Q3 and 9M 2021 Trading Update

Press release

Q3 and 9M 2021 Trading Update

Q3 AND 9 MONTHS 2021 TRADING UPDATE

Solid business and market trends confirm Safilo's sales and

profits above 2020 and 2019

Double-digit organic2 sales growth vs 2019 driven by the US

and the beginning of a recovery in Europe

Sales development and progress on costs saving program

driving significant recovery of profitability

In Q3 2021

• Net sales €226.6M, +2.6% vs 2020, +11.1% vs 2019 at constant currencies
• Adj.1 EBITDA €19.1M, +33.3% vs 2020, +45.9% vs 2019 Adj.1 EBITDA margin 8.4%vs 6.5% in 2020, 6.2% in 2019

In 9M 2021

• Net sales €737.4M, +37.3% vs 2020, +8.7% vs 2019 at constant currencies
• Adj.1 EBITDA €68.8M, +593.1% vs 2020, +26.6% vs 2019 Adj.1 EBITDA margin 9.3%vs -2.5% in 2020, 7.7% in 2019
• Group Net Debt €228.3M vs €222.1M at December 31, 2020

Padua, November 9, 2021 - The Board of Directors of Safilo Group S.p.A. has today reviewed and approved the third quarter and the first nine months of 2021 economic and financial key performance indicators.

Angelo Trocchia, Safilo Chief Executive Officer, commented:

"Positive consumer trends in our key markets and product categories allowed us to close another strong quarter of recovery and growth despite the dampening effect of a still complex environment in a number of countries and our challenging comparison bases in the midst of our brand portfolio overhaul.

The robust organic2 growth we recorded in our key regions led our total net sales to increase by 11.1% at constant exchange rates compared to Q3 2019 and to also surpass Q3 2020.

This positive development of the top line, coupled with the further progress in our cost of goods sold saving program, allowed us to achieve, in the period, a significant improvement of our operating performance.

In the quarter, our strategic priority to expand the reach of our brand portfolio to new consumer generations, into the digital universe where we keep investing, was further advanced thanks to the new licensing agreement we signed with Chiara Ferragni.

This press release may use 'alternative performance indicators' not foreseen by the IFRS-EU accounting standards (EBITDA and Net debt), and whose meaning and contents are illustrated in the specific section of the press release and in accordance with the CESR/05-178b recommendation published on 3rd November 2005.

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Press release

Q3 and 9M 2021 Trading Update

A few days ago, we successfully completed the share capital increase we launched in October with the main aim of repaying the shareholder loan we received in 2020 to complete our acquisitions in the year, and this is for us another important step in the direction of building a healthy and profitable business.

The performance of the business in the third quarter was in line with our overall expectations to deliver a solid second semester and supportive of our full year growth targets."

NET SALES PERFORMANCE IN Q3 2021

In the third quarter of 2021, Safilo posted net sales of Euro 226.6 million, up 2.6% at constant exchange rates (+3.5% at current exchange rates) compared to Euro 219.1 million posted in Q3 2020, the first quarter last year to register a recovery compared to 2019 after the severe downturn experienced in H1 2020 following the Covid-19 pandemic.

Compared to Q3 2019, net sales were instead up 11.1% at constant exchange rates (+6.5% at current exchange rates), benefitting from a significant organic2 sales growth of around +16% at constant exchange rates, to which all the main markets of the Group contributed. While the strength of the United States was reconfirmed, on the other hand European markets showed a moderate recovery in consumer spending and a marked improvement of organic2 trends also supported by the favorable phasing in the deliveries of some orders. Compared to 2019, the sales generated by the new proprietary and licensed brands, overall surpassed the significant business decline due to the licenses terminated at the end of 2020 and at the end of June 2021.

In Q3 2021, prescription frames and sport products remained the key growth drivers, continuing to benefit from the sustained business activity of optical stores in the different markets as well as from a dynamic environment for outdoor activities supporting Smith's googles and helmets business.

In the quarter, the organic2 revenue performance of sunglasses turned positive almost everywhere, both in the comparison with 2019 and, more meaningfully, versus last year when sales of sunglasses had remained depressed in many markets.

In Q3 2021, the online business' share of the Group's total net sales equaled around 13% compared to only 3% in Q3 2019, and to 16% in Q3 2020 when the channel soared, thanks to the contribution of Blenders' online business and the surge of Smith's direct to consumer (DTC) channel and of the internet pure players.

Drivers by geography of the Group net sales performance in Q3 2021

										% change		% change
										2021 vs 2020		2021 vs 2019
	(Euro million)	Q3 2021	%	Q3 2020	%	Q3 2019	%			current	constant		current	constant
			forex	forex		forex	forex
	North America	115.1	50.8	113.1	51.6	79.9	37.6	+1.8%	+1.5%	+44.0%	+52.3%
	Europe	82.8	36.6	79.3	36.2	95.5	44.9	+4.5%	+3.7%	-13.3%	-12.8%
	Asia Pacific	11.3	5.0	15.9	7.2	17.5	8.2	-28.9%	-31.4%	-35.6%	-35.5%
	Rest of the world	17.4	7.7	10.9	5.0	19.8	9.3	+60.4%	+55.4%	-12.0%	+1.6%
	Total	226.6	100.0	219.1	100.0	212.8	100.0	+3.5%	+2.6%	+6.5% +11.1%

• Q3 2021 net sales in North America were again solid at Euro 115.1 million, growing by 1.5% at constant exchange rates (+1.8% at current exchange rates) compared to Q3 2020, the period in which the region recorded the first significant positive rebound from the Covid-19 pandemic.
  Compared to Q3 2019, Safilo's net sales in North America were up +52.3% at constant exchange rates, further consolidating the already significant organic2 revenue growth achieved last year in the US thanks to Smith and the positive momentum of Carrera and the Group's key licenses in the market, namely Kate Spade, Tommy Hilfiger and Jimmy Choo.

This press release may use 'alternative performance indicators' not foreseen by the IFRS-EU accounting standards (EBITDA and Net debt), and whose meaning and contents are illustrated in the specific section of the press release and in accordance with the CESR/05-178b recommendation published on 3rd November 2005.

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Q3 and 9M 2021 Trading Update

Compared to 2019, in North America the Group benefitted from the significant business contribution deriving from the new own brands, Blenders and Privé Revaux, and the new licenses in the portfolio, including, from this year, also Under Armour.

• Q3 2021 net sales in Europe reached Euro 82.8 million, recording an increase of 3.7% at constant exchange rates (+4.5% at current exchange rates) compared to Q3 2020, while remaining in negative territory compared to Q3 2019, at -12.8% at constant exchange rates, again due to the particularly significant impact in the area of the decline of the terminated licenses.
  In Europe, on the other hand, the organic2 sales performance showed a marked improvement, up double-digits compared to 2019, thanks to a moderate recovery in consumer spending and to a favorable phasing in the deliveries of some orders. Among the core markets of the region, Italy continued to outperform, followed by a solid performance in Germany and the UK, while Spain and France remained below 2019 levels, despite a significant year-on-year recovery.
• Q3 2021 net sales in Asia-Pacific equaled Euro 11.3 million, declining by 31.4% at constant exchange rates (-28.9% at current exchange rates) compared to Q3 2020, and by 35.5% at constant exchange rates compared to Q3 2019, with both performances strongly influenced by the negative impact of terminated licenses.
  In the period, the Group continued the transition of the region to a solid and profitable brand portfolio, an effort that allowed for an increase of the organic2 business compared to the previous year, while it was not enough to return to 2019 sales level due to the resurgence of Covid-related lockdowns and restrictions in Australia and in most Asian markets, with the exception of China, which remained, in the period, very positive.
• Q3 2021 net sales in the Rest of the World equaled Euro 17.4 million, growing by 55.4% at constant exchange rates (+60.4% at current exchange rates) compared to Q3 2020, and by 1.6% at constant exchange rates compared to Q3 2019. The positive sales performance of the region was driven by the strong organic2 sales growth recorded in the core Latin American markets, namely Brazil and Mexico, and a full recovery of pre-pandemic levels by the business in the Middle East and India.

KEY ECONOMIC HIGHLIGHTS OF Q3 2021

From an economic standpoint, in Q3 2021 Safilo recorded another significant recovery of profitability, both compared to the same quarter of last year and to Q3 2019. In the period, Safilo's operating performance benefited, in particular, from a more meaningful improvement of the gross margin supported by a positive sales mix development and the further progress on the cost of goods sold saving program.

(Euro million)	Q3 2021	Q3 2020	Q3 2019	% Change	% Change
				2021 vs 2020	2021 vs 2019
Net sales	226.6	219.1	212.8	+3.5%	+6.5%
Gross profit	118.7	112.6	109.0	+5.4%	+8.9%
% on net sales	52.4%	51.4%	51.2%
EBITDA	17.4	12.8	7.7	+35.8%	+125.8%
% on net sales	7.7%	5.8%	3.6%
1	19.1	14.3	13.1	+33.3%	+45.9%
Adjusted EBITDA
% on net sales	8.4%	6.5%	6.2%
IFRS 16 impact on EBITDA	3.0	3.2	3.4

Q3 2021 economic results included restructuring costs of Euro 1.7 million (Euro 1.8 million at the gross profit level).

Q3 2021 gross profit equaled Euro 118.7 million, recording an increase of 5.4% compared to Q3 2020 and of 8.9% compared to Q3 2019. Q3 2021 gross margin improved to 52.4% of sales from 51.4% in Q3 2020 and 51.2% recorded in Q3 2019. On an adjusted1 basis, Q3 2021 gross profit equaled Euro 120.5 million and a margin on sales of 53.2% improving 200 basis points compared to 2019.

This press release may use 'alternative performance indicators' not foreseen by the IFRS-EU accounting standards (EBITDA and Net debt), and whose meaning and contents are illustrated in the specific section of the press release and in accordance with the CESR/05-178b recommendation published on 3rd November 2005.

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Q3 and 9M 2021 Trading Update

Q3 2021 EBITDA equaled Euro 17.4 million, recording an increase of 35.8% compared to Q3 2020 and more than doubling compared to EBITDA reported in Q3 2019. Q3 2021 EBITDA margin grew to 7.7% of sales from 5.8% in Q3 2020 and 3.6% recorded in Q3 2019.

Q3 2021 adjusted1 EBITDA equaled Euro 19.1 million, recording an increase of 33.3% compared to Q3 2020 and of 45.9% compared to the adjusted1 EBITDA recorded in Q3 2019. Q3 2021 EBITDA adjusted1 margin grew to 8.4% of sales from 6.5% in Q3 2020 and 6.2% recorded in Q3 2019.

NET SALES PERFORMANCE IN THE FIRST 9 MONTHS OF 2021

In the first 9 months of 2021, net sales reached Euro 737.4 million, up 37.3% at constant exchange rates (+32.9% at current exchange rates) compared to Euro 554.7 million posted in the first 9 months of 2020.

Compared to the first 9 months of 2019, Safilo's net sales were up 8.7% at constant exchange rates (+4.0% at current exchange rates), with an organic2 sales growth of around +12% at constant exchange rates driven by the significant rebound in consumption recorded in the US market and in China, alongside the more recent organic2 growth posted by Europe and Latin America. In the first 9 months of 2021, the sales generated by the new proprietary and licensed brands largely counterbalanced the significant negative impact of the decline of the licenses terminated at the end of 2020 and at the end of June 2021.

Group net sales performance in the first 9 months of 2021:

									% change		% change
									2021 vs 2020		2021 vs 2019
	(Euro million)	9M 2021	%	9M 2020	%	9M 2019	%		current	constant		current	constant
		forex	forex		forex	forex
	North America	355.2	48.2	241.5	43.5	249.4	35.2	+47.0%	+55.8%	+42.4%	+51.2%
	Europe	291.0	39.5	244.3	44.0	341.8	48.2	+19.2%	+19.5%	-14.8%	-14.1%
	Asia Pacific	37.2	5.0	39.6	7.1	61.0	8.6	-6.1%	-5.6%	-39.0%	-38.1%
	Rest of the world	54.0	7.3	29.3	5.3	56.5	8.0	+84.4%	+90.8%	-4.5%	+9.9%
	Total	737.4	100.0	554.7	100.0	708.7	100.0	+32.9% +37.3%	+4.0%	+8.7%

This press release may use 'alternative performance indicators' not foreseen by the IFRS-EU accounting standards (EBITDA and Net debt), and whose meaning and contents are illustrated in the specific section of the press release and in accordance with the CESR/05-178b recommendation published on 3rd November 2005.

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Q3 and 9M 2021 Trading Update

KEY ECONOMIC AND FINANCIAL HIGHLIGHTS OF THE FIRST 9 MONTHS OF 2021

Economic results in the first 9 months of 2021 confirmed the strong recovery recorded by the Group compared to the losses suffered in the same period of last year due to the negative impacts of the Covid-19 pandemic, as well as a meaningful, double-digit improvement of the operating performance compared to 2019 thanks, in particular, to the leaner overhead costs structure following the completion of the planned Euro 20 million savings plan.

In the first 9 months of 2021, the structural savings in the cost of goods sold instead amounted to around Euro 10 million, a progress which was in the period partially counterbalanced by inflationary pressures in terms of higher transportation costs.

(Euro million)	9M 2021	9M 2020	9M 2019	% Change	% Change
				2021 vs 2020	2021 vs 2019
Net sales	737.4	554.7	708.7	+32.9%	+4.0%
Gross profit	380.9	261.2	375.1	+45.8%	+1.5%
% on net sales	51.7%	47.1%	52.9%
EBITDA	68.4	(25.8)	43.9	+365.3%	+55.6%
% on net sales	9.3%	(4.6%)	6.2%
1	68.8	(13.9)	54.3	+593.1%	+26.6%
Adjusted EBITDA
% on net sales	9.3%	(2.5%)	7.7%
IFRS 16 impact on EBITDA	8.7	9.2	10.4

In the first 9 months of 2021, the economic results included restructuring costs of Euro 17.4 million (Euro 10.2 million at the gross profit level) and the income of Euro 17 million booked in the first semester of 2021 due to the release of a provision for risks and charges to cover the potential estimated liability in relation to an investigation by the French Competition Authority. The release is a result of the positive outcome, without sanctions, of this investigation.

Gross profit in the first 9 months of 2021 stood at Euro 380.9 million, recording an increase of 45.8% compared to the first 9 months of 2020, and surpassing by 1.5% the gross profit registered in the first 9 months of 2019.

Gross margin in the first 9 months of 2021 moved to 51.7% of sales from 47.1% in the first 9 months of 2020 and 52.9% recorded in the first 9 months of 2019.

On an adjusted1 basis, gross profit in the first 9 months of 2021 equalled Euro 391.1 million and a gross margin of 53.0%, in line with 2019.

EBITDA in the first 9 months of 2021 increased to Euro 68.4 million, compared to the loss recorded in the first 9 months of 2020 and posting an increase of 55.6% compared to the first 9 months of 2019.

EBITDA margin in the first 9 months of 2021 increased to 9.3% of sales from -4.6% in the first 9 months of 2020 and 6.2% recorded in the first 9 months of 2019.

Adjusted1 EBITDA in the first 9 months of 2021 equalled Euro 68.8 million, compared to the loss recorded in the first 9 months of 2020 and posting an increase of 26.6% compared to the first 9 months of 2019.

Adjusted1 EBITDA margin in the first 9 months of 2021 increased to 9.3% of sales from -2.5% in the first 9 months of 2020 and 7.7% recorded in the first 9 months of 2019.

From a financial standpoint, the Group Net Debt as at September 30, 2021 stood at Euro 228.3 million (Euro 188.6 million pre-IFRS 16), substantially stable compared to the position recorded as at June 30, 2021 of Euro 226.9 million (Euro 186.7 million pre-IFRS 16) and the position of Euro 222.1 million (Euro 179.0 million pre-IFRS 16) as at December 31, 2020.

This press release may use 'alternative performance indicators' not foreseen by the IFRS-EU accounting standards (EBITDA and Net debt), and whose meaning and contents are illustrated in the specific section of the press release and in accordance with the CESR/05-178b recommendation published on 3rd November 2005.

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