CEWE Stiftung & Co. KGaA — Call Transcript 2021

Nov 12, 2021

Results Q3 2021 Analyst Conference Call

CEWE Stiftung & Co. KGaA

November 12, 2021

This presentation contains forward-looking statements that are based on current assumptions and forecasts of the management of CEWE. Known and unknown risks, uncertainties and other factors could lead to material differences between the forward-looking statements given here and the actual development, in particular the results, financial situation and performance of our Company. The Company assumes no liability to update these forward-looking statements or to conform them to future events or developments.

All numbers are calculated as exactly as possible and rounded for the presentation. Due to this, rounding differences might occur.

3

Agenda

1. Corporate Development by Business Segments

• 1.1 Photofinishing
• 1.2 Retail
• 1.3 Commercial Online-Print
• 1.4 Other

2. Group Results

• 3. Financial Details
• 4. Outlook

5. Q&A-Session

Q1-3 with a head start confirms CEWE Group Targets 2021

Comparison with the Q4 EBIT development of previous years

After a strong Q4 2020: Even a significant decrease in the Q4 result can lead to an EBIT 2021 within the target range

Results Q3: PF misses long-distance travel, COP improved

• Photofinishing (PF) is developing weaker in Q3 as many people caught up on experiences that were not possible during the lockdown and ordered fewer photo products. Long-distance travel as an occasion for a particularly large and page-rich CEWE PHOTOBOOK has not yet appeared again due to the pandemic. Turnover decreased by -3.7% to 106.3 million euros, EBIT is reduced accordingly to -2.1 million euros (Q3 2020: 0.2 million euros).
• Commercial Online-Print (COP) benefits in Q3 from the increasing demand for printed business and advertising materials with sales growth and significantly improved earnings. The optimized production and cost structure sustainably improves the earnings situation. Turnover increased by 8.0% to 16.6 million euros, EBIT improved by 1.3 million euros to -0.2 million euros.
• Hardware Retail (RT) improves earnings in Q3 with optimized point-of-sale-structure: Despite 30% shops less turnover decreased by only 15.8% to 7.6 million euros. EBIT improved slightly to -0.02 million euros (Q3 2020: -0.05 million euros).
• In total (including business segment others), Group turnover decreased in Q3 slightly by -2.9% to 132.4 million euros. The Group EBIT reached -2.1 million euros (Q3 2020: -1.7 million euros).

Photofinishing

EISA Award for the CEWE Photoworld App

Spectacular landscape wins CEWE Photo Award 2021

Photographer Manfred Voss won this year's CEWE Photo Award with an almost unreal but beautiful landscape photo of an ice-covered lighthouse on the island of Rügen

75 millionth CEWE PHOTOBOOK in 2021

• Bestselling photo book in Europe
• CEWE customer Lizzie Ross ordered the 75 millionth CEWE PHOTOBOOK at trading partner Boots in London
• Since 2005, the CEWE PHOTOBOOK has been a bestseller

NEW: Advent calendar with 100% biodegradable inner part

NEW: Expansion of frame range & lamination (glassless)

NEW: Premium poster - now also with design Stylish designs for every occasion

NEW: CEWE PHOTOBOOK gift box With gray linen cover and white cardboard inlay

NEW: CEWE PHOTOBOOK page package extension Roll-out of the page packages

NEW: Nature Prints High quality photos on recycled paper NEW: CEWE greeting cards with natural paper The sustainable paper alternative for greeting cards

NEW: Premium designs for even more products Stylish design templates for every occasion

Great emotions in the 2021 Christmas campaign

Gift promise for Christmas

"

This year we are making a clear gift promise to our customers: CEWE stocked up on all the necessary material at an early stage and comprehensively in order to be well equipped for the upcoming Christmas business. In view of the current challenges, we have prepared ourselves particularly well for the Christmas season so that we can produce the individually designed photo products as usual and deliver them in time for Christmas. "

Dr. Christian Friege, CEO

Number of prints and turnover Photofinishing Q3

• Impact of coronavirus easing still apparent in Q3: people are catching up with things that were not possible during lockdown and are ordering fewer photo products
• Mainly the coronavirus-related absence of top-selling (long-distance) travel photobooks saw
• 24 turnover per photo diminish in Q3 (CEWE PHOTOBOOK volume shows a Q3 decline of 8.4%)

Number of prints and turnover Photofinishing Q1-3

• Rounding differences may occur.
• Impact of coronavirus easings also apparent in the first nine months of the year: people are catching up more with things that were not possible during lockdown and are ordering fewer photo products

CEWE PHOTOBOOK Q3 and Q1-3

• More than any other, the classical multi-photo product is experiencing the emerging, temporary absence of photos resulting from holiday restrictions (including little or no long-distance travelling)
• Impact of the shift from coronavirus lockdown and easing of related measures: people are catching up more with things that were not possible during lockdown and are ordering fewer photo products

Business Segment Photofinishing Q3

in Euro millions

Shift from a coronavirus lockdown to relaxations still felt in Q3: people are catching up with things that were not possible during lockdown and are ordering fewer photo products (online)

• Since coronavirus relaxations are ongoing, in Q3 many people continued to catch up more with things they couldn't do in lockdown, hence also ordering fewer photo products ▪ Long-distance travels that are still not possible are dampening demand for CEWE PHOTOBOOKS and reducing Q3 turnover
• The decline in demand induced by the shift from a coronavirus lockdown to relaxations led to a weaker photofinishing EBIT than in a "normal" non-coronavirus year prior to 2020
• In this situation, only 0.3 million euros in social insurance payments in the form of partial unemployment benefits still helped to offset some of the personnel costs incurred without any work being performed (Q3 2020: 0.5 million euros)
• Q3 2021 special effects: -1.0 million euros
  • − Effects resulting from the Cheerz purchase-price allocation: 0.5 million euros
  • − Effects resulting from the WhiteWall purchase-price allocation: 0.5 million euros
• Previous-year Q3 2020 special effects: -1.1 million euros
  • − Effects resulting from the DeinDesign purchase-price allocation: 0.1 million euros
  • − Effects resulting from the Cheerz purchase-price allocation: 0.5 million euros
  • − Effects resulting from the WhiteWall purchase-price allocation: 0.5 million euros

Business Segment Photofinishing Q1-3

in Euro millions

Switching from a coronavirus lockdown to the easing of coronavirus restrictions changed demand-related behaviour in Q1-3 in comparison to the previous year and has hence likewise changed the earnings situation

• While the ongoing lockdown situation in Q1 generated growing online business to significantly benefit the development of sales and earnings, as soon as initial coronavirus easing began in Q2, people caught up with what had not been possible during lockdown, thus generally ordering fewer photo products in Q3 as well.
• In the period from Q1-3, the changed trend in demand as a result of government action relating to the pandemic saw the photofinishing EBIT at the same pre-coronavirus level as in 2018/2019.
• In this situation, only 0.9 m. euros in social insurance payments in the form of partial unemployment benefits still helped to offset some of the personnel costs incurred without any work being performed (Q1-3 2020: 1.2 million euros)
• Q1-3 2021 special effects: -3.1 million euros
  • − Effects resulting from the Cheerz purchase-price allocation: -1.5 million euros
  • − Effects resulting from the WhiteWall purchase-price allocation: -1.6 million euros
• Previous year special effects for Q1-3 2020: -3.3 million euros
  • − Effects resulting from the DeinDesign purchase-price allocation: -0.3 m. euros
  • − Effects resulting from the Cheerz purchase-price allocation: -1.5 m. euros
  • − Effects resulting from the WhiteWall purchase-price allocation: -1.5 m. euros

Photofinishing-Turnover by Quarter

Estimated seasonal distribution: CEWE 2017 to 2021 – Share in turnover by quarter as a million

Photofinishing-Turnover by Quarter

Estimated seasonal distribution: CEWE 2017 to 2021 – Share in turnover by quarter as a million

30

Fotofinishing-EBIT by Quarter

Estimated seasonal distribution: CEWE 2017 to 2021 – EBIT by quarter as a million

31

Retail

Retail with focus on photofinishing business

• Own retail stores in NO, PL, CZ, SK
• Strategic focus on photofinishing and online business
• EUR 34.1 million revenue (2020) with photo-hardware (cameras, lenses, …)

Retail segment contains hardware revenue only, photofinishing business is shown in photofinishing segment

Business Segment Retail* Q3

in Euro millions

Hardware retailing achieves slightly better earnings at a typical Q3 level with a structure of reduced stores

• In spite of fewer stores (around 100 instead of previously 140 stores), hardware retailing achieved turnover of only 15.8% less
• Due to a focus on photofinishing and online business and to consciously refraining from low-margin hardware business, the active reduction in turnover before the onset of the coronavirus crisis had for many years already amounted to an approximate strategic -10% to -15%
• With an optimised store structure, retailing generated a slight improvement to operative earnings
• In this situation, only 65 thousand euros in social insurance payments in the form of partial unemployment benefits continued to help in offsetting some of the personnel costs incurred without any work being performed (Q3 2020: 145 thousand euros).
• Q3 2021 special effects: none
• Previous-year special effects in Q3 2020: none

Business Segment Retail* Q1-3

in Euro millions

Hardware retailing improves earnings with an optimised store structure

• In Q1 2021, retail turnover declined by 16.8% due to the ongoing lockdown; in Q2, against the background of the easing of coronavirus measures in comparison to the first strict lockdown last year, turnover was at the same level as in the previous year. With around 30% fewer stores than in the previous year (100 instead of formerly around 140), turnover in Q3 was 15.8% weaker than that of Q3 in 2020
• The EBIT reported for retailing improved significantly by 3.0 million euros after rounding off.
• Last year saw the accrual of around 1.7 million euros in restructuring provisions and 1.5 million euros in allowances for inventories of stocks on the basis of the store structure optimisation announced (see below)
• In this situation, only 0.7 million euros in social insurance payments in the form of partial unemployment benefits still helped to offset some of the personnel costs incurred without any work being performed (Q1-3 2020: 1.0 million euros)
• Q1-3 2021 special effects: none
• Previous year special effects for Q1-3 2020: -3.2 m. euros
  • − Restructuring provisions for retailing: -1.7 million euros
  • − Allowances for inventories of stocks: -1.5 million euros

Commercial Online-Print

Commercial Online-Print

Business and advertising prints: flyers, business cards, stationery, packaging, promotional items, etc.

Business Segment Commercial Online-Print Q3

in Euro millions

• COP benefited from the revival of business life, with another increase in turnover
• 38 Rounding differences may occur. The optimised production and cost structure made a lasting improvement to the COP earnings situation
• The revival of business life that began when coronavirus measures were eased and continued in Q3 further increased demand for printed advertising material
• Thanks to these sales and an optimised cost structure, COP improved its quarterly earnings by a pleasing rounded amount of 1.3 million euros
• Ongoing strict cost management together with a generally more efficient production and cost structure sustainably backed up this improvement in earnings
• This did not involve any more social insurance payments in the form of partial unemployment benefits (Q3 2020: 0.2 million euros)
• Q3 2021 special effects: 0.1 million euros
  • − Effects from the Laserline purchase-price allocation: 0.1 million euros
• Previous-year Q3 2020 special effects: 0.1 million euros
  • − Effects from the Laserline purchase-price allocation: 0.1 million euros

Business Segment Commercial Online-Print Q1-3

in Euro millions

The optimised production and cost structure made a lasting improvement to the COP earnings situation

• In Q1, COP was strongly impacted by the coronavirus, with turnover declining by 43.2% during the lockdown; Q2 saw the easing of coronavirus measures and the revival of business life, boosting demand for printed advertising material and with COP increasing by 25.8% in comparison to the sharp decline in the figure for the previous year; this also raised Q3 turnover by 8.0% in comparison to the turnover generated in Q3 2020 when the decline had already been curbed
• Ongoing strict cost management together with a generally more efficient production and cost structure resulted in a clear improvement in earnings in the amount of 3.9 million euros
• In this situation, only 0.7 million euros in social insurance payments in the form of partial unemployment benefits still helped to offset some of the personnel costs incurred without any work being performed (Q1-3 2020: 1.2 million euros)
• Q1-3 2021 special effects: -0.2 million euros
  • − Effects from the Laserline purchase-price allocation: -0.2 million euros
• Previous year special effects for Q1-3 2020: -0.2 million euros
  • − Effects from the Laserline purchase-price allocation: -0.2 million euros

Other

Business Segment Other Q3

-0.9 -0.7 -0.3 -0.2

in Euro millions

0.3

Structural and corporate costs and profits arising from real estate property and company investments are shown in the "other" business segment.

▪ futalis continues to develop well, increasing turnover in the segment for other business by around 20.8%

• The contribution to EBIT made by the segment improved by 0.5 million euros
• futalis improved its earnings, thus continuing to make an extremely pleasing contribution to earnings at a level slightly above break-even
• The reversal of a provision no longer needed for potential subsequent property-tax payments (Saxopark) also generated a one-off improvement to earnings

Segment for Other business continues to increase turnover and improves earnings

2017 2018 2019 2020 2021

EBIT

Business Segment Other Q1-3

in Euro millions

Structural and corporate costs and profits arising from real estate property and company investments are shown in the "other" business segment.

▪ futalis continues to develop well, increasing turnover in the segment for other business by around 20.2%

EBIT

▪	The contribution to EBIT made by the segment
	improved by 0.3 million euros

▪ This saw futalis improving its earnings in comparison to the previous year, thus making a nice contribution to earnings

Segment for Other business continues to increase turnover and improves earnings

-2.3 -1.7 -1.5 -0.5 -0.2

2017 2018 2019 2020 2021

Group Results

Photofinishing Commercial Online-Print Retail Other

Coronavirus normalisation reduced demand and turnover in photofinishing COP continues to increase turnover, Retailing as expected with reduced space

Effect of the shift from a coronavirus lockdown to easing of measures determines the development of Group turnover

2017 2018 2019 2020 2021

Q3 Group EBIT: decline in photofinishing earnings slightly greater than improvement in COP and Retail earnings

Photofinishing

Commercial Online-Print

Retail

Other

With an edge into Q4: Group EBIT in Q1-3 better than in the previous year by a total of 0.7 million euros

Photofinishing

Print Retail

Other

Commercial Online-

Financial details

Consolidated income statement Q3

Figures in millions of euros	Q3 2020	% Turnover	Q3 2021	% Turnover	∆ as %	∆ m€
Revenues	136.3	100.0%	132.4	100.0%	-2.9%	-3.9	(+) Commercial Online-Print
Increase / decrease in finished and unfinished goods	-0.1	-0.1%	0.2	0.2%	375%	0.3	(-) Retail (-30% in number of stores)
Other own work capitalised	0.4	0.3%	0.3	0.2%	-11.1%	0.0	(-) Photophinishing (continued Corona easing 2021)
Other operating income	4.6	3.4%	6.2	4.7%	34.4%	1.6
Cost of materials	-37.6	-27.6%	-36.9	-27.9%	1.9%	0.7	(+) Release of accruals, sale of fix assets
Gross profit	103.6	76.0%	102.3	77.2%	-1.3%	-1.3	(+) Some service revenues
Personnel expenses	-43.4	-31.8%	-44.9	-33.9%	-3.4%	-1.5
Other operating expenses	-48.3	-35.5%	-46.1	-34.8%	4.7%	2.3	(-) Headcount increase in headquarter
EBITDA	11.8	8.7%	11.3	8.5%	-4.6%	-0.5	(-) Less compensation through short-time work allowances
Amortisation/Depreciation	-13.5	-9.9%	-13.4	-10.1%	1.0%	0.1
Earnings before interest, taxes (EBIT)	-1.7	-1.2%	-2.1	-1.6%	24.3%	-0.4	(+) Previous year corona related increase in expected loss
Financial income	0.0	0.0%	0.0	0.0%	0.0%	0.0	allowances of debtors
Financial expenses	-0.4	-0.3%	-0.5	-0.4%	-25.8%	-0.1	(+) Mailorder costs due to turnover development
Rounding differences may occur. Financial result	-0.4	-0.3%	-0.5	-0.4%	-26.4%	-0.1	(+) Less currency losses
Earnings before taxes (EBT)	-2.0	-1.5%	-2.5	-1.9%	-24.7%	-0.5	(-) Maintanance costs for preparation of Christmas business

Balance Sheet at 30 September

Assets increase due to the expiry of the Corona special measures and are financed by

equity, which is at a strong 57.3 % due to the earnings situation

Blue = Corona-related Rounding differences may occur.

49

From Balance Sheet to Management Balance Sheet

Management-Balance Sheet at 30 September

• Receivables for reimbursement of short-time allowances €1.2 m.
  • Capital employed increases primarily due to the corona-related increase in net working
  • 51 capital and is financed solely by equity

Blue = Corona-related Rounding differences may occur.

• Despite higher income tax payments due to advance payments, cash flow from operating activities increases by 2.1 million Euro due to higher trade accounts payable and lower sales tax payments as a result of lower sales.
• Cash outflow from investing activities 4.8 million Euro higher
• 52 Free cash flow in the second quarter fell by 2.7 million Euro Blue = Corona-related

Free cash flow Q1-3

Increase of € 3.7 m. due to, offsetting, lower operating investments, higher cash outflows for consolidated shares (Cheerz) and more inflows from investments in financial assets and the sale of property, plant and equipment

(+) €1.9 m. increase in Earnings (total EBITDA and non-cash effects).

(-) € 31.9 m. tax payments (postponed or reduced in the same quarter of the previous year due to Corona)

(-) Cash flows from operating net working capital lower by € 18.4 million (especially in Q1 from higher cash outflows from trade payables due to the distribution of customer payments from the mail order business via trading partners as well as payments to postal delivery service providers and lower incoming payments from trading partners due to reduced payments via their points of sale).

(-) Corona-related lower cash flows from other net working capital by € 8.2 million (mainly lower increase in sales tax liabilities due to lower sale)

Corona-related increased payments to trading partners in Q1 as well as postponements of income tax payments and the absence of positive effects from the Corona economy reduce cash flow from operating activities by 56.5 million Euro

Free cash flow decreased by 59.9 million Euro

ROCE

Mainly earnings from 2020 Christmas business in the 12-month EBIT see ROCE increase to an extremely good 19.8%

* ROCE = EBIT / Capital Employed. Rounding differences may occur.

Outlook

Revenue: CEWE on long term growth path

EBIT development: e2021

in Euro millions

Q1-3 with a head start confirms CEWE Group Targets 2021

Comparison with the Q4 EBIT development of previous years

After a strong Q4 2020: Even a significant decrease in the Q4 result can lead to an EBIT 2021 within the target range

CEWE Group Targets 2021

Targets		PY 2020	Target 2021	Change in %
1 Photos	billion photos	2.34	~2.3 to ~2.4	-2 to +3
CEWE PHOTO BOOK	millions	6.52	~6.4 to ~6.7	-2 to +3
Operational Investments 2	Euro millions	35.6	~48
Revenue	Euro millions	727.3	710 to 770	-2 to +6
EBIT	Euro millions	79.7	72 to 84	-10 to +5
EBT 3	Euro millions	76.4	70 to 82	-8 to +7
Earnings after tax 4	Euro millions	51.9	48 to 56	-8 to +7
Earnings per share	Euro	7.20	6.60 to 7.73	-8 to +7

1 The number of photos is the sum of the images with which CEWE photo products were designed and refers to all images that are used in value Rounding differences might occur. -added products (e.g. CEWE PHOTOBOOK, CEWE CARDS, CEWE CALENDAR, CEWE WALL PICTURES and other photo gifts)

2 Outflows from investments in property, plant and equipment and intangible assets, netted against inflows from the sale of property, plant and equipment and intangible assets; without acquisitions/company acquisitions 3 Without subsequent valuations of equity instruments

4 Based on the normalized group tax rate of the previous year

»The ranges of these 2021 targets reflect the uncertainty that is currently arising from the pandemic and potential effects on CEWE's business development

Q&A-Session