Safilo S p A : The Board of Directors of Safilo Group S.p.A. approves the financial results of the first half of 2022

Press release

H1 2022 Results

THE BOARD OF DIRECTORS OF SAFILO GROUP S.P.A. APPROVES

THE RESULTS OF THE FIRST HALF OF 2022

H1 2022 organic1 sales growth of +12.0%

and adj.2 EBITDA margin at 11.0%

Q2 2022 organic1 sales growth of +9.8% and adj.2 EBITDA margin at 10.6%

Strong results confirm effectiveness of Safilo's strategies and execution

Highest growth momentum driven by Europe, key emerging markets, and

the sport and outdoor portfolio of Smith

Significant increase of profitability thanks to sales growth and structural cost reduction beyond inflationary headwinds

H1 2022 Key Economic and Financial highlights

• Net Sales:€570.9M, +6.2% at constant FX. Organic1 growth +12.0%
• Gross profit: €318.3M, +21.4% and margin at 55.8% vs 51.3% in 2021
• Adj.2 EBITDA: €62.6M, +26.1% and margin at 11.0% vs 9.7% in 2021
• Adj.2 Net result: €33.7M vs €4.4M and margin at 5.9% vs 0.9% in 2021
• Group Net debt: €105.6M vs €94.0M as at December 31, 2021

Padua, August 3, 2022 - The Board of Directors of Safilo Group S.p.A. has today reviewed and approved the economic and financial results of the first half of 2022.

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

H1 2022 Results

Angelo Trocchia, Safilo Chief Executive Officer, commented:

"We are pleased with the development of our business in the second quarter. Our strategic objective to build a Safilo with a strong and balanced portfolio of brands, geographies, products and channels is progressing well. This year Europe, our second largest region, has bounced back strongly becoming the Group's key revenue growth driver in the first semester.

Our organic1 business instead remained substantially in line with last year in North America, where, this year, the pace of consumption has been undoubtedly moderate behind a tougher economic environment in the United States, a market where our sales were faced with an even more demanding comparison with Q2 2021.

In Q2 we also benefited from the strength of our business in emerging markets, in particular in Brazil, Mexico and the Middle East, while China was impacted by the Covid-related lockdowns.

After posting a strong start to the year, positive top line momentum continued in Q2 with a total performance at constant exchange rates of +4.0% and another solid organic1 growth of +9.8% which allowed us to close the first half of the year with a double-digit organic1 growth of +12.0%. As expected, sales of sunglasses were back to growth, but we were equally delighted to see that our prescription frames business continued to rise.

Our brands were our strongest assets: from our own Carrera and Polaroid, which continued to record strong double- digit growth rates, adding to the outstanding performance of Smith's portfolio of sport and outdoor focused products, to our licensed brands BOSS, Tommy Hilfiger, Kate Spade, David Beckham, UnderArmour and Isabel Marant. We are particularly proud of the strong demand for our new launches of Carolina Herrera, Chiara Ferragni and Dsquared2, all supporting our strategy for a more diversified and balanced license portfolio.

Also in the second quarter, our earnings growth continued to exceed sales growth. We delivered another meaningful expansion of the gross profit, up 20.0% compared to last year, while the gross margin soared to 56.5% from 52.3%, more than offsetting ongoing inflationary pressures of logistics and energy costs with a positive sales mix and price. This has been a key enabler to keep investing in marketing and advertising activities to fuel the growth of our brands. At the operating level, our adjusted2 EBITDA margin reached 10.6% in Q2, taking our H1 margin to 11.0%, 130 basis points higher than in H1 2021.

In the first half, we also returned to a more consistent net result, reaching 33.7 million euros, and an exponential increase compared to both H1 2021 and H1 2019.

At the end of June, our Group Net Debt was well under control, slightly below the position recorded at the end of March, and around 11 million euros higher than year-end last year due to our business seasonality.

Despite the numerous macro headwinds in which we operate, including the persistence of strong inflationary pressures and their related impacts on consumption, Covid-related restrictions and the conflict in Ukraine, our results and the trends recorded so far in the eyewear industry give us confidence to reach already in 2022 the economic targets set out in our 2024 business plan."

Q2 2022 TRADING UPDATE - NET SALES PERFORMANCE

Safilo's net sales in Q2 2022 reached Euro 288.3 million, up 11.2% at current exchange rates and 4.0% at constant exchange rates compared to Euro 259.4 million recorded in Q2 2021.

The organic1 sales performance, equalling a growth of 9.8% at constant exchange rates, was driven by Smith's continuing strong momentum, as well as by the double-digit sales growth rates of Carrera and Polaroid. Within the Group's licensed portfolio, the significant progress of Tommy Hilfiger, BOSS, David Beckham, Under Armour and Isabel Marant stood out.

In Q2, Safilo's total net sales performance continued to be supported by the successful roll-out of the new Carolina Herrera, Dsquared2 and Chiara Ferragni eyewear collections, all contributing to offset the discontinued business still recorded in Q2 2021.

Q2 organic1 sales performance remained also driven by the key product and channel dynamics recorded in the first quarter, with the sunglasses business confirming a significant rebound, equal to + 9.2% at constant exchange rates, reflecting a buoyant consumer demand in Europe, Middle East and Latin America, and the sales of prescription frames which recorded yet another quarter on quarter progress, equal to + 4.6% at constant exchange rates.

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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H1 2022 Results

Finally, the Group's 'Other' product category, mainly comprising the sales of snow goggles and snow and bike helmets, confirmed a strong double-digit growth rate of +48.2% at constant exchange rates in the quarter.

In the second quarter, Safilo kept benefitting from the evolution of its increasingly multi-channel business model, which has allowed it, on the one hand, to fully seize the opportunities provided in the period by the strong recovery of physical retail, while, on the other, to continue developing the digital sales channels: direct to consumer (D2C) and through internet pure players (IPPs), which in Q2 grew by around 6% at constant exchange rates.

Group's net sales performance by geography in Q2 2022:

					Change at	Change at
					current forex	constant forex
(Euro million)	Q2 2022	%	Q2 2021	%	Reported	Reported	1
Organic
North America	129.6	45.0	121.0	46.6	+7.1%	-5.1%	-0.6%
Europe	120.0	41.6	106.7	41.1	+12.4%	+12.1%	+20.7%
Asia Pacific	12.7	4.4	12.9	5.0	-1.4%	-8.5%	+5.9%
Rest of the world	26.0	9.0	18.7	7.2	+38.6%	+24.9%	+26.4%
Total	288.3	100.0	259.4	100.0	+11.2%	+4.0%	+9.8%

• Net sales in North America totalled Euro 129.6 million in Q2 2022, up 7.1% at current exchange rates thanks to the positive foreign exchange impact resulting from the significant revaluation of the US dollar against the euro. At constant exchange rates, the performance of the market instead declined by a total 5.1% due to the challenging comparison with Q2 2021 and a slower consumption pace in the United States. The organic1 business instead remained substantially in line with last year, at -0.6%, thanks especially to Smith's outstanding performance in its core categories of goggles and helmets, and by a sound growth of Carrera, BOSS, HUGO, Under Armour and David Beckham, while Blenders softened due to a business environment that became progressively more challenging for pure e-tailers.
• Net sales in Europe reached Euro 120.0 million in Q2 2022, up 12.4% at current exchange rates and +12.1% at constant exchange rates compared to Q2 2021. Organic growth1 at +20.7% at constant exchange rates, confirmed the excellent performance recorded by the region in Q1, in the wake of a very dynamic business environment, fuelled by the return of local and international tourists, the latter mainly from the United States and the Middle East.
  Sales of sunglasses recorded a strong bounce back in all key European markets, especially in Italy, France, Spain and Portugal, while business in Turkey and Poland was particularly strong thanks to the significant growth of Polaroid,
  Carrera and the Group's core licenses.
  In Europe, the Iberian markets in particular benefitted from the highly successful launch of the new collections of Carolina Herrera by Safilo.
• Net sales in Asia and Pacific stood at Euro 12.7 million in Q2 2022, down 1.4% at current exchange rates and 8.5% at constant exchange rates compared to Q2 2021, with the business in Greater China remaining the main drag of the reported regional performance due to the months of April and May heavily impacted by Covid-related lockdowns. Sales momentum was instead dynamic in South East Asia, in Australia and in Japan, thanks to the ongoing expansion of brands such as Carrera, Smith, BOSS, Kate Spade and Levi's which supported another quarter of positive organic1 growth for the region, at +5.9% at constant exchange rates.
• Net sales in the Rest of the World increased to Euro 26.0 million in Q2 2022, up 38.6% at current exchange rates and 24.9% at constant exchange rates compared to Q2 2021. Similarly, organic1 sales growth in the region equalled +26.4% at constant exchange rates, consolidating the strong performance recorded in Q1 and again marking the very positive business momentum experienced on one side by Brazil and Mexico, alongside the other smaller Latin American markets, and, on the other, by Middle East and India, on the back of a dynamic trading environment and strong performance in particular by Carrera, Polaroid, Tommy Hilfiger, BOSS, HUGO and David Beckham.

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

H1 2022 Results

Q2 2022 TRADING UPDATE - ECONOMIC PERFORMANCE

In Q2 2022, Safilo continued to effectively counter inflationary pressures with a positive price/mix effect and additional structural COGS savings, overall granting the Group another significant increase in gross profit and the ability to reinvest part of this improvement in higher advertising and communication activities to support the positive top line momentum.

Key Economic highlights - in Euro million	Q2 2022	% on	Q2 2021	% on	% Change
net sales	net sales	2022 vs 2021
Net sales	288.3		259.4		+11.2%
Reported at cFX					+4.0%
Organic	1	at cFX					+9.8%
Gross Profit	162.8	56.5%	135.6	52.3%	+20.0%
EBITDA		33.3	11.6%	37.7	14.5%	-11.5%
	2	30.6	10.6%	23.8	9.2%	+28.5%
Adjusted EBITDA
IFRS 16 impact on EBITDA	2.8		2.8

Gross profit in Q2 2022 amounted to Euro 162.8 million, marking an increase of 20.0% compared to Q2 2021, while the gross margin rose by 420 basis points, from 52.3% to 56.5% of sales (respectively +16.8% and +280 basis points compared to Q2 2021 adjusted2 gross profit and margin).

In the period, selling, general and administrative costs increased by 13.0% compared to Q2 2021 due to higher investments in marketing and advertising, and for Euro 1.8 million due to the impact related to software-as-a-service investment projects under the new IFRIC agenda, the equivalent of which in Q2 2021 had been capitalized.

Adjusted2 EBITDA in Q2 2022 stood at Euro 30.6 million, up 28.5% compared to Q2 2021, while the adjusted2 EBITDA margin rose by 140 basis points, from 9.2% to 10.6% of sales (11.2% ex IFRIC SaaS impact).

H1 2022 RESULTS - NET SALES PERFORMANCE

Safilo's net sales in H1 2022 totalled Euro 570.9 million, up 11.8% at current exchange rates, +6.2% at constant exchange rates compared to Euro 510.7 million recorded in H1 2021.

After a strong organic1 growth of 14.3% in Q1, the solid top line momentum recorded in Q2, at +9.8%, allowed the Group to close the first half of the year with a double-digit organic1 growth of 12.0% at constant exchange rates, driven by the continued strength of the owned brands Polaroid, Smith and Carrera, and of the main licensed brands of the Group. In H1 2022, Safilo made further progress in the implementation of its turnaround strategy, countering the sales recorded in H1 2021 by the discontinued brands with the successful launch of the new collections of Carolina Herrera, Dsquared2 and Chiara Ferragni.

The first half of the year saw the expected pick-up of sunglass sales, posting an organic1 growth of 13.9% at constant exchange rates, thanks to a buoyant consumer demand in Europe, the Middle East and Latin America. Sales of prescription frames, representing 38.9% of the Group's total business at the end of the semester, confirmed their natural resilience, recording an organic1 growth of 5.0% at constant exchange rates, despite the very demanding comparison with H1 2021 when the product category soared by 19.8% compared to H1 2019. Finally, the business of helmets and goggles for winter and summer sport activities kept growing at a rapid pace in the first half of 2022, taking the share of the Group's 'Other' product category to 9.6% of the Group's total business, growing sales by +33.6% at constant exchange rates, and leading the turnover of sports products to more than double compared to H1 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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Press release

H1 2022 Results

In H1 2022, Safilo's total online sales, consisting of its direct to consumer business (D2C) and the Group's sales via internet pure players (IPP), increased by 7% at constant exchange rates, confirming their share of Safilo's total revenue at a solid 14.4% (13.6% in H1 2021) despite consumer spending returning strongly to physical stores.

The Group also kept leveraging its multichannel business model by continuing to develop its B2B e-commerce platforms, including You&Safilo in Europe, whose revenues grew by around 12% compared to H1 2021.

In the first half of the year, sales growth by geography was driven by the strong bounce back of Europe, while sales performance in North America, facing the double challenge of a tough comparison with H1 2021 and this year's slower consumption pace in the United States, remained positive at the organic1 level. The emerging markets of Latin America, India and the Middle East, representing together the so called 'Rest of the World' region, confirmed very sustained growth rates over the entire half year, whereas sales in Asia and Pacific, overall penalized by the Covid-related restrictions and lockdowns imposed by China until the beginning of June, grew at the organic1 level thanks to continued positive trends in South East Asia and Japan.

Group's net sales performance by geography in H1 2022:

					Change at	Change at
					current forex	constant forex
(Euro million)	H1 2022	%	H1 2021	%	Reported	Reported	1
Organic
North America	258.7	45.3	240.1	47.0	+7.7%	-2.2%	+2.4%
Europe	237.1	41.5	208.2	40.8	+13.9%	+14.1%	+22.7%
Asia Pacific	25.1	4.4	25.9	5.1	-2.9%	-8.9%	+4.1%
Rest of the world	49.9	8.7	36.5	7.2	+36.7%	+26.1%	+28.1%
Total	570.9	100.0	510.7	100.0	+11.8%	+6.2%	+12.0%

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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