windeln.de SE — Earnings Release 2016

Mar 15, 2017

Full year and Q4 2016 results March 15, 2017

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Results Highlights and Business Update

Financial Update Q4 / FY 2016

Summary

2016 was a challenging year overall but progress clearly visible in Q4 results

• 21% revenue growth in 2016 year over year despite tough conditions

• − Negative impact from regulatory changes for China cross-border e-commerce and ERP introduction
• − Adj. EBIT margin of -13.7% also impacted by international expansion
• − 2016 revenue growth, gross margin and adj. EBIT margin in line with recent outlook provided
• Seasonally strong Q4 financial performance shows improvement throughout 2016
• − Revenues of EUR 57.1m: +25% growth compared to Q3
• − Adj. EBIT EUR -7.4m: -12.9% margin compared to -14.5% in Q3
• International shops are performing well
• − EUR 55.9m revenues in 2016: +169% growth year over year
• − Adj. EBIT EUR -11.4m in 2016: -20.5% margin compared to -26.0% in 2015
• Good progress on implementing STAR measures and initiatives to improve customer experience
• Liquidity position remains strong with EUR 55.7m
• Moderate double digit growth and profitability improvement expected for 2017
• Mid-term guidance of avg. 15+% annual revenue growth and adj. EBIT break-even in the course of 2019

FY 2016 results in line with recent outlook provided

5

At a glance

We are one of the leading online retailers in the attractive baby and children products market

We are making good progress on the STAR measures…

…and on initiatives to improve customer experience

	Striving to be #1 for our customers
China offering: Unionpay	Private label: stroller	Private label: Avani brand	IT: New Shop System
 Additional, popular payment method in China  Winning new customers in China  Increasing customer convenience	 High quality at affordable price  Carefully chosen materials	 Textiles with natural materials  Produced with ethically correct standards	 Improved, responsive design  Website adapts easily on mobile devices  Launched in IT, CH, Nakiki, CN  Launch German Shop in April 2017
			Q2 / 2017

Results Highlights and Business Update

Financial Update Q4/2016

We have more than 1 million active customers; Net Promotor Score increased

Note: Continuing operations shown (i.e. excluding discontinued segment Shopping Clubs). See appendix for definition of KPIs.

*Net Promoter Score (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).

Revenues

4 th quarter seasonally strong but also shows improvement in our business throughout the year

Note: Continuing operations shown (i.e. excluding discontinued segment Shopping Clubs).

Revenues

21% revenues growth year over year despite China regulation and ERP impact in 2016

Revenues

The diversification of revenues continues through our European expansion

Margins

Seasonally strong 4th quarter shows improvement in relative cost items

	Q1 2016	Q2 2016	Q3 2016	Q4 2016	12M 2016
Revenues EUR m % of Revenues	47.1	44.9	45.7	57.1	194.8
Gross profit	28.1%	29.5%	25.9%	23.9%	26.7%
1 Fulfilment costs	(19.0)%	(18.3)%	(17.0)%	(15.6)%	(17.4)%
2 Marketing costs	(6.3)%	(7.8)%	(7.4)%	(6.5)%	(7.0)%
Operating contribution	2.8%	3.4%	1.5%	1.9%	2.4%
3 Other SG&A	(16.5)%	(17.3)%	(16.0)%	(14.8)%	(16.1)%
4 Adjusted EBIT	(13.8)%	(13.9)%	(14.5)%	(12.9)%	(13.7)%

Comments on Q4

• Seasonally strong revenues (Xmas)
• Typically lower margins in Q4 (toys, promotions)
• Purchasing project in Q4
• Relative costs improved vs. Q3

Note: Adjusted continuing operations shown (i.e. excluding discontinued segment Shopping Clubs).

1 Adj. Fulfilment costs consist of logistics and rental expenses, which are recognized within selling and distribution expenses in the consolidated statement of profit and loss. Adjusted fulfilment costs exclude costs in connection with the reorganization of the Swiss and Spanish warehouses.

2 Marketing costs are recognized within selling and distribution expenses and consist mainly of advertising expenses, including search engine marketing, online display and other marketing channel expenses, as well as costs for our marketing tools.

3 We define Adjusted Other SG&A Expenses as selling and distribution expenses, excluding marketing costs and fulfilment costs, and administrative expenses as well as other operating income and expenses. Adjusted other SG&A expenses exclude expenses in connection with share-based compensation as well as expenses and income in connection with the IPO, with acquisitions and integration of new subsidiaries and expenses in connection with the expansion of the Group as well as for expenses for reorganization, internal restructuring measures and ERP system change.

14 4 Adjusted to exclude share-based compensation and IPO related expenses, acquisition and integration and expansion costs as well as costs for reorganization and restructurings under corporate law as well as one-time costs for ERP system change.

Continous margin improvement at International Shops

German Shops (DE + CN) International Shops

We reduced our inventory significantly during the last year

measures

• Stop of Nakiki flashsale

• Selldown of excess Nakiki and windeln.de inventory
• Reduction of # of brands/SKUs
• Monitoring max. days of inventory by category

Liquidity position remains strong

Outlook

We expect on average 15+% revenues growth annually and adj. EBIT break-even in the course of 2019

Outlook

Break-even outlook to be achieved through ongoing STAR measures and scale effects from revenue growth

Adj. EBIT margin in %

• We have identified, initiated and partially already completed STAR measures

• We expect to grow on average at least 15% annually

Appendix

Key performance indicators quarter over quarter (continuing operations)

							Consolidation of Feedo	Consolidation of Bebitus
	Q1 '14	Q2 '14	Q3 '14	Q4 '14	Q1 '15	Q2 '15	Q3'15	Q4'15	Q1'16	Q2'16	Q3'16	Q4'16
Site Visits (in thousand) ¹	5,089	6,261	7,463	8,798	9,897	10,524	12,771	18,532	21,346	22,106	23,030	27,507
Mobile Visit Share (in % of Site Visits) 2	37.7%	45.4%	49.4%	50.0%	55.5%	57.4%	54.1%	55.2%	58.6%	62.0%	65.3%	66.7 %
Mobile Orders (in % of Number of Orders) 3	27.2%	32.3%	35.0%	36.0%	39.9%	40.3%	38.4%	39.0%	42.6%	43.9%	46.2%	48.7 %
Active Customers (in thousand) 4	302	332	382	442	496	546	670	859	928	965	998	1,065
Number of Orders (in thousand) 5	231	257	301	349	365	377	459	603	594	532	537	674
Average Orders per Active Customer (in number of orders) 6	2.5	2.5	2.5	2.6	2.6	2.5	2.5	2.4	2.4	2.3	2.3	2.2
Orders from Repeat Customers (in thousand) 7	176	198	232	270	284	293	349	432	440	391	387	458
Share of Repeat Customer Orders (in % of Number of Orders) 8	80.9%	81.8%	82.1%	82.1%	81.9%	81.8%	80.7%	77.6%	77.4%	76.9%	76.2%	76.6 %
Gross Order Intake (in € thousand) 9	20,642	23,489	28,116	34,265	35,446	37,677	41,649	56,363	54,522	47,886	47,066	55,022
Average Order Value (in €) 10	89.5	91.3	93.5	98.2	97.2	99.9	90.8	93.5	91.9	90.0	87.6	81.6
Returns (in % of Net Merchandise Value) 11	4.0%	4.3%	5.8%	3.5%	4.1%	5.1%	4.8%	3.6%	6.3%	5.8%	5.1%	3.9 %

Definitions of key performance indicators

• 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 unique customers placing at least one order in one of our shops 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''. Cancelled orders are not included in the Number of Orders.
• 6) We define Average Orders per Active Customer as Number of Orders in the last twelve months divided by the number of Active Customers.
• 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 in the last twelve months.
• 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. From Q2 2016 onwards including Bebitus and Feedo returns.

Selected business segment and geographic data

Business segments								Geographic region (Total)
kEUR	2016	2015 R1	yoy growth	Q4 2016	Q4 2015 R1	yoy growth	kEUR	2016	2015 R1	yoy growth	Q4 2016
Revenues (continuing)	194,756	160,994	21.0%	57,131	55,052	3.8%	Revenues
German Shop	138,986	140,255	-0.9%	41,660	43,082	-3.3%
International Shops	55,870	20,739	169.4%	15,507	11,970	29.5%	Rest of
Reconciling item	-100	-	-	-36	-	-	Europe3
Shopping Clubs	14,830	17,608	-15.8%	67	5,238	-98.7%
EBIT2 Adj. (continuing)	-26,712	-9,329		-7,363	-3,925
German Shop	-1,632	5,630		-739	1,777
% margin	-1.2%	4.0%		-1.8%	4.1%
International Shops	-11,439	-5,392		-2,920	-2,747
% margin	-20.5%	-26.0%		-18.8%	-22.9%
Reconciling item	-13,641	-9,567		-3,704	-2,955
Shopping Clubs	-4,878	-5,810		-228	-1,640
% margin	-32.9%	-33.0%		-340.3%	-31.3%

kEUR 2016 2015 R¹ yoy growth Q4 2016 Q4 2015 R¹ yoy growth Revenues (continuing)194,756 160,994 21.0% 57,131 55,052 3.8% DACH³ 54,512 54,498 0.0% 15,615 15,327 1.9% China⁴ 89,383 91,068 -1.9% 27,536 29,759 -7.5% Rest of Europe³ 50,861 15,428 229.7% 13,980 9,966 40.3%

1 Restatement of 2015 comparative numbers includes separate disclosure of continued and discontinued operations.

2 Adjusted to exclude share-based compensation and IPO related expenses, acquisition and integration and expansion costs as well as costs for reorganization and restructurings under corporate law as well as one-time costs for ERP system change.

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.

Appendix

Income statement (continuing operations)

kEUR	2016	2015 R1	Q4 2016	Q4 2015 R1
Revenues	194,756	160,994	57,131	55,052
Cost of sales	-142,984	-118,405	-43,628	-39,600
Gross profit	51,772	42,589	13,503	15,452
% margin	26.6%	26.5%	23.6%	28.1%
Selling and distribution expenses	-68,413	-43,117	-18,485	-16,283
Administrative expenses	-18,804	-23,395	-1,109	-8,790
Other operating income	971	5,093	227	221
Other operating expenses	-839	-545	-187	-158
EBIT	-35,313	-19,375	-6,051	-9,558
% margin	-18.1%	-12.0%	-10.6%	-17.4%
Financial result	864	-2,980	117	-2,477
EBT	-34,449	-22,355	-5,934	-12,035
% margin	-17.7%	-13.9%	-10.4%	-21.9%
Income taxes	-16	5	-	1.600
Profit or loss from continuing operations	-34,465	-22,350	-5,934	-10,345
% margin	-17.7%	-13.9%	-10.4%	-19.0%
EBIT	-35,313	-19,375	-6,051	-9,558
Share-based compensation Acquisition, integration and expansion costs	5,597 633	10,940 -576	-2,324 19	5,349 165
IPO related expenses	-	-430	-	7
Reorganization	984	-	397	-
Costs of restructuring under corporate law	139	112	3	112
One-time costs of ERP system change	1,248	-	593	-
Adjusted EBIT	-26,712	-9,329	-7,363	-3,925
% margin	-13.7%	-5.8%	-12.9%	-7.1%

1 Restatement of 2015 comparative numbers includes separate disclosure of continued and discontinued operations, changes from retrospective purchase price adjustments in accordance with IFRS 3, and changes from error corrections according to IAS 8.

Total, discontinued and continuing operations

		2016		Q4 2016
kEUR	Total	Discontinued (Shopping Clubs)	Continuing (ex Shopping Clubs)	Total	Discontinued (Shopping Clubs)	Continuing (ex Shopping Clubs)
Revenues	209,586	14,830	194,756	57,198	67	57,131
% yoy growth	17.3%	-15.8%	21.0%	-5.1%	-98.7%	3.8%
Operating contribution margin	4,644	28	4,616	1,135	53	1,082
% margin	2.2%	0.2%	2.4%	2.0%	79.1%	1.9%
EBIT	-42,819	-7,506	-35,313	-6,330	-279	-6,051
% margin	-20.4%	-50.6%	-18.1%	-11.1%	-416.4%	-10.6%
Adjusted EBIT	-31,590	-4,878	-26,712	-7,591	-228	-7,363
% margin	-15.1%	-32.9%	-13.7%	-13.3%	-340.3%	-12.9%

Balance sheet and cash flow statement

Consolidated statement of financial position
kEUR	December 31, 2016	December 31, 2015 R3
Total non-current assets	35,520	33,750
Inventories	21,645	27,099
Prepayments	374	1,670
Trade receivables	2,508	2,469
Miscellaneous other current assets1	10,326	7,677
Cash and cash equivalents	51,302	88,678
Total current assets	86,155	127,593
Total assets	121,675	161,343
Issued capital	26,318	25,746
Share premium	159,993	154,570
Treasury shares	-370	-
Accumulated loss	-105,473	-63,500
Cumulated other comprehensive income	-233	-20
Total equity	80,235	116,796
Total non-current liabilities	7,004	10,174
Other provisions	1,662	2,221
Financial liabilities	64	41
Trade payables	17,517	18,137
Deferred revenue	3,317	4,352
Miscellaneous current liabilities2	11,876	9,622
Total current liabilities	34,436	34,373
Total equity & liabilities	121,675	161,343

Consolidated statement of cash flows
kEUR	2016	2015	Q4 2016	Q4 2015
Net cash flows from/used in operating activities	-31,224	-22,244	-9,554	-12,318
Net cash flows from/used in investing activities	-6,113	-16,271	-4,725	-6,383
Net cash flows from/used in financing activities	-39	93,356	1	-29
Cash and cash equivalents at the beginning of the period	88,678	33,830	65,581	107,473
Net increase/decrease in cash and cash equivalents	-37,376	54,841	-14,278	-18,730
Cash and cash equivalents at the end of the period	51,302	88,678	51,302	88,678

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

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

3 Restatement of 2015 comparative numbers includes changes from retrospective purchase price adjustments in accordance with IFRS 3, and changes from error corrections according to IAS 8