Technogym — Investor Presentation 2018

Mar 27, 2019

>35 years of organic growth

Technogym disruptive innovation

SKILLATHLETIC: our new experience for athletic training

A new immersive training experience accessible both in existing Clubs or in new boutique fitness studios

SKILL LINE: a new product category defined by Technogym

2018: Technogym confirms its profitable growth Currency neutral double-digit top line growth, significantly outpacing the market and competitors

Profitability enhancement: 21,2% EBITDA margin and 16,9% EBIT margin

in all the key geographies

• Net Profit grew by 53% Y/Y to EUR 93m
• Sound net financial position: Net Debt / EBITDA <0,3x at EUR 35m (including EUR 28m of leasing exposure) Dividend of EUR 0,18/sh (+100% Y/Y) to be proposed to the shareholders meeting

Revenues showed high single-digit growth

Top line growth mainly driven by new customers

Revenue growth driven primarily by NA, APAC & Italy

Growth driven primarily by field sales

Profit and Loss statement

(€m)	Profit and Loss statement
	Dec		2018 vs
	2017	2018	2017
Total revenue	587,0	634,1	8,0%
Cost or raw, ancillary and consumable materials and goods for resale	(194,6)	(200,5)	3,0%
Service, Rentals and leases	(140,4)	(162,5)	15,8%
of which (cost) not recurrent	(0,0)	(2,0)
Personnel cost	(125,3)	(133,8)	6,8%
of which (cost) not recurrent	(0,3)	(1,0)
Depreciations, amortisations and write-downs	(24,5)	(22,0)	-10,2%
Provision for risk and charges	(4,1)	(2,6)	-37,4%
Other operations cost of which (cost) not recurrent	(7,1) 0,177	(6,1) 0,0	-13,5%
Share of result joint venture	0,0	0,3	486,1%
Net operating income	91,1	106,9	17,3%
Margin (%)	15,5%	16,9%
Financial income and (expenses)	(5,2)	0,6	-111,7%
Profit (loss) before tax	85,9	107,5	25,1%
Taxes	(24,7)	(14,0)	-43,3%
Profit (loss) before minority interest	61,2	93,5	52,6%
Margin (%)	10,4%	14,7%
Profit (loss) for the year of minority interests	(0,3)	(0,4)	49,4%
Profit for the year	60,9	93,0	52,6%

Key comments

• Net operating income drivers • Commercial customers leading the growth with sound contribution from 2017
  • HCP and H&R • Revenues driven by a healthy combination of volumes/price/product

  • mix growth • Increase in personnel, service costs and inefficiencies related to the new ERP implementation offset by efficiencies in production and better raw material sourcing • Declining D&A on a yearly basis driven by lower D&A on intangibles Negative FX impact driven primarily by USD, RUB and JPY: • -14,3m € on revenues • -7,4m € on EBITDA ADJ • -7,3m € on NET RESULT Tax rate was positively affected by one

-

offs (Patent Box accounted for c. 14,8m € and US for c. 2,6m € DTA not previously accrued). Recurring tax rate stood at 29,2% in the period.

EBITDA adjusted growing at >10% vs Y-1 with positive impact on profitability (21,2% vs 20,4% of Y-1)

Key comments

EBITDA adjusted margin increase:

• Positive effect mainly driven by product mix (i.e. higher weight of
• Skill Line) • Declining direct costs mainly due to production processes were offset by inefficiencies related to the new ERP implementation and a slight increase in raw material prices. • FX negatively affected EBITDA by 7,4m € in FY 18, mainly driven by USD and RUB

Technogym confirmed a strict control on Costs

Temporary TWC increase due to one offs in 2018

Working Capital (€m) Key comments

Working Capital (€m)			Key comments
(€m)	Dec 2017	Dec 2018
Inventories	67,0	89,5
Trade receivables	111,7	151,5	new ERP implementation.
Trade payable	(123,2)	(143,9)
Trade Working Capital	55,4	97,1
% LTM of total revenue	9,4%	15,3%
Other current assets/(liabilities)	(51,7)	(40,4)	Inventories
Current tax liabilities	(8,6)	(8,1)
Provisions	(14,6)	(14,1)	ERP implementation
Net Working Capital	(19,5)	34,6
% LTM of total revenue	-3,3%	5,5%	€) and raw materials (17,2m €)
Inventory Turnover 1	6,1	5,2	Trade receivables
Days Sales Outstanding (DSO) 2	57,9	72,5
Days Payables Outstanding (DPO) 3	123,5	133,0	the "Order to cash" process
			Trade payables
			FY 2018

The TWC - 15% of revenues in FY 18 – has been negatively impacted by inefficiencies related to the new ERP implementation. Technogym is currently recovering these one-off issues which should be solved by H1 2019 • Yearly increase led by higher stocking due to ERP implementation • Main components are finished products (71,0m €) and raw materials (17,2m €) Trade receivables

Inventories

-

• Yearly growth driven by some constraints in executing the right billing and credit recovery in the "Order to cash" process • Confirmed general good credit quality Trade payables • Improving DPO dynamics (now at 133 days) in FY 2018
  -

Strictly private & confidential 16

CAPEX at 5,1% on revenues, slightly increasing Y/Y

Net Financial Debt

Net Financial Debt (€m) Key comments

Cash & Cash equivalent • Strong cash position mainly refers to bank deposits € denominated

• Current bank debt

• Mainly composed of credit lines stand-by and short-term financing. As of 31/12/2018 − Lines of credit and overdrafts uncommitted for ~96,6m € of which 29,1m € drawn (revocable / floating rate: EURIBOR + spread) Current portion of non-current debt / Non current

• financial debt • Flexible financial structure based on bank amortizing loans with ~1,7y duration (floating: EURIBOR + spread) • In 2017 one amortizing loan has been hedged with a plain vanilla interest swap (Notional: 18m €, maturity

  • 2020)
• Leasing exposure stands at 28,1m € in Y18 (12,4m € short term among "other current financial debt" and 15,7m € among "non current financial debt"), increasing vs Y-1 (22,9m €). Other financial debt

• Excluding other financial debt (mainly due to financial leasing required by IAS 39) NFD would have decreased by 65% compared to previous year (€ 6,4m in 2018 vs 18,1m in 2017)

Balance Sheet

€m	Dec 2017	% on Revenues	Dec 2018	% on Revenues
Inventories	67,0	11,4%	89,5	14,1%
Trade receivables	111,7	19,0%	151,5	23,9%
Trade payables	(123,2)	(21,0%)	(143,9)	(22,7%)
Trade Working Capital	55,4	9,4%	97,1	15,3%
Other current assets/(liabilities)	(51,7)	(8,8%)	(40,4)	(6,4%)
Current tax liabilities	(8,6)	(1,5%)	(8,1)	(1,3%)
Provisions	(14,6)	(2,5%)	(14,1)	(2,2%)
Net Working Capital	(19,5)	-3,3%	34,6	5,5%
Property, plant and equipment	139,0	23,7%	142,6	22,5%
Intangible assets	28,9	4,9%	35,9	5,7%
Investments in joint ventures	17,7	3,0%	18,0	2,8%
Employee benefit obligations	(3,1)	(0,5%)	(3,0)	(0,5%)
Other non current asset and (liabilities)	11,3	1,9%	16,1	2,5%
Net Fixed Capital	193,9	33,0%	209,6	33,1%
Net Invested Capital	174,4	29,7%	244,1	38,5%
Shareholders' Equity	133,1		209,3
Financial Net Debt	41,3	7,0%	34,9	5,5%
Total Source of Funding	174,4	29,7%	244,1	38,5%

Cash Flow statement

Consolidated profit for the year 61,2 93,5 32,2 Depreciation, amortization and impairment losses 24,5 22,0 Provisions 4,1 2,6 Share of net result from joint ventures (0,0) (0,3) Net financial expenses 4,2 (0,5) Income/(expenses) from investments 0,9 (0,1) Income tax expenses 24,7 14,0 Cash flows from operating activities before changes in working capital 119,6 131,2 11,5 Change in inventory 5,2 (22,5) Change in trade receivables (17,5) (37,6)	52,6%
	9,6%
Change in trade payables (1,1) 20,8
Change in other operating assets and liabilities (0,7) (11,1) Non-recurrent fiscal payment 0,0 0,0
Income taxes paid (18,5) (18,6)
Net cash inflow from operating activities (A) 87,0 62,2 (24,8)	(28,5)%
Investments in property, plant and equipment (9,8) (18,2)
Disposals of property, plant and equipment 0,2 0,4
Investments in intangible assets (15,3) (15,1)
Disposals of intangible assets 0,0 0,3 Dividends received from associates 0,0 0,0
Dividends received from other entities 0,2 (0,0)
Dividends received from joint ventures 0,0 0,0
Minority Interest 0,0 0,0
Investments in subsidiaries, associates and other entities (0,3) (0,9)
Disposal of subsidiaries, associates and other entities 0,0 0,0
Net cash inflow (outflow) from investing activities (B) (25,0) (33,4) (8,5)	33,9%
Proceeds from new borrowings 20,0 0,0
Repayment of borrowings (20,5) (37,8)
Net increase (decrease) of current financial assets and liabilities (17,1) 26,8
Dividends paid (13,0) (18,1)
Payments of net financial expenses (3,9) 0,2
Net cash inflow (outflow) from financing activities (C) (34,5) (29,0) 5,6	(16,1)%
Net increase (decrease) in cash and cash equivalents (D)=(A)+(B)+(C) 27,5 (0,2) (27,7)	(100,6)%
Cash and cash equivalents at the beginning of the year 53,1 77,8
Net increase (decrease) in cash and cash equivalents from January 1 to December 31 26,7 (0,2)
Effects of exchange rate differences on cash and cash equivalents (2,0) 0,8
Cash and cash equivalents at the end of the year 77,8 78,5

EBITDA Reconciliation

(€m)	Dec 2017	Dec 2018	Dec 2017 vs Dec 2018
Net operating income	91,1	106,9	Δ % 17,3%
ERP inefficiencies (operation processes) IPO Cost	0,0 0,2	3,0 0,0
Total not recurring items	0,2	3,0	1.752,1%
Adjusted Net operating income	91,2	109,9	20,4%
Depreciations, amortisations and write-downs	(24,5)	(22,0)	-10,2%
Provision for risk and charges	(4,1)	(2,6)	(37,4%)
EBITDA adjusted	119,9	134,4	12,2%
Margin %	20,4%	21,2%
Non recurring	0,2	3,0
EBITDA	119,7	131,4
Margin %	20,4%	20,7%