Mister Spex SE (MRX) Earnings Call Transcript

Thank you for standing by. Welcome to Mister Spex's Q3 2025 Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Irina Zhurba, Director of Investor Relations. Please go ahead.

Thank you so much. Good morning, everyone, and welcome to our Q3 results. As usual, the presentation will last roughly 30 minutes. Following this, we'll allow 10 to 15 minutes for the Q&A. And as always, you can find the presentations, the financials, the reports, the press releases, everything on the Investor Relations website under the Reports and Presentations. That said, today's speaker with me is Tobias Krauss, who will guide you through today's presentation. That said, let me hand over to him and begin today's call. Thank you.

Thank you, Irina, and good morning to everyone. Welcome to the results call for the third quarter. Well, today is our first touch point view following the announcement that Stephan Schulz-Gohritz has left the company at the end of October, and I'm pleased to welcome Benjamin von Schenck, who will join the next Capital Market communication event. Today's presentation is quite packed. I will share my perspective on the business after 6 months as the CEO, how I see Mister Spex moving forward and what lies ahead in 2026 and beyond. I will also provide some context and discuss this morning's press release regarding our M&A transactions and of course, walk you through our Q3 results. Even before joining the company, I was fully convinced by the market opportunity and brand strength that Mister Spex has built over the past 16 years. Once I joined, this conviction only strengthened. But as we conducted our ongoing strategic assessment and with a renewed focus on true optical expertise, it became clear that while SpexFocus has driven significant improvement, we now need to go even deeper into our operations. The goal is to understand whether everything we do truly creates customer value or as we like to call it internally, whether it contributes to the click, the value-adding moments, the activities, products and services which customers are willing to pay for. So where do we stand today? 2024 was about Country and Store rationalization. 2025 is about reducing overhead where we've just rolled out a voluntary separation program at headquarters. In 2026, we will focus on optimizing our tech stack and logistics backbone, the final step in completing our restructuring. Next year, we will return to an adjusted reporting view as this last phase will include several cash and noncash one-off effects that would otherwise distort comparability. We'll go into more details on this with our 2026 guidance in March. In parallel, we are evolving our segment reporting to better reflect our business model, shifting to online and offline channels starting next year. And importantly, 2026 will also mark the beginning of our next phase, rebuilding scale through highly selective margin-accretive bolt-on acquisitions. The first one, which we communicated this morning is a good example, profitable, well-run optical stores that strengthen our local footprint. The focus here is not on volume, but on quality. Businesses that are immediately EBITDA accretive expand our brand portfolio and add optical know-how. This disciplined approach will allow us to expand efficiently and accelerate our return on growth. The results we see today are not the end of the transformation. They mark the beginning of a company culture and DNA built on continuous improvement and operational excellence. To summarize, one key takeaway from this phase is need for stronger leadership to drive the next chapter. Based on that, we have appointed Benjamin von Schenck as our new CFO, succeeding Stephan Schulz-Gohritz. Benjamin brings more than 15 years of [Technical Difficulty] digital, retail and media sectors. His broad finance expertise, operational mindset and proven track record in managing transformation and integration make him an excellent fit for our next chapter as we start shifting focus towards disciplined growth and profitability. Benjamin will play a key role in strengthening our financial steering and driving profitable growth. The quantitative criteria for these bolt-on acquisitions are firm. We require targets to have accretive financial and operational characteristics with [Technical Difficulty]. Specifically, this means revenue above EUR 700,000 and an EBITDA margin greater than 10%, while retaining separate brand identity, customer and employee relationships. This is governed by our rule of 3x 80% across the high-margin categories of Prescription Glasses, Varifocal and Prescription Sunglasses. This strategy allows us to accelerate profitable growth and enhance our margin profile. Mister Spex is executing a strategy to accelerate profitable growth and enhance its margin profile by optimizing its optical retail mix, building scale in Tier 2 and Tier 3 cities and adding specialized optical expertise. This approach strengthens its position as one of Germany's leading omnichannel optical retailers, successfully combining digital scale with local excellence. Our First Step confirms this disciplined approach. These asset deals involve the acquisition of 4 profitable well-established optical stores. These stores generate a cumulative annual revenue of approximately EUR 4 million with an EBITDA margin comfortably above 10%, including rent. They will operate in a stand-alone integration model, maintaining brand and operational continuity. Locations include 2 stores in North Rhein Westfalia, Krefeld and Bruhl. Bruhl is the store you can see in one location, each in Berlin and Hanover area. Their experienced local teams will remain in place. Our focus on profitability is evident in our store network. 35 stores now achieve an EBIT margin greater than 10% in Q3 2025, a significant increase from just 18 in Q3 2024. This success is driven by our improved product mix. The Prescription Glasses' share is at 62%, up from 59% in Q3 2024. The Multifocal share is around 40% and the Prescription Glasses' share stands at approximately 30%. The average order value in our stores reached EUR 192, representing a substantial 20% growth year-on-year. Stores sales still range from EUR 0.3 million to EUR 1.8 million for the 9 months of 2025, which illustrates the potential for further like-for-like growth in the near future. Let's return to our operational structure and initiatives we are taking to sharpen our backbone. In refocusing our international footprint and thereby reducing our strategic complexity, we have closed 5 of 10 international web stores: Finland, France, Norway, Spain and the United Kingdom. We are continuing operations in Austria, Switzerland, Sweden, The Netherlands and Belgium. The Home Trial was discontinued in all markets, except Germany, Austria and Switzerland. In streamlining overhead and structures, we launched a voluntary separation program at headquarter in October 2025. This means additional 25 people will leave the company, contributing to an overall headcount reduction of approximately 140 people since the beginning of the year, a reduction of 10% versus the start 2025. 30 of these reductions are in overhead. In 2026, we'll focus on optimizing our tech stack and logistics backbone. This involves the implementation of one integrated AI-supported IT architecture for ERP, Store and E-commerce, simplifying our operating model and enabling scalable growth with strong efficiency gains expected from 2027 onwards. With this strategic and operational context established, let us now move to the financial update for the third quarter. Q3 2025 shows ongoing profitability improvements across key indicators. Net revenues for the group declined 18%, reaching EUR 47.5 million in Q3 2025. Germany's revenue declined 11% with like-for-like growth of 10% plus, while International saw a 41% decline due to our strategic refocus mentioned before. This is due to Mister Spex's strategic pricing discipline and not accepting loss-making business anymore. The core of this improvement is the gross profit margin expansion of 600 basis points, marking the first consecutive quarter margin improvement and resulting in a Q3 margin of 54.7%. This margin discipline and cost control drove a EUR 10 million improvement in EBIT, closing the quarter at minus EUR 4.6 million. Our free cash flow also saw a robust EUR 10.2 million improvement versus Q3 2024, finishing Q3 at minus EUR 7.5 million. This reflects operational improvements and reduced IT and tech investments in legacy systems. A deeper look at the German segment confirms the shift towards high-margin business. Net revenue in Germany declined by 11% to EUR 40.1 million. However, the segment's gross margin expanded sharply to 55.4%. This is driven by high-margin categories. Prescription Glasses sales grew 17% year-on-year in stores and 10% overall, reaching EUR 19.5 million in revenue. This drove AOV growth of 24% in Q3. Our offline sales grew by 11%, leading to a strong like-for-like growth of 10%. Note, the Sunglasses category was impacted by a 25% revenue decline, reaching EUR 11.9 million in Q3. Sunglasses AUV still grew by 10% in Q3. This strong margin expansion was achieved despite Sunglass category pressure, highlighting the success of successful discount detox. The International segment, the figures reflect our refocusing efforts. Net revenue declined by 41% to EUR 7.4 million. This revenue decline is due to the closure of stores in the United Kingdom and the shutdown of Web shops in markets like Sweden, Spain and Norway as part of the SpexFocus program as well as reduced discount activity. Despite this revenue decline, the international gross margin remained stable at 43.4%. The biggest revenue impact we've seen in the Sunglasses category, down 57% and contact lenses down 33% due to the deep reduction in discounts. Reviewing the P&L in detail. The gross profit margin improved by approximately 600 basis points year-on-year, reaching 54.7% on a gross profit of EUR 26 million. On the cost side, personnel expenses improved by EUR 3.3 million year-on-year, reducing to EUR 13 million. This includes an adjustment for one-off garden leave payments. Marketing expenses were reduced by EUR 1.6 million to minus EUR 4.9 million year-on-year as the campaign for the subscription service, Mister Spex SWITCH, was launched in Q4. Other operating expenses decreased by EUR 2.6 million to minus EUR 9.3 million due to lower legal fees. The cumulative effect of these savings and margin gains drove the total EUR 10 million EBIT improvement, reducing the loss of minus EUR 4.6 million. So to conclude, after 3 quarters, we can say with confidence that we've achieved substantial improvements across the business. Profitability is improving. Our structure is leaner and our focus is much sharper. But it is also clear that our transformation is not yet complete. For the full year, we expect net revenue to decline between 10% and 20% with results likely to land around the midpoint of the guidance range, reflecting the continued reduction of discounts and our focus on higher-margin products. EBIT margin between minus 5% and minus 15% expected to come in towards the lower end of the range, mainly driven by higher IT costs, impairments, the voluntary separation program and management changes. Cash and cash equivalents to the end of the year between EUR 56 million and EUR 54 million, maintaining a solid liquidity position. Looking ahead to 2026, our focus will shift to completing the final phase of our restructuring. Optimizing our logistics and tech stack, therefore, will also incur a low double-digit euro amount in one-off costs in this last part of restructuring. As of next year, we will transition our performance metrics to revenue and adjusted EBITDA, providing a clearer view of the true operational performance. In addition, we will update our segment reporting to better reflect how we manage the business moving to online and offline segment starting in 2026. And last but not least, we'll consolidate the 4 optical stores recently acquired, contributing approximately EUR 4 million in annual sales and around EUR 0.5 million in EBITDA on a full year basis. Three quarters in, the direction is clear. Profitability is improving, our structure is leaner, and we are building the foundation for long-term profitable growth, driven by a company culture and DNA of lean management and continuous improvement. With that, we conclude the presentation and are now happy to take your questions. Thank you.

[Operator Instructions] And your first question comes from Ralf Marinoni with Quirin PrivatBank.

I have some questions regarding your acquired stores. First of all, where do you see the potential for synergies? Further on, which multiples did you pay? Maybe you can indicate us the multiples? And finally, can we expect a higher volume of acquisitions? I think that many opticians will see the business -- will leave the business due to their age in the future. So there can be a lot of opportunities to accelerate your acquisitions?