV per top customers by plus 13.6% compared to the same period last year. In The United States, our business with top customers in terms of GMV grew by plus 34.7% the second quarter of fiscal year twenty twenty five. [indiscernible] Martin will talk in a few minutes about the details of our bottom line results for the second quarter but let me provide you already with some key operational highlights. We achieved excellent customer satisfaction measured by our internal MYT promoter score has reached an outstanding 83.3% in Q2 fiscal twenty twenty five, demonstrating the consistent excellence of our customer services proposition. Our average order value last twelve months increased by plus 9.5% to euros $7.36 in Q2 fiscal year twenty twenty five demonstrating the success of our focus on selling high end luxury products to top customers. Furthermore, we reported stable return rates and improving cost ratios in the second quarter of fiscal year twenty twenty five. All these operational highlights underline the fundamental strengths and the consistent performance of our business Second, the second quarter clearly showed that Mitreza builds community for true luxury enthusiasts [indiscernible] through digital and physical experiences.

This makes us highly attractive for luxury brands to partners The second quarter saw many high impact campaigns and exclusive product launches that drove our global business with high spending water building customers. We launched exclusive womenswear and men's wear runway looks from Moncler Grenoble as well as exclusive bath and accessories Sunnaya Fujita Collection for womenswear. Menswear and live. We launched an exclusive women's wear capsule collection by Victoria Beckham, only available with MyTERESA MYT. We were exclusive partner for launching the women's wear new muse ski collection only available at Miu Miu and Maqareba. And we exclusively offered our top customers early access to the women's wear Gucci holiday collection. We were exclusive pre launch partner for Kate's Resort twenty twenty five collection and Allianz Archetypes collection. Finally, I wish to mention that we launched an exclusive menswear eveningwear collection from Laurentian. Please see our investor presentation for more details on brand collaboration in the second quarter. Another very recent and noteworthy collaboration is the launch of Bulger refined jewelry and watches in my division. It's the prestigious Italian Maison Bvlgari we are further extending our fine jewelry assortment. This latest brand partnership is a clear testimony and reinforcement of our clear focus on high spending top customers.

In addition to creating the reliability for our top customers, with exclusive digital campaigns and product launches, We also hosted again many events and physical experiences for our top customers some of which were true money can't buy experience. We aspire to constantly engage with our top customers across the globe to build strong long lasting relationships, In the second quarter, we hosted various top customer events, including StyleSuite in New York, Singapore, Toronto and Miami. We also invited top customers to a multi day StyleSuite event at the Nature Discovery Park on the rooftop of K-eleven, Nizia, in Hong Kong. We arranged an intimate cocktail event for top customers in Jeddah and an intimate dinner in Abu Dhabi. Top customers were invited to an exclusive Parisian experience with Verluti in Paris that included a private tour of Verluti's [indiscernible] We also hosted an elegant cocktail reception and dinner with the article at the iconic Saint Ambrose in Milan, in attendance, of both designers, [indiscernible] Together with Oscar de la Renta, we hosted a dinner at the Hia Hap in Riyadh. In attendance of the designers Fernando Garcia and Laura Kim. Another highlight was an intimate cocktail and dinner with Victoria Beck at CocoDuck in New York.

To celebrate the launch of the third exclusive Victoria Beckham ex Miterreza capsule collection. We also hosted several fine jewelry events, including a cock and an exclusive event with the fine jewelry brand Yeprem in New York please see our investor presentation for more details on our various exclusive events around the world in the second quarter. As always, the absence highlights for our top customers were amazing true money can buy experiences that we created for them. In the spirit of being a community for luxury and sues. We invited guests to an unforgettable mountain experience with Zenya between the scenic Viela Alps of Piedmont and the culinary treats of Mina. [indiscernible] to our season where they immersed themselves into the history and craftsmanship of Zenya through a private tour of the houses we live. [indiscernible] where guests enjoyed a lunch inspired by the family recipes of Nina Zengia. The experience concluded with an intimate dinner at Nina in attendance of Artistic Director Alessandro Gossaartouki. Another highlight was an exclusive multi day Nordic winter experience with Nungklaer Gromovle in Oslo. Over two days, our guests were invited to various unique moments including a cocktail reception and dinner at the iconic contemporary Oslo Opera followed by snow activities at Ski More Park Ski Resort the day after.

In The United States, we have just announced that we will team up with Bemerman's Bar the store eight New York bar an exclusive invite only pop up in Aspen. Together, we are creating an immersive apprise ski experience, bringing luxury fashion and Bemerman's signature martinis to Aspen on February 14 through March In addition to providing our top customers with memorable all these events also created global brand awareness for MYT Theresa through press and social media amplification. Third, we see ourselves well positioned and equipped to create a leading global digital luxury group with enormous reach and relevance with the expected acquisition of JUEX Netaport, We will be home to some of the most distinguished digital store brands in the world. [indiscernible] and the brands Netaporter, Mr. Porter, JUEX and The Outlet all individually have earned a strong reputation in the Luxe industry for their pioneering roles in innovation, authoritative editorial voice and curation as well as high quality customer service. All store brands stand for clearly differentiated but complementary multi brand offerings for luxury customers worldwide. We are committed to further strengthen and develop the unique store brands and the identities within the group by building on their heritages while fostering synergies in the back of house.

We expect closing of the transaction in the first half of twenty twenty five. As we enter a new and exciting phase of our company, we have decided to form the new group under the new brand name Luxe Experience. Which will replace mighty Netherlands parent EV MYT, as our group name upon closing. This new name clearly underlines our unique focus on creating desirability for luxury enthusiasts with digital and physical experiences. Luxe experience will serve as a unifying symbol reflecting the core values of a strong customer focus, a highly curated edit and inspiration as well as the creation of their liabilities through unique digital and physical experience. Of course, we will continue to serve our customers with our well known and highly loved brand name, Michelin. We will continue to be listed on the New York Stock Exchange, which trade name Luxe Experience and the new ticker symbol of Luxe. A u x e. That will replace the current ticker symbol MYT Laxxexperience will present the most exciting opportunity for investors worldwide to participate in the huge market opportunity in digital, multi brand luxury shopping. [indiscernible] also recently announced the nomination of Borkard Gold, Chief Financial Officer of Richemont as a new Supervisory Board member.

With the completion of the transaction, we are excited to welcome Richemont, one of the most renowned and largest luxury companies, as a major shareholder of Mitelix. As part of the agreement signed Richemont has the right to nominate a candidate for a seat on the Supervisory Board. Expanding it from seven to eight seats. We are delighted that Volkgaard Gund, a highly qualified financial and industry expert in the luxury goods Sektor has been nominated to join the Board upon closing. The Board will remain composed of a majority of independent [indiscernible] [indiscernible] Both the remaining and the nomination of Boca Goun will be presented for approval by our shareholders at an extraordinary general meeting scheduled for March 6, and are subject to completion of the YNAB acquisition. With all the above, it should come as no surprise that we are very pleased with our performance in the second quarter of fiscal year twenty twenty five. We believe that the strong financial results demonstrate the strength and consistency of our business model delivering profitable growth. We are extremely well positioned [indiscernible] fully prepared for the expected acquisition of YNAB which will unlock even greater opportunities for profitable growth and will create significant value for our shareholders.

All this and the results of the first half of this year twenty five support our strong confidence in our medium term growth trajectory and profitability target. And now, I hand over to Martin to discuss the financial results Thank you, Michael. As mentioned, we continue to successfully work towards the closing of our acquisition of the JUXT Metaporte Group expected in the first half of twenty twenty five. And we are truly excited for this next chapter of growth. With establishing Luxe Experience, a clear global leader in online and multi brand luxury. We will provide a more in-depth view on the performance and our plans for the future after closing. I will therefore focus this call on the financial highlights of our second quarter of fiscal year twenty twenty five ended 12/31/2024. We are very pleased with our results the second quarter of fiscal year twenty twenty five. Double digit net sales growth of plus 13.4%. Our AOV LTM increased by plus 9.5% an improvement in the gross profit margin of 110 basis points and a strong adjusted EBITDA margin of plus 7.3%, an increase of three fifty basis points versus last year. Even with our strong top line growth, inventory levels, decreased minus 1.3% year over year with a DIO of two fifty eight days.

High at the target level. We will continue our track record of profitable growth leveraging our global presence increasing acquisition of true top luxury customers worldwide and ever increasing support from the strongest luxury brands. I will now review the financial results for the second quarter and first half of fiscal year twenty twenty five ended 12/31/2024, in more detail and give additional input on certain key developments affecting our performance. Unless otherwise stated, all numbers refer to Europe. September through December, '24, net sales grew by $26,400,000 or 13.4%. In the first six months, of the first fiscal year, Net sales grew by 10.6% to $424,700,000 We saw an increase in GMV per all customers of plus 6.3% in the second quarter of fiscal year twenty twenty five even more impressive, the GMV per top customer increased by plus 13.6% during the quarter. GMV grew by 9.2% to $461,200,000 with an increase of €64 per order, Our average order value in the last twelve months now stands at an outstanding €736 as compared to €672 in the prior year period. A plus of 9.5%. Our increase in IOV improves not only our unit economics, but also manifest our successful focus on full price selling.

At the very high end, of true luxury. We are outpacing our competitors and thus continuously capture market share. In Q2 of fiscal twenty twenty twenty five, we grew our business in The U. S. By plus 17.6%. Our net sales share in The U. S. Now stands at 20.6% driven by an increase in GMV coming from our top customers of plus 34.7%. Our core market Europe also grew by plus 12.8% in net sales and we are strengthening our market positions worldwide. In the second quarter of fiscal year twenty twenty five, plus profit increased by 16% to $113,600,000 as compared to $97,900,000 in the prior year period. The gross profit margin increased by 110 basis points to 50.9%. In H1, of fiscal year twenty twenty five, the gross profit margin increased by 140 basis points, from 46.2% to 47.6%. We continue to focus on increasing our share of full price sales and remain cautiously optimistic that we will be able to successfully continue to do so. The adjusted shipping and payment cost ratio decreased by 90 basis points during the quarter now standing at 13.8%, as compared to 14.7% in the prior year period. The improvement mainly stands from our high quality MYT focus resulting in higher AOVs and stable return rates.

In H1, of fiscal year twenty five, The adjusted shipping and payment cost ratio decreased 60 basis points to 13.7% from 14.3% in the prior year period. In the second quarter of fiscal year twenty twenty five, the marketing cost ratio increased by 160 basis points from 10.7% to now 12.3%. We stay focused acquiring high potential customers and retaining our top customers. With returning to these normal levels, of marketing costs, we are able to position Margarita even more successfully to capture market share as the market continues to pick up. During the six months, ended 12/31/2024, the marketing cost ratio as a percentage of GMV increased by 70 basis points to now 11.9% as compared to 11.2% in the prior year period. Adjusted selling, general and [indiscernible] SG and A cost ratio decreased by 160 basis points to 13.9% during the second quarter of fiscal year, in line with our preceding quarters of around 14% of GMV. On an absolute basis, adjusted SG and A expenses remained stable at $33,900,000 In the first six months, fiscal year twenty twenty five, the adjusted SG and A cost ratio decreased by 110 basis points to 13.9%. We capitalize on cost leverage to optimize our operational efficiencies, as we scale.

We remain committed to continuously decrease our SG and A cost ratio. In the second quarter of fiscal year 'twenty five, adjusted EBITDA increased by $8,700,000 to $16,200,000 The adjusted EBITDA margin increased by three fifty basis points to 7.3% as compared to 3.8% in the prior year quarter. The increase is mainly driven by our gross profit margin improvement and further efficiencies in all cost lines despite investments in our market position. For H1, a fiscal year '25. Adjusted EBITDA was at $19,100,000 with an adjusted EBITDA margin of 4.5%. Increasing by two eighty basis points. Depreciation and amortization remained fairly stable in the second quarter of fiscal year 'twenty five, with $3,900,000 as compared to $3,800,000 in the prior year quarter. As a percentage of GMV, depreciation and amortization decreased from 1.8% to now 1.6%. Our profitable growth and the strength of our business model were also visible on adjusted operating income and adjusted net income level. In the second quarter of fiscal year twenty twenty five, adjusted operating income was at a margin of 5.5% just slightly below the 7.3% adjusted EBITDA margin. This has been and is a continuous highlight of the MyTreesa business model. Adjusted net income in the second quarter was $10,600,000 or 4.8% of net sales.

Let's take a look at the cash flow statement. In the second quarter of fiscal year twenty twenty five, operating cash flow used only $6,000,000 as we're coming back to normalized levels of working capital. We are fully on track with managing our inventory levels. Our inventory stood at $404,600,000 decreasing by minus 1.3% year over year even with our top line growth. As of 12/31/2024, we had a DIO of two fifty eight days which is right at our long term target of around two sixty days inventory outstanding. Cash flow from investing used up $400,000 in the second quarter and $1,700,000 in the first six months of the fiscal year. With this, CapEx was significantly below 1% of GMV Another highlight of our business model. We ended the six month period with $13,800,000 cash attached. The excellent performance of the quarter is fully in line with our expectations. Given the seasonality in the business, you always need to look at the first half and the second half of the fiscal year combining fiscal Q1 and Q2, and combining fiscal Q3 and Q4. For the first half of fiscal year 'twenty five, net sales [indiscernible] plus 10.6%. And GMV grew plus 9.2%.

The adjusted EBITDA margin was at 4.5%. We therefore confirm our guidance ending 06/30/2025, with GMV and net sales growth between 713% MYT, and an adjusted EBITDA margin between 35% MYT. In line with our seasonality, we expect typically weaker fiscal Q3 comparable with fiscal Q1. And a typically strong fiscal Q4. With all the above, it comes as no surprise that we're very comfortable with our of our unique positioning and business model and we will continue our clear focus on strong and profitable growth. We are also truly excited for the medium and long term outlook of our business as we embark on the next chapter of growth. With the expected closing of the acquisition [indiscernible] in H1 of calendar year twenty twenty five. Forming the new group LUX6 experience, we aim to fortify our clear market leadership position in global multi brand luxury. That's for strong profitable growth and thereby creating significant value for our shareholders and all stakeholders in MyTeresa and the YOOX NETAPORTEE group. And with that, I will now turn the call back over to Michael. For his concluding remarks. Thank you, Martin. We are very pleased with our second quarter of fiscal year twenty twenty five earnings results.

We are even more pleased to see ourselves well positioned to achieve our fiscal year twenty twenty five guided targets. Based on the first half of this year, 2025, We continue to focus on creating a community for true luxury enthusiasts worldwide and the desire to digital and physical experience. We see ourselves well prepared for the and are excited to create significant value for our high end customer brand partners and shareholders. And with that, I ask the operator to open the line for your questions. Our first question will come from the line of Oliver Chen with TD Cowen.

Please go ahead.

Hi, thank you very much. I'm excited with the deal. As you think about getting ready for the deal, what are your thoughts on the technology stack? And what you're doing just to to optimize the integration opportunity. Also, as we look forward to that, any other thoughts on the YOOQ side of the business in terms of restoring better profitability there And then a follow-up on guidance, would love color on gross margins in [indiscernible] how you're viewing those. It sounds like inventory is in really good shape. Thank you, Oliver. Let me address the first two questions and then Martin will speak about the guidance. As we are before closing, we of course [indiscernible] in a position to have full operational insights, but we explained clearly in our Investor Presentation on the announcement of agreement that the clear strategy is to bring the luxury businesses of Lutz Netherporter onto the Miterreza Platte in the sense of our own developed technology that is clear clearly the best solution. We have a platform that works. It's fully owned by us, fully operated by us. We know it inside out. We have the strong engineering bench to do that. Clearly, such a replatforming exercise will require 24 to thirty six months.

That is an expected duration and MYT quite achievable based on our experience of our OVE platform. We strongly believe that with a joint back office and a separated back office for the off price businesses, we do and provide the best and most efficient solutions for all those banners that join our group. And then on the banner side, we see opportunity to make them even stronger, even though the brand equity of Letter Porter, Mr. Porter, MYT outlet are quite strong. But we will invest to make them even more desirable and to be fully in line with the principles of Luxe experience, which is customer focused, curation and inspiration. So we're really excited about this and are hopeful to close the deal in the next couple of months. Then Martin, maybe you take up the margin question. Yes, happy to do so. Guidance and gross profit margin development. Exactly, as you rightfully focus on how is the quarter performance changing the overall guidance and how it is relating to the guidance. The performance in Q2 is fully in line with our expectation. And it is always given the seasonality you have to look at always the first and the second half.

So Q2 and Q4 are very strong quarters. Q1 and Q3, given seasonality, are weaker quarters. That's why looking at the performance of H1, and the as you rightfully point out, Oliver, the improvement in the the gross profit margin of 140 basis points in Q2, it was 110 basis points. We expect a similar performance of H2 than what we saw in H1. So therefore, I mean, the 140 basis points, I'm not sure whether due to the lapsing of some effects, we everybody should expect for H2. But we don't want to come back to decreasing gross profit margins. We want to continue and that is clearly visible in our numbers on our focus on full price on a very strong full price share. On targeting the right set of customers and this is fully in line with our guidance. So also expect an H2 a stable, slightly increasing gross profit margin. And the overall H2 to be very comparable with H1. Thank you. Best regards.

And we'll take our next question from the line of Matt Boss with JPMorgan. Please go ahead.

Thanks and congrats on a nice quarter.

So Michael, could you speak to current health of the digital [indiscernible] in terms of what you're seeing? And just elaborate on the acceleration in demand that you saw across The U. S. And Europe in the second quarter? And has the momentum continued post Sure. Thank you, Matt.

I think the digital sector is good health if you regard it from the consumer perspective. The expansion of the digital share in luxury is continuing. Of course, there are sort of polarizations out there. It's absolutely true for the big spenders. We continue to see they spend more and more with us spend more and more on digital and there is this geographic polarization. We have seen continuous improvement in U. S. Post election, really strong demand and we are very happy with our European business almost 13% growth, So we have now a second strong lag in the business and it's of course also a very strong business in the Arabid Peninsula While Asia, particularly Greater China, still lags behind, still MYT The demand is still dampened by the economic outlook. So we would say the health is very good.

We have really seen a turn out of the heavy discounting that we saw last year, the slowdown as discussed before, has really surprised many players leading to high inventory levels [indiscernible] as long as Martin clearly highlighted, we are actually slightly below last year's inventory because despite revenue growth but the digestion of inventory or oversupply of inventory has happened across the board. So while we only see small green shoots in some places, The health of the industry is dramatically better than twelve ago and then we in our numbers for sure have seen a pivot now for some quarters and therefore our outlook is positive, not negating that the macro environment is still quite volatile.

Great. And then Martin, maybe relative to 3% to 5% EBITDA margins this year, How best to think about the timeline you see as reasonable for a return to historical high single digit EBITDA margin? Yes. Happy to do so, Matt MYT.

I mean, obviously, we in the first half of the fiscal year, we had an EBITDA margin of 4.5% MYT for the second half, I mean, for the full fiscal year, we guide to 3% to 5%.

Given the uncertainties in the industry, the shifts that I mean, nobody really can foresee how 2526 will unfold. But it is clear that we embarked on a trend on the gross margin side and this is the key driver for our overall profitability MYT, So we clearly expect in the medium term to come back to the higher single digit margins that we used to have couple of years ago.

Great. Best of luck.

Our next question will come from the line of Ashley Helgans with Jefferies. Please go ahead.

Hi, it's Blake on for Ashley. Thanks for taking our question. Wanted to start with sounds like you're your high end luxury consumer is obviously really strong. Can you talk at all about the trends of the more aspirational customer throughout the quarter?

Sure. Happy to do so. What we have seen and it continues that The U. S. Consumer is really leading the way and we have really seen strong growth in The U. S. Market.

For some quarters, at least for MYT data that is. And now we have also seen double digit growth in Europe, which is quite nice to see even though, of course, also in Europe, there are markets that grow even stronger and some markets are lagging. And this is starting to be also driven by aspirational customers also starting to be driven by better sales in accessories, in bags, which are the categories that are driven by or at least driven more by aspirational customers. This is by no means where we were in 2022, But as you rightly say, our strong driver gross driver is the better part of the customer cohorts And here, we continue to see also in this quarter double digit revenue increase per capita. These are the drivers this makes Miteliver so successful in the still volatile environment. But we and I will repeat, we see a pivot in the market If you exclude Greater China, then we clearly see a pivot in the market.

That's encouraging. And then wanted to ask, two more if I could. One was on the marketing ratio. There seem to be you seem to lean into marketing spend a bit more in Q2. How should we think about that rate for the second half on marketing?

And then the touching again on the top customers, I think they did decline slightly year over year. Versus being positive recently how are you thinking about managing the growth of AOV versus top customers in that [indiscernible] Very happy to answer and you're right and you picked up correctly on our presentation.

I'll leave it to Martin for the outlook of marketing spend, but actually the two questions are connected. We have, as you heard from Martin, increased our marketing spend significantly over the quarter last year. And what we are doing now, we are investing in growth with upper funnel investments.

Of course, in 2023, as the market was more difficult and as we managed costs very tightly to achieve still good financial results. We focused a lot of the marketing spend on the lower immediately returning investments But now that we see opportunity to grab market share and as now the market is picking up we're also investing more on the upper funnel, which does not give you immediate new customers, which does not drive immediate pickup in revenue. But it's sets and lays the ground for future cohort acquisition because for new customers, it takes a while and much It's not immediate conversion. And that's what you see and what you rightly picked up as small decrease in the base even though the quality is amazing with double digit [indiscernible] consequence of lower longer longer term operating marketing spend a year ago So it's good news. We are back. We're investing in marketing.

And this lays the foundation for more customer growth and also expansion of the top customer cohorts. So nice pickup. And Martin, maybe you give an outlook on that.

Yes. Yes. And with that, what Michael said, we expect also for H2 they come back to the normal levels of the marketing cost ratio that we always had. Around 1212.5%.

Great. Thank you so much and best of luck for the second Our next question comes from the line of Grace O'Sottaloe with Morgan Stanley.

Hi. Thank you for taking my I wanted to ask on what you're seeing around price points. You've had a lot of evidence of more premium brands doing better than luxury in the industry. So any color there that you can call out? And also in [indiscernible] price for items in the industry?

Thank you.

Honestly, in our business, the emergence of more entry price points, I cannot the business is driven by expenditures, is driven by high priced items. What I can confirm is, however, that we clearly are in a moment of pause or hold on any further price increases.

So in that sense, we have come out of a phase where a lot of price increases happens and arguably some of them were too far or too high. The market overall, I think, is is looking at opportunities to bring back the aspirational customer as just a discussed, and we do believe that well priced entry price level or, of course, in the context of true luxury is one element of that strategy. And our business, the growth that you have seen and as demonstrated by the average order value, which in turn is driven really by the average item value, the 9.5% increase Our gross is not driven by business that is tilting towards premium or entry price points.

Thank you. Question from the line of Oliver Chen with TD Cowen.

Please go ahead.

Hey, Michael, Martin. Thanks a lot. U. S, you've had really great momentum and you continue to have. What are your thoughts in terms of what's fueling that and also service levels and distribution centers.

Longer term, our thesis is for physical meets digital and bricks meets clicks. What do you think about the future of how you'll evaluate physical distribution as well more broadly?

Well, I mean on the second part, I agree. We agree that physical presence is key. I mean, we believe we need to form strong customer relationships and we are. We need to present digital, but physical experiences as well.

And for the moment, this clearly means physical pop ups, physical presentations of our brand of what we do, as of this weekend, we will be present physically In Aspen, [indiscernible] together with our friends from Bermonde's Bar from New York, first time, you can experience Berndon's Bar outside of the Carlisle in New York. So that we totally agree with and the no coincidence that we name our overall group Luxe Experience therefore, physical, incarnation, so to speak, RT The key for our success, we believe, at least is our customer focus, really understanding what it is that our customer wants, introducing products they desire, be it kids, live and now a clear focus on fine jewelry and really establishing relationships with a customer clientele that is very careful with its time. So, you need occasional moments to really strengthen and form relationships and otherwise, time is and speed is still one of the key components of excellent service in e commerce and we are working hard on this Our new distribution center in Leipzig As again made it possible to be faster We always sit down on the roadmap If we achieve critical mass in certain geographies, we also believe that regional distribution centers can play a role in making time a real USB.

And obviously, with the expected acquisitions, there are more opportunities to to start doing this.

We'll take our final question from the line of Wendy Gauth with CICC. Okay. So how long Martin and Michael, and congratulations to the nice results. I think I have a question about the top customer profile by region. Like can you share any something about maybe the mix about the top customer profile and also the relevant average order value?

I mean, we have shared in the past that [indiscernible] and numbers account for close to 4% and make up close to 40% of revenue. And that mix is actually quite similar across geographies. So this holds true for Europe, for The Americas, and for Asia and Greater China. What is true is that the average order values particular in Greater China, particular Asia, also in the Arabic Peninsula tend to be higher So we are getting there more to four digits or above. Whereas across the other geographies, it is three digits and the average is seven thirty six.

So there is even higher appetite for some of the more expensive items, pine jewelry in the Redick Peninsula, higher priced accessories in Asia, Southeast Asia Greater China. But the percentage and the importance also driven by our focus of top customers is the same across all geography and the desire to have the latest European available in those regions is also the same in terms of which brands are popular. We always share that if you look at the top 30 brands, they are very similar. Maybe the sequence is different across geographies, but the top 30 brands are very similar across the whole world for us.

Understood. Thank you. And if we just talking about like with the China, you mentioned that this region is still impacted by maybe the macro uncertainties.

Or something else? But if you look at like quarter by quarter, how do you think about the the rates were like recover a bit?

Yes, you're absolutely right. It's still dampening, but we do also for this region see continuous improvement particularly in Greater China. We see that the business is improving slowly. After, of course, quite significant contraction, We do believe it has a lot to do with the macro economic environment and therefore, it is quite interesting and important to see what additional economic stimulus and economic programs The government will launch in China. But at the moment, we do see a slow recovery already.

That will conclude our question and answer session in our call today.