Zalando SE — Call Transcript 2017

May 9, 2017

Q 1 2 0 1 7 E A R N I N G S C A L L

E U R O P E ' S L E A D I N G O N L I N E F A S H I O N D E S T I N A T I O N

R E S U L T S H I G H L I G H T S A N D B U S I N E S S U P D A T E

• (2) Positive one-off effect of €7m due to allowance release in Q1/16 included.
• 3

(1) Excluding equity-settled stock based compensation costs ("SBC") of €5.4m in Q1/17.

S U C C E S S F U L S T A R T I N T O 2 0 1 7 : G R O W T H A N D P R O F I T A B I L I T Y O N T R A C K

F U R T H E R E X P A N D E D O U R C O N V E N I E N C E O F F E R I N G A C R O S S E U R O P E ,...

SAME DAY DELIVERY UPGRADE + 2 GERMAN CITIES

INCREASED AUTOMATION IN MGB THANKS TO BAGSORTER

REDUCED LEAD TIME BY ONE DAY IN NORWAY

	LAUNCH OF PARIS SPOKE LEAD-TIME SHORTENED: 2 DAYS FOR PARIS
	1 DAY FOR REST OF FR
INTRODUCTION OF SIZING CHAT IN ALL COUNTRIES	>100.000 SKUs SHOP THE LOOK

RETURN ON DEMAND TESTS + 4 GERMAN CITIES

... B O O S T E D Z A L A N D O ' S F A S H I O N A B I L I T Y ...

… A N D I N V E S T E D I N T O O U R C O R P O R A T E B R A N D F O R T H E F I R S T T I M E B Y H O S T I N G T H E V I Z I O N S P L A T F O R M C O N F E R E N C E

5.6 million Twitter impressions, 100+ Journalists from the EU, 50+ Interviews that day

24hrs of content on 3 stages with 50 content streams

F I N A N C I A L U P D A T E Q 1 2 0 1 7

G R O W T H S T O R Y O N T R A C K

GROUP REVENUE

In €m

I N C R E A S I N G C U S T O M E R B A S E , O R D E R F R E Q U E N C Y A N D S H A R E O F W A L L E T

(1) Defined as the transactional revenue (incl. VAT and transactional volume of Partner Program) after cancellations or returns d ivided by the number of orders. (2) GMV (gross merchandise volume) per active customer = average orders per active customer (LTM in #) x average basket size afte r returns (in €).

ACTIVE CUSTOMERS

A V E R A G E O R D E R S P E R A C T I V E C U S T O M E R

G R O U P P R O F I T A B I L I T Y S T A B L E D E S P I T E P L A N N E D I N V E S T M E N T S

GROUP EBIT PROFITABILITY

EBIT margin¹

DACH EBIT

EBIT margin 1

(1) Excluding equity-settled stock based compensation costs ("SBC") of €5.4m in Q1/17. (2) Positive one-off effect of €7m due to allowance release in Q1/16 included.

F U L F I L L M E N T C O S T I N V E S T M E N T S I M P A C T M A R G I N , W H I L E M A R K E T I N G L E V E R A G E C O N T I N U E S

COSTS AND MARGINS

excl. SBC¹in percent of revenue

S T R O N G W O R K I N G C A P I T A L A N D G R O W T H I N V E S T M E N T S I N L O G I S T I C S I N F R A S T R U C T U R E

CAPITAL EXPENDITURE¹

in €m

NET WORKING CAPITAL (END OF Q1)

in percent of annualized Q1 revenue

L I Q U I D I T Y R E M A I N S S T R O N G

CASH FLOW DEVELOPMENT (Q1)

In €m

(1) Q4/16 and Q1/17 liquidity include investments into short-term deposits with maturity of more than 3 and less than 12 months of €220m and €150m, respectively. (2) Includes investments in fixed, intangible assets, payments for acquisitions and change in restricted cash.

(3) Includes financing cash flow (€-0.8m) and effect of exchange rate on cash and cash equivalents €2.2m.

O U T L O O K

O U T L O O K F O R F Y 2 0 1 7 U N C H A N G E D – F O C U S O N P R O F I T A B L E G R O W T H

• (2) Excludes investments into M&A.
• 15

2

(1) Adjusted EBIT margin excludes stock-based compensation of 0.4%.

Type of Shares Ordinary bearer shares with no-par value (Stückaktien)

Stock Exchange Frankfurt Stock Exchange

Market Segment Regulated Market (Prime Standard)

Index Listings MDAX (2.3% share1)

Total Number of Shares Outstanding 247,268,958

Issued Share Capital €247,268,958

SHARE INFORMATION

I S S U E D S H A R E C A P I T A L

As of 31-Mar-2017

SHARE STOCK OPTION PROGRAMS

As of 31-Mar-2017

EMPLOYEE INCENTIVE PLAN²

As of 31-Mar-2017

Strike price

17 (1) Average April-2017.

Program	# Options outstanding	Strike price	Program	# Options outstanding	Strike price
Various	76,670	1.00	EIP 2016 – Summer Tranche 2016	109,863	1.00
SOP 2011	2,543,200	5.65	EIP 2016 – Summer Tranche 2016	555,437	27.10
SOP 2013	9,817,500	15.63	EIP 2016 – Summer Tranche 2016	171,304	32.52
SOP 2014 – Tranche pre IPO	4,946,863	17.72	EIP 2016 – Winter Tranche 2016	17,494	1.00
SOP2014 – Tranche Mar 2015	607,489	22.79	EIP 2016 – Winter Tranche 2016	69,104	36.83
SOP 2014 – Tranche May 2015	222,230	25.03	EIP 2016 – Winter Tranche 2016	36,368	44.20
SOP 2014 – Tranche Aug 2015	190,812	29.92	Total	959,570
SOP 2014 – Tranche Nov 2015	58,900	30.48
SOP 2014 – Tranche Mar 2016	326,216	31.60
Total	18,789,880

(2) The AGM of 31-May-16 authorized the Management Board to grant options under the Employee Incentive Plan.

I N C O M E S T A T E M E N T

€

€ m	FY/14	FY/15	FY/16	Q1/16	Q1/17
Revenue	2,214.0	2,958.2	3,639.0	796.1	980.2
% growth	25.7%	33.6%	23.0%	23.7%	23.1%
Cost of Sales	(1,255.3)	(1,624.0)	(2,029.6)	(462.7)	(574.8)
Gross Profit	958.7	1,334.1	1,609.4	333.4	405.4
% margin	43.3%	45.1%	44.2%	41.9%	41.4%
Selling and Distribution Costs	(793.8)	(1,118.9)	(1,223.7)	(277.2)	(339.2)
Administrative Expenses	(109.1)	(129.0)	(191.3)	(40.6)	(52.8)
Other Operating Income	12.2	10.2	16.7	1.5	2.7
Other Operating Expenses	(5.8)	(7.0)	(4.1)	(0.7)	(1.1)
EBIT	62.1	89.6	207.0	16.4	14.9
% margin	2.8%	3.0%	5.7%	2.1%	1.5%
Net Financial Result	(4.5)	(3.0)	(14.1)	(6.2)	(3.6)
EBT	57.7	86.6	192.9	10.3	11.3
% margin	2.6%	2.9%	5.3%	1.3%	1.2%
Income and Other Tax	(10.5)	34.9	(72.5)	(5.7)	(6.2)
Net Income	47.2	121.5	120.5	4.6	5.1
% margin	2.1%	4.1%	3.3%	0.6%	0.5%
Depreciation & Amortization	25.8	34.2	48.2	9.1	12.6
EBITDA	88.0	123.8	255.2	25.5	27.5
% margin	4.0%	4.2%	7.0%	3.2%	2.8%
Share Based Compensation (SBC)	19.8	17.9	19.9	3.8	5.4
Adj. EBIT (adj. for SBC)	82.0	107.5	216.3	20.2	20.3
% margin	3.7%	3.6%	5.9%	2.5%	2.1%
Adj. EBITDA (adj. for SBC)	107.8	141.7	264.5	29.3	32.8
% margin	4.9%	4.8%	7.3%	3.7%	3.4%

S H A R E B A S E D C O M P E N S A T I O N

Per Income Statement Line Item

€m	FY/14	FY/15	FY/16	Q1/16	Q1/17
Per Income Statement Line Item
Cost of Sales	4.4	4.5	5.0	0.9	1.3
Selling and Distribution Costs	9.6	9.0	9.9	1.9	2.7
Administrative Expenses	5.8	4.5	5.0	0.9	1.3
Share Based Compensation	19.8	17.9	19.9	3.8	5.4
As % of revenue	FY/14	FY/15	FY/16	Q1/16	Q1/16
Per Income Statement Line Item
Cost of Sales	0.2%	0.2%	0.1%	0.1%	0.1%
Selling and Distribution Costs	0.4%	0.3%	0.3%	0.2%	0.3%
Administrative Expenses	0.3%	0.2%	0.1%	0.1%	0.1%
Share Based Compensation	0.9%	0.6%	0.5%	0.5%	0.6%

Per Income Statement Line Item

S E G M E N T S

€ m	FY/14	FY/15	FY/16	Q1/16	Q1/17
Revenue	2,214.0	2,958.2	3,639.0	796.1	980.2
DACH	1,234.0	1,580.1	1,813.8	405.8	475.0
Rest of Europe	862.6	1,211.6	1,570.2	334.5	428.3
Other	117.4	166.5	255.1	55.8	76.9
As % of total	100.0%	100.0%	100.0%	100.0%	100.0%
DACH	55.7%	53.4%	49.8%	51.0%	48.5%
Rest of Europe	39.0%	41.0%	43.1%	42.0%	43.7%
Other	5.3%	5.6%	7.0%	7.0%	7.8%
EBIT	62.1	89.6	207.0	16.4	14.9
DACH	72.3	92.2	221.4	37.4	32.8
Rest of Europe	(18.6)	(10.2)	(6.2)	(18.5)	(21.4)
Other	8.4	7.5	(8.1)	(2.4)	3.4
% margin	2.8%	3.0%	5.7%	2.1%	1.5%
DACH	5.9%	5.8%	12.2%	9.2%	6.9%
Rest of Europe	(2.2%)	(0.8%)	(0.4%)	(5.5%)	(5.0%)
Other	7.2%	4.5%	(3.2%)	(4.4%)	4.4%
Adjusted EBIT	82.0	107.5	216.3	20.2	20.3
DACH	83.0	101.9	226.3	39.3	35.5
Rest of Europe	(11.6)	(3.3)	(3.3)	(17.0)	(19.1)
Other	10.5	8.9	(6.7)	(2.1)	3.9
% adjusted margin	3.7%	3.6%	5.9%	2.5%	2.1%
DACH	6.7%	6.4%	12.5%	9.7%	7.5%
Rest of Europe	(1.3%)	(0.3%)	(0.2%)	(5.1%)	(4.5%)
Other	9.0%	5.3%	(2.6%)	(3.7%)	5.1%

B A L A N C E S H E E T

€m Q1/16

		Q1/16 (% of total		Q1/17 (% of total
€m	Q1/16	assets)	Q1/17	assets)
Total Non-Current Assets	264.8	12.1%	456.6	17.0%
Thereof: Property, Plant and Equipment	136.6	6.2%	300.3	11.2%
Other Financial Assets	24.1	1.1%	43.8	1.6%
Non-Financial Assets	3.3	0.2%	2.8	0.1%
Other Non-Current Assets	100.8	4.6%	109.7	4.1%
Total Current Assets	1,931.6	87.9%	2,230.5	83.0%
Thereof: Inventories	590.4	26.9%	718.7	26.7%
Trade and Other Receivables	162.8	7.4%	231.4	8.6%
Other Assets1	237.2	10.8%	330.5	12.3%
Cash and Cash Equivalents1	941.2	42.9%	949.9	35.3%
Total Assets	2,196.4	100.0%	2,687.0	100.0%
Total Equity	1,278.3	58.2%	1,415.1	52.7%
Thereof: Issued Capital	247.0	11.2%	247.2	9.2%
Capital Reserves	1,144.7	52.1%	1,166.4	43.4%
Retained earnings	(0.1)	(0.0%)	(5.3)	(0.2%)
Accumulated Gains (Loss)	(113.4)	(5.2%)	6.8	0.3%
Total Non-Current Liabilities	29.6	1.3%	29.5	1.1%
Thereof: Financial Liabilities	13.6	0.6%	10.5	0.4%
Other Non-Current Liabilities	16.0	0.7%	19.0	0.7%
Total Current Liabilities	888.4	40.4%	1,242.5	46.2%
Thereof: Trade Payables and Similar Obligations	737.7	33.6%	1,047.9	39.0%
Other Current Liabilities	150.8	6.9%	194.6	7.2%
Total Equity & Liabilities	2,196.4	100.0%	2,687.0	100.0%
Net Working Capital	15.5	0.7%	(97.7)	(3.6%)

C A S H F L O W S T A T E M E N T

€m	FY2014	FY2015	FY/16	Q1/16	Q1/17
Net Income	47.2	121.5	120.5	4.6	5.1
Non-Cash Expenses from Share-Based Payments	19.8	17.9	19.9	3.8	5.4
Cash Settlement of Claims from Share-Based Payments	0.0	(2.3)	0.0	0.0	0.0
Depreciation	25.8	34.2	48.2	9.1	12.6
Income Taxes	10.5	(34.9)	72.5	5.7	6.2
Income Taxes Paid, Less Refunds	0.0	(0.0)	(33.8)	(20.1)	(3.9)
Change in Provisions	1.0	(0.5)	0.1	3.6	(0.1)
Other Non-Cash Income	(0.2)	(1.0)	1.2	(0.0)	0.7
Change in Inventories and Receivables	(68.7)	(154.2)	(147.4)	(108.3)	(157.2)
Change in Trade Liabilities	94.9	154.9	264.3	89.6	126.5
Change in Other Assets/Other Liabilities	44.6	(16.2)	(69.7)	2.8	(11.9)
Cash Flow from Operating Activities	174.9	119.4	275.8	(9.2)	(16.7)
Payments for Investments in Fixed and Intangible Assets	(51.1)	(60.0)	(181.7)	(23.7)	(77.8)
Payments for Acquisitions	0.0	(16.8)	(30.4)	(0.9)	0.0
Cash Paid for Investments in Term Deposits	0.0	(155.0)	(65.0)	0.0	70.0
Change in Restricted Cash	(0.8)	35.3	0.0	(0.0)	0.4
Cash Flow from Investing Activities	(51.9)	(196.5)	(277.1)	(24.6)	(7.4)
Payments Received from Capital Increases	510.1	6.4	1.1	0.0	0.0
Cash Received from Loans	3.9	0.0	0.0	0.0	0.0
Repurchase of treasury shares	0.0	(1.7)	(0.7)	0.0	0.0
Cash Repayments of Loans	(3.2)	(3.2)	(3.2)	(0.8)	(0.8)
Cash Flow from Financing Activities	510.8	1.5	(2.9)	(0.8)	(0.8)
Change in Cash & Cash Equivalents	633.8	(75.7)	(4.1)	(34.7)	(25.0)
Effects of Exchange Rate on Cash & Cash Equivalents	0.0	0.9	0.5	(0.4)	2.2

K P I D E V E L O P M E N T

	2015	Q1/16	Q2/16	Q3/16	Q4/16	2016	Q1/17
Site Visits (m)1	1,656.4	479.5	480.2	468.6	563.2	1,991.6	617.6
Mobile Visit Share (in % of Site Visits)2	57.1%	62.3%	64.7%	67.0%	68.1%	65.6%	68.8%
Active Customers (m) 3	17.9	18.4	18.8	19.2	19.9	19.9	20.4
Number of Orders (m) 4	55.3	15.6	17.5	16.4	19.6	69.2	19.9
Average Order per Active Customer	3.08x	3.20x	3.32x	3.39x	3.48x	3.48x	3.60x
Average Basket Size (in €) 5	67.8	66.5	66.2	62.8	70.2	66.6	63.0
Fulfillment Cost Ratio (in % of revenue) 6	26%	24%	23%	24%	22%	23%	25%
Marketing Cost Ratio (in % of revenue) 7	12%	10%	10%	10%	10%	10%	9%

• (1) Site Visits defined as the number of series of page requests from the same uniquely identified client at Zalando, including w ebsite, m.site and apps in the measurement period. A visit is considered ended when no requests have been recorded in more than 30 minutes.

• (2) Mobile is defined as tablets, mobile site and apps.

• (3) Active Customers defined as the number of customers placing at least one order in the last twelve months in the measurement p eriod irrespective of cancellations or returns.

• (4) Number of Orders defined as the number of customer orders placed in the measurement period irrespective of cancellations or r eturns. 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 peri od or have been cancelled.
• (5) Average Basket Size defined as the transactional revenue (incl. VAT and transactional volume of Partner Program) after cancel lations or returns divided by the number of orders.
• expenses, as well as allocated overhead. costs. Fulfillment costs therefore comprises all selling and distribution costs, exc ept for marketing costs. All numbers shown excluding equity settled SBC costs.
• (7) Marketing Cost Ratio defined as marketing cost as a proportion of revenue in the measurement period. Marketing cost mainly co nsists of advertising expenses including search engine marketing, television, online display and other marketing channels as well as allocated overhead cost. All numbers shown excl uding equity-settled SBC costs.

(6) Fulfillment Cost Ratio defined as fulfillment cost as a proportion of revenue in the measurement period. Fulfillment costs ma inly include logistics, content creation, service and payment

F I N A N C I A L C A L E N D A R 2 0 1 7

Date	Action
Tuesday, 16-May	NDR, Edinburgh
Wednesday, 17-May	Citi's European Internet and Digital Conference, London
Wednesday, 31-May	Annual General Meeting 2017
Monday + Tuesday, 19-20 June	Capital Markets Day 2017
Thursday, 22-June	dbAccess - German, Swiss & Austrian Conference, Berlin
Tuesday, 27-June	Erste Securities Polska Conference, Warsaw
Friday, 30-June	Kepler Cheuvreux One-Stop-Shop, Amsterdam
Thursday, 10-Aug	Q2/2017 Results
Tuesday, 7-Nov	Q3/2017 Results

June 2017
M	T	W	T	F
			1	2
5	6	7	8	9
12	13	14	15	16
19	20	21	22	23
26	27	28	29	30

August 2017
M		T	W	T	F
		1	2	3	4
7		8	9	10	11
14		15	16	17	18
21		22	23	24	25
28		29	30	31

November 2017
M	T	W	T	F
		1	2	3
6	7	8	9	10
13	14	15	16	17
20	21	22	23	24
27	28	29	30

May 2017
M	F
1	2	3	4	5
8	9	10	11	12
15	16	17	18	19
22	23	24	25	26
29	30	31

Certain statements in this communication may constitute forward looking statements. These statements are based on assumptions that are believed to be reasonable at the time they are made, and are subject to significant risks and uncertainties. You should not rely on these fo rward-looking statements as predictions of future events and we undertake no obligation to update or revise these statements. Our actual results may differ materiall y and adversely from any forwardlooking statements discussed on this call due to a number of factors, including without limitation, risks from macroeconomic developments, external fraud, inefficient processes at fulfillment centers, inaccurate personnel and capacity forecasts for fulfillment centers, hazardous material / c onditions in production with regard to private labels, lack of innovation capabilities, inadequate data security, lack of market knowledge, risk of strike and chang es in competition levels.

D I S C L A I M E R