windeln.de SE — Call Transcript 2015

May 28, 2015

Q1 2015 Earnings Call

May 28, 2015

Disclaimer

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Executive Summary

Q1 2015

• Strong Q1 revenue growth of +87% year over year, with all business segments exhibiting significant growth
• Increasing profitability at gross profit, operating contribution and adjusted EBIT level, supported by increasing scale, customer loyalty and engagement

Strategy execution on track

• Entry of Italian market in Q2 2015: www.pannolini.it live
• Acquisition of Feedo signed (Poland, Czech Republic & Slovakia); closing expected in Q3 2015
• Further organic growth: Partnership with leading organic brand Alnatura signed; renewed TV campaign, private label initiated, launch of product category 'kids furniture & living'

2015 outlook

• Growth of +70% to +80% year over year with further revenue upside from entry into Italian market, first-time consolidation of Feedo as well as potential acquisitions and / or product extensions
• Profitability improvement expected to continue for existing business segments

Results Highlights and Business Update

Continued strong growth coupled with increasing margins

1 Gross profit minus marketing and fulfillment costs.

2 Adjusted to exclude equity settled share-based compensation expenses, transaction costs and IPO related expenses.

Italian webshop launched: www.pannolini.it

• Website fully translated; Italian MD hired
• Delivery out of Germany within 3-4 days
• Warehouse expected in Italy by end of year with delivery times of 1-2 days
• Payment method "cash on delivery" implemented
• Start with assortment of 70,000 SKUs; local assortment added in H2 2015

Acquisition of Feedo: expansion into Eastern Europe market

• Acquisition signed on April, 17 2015
• Market leader in Czech Republic and Slovakia; currently expanding to Poland
• Approx. €6m revenues in 2014; strong growth track record
• Closing and first-time consolidation expected in H2 2015

Partnership with Alnatura: leading organic brand in Germany

• Alnatura products now available online at windeln.de
• Premium and well-known organic brand in Germany
• Convenient home delivery of more than 100 Alnatura products for babies and toddlers
• Shop-in-shop product offering

Launched our first private label brand: Dimbo world

• High quality leather shoes for babies
• Successfull introduction on shopping-club windelbar.de
• More than 4,000 shoes sold
• Strong margins
• Partnership with Indian NGO to further pursue private label strategy in an ethical manner

New product category: kids furniture and living

• New product category introduced in February 2015: kids furniture and living
• Furniture for babies, toddlers and kids
• Wide product range of well-known brands including Haba, Pinolino and babybaby
• Convenient shopping experience with home delivery within 1-2 days

Financial Update Q1 2015 and Outlook

Strong growth across our regions ...

... as well as our three business segments

1 Includes Austria as well as insignificant revenues from customers in other countries/rest of Europe.

2 kindertraum.ch AG including webshops kindertraum.ch and toys.ch acquired in November 2013.

Growing scale, customer loyalty and engagement

1 Number of customers who placed an order within the last twelve months.

2 NPS measures the loyalty that exists between a provider and a consumer. NPS can be as low as -100 (everybody is a detractor) or as high as +100 (everybody is a promoter); average as of Q1 2015; tracked by windeln.de.

3 Number of orders from customers who had previously purchased from windeln.de at any point in time, irrespective of returns.

4 Refers to the share of repeat customer orders (in % of number of orders) we define as the number of orders from repeat customers divided by the number of orders during the measurement period (last twelve months).

5 Order intake (incl. VAT and shipping) divided by total number of orders during respective year.

6 Share of mobile traffic from non-Chinese customers on windeln.de and windeln.ch; does not include traffic on the windeln.de magazine.

Increasing profitability throughout operations…

% revenues	Q1 2014	Q1 2015	Delta
Gross profit	23.3%	25.6%	2.3pp
1 Fulfillment	12.4%	10.5%	-1.9pp
2 Marketing	4.8%	5.0%	0.2pp
Operating contribution	6.1%	10.0%	4.0pp
Adj. other SG&A3	17.0%	13.6%	-3.4pp
4 Adj. EBIT	-11.0%	-3.6%	7.4pp

1 Marketing costs consist mainly of advertising expenses, including search engine marketing, online display and other marketing channel expenses, as well as costs for our marketing tools, which include tools for automated SEA bidding and multivariate landing page optimization, and allocated overhead costs, but not costs related to our loyalty program. Allocated overhead costs include rent and depreciation, but not costs of shared services.

2 Fulfillment costs comprise logistics and related rental expenses.

3 We define adjusted other SG&A expenses as selling and distribution expenses plus administrative expenses and other operating expenses less other operating income, but excluding marketing and fulfillment costs; adjusted to exclude equity settled share-based compensation expenses of €0.8m and €2.9m in Q1 2014 and Q1 2015 respectively, transaction costs of €0.1m in Q1 2015 and IPO related expenses of €0.9m in Q1 2015.

⁴ Adjusted to exclude equity settled share-based compensation expenses resulting, transaction costs and IPO related expenses. 11

...as well as across business segments

1 Includes Austria as well as insignificant revenues from customers in other countries/rest of Europe.

2 kindertraum.ch AG including webshops kindertraum.ch and toys.ch acquired in November 2013.

Strong cash flow generation in Q1

1 Mainly reflects the repayment of financial liabilities as well as the remaining financing cash flow.

2 Includes primary IPO proceeds net of estimated IPO costs.

FY 2015 outlook – strong growth trajectory to continue

Growth of + 70 to +80% for existing business segments windeln.de, windelbar.de and windeln.ch Additional €1-2m revenues from Italian market entry

Revenues

• Feedo with approx. +50% yoy growth (2014: ~€6m)
• Upside from acquisitions and / or product extensions

Gross Profit Margin

Gross profit margin for existing business segments expected to increase from +23% to approx. +25%

Adj. EBIT Margin

• Business segment windeln.de with increase from +2% in 2014 to approx. +3% 2015 despite additional TV campaign
• Total group with existing business segments -5% to -6% compared to -8% in 2014
• Including new segments Italy and Feedo of -6% to -8%

Questions

	Q1 2012	Q2 2012	Q3 2012	Q4 2012	Q1 2013	Q2 2013	Q3 2013	Q4 2013	Q1 2014	Q2 2014	Q3 2014	Q4 2014	Q1 2015
Site Visits (in thousand) ¹	1,385	1,697	2,263	2,837	4,682	6,120	5,759	5,874	7,323	8,483	10,647	12,459	14,299
Mobile Visit Share (in % of Site Visits) 2	9.9%	13.2%	16.7%	19.7%	26.2%	32.6%	39.3%	42.0%	47.9%	52.7%	58.2%	60.5%	65.5%
Mobile Orders (in % of Number of Orders) 3	6.2%	8.6%	10.0%	12.2%	16.4%	21.2%	26.8%	27.8%	32.7%	37.3%	41.2%	42.3%	46.7%
Active Customers (in thousand) 4	92	117	142	163	194	229	259	290	334	372	430	496	556
Number of Orders (in thousand) 5	62	78	92	114	154	198	202	219	273	303	363	416	454
Average Orders per Active Customer (in number of orders) 6	1.8	1.9	2.0	2.1	2.3	2.4	2.6	2.7	2.7	2.7	2.7	2.7	2.8
Orders from Repeat Customers (in thousand) 7	36	48	58	82	114	153	158	175	211	238	286	328	350
Share of Repeat Customer Orders (in % of Number of Orders) 8	59.1%	62.0%	63.6%	71.7%	73.9%	77.5%	78.0%	79.7%	77.2%	78.7%	78.8%	78.9%	83.6%
Gross Order Intake (in € thousand) 9	4,188	5,638	7,148	9,862	12,209	15,034	15,676	18,226	23,241	26,208	32,111	38,891	41,970
Average Order Value (in €) 10	67.9	72.6	77.9	86.3	79.3	76.1	77.5	83.2	85.2	86.6	88.5	93.5	92.5
Returns (in % of Net Merchandise Value) 11	4.4%	4.1%	4.9%	4.4%	4.3%	4.6%	4.9%	5.8%	5.1%	5.8%	6.8%	5.1%	6.0%

Selected key performance metrics (2/2)

• 1) We define Site Visits as the number of series of page requests from the same device and source in the measurement period and include visits to our online magazine. A visit is considered ended when no requests have been recorded in more than 30 minutes. The number of site visits depends on a number of factors including the availability of the products we offer, the level and effectiveness of our marketing campaigns and the popularity of our online shops. Measured by Google Analytics.
• 2) We define Mobile Visit Share (in % of Site Visits) as the number of visits via mobile devices (smartphones and tablets) to our mobile optimized websites divided by the total number of Site Visits in the measurement period. We have excluded visits to our online magazine and visits from China. We exclude visits from China because the most common online translation services on which most of our customers who order for delivery to China rely to translate our website content are not able to do so from their mobile devices, and therefore very few of such customers order from their mobile devices. Measured by Google Analytics.
• 3) We define Mobile Orders (in % of Number of Orders) as the number of orders via mobile devices to our mobile optimized websites divided by the total Number of Orders in the measurement period. We have excluded orders from China. Measured by Google Analytics.
• 4) We define Active Customers as the number of customers placing at least one order in the 12 months preceding the end of the measurement period, irrespective of returns.
• 5) We define Number of Orders as the number of customer orders placed in the measurement period irrespective of returns. An order is counted on the day the customer places the order. Orders placed and orders delivered may differ due to orders that are in transit at the end of the measurement period or have been cancelled. Every order which has been placed, but for which the products in the order have not been shipped (e.g., the products are not available or the customer cancels the order), is considered ''cancelled''.
• 6) We define Average Orders per Active Customer as Number of Orders divided by the number of Active Customers in the measurement period.
• 7) We define Orders from Repeat Customers as the number of orders from customers who have placed at least one previous order, irrespective of returns.
• 8) We define Share of Repeat Customer Orders as the number of orders from Repeat Customers divided by the Number of Orders during the measurement period.
• 9) We define Gross Order Intake as the aggregate Euro amount of customer orders placed in the measurement period minus cancellations. The Euro amount includes value added tax and excludes marketing rebates.
• 10) We define Average Order Value as Gross Order Intake divided by the Number of Orders in the measurement period.
• 11) We define Returns (in % of Net Merchandise Value) as the Net Merchandise Value of items returned divided by Net Merchandise Value in the measurement period.

Selected business segments and geographic data

	Business segments
In €k	Q1 2014	Q1 2015
Revenue	19,083	35,649
windeln.de	16,721	30,698
windelbar.de	1,653	3,549
windeln.ch	709	1,402
Adj. EBIT 1,2	-2,091	-1,276
windeln.de Adj. EBIT contribution	Geographic region 135 1,703 -374 -773 -512 -534
windelbar.de Adj. EBIT contribution
windeln.ch Adj. EBIT contribution

In €k	Q1 2014	Q1 2015
Revenue	19,083	35,649
DACH 3	8,052	15,443
China 4	10,636	19,578
Other/rest of Europe 5	395	628

1 Adjusted to exclude equity settled share-based compensation expenses, transaction costs and IPO related expenses.

2 Adjusted EBIT at the Group level does not correspond to the sum of the Adjusted EBIT Contributions of the "windeln.de", "windelbar.de" and "windeln.ch" business segments because (a) certain income/expenses relating to shared services are managed and contracted on a central basis and not allocated to the business segments and (b) effects resulting from intersegment transactions are eliminated at the Group level.

3 Our "DACH" geographic region consists of that part of our business that generates product and services revenues from customers ordering for delivery to Germany, Austria and Switzerland.

4 Our "China" geographic region consists of that part of our business that generates product and services revenues from customers ordering for delivery to China.

5 Our "Other/rest of Europe" geographic region consists of that part of our business that generates product and services revenues from customers ordering for delivery to countries other than Germany, Austria, Switzerland and China.

Income statement

In €k	Q1 2014	Q1 2015
Revenues	19,083	35,649
% growth		86.8%
Cost of sales	-14,636	-26,520
Gross profit	4,447	9,129
% margin	23.3%	25.6%
Selling and distribution expenses	-5,483	-8,979
Administrative expenses	-1,949	-5,451
Other operating income	69	386
Other operating expenses	-7	-263
EBIT 1	-2,923	-5,178
% margin	-15.3%	-14.5%
Financial result	2,291	-9
EBT	-632	-5,187
% margin	-3.3%	-14.5%
Income taxes	-38	-195
Profit or loss for the period	-670	-5,382
% margin	-3.5%	-15.1%
Operating contribution margin	1,157	3,581
% margin	6.1%	10.0%
Share-based compensation	832	2,871
1 Acquisition and integration costs	-	105
2 IPO related expenses	-	926
Adjusted EBIT	-2,091	-1,276
% margin	-11.0%	-3.6%
Depreciation & amortization	179	211
Adjusted EBITDA	-1,912	-1,065
% margin	-10.0%	-3.0%

1 EBIT includes share-based compensation expense, transaction costs and IPO related expenses.

2 Transaction costs of €105 thousand were incurred in Q1 2015 in connection with the acquisition and integration of Feedo.

3 IPO related expenses of €926 thousand were incurred in Q1 2015 in connection with the preparation of our IPO.

Balance sheet and cash flow statement

In €k	Dec 2014	Mar 2015
Total non-current assets	4,523	4,915
Inventories	10,754	10,821
Prepayments	285	241
Trade receivables	1,725	1,752
Miscellaneous other current assets1	5,927	5,072
Cash and cash equivalents	33,830	33,065
Total current assets	52,521	50,951
Total assets	57,044	55,866
Issued capital	163	163
Share premium	68,911	78,124
Accumulated loss	-34,488	-39,870
Cumulated other comprehensive income	35	290
Total equity	34,621	38,707
Total non-current liabilities	6,813	517
Other provisions	1,246	1,440
Financial liabilities	1,532	175
Trade payables	8,830	9,191
Deferred revenue	1,985	2,340
Miscellaneous current liabilities2	2,017	3,496
Total current liabilities	15,610	16,642
Total equity & liabilities	57,044	55,866

Consolidated statement of financial position			Consolidated statement of cash flows
	Dec 2014	Mar 2015	In €k	Q1 2014
Total non-current assets	4,523	4,915	Net cash flows from/used in operating	-2,237
Inventories	10,754	10,821	activities
Prepayments	285	241		-210
Trade receivables	1,725	1,752	Net cash flows from/used in investing activities
Miscellaneous other current assets1	5,927	5,072
Cash and cash equivalents	33,830	33,065	Net cash flows from/used in financing activities	9,183
Total current assets	52,521	50,951	Cash and cash equivalents at the beginning of
	57,044	55,866	the period	267
			Net increase/decrease in cash and cash	6,736
Issued capital	163	163	equivalents
Share premium	68,911	78,124	Cash and cash equivalents at the end of the
			period	7,003

1 Miscellaneous other current assets include income tax receivables, current other financial assets and current other non-financial assets.

2 Miscellaneous other current liabilities include income tax payables, current other financial liabilities and current other non-financial liabilities.