windeln.de SE — Earnings Release 2017

Mar 14, 2018

Full Year/Fourth Quarter 2017 Results

March 14, 2018

Disclaimer

This document and its related communication ("Presentation") have been issued by windeln.de SE and its subsidiaries ( "Company") and do not constitute or form part of and should not be construed as any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any securities of the Company in the U.S.A. or in any other country, nor shall any part of it nor the fact of its distribution form part of or be relied on in connection with any contract or investment decision relating thereto, nor does it constitute a recommendation regarding the securities of the Company. Nothing in this Presentation constitutes tax, legal or accounting advice; investors and prospective investors should seek such advice from their own advisors. Third parties whose data is cited herein are neither registered broker-dealers nor financial advisors and the use of any market research data does not constitute financial advice or recommendations. Securities may not be offered or sold in the U.S.A. absent registration or an exemption from registration under the U.S. Securities Act of 1933, as amended; neither this Presentation nor any copy of it may be taken or transmitted or distributed, directly or indirectly, to the U.S.A., its territories or possessions or to any US person.

This Presentation has been carefully prepared. However, no reliance may be placed for any purposes whatsoever on the information contained herein or on its completeness. No representation or warranty, express or implied, is given by or on behalf of the Company or its directors, officers or employees or any other person as to the accuracy or completeness of the information or opinions contained in this Presentation and no liability whatsoever is accepted by the Company or its directors, officers or employees nor any other person for any loss howsoever arising, directly or indirectly, from any use of such information or opinions or otherwise arising in connection therewith. This Presentation is subject to amendment, revision and updating. Certain statements and opinions in this Presentation are forward-looking, which reflect the Company's or its management's expectations about future events. Forward-looking statements involve many risks, uncertainties and assumptions that could cause actual results or events to differ materially from those expressed or implied herein or could adversely affect the outcome and financial effects of the plans and events described herein and may include (without limitation): macroeconomic conditions; behavior of suppliers, competitors and other market participants; inadequate performance with regard to integration of acquired businesses, anticipated cost savings and productivity gains, management of fulfillment centers, hazardous material/ conditions in private label production or within the supply chain, data security or market knowledge; external fraud; actions of government regulators or administrators; strike; or other factors described in the "risk" section of the Company's annual report. Forward-looking statements regarding past trends or activities should not be taken as a representation that such trends or activities will continue. The Company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should not place undue reliance on forwardlooking statements.

This Presentation may include supplemental financial measures that are or may be non-GAAP financial measures. These supplemental financial measures should not be viewed in isolation or as alternatives to measures of the Company's net assets and financial positions or results of operations as presented in accordance with IFRS in its consolidated financial statements. Other companies that report or describe similarly titled financial measures may calculate them differently.

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Summary

2017 was a challenging year but we made good progress in several areas

• EUR 211.9m in revenues and +8.8% growth in 2017 yoy despite increased focus on profitable growth
• − +18.2% growth yoy in China and +22.2% in rest of Europe; DACH region lower (-18.9%) due to focus of marketing spent on profitability
• − Q4 revenues of EUR 52.5m; -8.1% compared to previous year given higher revenue base in China, temporary integration effects and lower DACH revenues
• Adj. EBIT improved yoy to EUR 24.9m (-11.8% margin) after EUR -26.7m (-13.7%) in previous year
• − Operating contribution margin improved to EUR 10.1m (4.8% of revenues) after EUR 4.6m (2.4% of revenues) in previous year due to lower fulfilment cost and marketing cost ratio
• − Adj. other SG&A of EUR 35.1m (-16.5% of revenues) in 2017 to be significantly lowered going forward through measures initiated in February (cost reduction headquarter, focusing of international businesses)
• − Adjustment items in 2017 related to earn out payments related to acquisition and write down of intangible assets
• Net liquidity position of EUR 25.7m as of December 31; additional capital increase of EUR 5.2m in February
• New CEO Matthias Peuckert to start on May 1, 2018
• Adj. EBIT break-even target for early 2019
• − Similar revenue growth expected for 2018 as in 2017 (+8.8%)
• − Significant improvement in operating contribution, EBIT and free cash flow expected in 2018

Business Highlights

Improvements for our customers in Europe in 2017

Improvements for our customers in China in 2017

Improve service offer

Faster delivery

Matthias Peuckert to join as CEO on May 1, 2018

Focus in 2018: Leaner and more efficient organization

Streamline business and create leaner organization in 2018 to lay foundation for a structural profitable business and sustainable growth going forward

We are reducing headcount significantly

Comments

• Relocated customer service
• Closed Swiss office
• Reorganized certain internal departments
• Integrated Bebitus
• Closed Italian shop
• Explore divestiture of Feedo Group
• Reduced headcount at headquarter

Financial highlights

Revenue growth of 8.8% year over year

FY/16 FY/17 Q4/16 Q4/17

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

18.2% revenue growth in China year over year

• Strong growth on Tmall Global in FY 2017 (revenues of EUR 10.7 million after EUR 1.6 million in 2016)
• Quarter over quarter growth lower due to high revenues basis in Q4 2016

DACH revenues driven by profitability focus

• Margin focused marketing approach /deliberate lowering of marketing expenses
• Focus on increasing revenue share of nonconsumable products/cross - selling

DACH marketing costs and revenues

+22% growth in rest of Europe year over year

Comments

• Strong growth on year over year basis
• Bebitus with weaker Q4 due to temporary integration effects (effective October 1, 2017)
• Closure of Italian shop (revenues of EUR 4.8 million in 2017 and EUR 1.3 million in Q4 2017)

Group Profitability

Improved operating contribution and EBIT; lowering of Other SG&A addressed

			By quarter			Full year
EUR m % of Revenues	Q1 2017	Q2 2017	Q3 2017	Q4 2017	FY 2016	FY 2017	Comments on Q4
Revenues	51.9	54.6	52.9	52.5	194.8	211.9	Low 4th quarter
Gross profit	23.3%	25.8%	24.8%	24.7%	26.6%	24.7%	Higher share of intl. revenues
Fulfilment costs 1	(15.4)%	(14.2)%	(13.9)%	(15.2)%	(17.4)%	(14.7)%	Addition of PostNL; regional mix
Marketing costs 2	(6.0)%	(5.3)%	(4.9)%	(4.9)%	(7.0)%	(5.3)%	Margin based marketing focus
Operating contribution	1.9%	6.4%	6.0%	4.7%	2.4%	4.8%	Improved yoy
Other SG&A 3	(15.8)%	(16.9)%	(16.3)%	(17.1)%	(16.1)%	(16.5)%	To be lowered through recently
4 Adj. EBIT	(14.0)%	(10.5)%	(10.3)%	(12.4)%	(13.7)%	(11.8)%	initiated measures
Adj. EBIT	(7.2)	(5.7)	(5.5)	(6.5)	(26.7)	(24.9)	Improved yoy

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

1 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 income and expenses in connection with the reorganization of warehouses.

2 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 Defined 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 income and expenses from acquisition and integration of subsidiaries, share-based compensation, and impairments of intangible assets.

4 Excludes exclude income and expenses in connection with the reorganization of warehouses, from acquisition and integration of subsidiaries, share-based compensation, and impairments of intangible assets.

Group Profitability

EBIT adjustments mainly related to earn-outs and impairments

kEUR	FY 2016	FY 2017
Earnings before interest and taxes (EBIT)	(35,313)	(43,583)
costs of acquisition, integration & expansion	633	121
share-based compensation	5,597	8,128
costs of reorganization	984	94
impairment of intangible assets	-	10,294
costs of restructuring under corporate law	139	-
ERP system change	1,248	-
Adjusted EBIT	(26,712)	(24,946)
Adjusted EBIT margin	(13.7)%	(11.8)%

• Share-based compensation related to acquisitions: Bebitus EUR 7,818k Feedo EUR -103k
• Stock option programs of windeln.de SE: EUR 413k
• Switzerland (one domain strategy): EUR 1,816k
• Bebitus (France only): EUR 2,731k
• Feedo (no integration): EUR 5,747k

Earn-out payments expected to be completed in 2018

	Feedo	Bebitus
Acquisition structure	Base purchase price in 2015 + Earn Out for 2015 to 2018; full reps & warranties	Base purchase price in 2015 + Earn Out for 2015 to 2017; full reps & warranties
Purchase price paid 2015 thereof Cash thereof shares	€ 8,807k € 7,000k € 1,807	€ 5,099k € 5,099k -
Earn Out for 2015 / 2016 (paid) thereof Cash thereof Shares	• Leaver event € 1,183k • Simplification of payment terms € 184k (paid in Q2 2017) € 1,034k (issued in Q3 2017)1	€ 8,412k € 1,700k (paid Q3 2017) € 6,133k (issued in Q3 2017)2
Earn Out for 2017 (to be paid) Cash or Shares	Fair value € 0 Dec 31, 2017	Early € 4,896k settlement July 2017 (@25% discount) to be paid H2 2018
Earn Out for 2018 (to be paid) Cash or Shares		NA

Revenue multiple 0.5x 2017 at +26% yoy revenues growth

Cash Flow

Adj. EBIT and change in net liquidity by quarter

Change in net liquidity position1) and adjusted EBIT -6.5 -6.3 -6.6 -7.4 -7.2 -5.7 -5.5 -6.5 -9.8 -11.6 -1.5 -10.0 -7.5 -6.3 -11.3 -4.9 -14.8% -15.9% -16.6% -13.3% -14.0% -10.5% -10.3% -12.4% -18.0% -16.0% -14.0% -12.0% -10.0% -8.0% -6.0% -4.0% -2.0% 0.0% -12.0 -10.0 -8.0 -6.0 -4.0 -2.0 0.0 Q1 '16 Q2 '16 Q3 '16 (2) Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Adj. EBIT Cash outflow Adj. EBIT in % Closure of Shopping Club EUR m Net Liquidity1) EUR 25.7m Pre-stocking bonded warehouse & Bebitus plus cash earn-out payments in %

1) Includes cash and cash equivalents, time deposits and restricted cash excluding cash inflow from borrowing base (3.5 million)

2) Excluding inventory reduction of approx. EUR 8.6m related to closure of shopping club.

Cash Flow

Net working capital by quarter

Liquidity position strengthened by capital increase

Outlook

Outlook 2018

Revenues	• Growth similar to previous year (8.8%)
Operating contribution margin	• Significant improvement
Adj. EBIT	Break-even • Significant improvement early 2019
Free Cash Flow	• Significant improvement

Questions

Appendix

Our shareholder structure

Shareholder structure1)		Basic share data
Free Float*: 12,291,494 shares (39.5%)	MCI Capital: 4,747,982 shares (15.3%)	WKN	WNDL11
		ISIN	DE000WNDL110 DE000WNDL1J7
	DN Capital: 3,327,084 shares (10.7%)	Market place	Frankfurt Stock Exchange
	Acton Capital: 3,126,172 shares (10.1%)	Type of share	No-par value bearer shares
Schroders: 1,638,702 shares (5.3%)		Initial listing	May 6, 2015
	Founders**: 2,289,419 shares (7.4%)	Designated Sponsor	Equinet AG
Goldman Sachs: 1,721,491 shares		Number of shares	31,100,743
(5.5%)	Deutsche Bank: 1,958,399 shares	as of February, 2018
Supervisory Board members	(6.3%)	Share capital	EUR 31,100,743
Willi Schwerdtle (Chairman)	Petra Schäfer (Globus)
Dr. Christoph Braun (Acton Capital)	Tomasz Czechowicz (MCI Capital)

Dr. Edgar Carlos Lange (Lekkerland) Nenad Marovac (DN Capital)

As of February 12, 2018

Disclaimer: The shareholder structure pictured above is based on the published voting rights announcements and company information. windeln.de SE assumes no responsibility for the correctness, completeness or currentness of the figures. Total number of shares: 31,100,743

*Free float according to the definition of Deutsche Börse

** Aggregate shareholding of the founders (Alexander Brand & Konstantin Urban)

Key performance indicators quarter over quarter (continuing operations)

	Q1 '14	Q2 '14	Q3 '14	Q4 '14	Q1 '15	Q2 '15	Q3'15	Q4'15	Q1'16	Q2'16	Q3'16	Q4'16	Q1 '17	Q2 ´17	Q3 '17	Q4 ´17
Site Visits (in thousand) ¹ 4	5,089	6,261	7,463	8,798	9,897	10,524	12,771	18,532	21,346	22,106	23,030	27,507	26,037	21,884	21,843	20,747
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 %	68.6%	69.8%	72.4%	72.1%
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 %	46.3%	47.3%	48.7%	47.4%
Active Customers (in thousand) 4	302	332	382	442	496	546	670	859	928	965	998	1,065	1,073	1,103	1,126	1,051
Number of Orders (in thousand) 5	231	257	301	349	365	377	459	603	594	532	537	674	630	580	561	586
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	2.2	2.2	2.2	2.2
Orders from Repeat Customers (in thousand) 7	176	198	232	270	284	293	349	432	440	391	387	458	468	442	501	436
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 %	75.6%	76.2%	83.2%	76.2%
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	52,210	52,773	50,320	50,990
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	82.9	91.0	89.8	87.1
Returns (in % of Gross Revenues from orders) 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 %	3.9%	2.9%	2.9%	2.9%

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. Until the end of 2016 we have also excluded visits from China because the most common online translation services on which most of our customers who ordered in our German shop for delivery to China relied to translate our website content were not able to do so from their mobile devices, and therefore very few of such customers ordered from their mobile devices. As we have started a customized website for our Chinese customers in December 2016 we include visits from China from Q1 2017 onwards. 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. From Q1 2017 onwards we include 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 Gross Revenues from Orders (until Q1 2017 in % of Net Merchandise Value)) as the returned amount in Euro divided by Gross Revenues from Orders in the measurement period. From Q2 2016 onwards including Bebitus and Feedo returns. Gross Revenues from Orders are defined as the total aggregated Euro amount spent by our customers minus cancellations but irrespective of returns. The Euro amount does not include value added tax. As the Gross Revenues from Orders do not exclude returns and include all marketing rebates it is more reasonable to use this KPI for the return rate calculation than the Net Merchandise Value. The change of the calculation logic has no material impact on the reported return rate. Therefore, the calculation has been changed accordingly from Q2 2017 onwards.

Income statement (continuing operations)

kEUR	FY 2017	FY 2016	Q4 2017	Q4 2016
Revenues	211,899	194,756	52,483	57,131
Cost of sales	-159,564	-142,984	-39,505	-43,628
Gross profit	52,335	51,772	12,978	13,503
% margin	24.7%	26.6%	24.7%	23.6%
Selling and distribution expenses	-75,021	-68,413	-26,937	-18,485
Administrative expenses	-21,421	-18,804	-3,039	-1,109
Other operating income	1,306	971	446	227
Other operating expenses	-782	-839	-86	-187
EBIT	-43,583	-35,313	-16,638	-6,051
% margin	-20.6%	-18.1%	-31.7%	-10.6%
Financial result	1,616	864	99	117
EBT	-41,967	-34,449	-16,539	-5,934
% margin	-19.8%	-17.7%	-31.5%	-10.4%
Income taxes	4,053	-16	4,019	-
Profit or loss from continuing operations	-37,914	-34,465	-12,520	-5,934
% margin	-17.9%	-17.7%	-23.9%	-10.4%
EBIT	-43,583	-35,313	-16,683	-6,051
Share-based compensation	8,128	5,597	-101	2,324
Acquisition, integration and expansion costs	121	633	-12	19
Reorganization	94	984	197	397
Intangible assets	10,294	-	10,043	-
Costs of restructuring under corporate law	-	139	-	3
One-time costs of ERP system change	-	1,248	-	593
Adjusted EBIT	-24,946	-26,712	-6,511	-7,363
% margin	-11.8%	-13.7%	-12.4%	-12.9%

Balance sheet and cash flow statement

Consolidated statement of financial position
kEUR	December 31, 2017	December 31, 2016 R3
Total non-current assets	22,714	35,520
Inventories	19,174	21,645
Prepayments	332	374
Trade receivables	2,298	2,508
Miscellaneous other current assets1	11,052	10,326
Cash and cash equivalents	26,465	51,302
Total current assets	59,321	86,155
Total assets	82,035	121,675
Issued capital	28,472	26,318
Share premium	168,486	159,993
Treasury shares	-	-370
Accumulated loss	-143,387	-105,473
Cumulated other comprehensive income	-298	-233
Total equity	53,273	80,235
Total non-current liabilities	2,289	7,004
Other provisions3	315	424
Financial liabilities	3,575	64
Trade payables	14,779	17,517
Deferred revenues3	3,057	4,555
Miscellaneous current liabilities2	4,747	11,876
Total current liabilities	26,473	34,436
Total equity & liabilities	82,035	121,675

Consolidated statement of cash flows
kEUR	FY 2017	FY 2016	Q4 2017	Q4 20164
Net cash flows from/used in operating activities	-27,963	-31,224	-4,607	-9,554
Net cash flows from/used in investing activities	-201	-6,113	484	-4,752
Net cash flows from/used in financing activities	3,339	-39	3,434	1
Cash and cash equivalents at the beginning of the period	51,302	88,678	27,152	65,581
Net increase/decrease in cash and cash equivalents	-24,825	-37,376	-689	-14,278
Cash and cash equivalents at the end of the period	26,465	51,302	26,465	51,302

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 2016 comparative numbers from adoption of IFRS 15: recognition of loyalty bonuses within deferred revenues as part of contract liabilities.

4 Includes approx. EUR 8.6m inventory reduction due to closure of shopping club.