XXL

Investor Presentation • Feb 8, 2023

XXL ASA – Q4 2022 Presentation of

Financial Results 8 February 2023

Disclaimer

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This presentation includes and is based, inter alia, on forward-looking information and contains statements regarding the future in connection with the XXL Group's growth initiatives, profit figures, outlook, strategies and objectives. All forward-looking information and statements in this presentation are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are major markets for the XXL Group and its lines of business. These expectations, estimates and projections are generally identifiable by statements containing words such as "expects", "believes", "estimates" or similar expressions.

Important factors may lead to actual profits, results and developments deviating substantially from what has been expressed or implied in such statements. Although XXL believes that its expectations and the presentation are based upon reasonable assumptions, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in the presentation.

XXL is making no representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the presentation, and neither XXL nor any of its directors, officers or employees will have any liability to you or any other persons resulting from your use.

This presentation was prepared for the interim results presentation for the fourth quarter 2022, held on 8th of February 2023. Information contained herein will not be updated. The following slides should also be read and considered in connection with the information given orally during the presentation.

XXL ASA

– Q4 2022 Great brands Great prices Great assortment Great expertise Great accessibility

Launched the largest and most aggressive campaign in three years

Challenging markets and results – exiting Austria, waiver agreement and new equity secured

Q4 2022

• Challenging macro situation with reduced consumer spend and inventory build up in the industry
• XXL increased campaign activity to avoid carrying inventory into 2023, resulting in significant lower gross margin
• Additional write-down of inventory of NOK 301 million
• XXL are executing on strong and immediate actions in order to adapt to the new market situation

2022

• Disappointing sales trend in a challenging market
• Weakened gross margin due to heavy campaign activities and additional write-down of inventory
• Several actions initiated second half of 2022 in order to reduce incoming goods, costs and capex
• Record low EBITDA, driven by the negative growth and lower gross margins

Prepared for 2023

• Strict inventory and liquidity control XXL has launched a massive clearance campaign in order to adapt to the challenging market conditions
• Scale and cost efficiency to strengthen XXL position through the current market turmoil
• Exit of Austria
• Increase share of private label going forward
• Optimize store footprint and size over time

Highlights Q4 2022

• Historically low consumer confidence, combined with a build up of inventory in the whole sporting goods industry
• Operating revenue of NOK 2 264 million (NOK 2 609 million)
• All segments with decline vs. LY
• E-commerce decline of 7%, representing 25.9% of the total revenue for the Group
• Gross margin ended significantly below LY, negatively impacted by more clearance activities in the market, as well as increased sourcing costs
• EBITDA of NOK 65 million (NOK 403 million), mainly explained by the reduced revenue, and lower gross margin

Q4 proved to be a difficult quarter for XXL and for the market

• Challenging market conditions for the sporting goods industry in 2022 with weakening consumer sentiment and reduced demand for sporting goods all over Nordics
• Mainly the outlet segment that is growing and capturing market shares
• XXL's target and goal is to gain market shares over time

Highlights 2022 – a challenging year

• Operating revenue of NOK 8 426 million (NOK 9 597 million)
• o Sudden changes in sales from May 2022 and onwards due to reallocation of consumer spending towards travel and services, combined with weakening consumer sentiments
• o Broad based decline in revenue, all segments with decreased sales
• o E-commerce with negative growth of 14 per cent after two strong covid years, representing 22 per cent of total revenue
• Poor gross margin of 35.9%
• o High inventories in the industry leading to campaign pressure in the market
• o Increased freight and input costs
• EBITDA of NOK 538 million (NOK 1 386 million)
• Liquidity reserves ending at NOK 746 million (NOK 1 093 million)

1) All figures excluding additional write-down of inventory

We continue to face challenging markets, but will adapt accordingly

Low demand and market activity… … together with high inventories … … resulting in high campaign activity E24.no, 10th of November 2022 Inventory vs LY (%), Q3 2022 36% 72% 72% 43% 29% 46% 43% International supplier International supplier International supplier International supplier International retailer International retailer

International retailer

30%

Avg: 46%

The defensive moves gave effects in 2H of 2022

Financial Review Q4 2022

Q4 results significantly impacted by inventory write-down

• 2022 negative top line growth, and inventory build up at both XXL and for the sporting goods industry in general
• Very challenging macro conditions with decreased purchasing power among most consumers
• High campaign pressure in the market during 2022 and expected to continue into 2023 until the inventory levels have normalized

Background Write-down of inventory Implications

• XXL has done an assessment of the whole assortment and inventory in all countries
• The composition of the inventory is very healthy with record low levels of old inventory (> 24 months)
• However, due to the expected campaign pressure going forward and liquidity control, XXL has done an additional writedown of the inventory of NOK 301 million
• Additional write-down of the inventory of NOK 301 million
• Norway: NOK 136 million
• Sweden: NOK 103 million
• Finland: NOK 62 million
• Austria: see next slide

XXL has started massive clearance sales in all markets

Improved liquidity and stronger financial position

Strict inventory control combined with reduced purchased volumes will consequently lead to a more normalization of campaign activities

Short term – negative effect on gross margins

Q4 results significantly impacted by exit in Austria

• Since the first store opening in Austria in 2017, XXL has not managed to create a profitable business
• In Q1 2022, XXL initiated a strategic review of the operations in Austria
• In December 2022, the Board of Directors concluded on the strategic review and decided that XXL shall exit the Austrian market during 2023. The company is working on several different solutions, including sale of the Austrian entity

• The Austrian operations will according to IFRS 5 be classified as discontinued operations as of 31 December 2022 and treated as asset held for sale

• The results from the Austrian operations will be presented separately in the Consolidated Income Statement until the sale has been completed. Prior periods will be restated accordingly

• The detailed P&L, balance and cash flow statement will be presented in the notes to the financial statement
• The assets and liabilities related to the Austrian operations will be classified as held for sale separately from other assets and liabilities on the balance sheet
• The asset and liability held for sale is measured at the lower of its carrying amount and fair value

Background IFRS 5 Disc' Ops Fair value assessment

• The fair value assessment results in impairment of some of the assets related to the Austrian operations
• Net impairment on the assets is EUR 6.4 million
• XXL has also booked a provision of EUR 2.4 million for costs that will occur due to the decision, mainly related to personnel and other opex

XXL has secured a refinancing of the Group and an agreement with banks

Agreement with banks Capital Raise Balance sheet

• Liquidity covenants until December 2023
• NOK 200-300 million in H1 2023
• 169 MNOK - NOK 400-600 million in H2 2023

• Leverage covenant of 3.0x from December 2023

• Private placement of NOK 500 million to be executed in Q1 2023

• To be used to pay down existing loan facilities

• Potential subsequent offering of NOK 100 million to be executed in March 2023

• Significantly reduced purchasing budgets vs. 2022

• Aim to reduce inventory of NOK 500 million vs. 2022

Key Figures

(Amounts in NOK million)	Q4 2022	Q4 2021	FY 2022	FY 2021
GROUP Continuing Operations - Figures adjusted
for additional write-down and impairment losses)
Operating revenue	2 264	2 609	8 426	9 597
Growth (%)	-13,2 %	6,5 %	-12,2 %	-3,4 %
Gross profit (adj.)	749	1 105	3 022	3 949
Gross margin (adj.) (%)	33,1 %	42,3 %	35,9 %	41,1 %
Additional write-down of inventory	301	-	301	-
OPEX %	30,2 %	26,9 %	29,5 %	26,7 %
EBITDA (adj.)	6 5	403	538	1 386
EBITDA margin (adj.) (%)	2,9 %	15,5 %	6,4 %	14,4 %
Impairment losses	- 0	1 3	1	1 3
EBIT (adj.)	-107	174	-165	615
EBIT margin (adj.) (%)	-4,7 %	6,7 %	-2,0 %	6,4 %
Net Income adj	-72	165	-109	453
**Earnings per share (adj)	-0,28	0,66	-0,43	1,80
GROUP Continuing Operations (Reported Figures)
Gross profit	448	1 105	2 721	3 949
Gross margin (%)	19,8 %	42,3 %	32,3 %	41,1 %
EBITDA	-236	403	237	1 386
EBITDA margin (%)	-10,4 %	15,5 %	2,8 %	14,4 %
EBIT	-408	161	-467	602

EBIT margin (%) -18,0 % 6,2 % -5,5 % 6,3 % Net Income -373 153 -411 440 **Basic Earnings per share (NOK) -1,48 0,60 -1,63 1,74

• Revenue down with NOK 345 million vs. last year
• Negative like for like growth of 13.2%
• E-com growth of negative 7.0% representing 26.1% of total revenue versus 24.3% last year
• Gross margins adjusted for additional write -down ended at 33.1%, down from 42.3% last year
• More clearance activities both in the market as a whole and by XXL
• XXL has seen a transition to more sales on lower price points as well as higher share of sales on campaign products
• Additional write -down of inventory of NOK 301 million
• OPEX in % is 3.3 p.p higher than last year driven by the lower top line hampering scale in operations
• EBITDA (adj) ending at NOK 65 million
• 2022 EBITDA (adj) of NOK 538 million
• 2022 EBITDA (adj) ex. IFRS of minus NOK 22 million
• Austria segment + Austrian Central Warehouse reported as discontinued operations in Q4 2022 and FY 2022 (all comparable figures restated). 2021 includes a write -down of assets related to the two outlet stores in Sweden of NOK 13 million
• Adjusted net income of minus NOK 72 million in Q4 2022

Gross Margin1) Development

XXL ASA Q4 2022 - Gross margin per segment (in %)

• Weakened gross margin development in the quarter, down from 42.3% in Q4 2021 to 33.1% in Q4 2022
• Margins negatively affected by high campaign shares and heavy discounting in the markets. The current market demands strict focus on inventory levels and liquidity control. XXL has prioritized strict liquidity management with sales and inventory actions over gross margins
• XXL targets a long term sustainable gross margin around 40 per cent for the Group

OPEX Development

• Group OPEX% up with 3.3 points to 30.2% in Q4, explained by lower revenue hampering scale in operations
• Operating expenses decreased by NOK 16 million due to strict cost focus throughout the organization, including lower personnel cost in stores and decreased marketing spend, and despite increased energy prices and KPI adjustments under rental contracts

EBITDA1) Development

XXL ASA Q4 2022 - EBITDA per segment (in MNOK)

Q4 21 Q4 22

• Negative EBITDA development vs LY explained by the negative like for like revenue growth and decreased gross margins
• All segments posting worsened EBITDA in the quarter vs. LY
• EBITDA margin of 2.9% in Q4 2022 vs. 15.5% in Q4 2021

Net Debt Development

Financial position

Outlook

Six clear priorities going forward

PRIORITY	Revenue	Gross margin	Opex	Balance sheet
Category strategies	✓	✓		✓
Private Label	✓	✓
Full fletch omni-channel	✓
Improve campaigns and marketing	✓		✓
Austria strategic review	✓	✓	✓	✓
Cost to 30%*			✓
* Excluding IFRS 16 effects

Austria – decision to exit Austria in 2023

• XXL entered the Austrian market in 2017 and has invested NOK 200 million to build a position in a very competitive market
• In addition, XXL has suffered losses of approx. NOK 500 million, due to both very strict Covid restrictions, but also challenges to obtain the needed assortment.
• XXL has evaluated all options, but despite strong efforts by the Austrian team, but it has not been enough to turnaround the business
• Ambition to have no negative cash effects going forward
• Austria is treated as discontinued operations from Q4 2022

25

Race to 30%* OPEX – working towards a more flexible cost base

Stores HQ

Already implemented actions

• Decreased direct deliveries (from 31% in 2016 to 5% in 2022)
• Electronic price labels
• Self-check-out in store
• 9% • Pickup lockers
• New digital tool for store employees (Retail solution)
• RFID

Actions in progress

• New budget tool + improved manning tool
• Self service improvement instore

HQ

Actions in progress

• Increased cost focus in all departments
• Scaling of HQ functions (rightsizing of several departments)
• Reduce complexity and streamline processes
• Making the cost base more scalable and flexible

* excluding IFRS 16 effects

7.4

-0.3

Financial ambitions – "40-30-10"

Actions to achieve ambition

• Increase private label share from 10% towards 30%
• Category strategy and execution
• Pricing balance every day low price vs. campaign execution – protect market share

Actions to achieve ambition

• Optimize store staffing
• Marketing efficiency
• HQ costs
• Downscaling of stores (including exiting two outlet stores) and optimize store footprint
• Austria

Closing remarks

Q4 2022 Key Takeaways Priorities Going forward

• Challenging markets and results
• Waiver agreement with bank consortium, and new capital secured
• Additional write-down of inventory of NOK 301 million
• Exit of Austria in 2023

• XXL are executing on strong and immediate actions in order to adapt to the new market situation

• Manoeuvring through the turmoil in the market

• Strict liquidity control and follow up
• Optimize inventory
• Reduce cost base
• Austria exit
• Category strategies
• E-commerce growth

• Strengthen campaigns and marketing

• Scale and cost efficiency to strengthen XXL position through the current market turmoil

• Race to "40-30-10"
• Decreased sales in January 2023 of approx. 5%
• XXL has launched massive clearance campaigns in all markets at the end of January 2023

Q&A

XXL ASA – Q4 2022

Appendix

Q4 2022 – Reduced demand for sporting goods affecting topline – Inventory management affecting EBITDA

	Group	Norway	Sweden	Finland	HQ
LFL GROWTH	-13.4%	-12.5%	-17.6%	-9.2%	n/a
EBITDA1) GROWTH (mnok)	-338	-128	-128	-51	-32

Q4: Norway and Sweden

• Negative development in topline compared to the same quarter last year, representing negative growth of 11.9 per cent
• More clearance and campaign activities under challenging market conditions as well as higher sourcing costs, explains the decreased of 8 percentage points in the gross margin.
• EBITDA (adj.) of NOK 201 million (NOK 330 million)

• Additional write-down of inventory of NOK 136 million

• Negative development in topline compared to the same quarter last year, representing negative growth of 16.2 per cent

• High clearance and campaign activities, both in the market and by XXL, under challenging market conditions as well as higher sourcing costs, explains the decreased of 11.2 percentage points in the gross margin
• Operating expenses ended at 29.4 percent, explained by the negative like for like growth impacting scale in the operations
• EBITDA (adj.) ending at negative SEK 8 million (SEK 122 million)
• Additional write-down of inventory of NOK 103 million

Q4: Finland

• Negative like-for-like growth. Challenging conditions with weakened consumer sentiment and reduced demand for sporting goods
• Lower gross margin is explained by more clearance activities under challenging market conditions as well as higher sourcing cost
• Opex% worse than LY due to negative like for like for growth, hampering scale in the operations. XXL has focused on cost efficiencies mostly related to store staffing and marketing spend.
• Additional write-down of inventory of NOK 62 million

1) Excluding additional write-down of inventory

All sports united. Sports unite all.