Technogym — Investor Presentation 2020

Sep 9, 2020

Financial results H1 2020

Investor presentation

Cesena, September 9th 2020

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This presentation might contain certain forward-looking statements that reflect the Company's management's current views with respect to future events and financial and operational performance of the Company and its subsidiaries. These forward-looking statements are based on Technogym S.p.A.'s current expectations and projections about future events. Because these forward-looking statements are subject to risks and uncertainties, actual future results or performance may differ materially from those expressed in or implied by these statements due to any number of different factors, many of which are beyond the ability of Technogym S.p.A. to control or estimate. You are cautioned not to place undue reliance on the forward-looking statements contained herein, which are made only as of the date of this presentation. Technogym S.p.A. does not undertake any obligation to publicly release any updates or revisions to any forward-looking statements to reflect events or circumstances after the date of this presentation.

Any reference to past performance or trends or activities of the Technogym Group shall not be taken as a representation or indication that such performance, trends or activities will continue in the future.

This presentation does not constitute an offer to sell or the solicitation of an offer to buy Technogym's securities, nor shall the document form the basis of or be relied on in connection with any contract or investment decision relating thereto, or constitute a recommendation regarding the securities of Technogym.

Technogym's securities referred to in this document have not been and will not be registered under the U.S. Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. Andrea Alghisi, the Manager in charge of preparing the corporate accounting documents, declares that, pursuant to art. 154-bis, paragraph 2, of the Legislative Decree no. 58 of February 24, 1998, the accounting information contained herein correspond to document results ,books and accounting records.

Home growth only partially offset the decline in the B2B

YoY decline mainly driven by:

• North America (-32%), APAC (-26%) and Europe excluding Italy (-24%)
• Segments: strong double-digit growth in Home did not offset the decline in Commercial segments
• Channels: strong growth of Inside Sales and Retail – mainly exposed to Home segment offset by a decline in Field Sales (-32%) and Distributors (-24%)
• Offering: good performance from Digital solutions in the period

Excluding FX impact, drop would have been -24,9%. Major impacts:

• USD, GBP and JPY

Performances per country were directly impacted by the Covid pandemic

Inside Sales and Retail benefitted from the higher exposure to Home

Steady EBITDA margin despite revenues decrease

Profit and Loss statement (IFRS16 included) Key comments

(€m )	Jun 2019	Jun 2020	Delta	2020 vs 2019
Total revenue	295,3	222,4	(72,8)	(24,7)%
Cost of raw, ancillary and consumable materials and resale	(96,3)	(69,0)	27,3	-28,4%
goods for of which (cost) not recurrent	(0,1)	(0,3)	(0,2)
Service, Rentals and leases	(80,7)	(60,3)	20,4	-25,3%
of which (cost) not recurrent	(0,6)	(0,7)	(0,1)
Personnel cost	(67,0)	(54,8)	12,2	-18,2%
which (cost) of not recurrent	(0,6)	(0,4)	0,2
Depreciations, amortisations and write-downs	(14,7)	(17,2)	(2,5)	16,8%
Provision for risk and charges	(1,4)	(2,2)	(0,8)	57,1%
Other operations cost	(2,7)	(3,9)	(1,2)	42,5%
of which (cost) not recurrent	0,0	(1,1)	(1,1)
Share of result joint venture and impairment	0,5	(2,1)	(2,6)	h.v.
of which (cost) not recurrent	0,0	(2,5)	(2,5)
Net operating income	32,8	12,8	(20,0)	(60,9)%
Margin (%)	11,1%	5,8%	(5,3%)
Financial income and (expenses) and from investments	(0,6)	(1,3)	(0,7)	h.v.
Profit (loss) before tax	32,2	11,5	(20,7)	(64,2)%
Taxes	(6,8)	(5,3)	1,5	h.v.
of which (cost) not recurrent	1,5	(0,3)	(1,7)
Profit (loss)	25,4	6,2	(19,2)	(75,5)%
Margin (%)	8,6%	2,8%	(5,8%)
Profit (loss) for the year of minority interests	(0,1)	(0,2)	(0,0)	27,0%
Profit (loss) attributable to owners of the parent	25,3	6,1	(19,2)	(76,0)%
Adjusted EBITDA	50,4	37,3	(13,1)	(26,0)%
Margin (%)	17,1%	16,8%	(0,3%)
Profit (loss) adjusted	25,2	11,4	(13,8)	(54,8)%
Percentage (%)	8,5%	5,1%	(3,4%)

Net operating income drivers:

• ▪Sales decrease driven by lower volumes partially offset by the growth in Digital services
• ▪Positive performance on products cost reduction partially offset by product mix
• ▪Decrease in Service costs led by cost efficiencies and lower sales volumes
• ▪Decrease in Personnel costs driven by temporary unemployment program in different countries
• ▪Increase in D&A driven by last year investments for new products lines and IT project (including digital transformation)
• ▪Increase in provision for risk and charges is mainly due to the increase of bad debt provision
• ▪Tax variation is due to lower profit before tax and devaluations of participations not deductible

Positive FX impact driven primarily by USD and JPY:

• +0.8m€ on revenues
• +0.7m€ on Net operating income
• +0.7m€ on Net result

€m

TWC slightly increased but still on a normalization path

Working Capital (€m) Highlights

(€m)	Jun 2019	Dec 2019	Jun 2020
Inventories	94,8	76,8	91,5
Trade receivables	113,4	127,5	68,8
Trade payable	(126,9)	(127,5)	(88,7)
Trade Working Capital	81,3	76,8	71,6
% LTM of total revenue	12,4%	11,5%	12,0%
Other current assets/(liabilities)	(41,4)	(46,4)	(49,2)
Current tax liabilities	(17,9)	(5,1)	(8,7)
Provisions	(10,9)	(12,7)	(8,3)
Net Working Capital	11,0	12,6	5,4
% LTM of total revenue	1,7%	1,9%	0,9%
Inventory Turnover 1	5,2	6,1	4,6
Days Sales Outstanding (DSO) 2	54	59	35
Days Payables Outstanding (DPO) 3	112	112	89

Trade Working Capital

• ▪TWC almost stable compared to Dec 19 (11.5% of Sales), but better than in June 2019 (12.4%)
• ▪Inventory Turnover decreases by 0.6 compared to June 2019
• ▪DSO decrease by 19 days compared to June 2019, driven by the current trading payment terms and credit management
• ▪DPO decrease by 23 days compared to June 2019 in line with prevailing terms of payment and purchasing mix (direct / indirect)

Inventories

• ▪Inventories include mainly finished products (74.9m €) and raw materials & components (16.6m €)
• ▪Increase compared to Dec 19 mainly due to:
• Good in transit and local stock increase (seasonality)
• Sales slowdown due to Covid-19
• Safety stock increase of raw materials and components to address Covid-19 uncertainly

Other current A/L

Increase mainly due to higher advance from customers.

1. Calculated as revenues for products, spares parts, hardware e software divided by gross inventory;

2. 1. Calculated as trade receivables net of VAT (11%) divided by revenues;
3. 1. Calculated as trade payables net of VAT (~7%) divided by cost of products and cost of service

Capex decrease to 3.6% on revenues

* CAPEX: excluding financial investments (investment in JV.) and IFRS16 impact

Net Financial Position (€m) Key comments

€m	Jun 30 2019 30	Jun 2020
Cash & cash equivalent	(74,1)	(120,6)	Cash & Cash equivalent
Current financial receivables	(0,1)	(0,0)	deposits € denominated
			Current bank debt
Current bank debt	32,2	0,0
of which granted by Committed Credit facilities	32,2	0,0	financing. As of June 30th 2020
of which granted by Uncommitted Credit facilities	0,0	0,0
Current portion of debt non current	19,1	20,8
IFRS Current 16 liability	5,1	5,6
Other financial debt current	9,4	10,0
Net financial debt current	65,8	36,4
Non portion of debt current non current	28,7	35,2	debt
IFRS Non Current liability 16	13,9	17,7
Other financial debt non current	16,0	17,3	~2y duration (floating: EURIBOR + spread)
Non financial debt current	58,6	70,1
Net Financial Position	50,2	(14,1)
			(25,3m €).
NFP / EBITDA (LTM12m)	0 36x ,	n.a.	vs -31,2m€ (net debt) as at June 2019

NFP (exclud. IFRS 16) / EBITDA (LTM12m) 0,22x n.a.

Cash & Cash equivalent

▪Significant increase in cash position mainly refers to bank deposits € denominated

Current bank debt

• ▪Mainly composed of credit lines stand-by and short-term financing. As of June 30th 2020
• − Lines of credit and overdrafts committed for ~105m € not drawn (revocable / floating rate: EURIBOR + spread)
• − Lines of credit and overdrafts uncommitted for ~60m € not 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 ~2y duration (floating: EURIBOR + spread)
• ▪Leasing exposure stands at 26,8m € on June 2020 (9,6m € short term among "other current financial debt" and 17,2m € among "non current financial debt"), slightly increasing vs Y-1 (25,3m €).
• ▪IFRS 16 impact on financial debt is 23,3m € on June 2020. Without considering IFRS16 impact, NFP is 37,4m€ (net cash)

Net Financial Position walk

€m

Balance sheet

€m

€ m	Jun 2019	% on LTM Revenues	Dec 2019	% on Revenues	Jun 2020	% on Revenues
Inventories	94,8	14,4%	76,8	11,5%	91,5	15,3%
Trade receivables	113,4	17,3%	127,5	19,1%	68,8	11,5%
Trade payables	(126 ,9)	(19 ,3%)	(127 ,5)	(19 ,1%)	(88 ,7)	(14 ,9%)
Trade Working Capital	81,3	12,4%	76,8	11,5%	71,6	12,0%
Other assets/(liabilities) current	(41 ,4)	(6 ,3%)	(46 ,4)	(6 ,9%)	(49 ,2)	(8 ,3%)
Current liabilities tax	(17 ,9)	(2 ,7%)	(5 ,1)	(0 ,8%)	(8 ,7)	(1 ,5%)
Provisions	(10 ,9)	(1 ,7%)	(12 ,7)	(1 ,9%)	(8 ,3)	(1 ,4%)
Net Working Capital	11,0	1,7%	12,6	1,9%	5,4	0,9%
Property , plant and equipment Intangible assets Investments in joint ventures	166,4 38,8 17,5	25,3% 5,9% 2,7%	167,9 43,4 18,1	25,1% 6,5% 2,7%	162,6 44,2 16,0	73,1% 19,9% 7,2%
Employee benefit obligations	(2 ,9)	(0 ,4%)	(3 ,1)	(0 ,5%)	(3 ,0)	(1 ,4%)
Other (liabilities) and non current asset	19,4	3,0%	17,5	2,6%	26,1	11,7%
Net Fixed Capital	239,3	36,4%	243,8	36,5%	245,9	41,2%
Net Invested Capital	250,3	38,1%	256,4	38,3%	251,3	42,2%
Shareholders' Equity	200,1		260,1		265,4
Net Financial Position	50,2	7,7%	(3 ,7)	(0 ,5%)	(14 ,1)	(2 ,4%)
Total Source of Funding	250,3	38,1%	256,4	38,3%	251,3	42,2%
	NFP – Debt = 31,2m€ excluding IFRS16	NFP (Cash) = -25,3m€ excluding IFRS16			NFP (Cash) = -37,4m€ excluding IFRS16

Cash Flow statement

(€m )	Jun 2019	Jun 2020
Profit (loss)	25,4	6,2
Depreciation, amortization and impairment losses	14,7	17,2
Provisions	1,4	2,2
Share of net result from joint ventures	(0,5)	2,1
Net financial expenses	1,0	1,6
Income/(expenses) from investments	(0,4)	(0,3)
Income tax expenses	6,8	5,3
Cash flows from operating activities before changes in working capital	48,5	34,4
Change in inventory	(5,1)	(15,6)
Change in trade receivables	33,2	55,2
Change in trade payables	(17,4)	(39,5)
Change in other operating assets and liabilities	1,3	(4,0)
Non-recurrent fiscal payment	0,0	0,0
Income taxes paid	(3,4)	(5,5)
Net cash inflow from operating activities (A)	57,2	25,1
Investments in property, plant and equipment	(14,0)	(2,7)
Disposals of property, plant and equipment	1,4	0,5
Investments in intangible assets	(7,1)	(6,0)
Disposals of intangible assets	0,0	0,1
Dividends received from joint ventures	1,0	0,0
Dividends paid	0,0	0,0
Investments in subsidiaries, associates and other entities	0,0	0,0
Disposal of subsidiaries, associates and other entities	0,0	0,0
Net cash inflow (outflow) from investing activities (B)	(18,7)	(8,1)
Repayment of IFRS 16	(2,9)	(3,4)
Proceeds from new borrowings	0,9	0,0
Repayment of borrowings	(6,3)	(6,2)
Net increase (decrease) of current financial assets and liabilities	0,2	(0,5)
Dividends paid	(36,2)	0,0
Payments of net financial expenses	(0,2)	0,0
Net cash inflow (outflow) from financing activities (C)	(44,4)	(10,0)
Net increase (decrease) in cash and cash equivalents (D)=(A)+(B)+(C)	(6,0)	6,9
Cash and cash equivalents at the beginning of the year	78,5	114,4
Net increase (decrease) in cash and cash equivalents	(6,0)	6,9
Effects of exchange rate differences on cash and cash equivalents	1,6	(0,8)
Cash and cash equivalents at the end of the year	74,1	120,6

EBITDA vs EBITDA adjusted Reconciliation

(€m)	Jun 2019	Jun 2020	Jun 2019 vs Jun 2020 Δ %
Net operating income	32,8	12,8	(60,9)%
Other operations cost	0,0	1,1
Service Rentals and leases ,	0,6	0,7
Personnel cost	0,6	0,4
Cost of raw, ancillary and consumable materials and goods for resale	0,1	0,3
Operating non recurring items	1,4	2,6
Share of result joint venture and impairment	0,0	2,5
Total recurring items not	1,4	5,1	n.a
Adjusted operating income Net	34,2	17,9	(47,8)%
Depreciations , amortisations and write-downs for Provision risk and charges	(14 ,7) (1 ,4)	(17 ,2) (2 ,2)	16,8% 57,1%
EBITDA adjusted	50,4	37,3	(26,0)%
Margin %	17,1%	16,8%
Operating non recurring items	1,4	2,6
EBITDA	48,9	34,7	(29,1)%
Margin %	16,6%	15,6%