Disclaimer This presentation may include declarations about Springs Global s expectations regarding future events or results. All declarations based upon future expectations, rather than historical facts, are subject to various risks and uncertainties. These risks and uncertainties include factors related to the following: the Company s business strategy, the international and the Brazilian economies, technology, financial strategy, developments in the textile and retail sectors, market conditions, among others. To obtain further information on factors that may give rise to results different from those forecasted by Springs Global, please consult the reports filed with the Brazilian Comissão de Valores Mobiliários (CVM, equivalent to U.S. SEC ). 2
2Q18 Highlights Net revenue of R$ 523.7 million Gross profit of R$ 140.6 million, 2.9% superior yoy Gross margin of 26.8%, with an increase of 1.6 pp EBITDA of R$ 54.8 million with EBITDA margin of 10.5% Net income of R$ 8.9 million, with an improvement of R$ 5.8 million yoy E-commerce revenue more than doubled yoy 3
Growth of e-commerce revenue 500 Revenue from digital channels Base 100 = 2016 January 2018 Launch of digital franchise 400 April 2017 Launch of the new MMartan website July 2017 Launch of Artex website 300 200 100 0 2016 2017 2018 4
Growth of e-commerce revenue 500% July 2018 versus July 2016 2016 2017 2018 MMartan App MMartan website Wedding gift list Artex website MGM Multichannel Pix Growth / Digital marketing Blog Santista website 5
Financial Performance - Consolidated in R$ million 800 700 600 500 400 300 200 100 Revenue and Gross margin (%) EBITDA and EBITDA margin (%) 1 35% 90 11.7% 27.8% 27.7% 27.9% 30% 80 11.1% 26.8% 10.3% 25.3% 10.0% 25% 70 10.5% 540.4 60.9 508.5 518.2 523.7 59.8 20% 60 473.5 52.4 54.8 15% 50 47.2 10% 40 5% 30 0% 20-5% 10 12% 10% 8% 6% 4% 2% 0 2Q14 2Q15 2Q16 2Q17 2Q18-10% 0 2Q14 2Q15 2Q16 2Q17 2Q18 0% Revenue Gross margin EBITDA EBITDA margin 2Q18/2Q17-3.1% + 1.6 pp - 8.4% - 0.6 pp 1 Adjusted EBITDA and EBITDA margin in recurring terms in 2Q15 6
2Q18 LTM 1 Consolidated Results in R$ million 2,194.6 248.2** EBITDA margin (%) 1,202.8 210.00 160.00 191.3 Total 11.3% South America - Wholesale 15.9%* 254.5 110.00 South America - Retail 0.9% 812.7 60.00 10.00 2.4 59.1 North America - Wholesale 7.3% Net revenue -40.00 EBITDA EBITDA 1 Last 12 months ended at June 30, 2018 * Includes Intercompany revenue of R$ 75.4 million in 2Q18 LTM ** Includes non-allocated expenses of R$ 4.7 million in 2Q18 LTM 7
Sales mix impacts average price and gross margin in R$ million 2Q18 2Q17 Variation (%) Revenue: R$ 523.7 million R$ 540.4 million -3.1% Volume: 22.3 thousand ton 25.8 thousand ton -13.7% Average price: R$ 23.5/kg R$ 21.0/kg +12.3% Gross margin: 26.8% 25.3% +1.6 pp Per product line 11% 11% Average Price 2Q18 R$/kg Average Price Variation 2Q18-2Q17 (%) 11% 15% Retail 35% 29% Intermediate products 10.4 + 1.9% Utility bedding 18.0 + 16.6% 43% 45% Bedding, tabletop and bath 33.9 + 9.4% 2Q18 2Q17 8
Better price and mix offset lower volumes in R$ million 59.8 (18.7) 22.6 (4.7) (4.2) 54.8 EBITDA 2Q17 Volume Price and Mix - Revenue and COGS SG&A Others EBITDA 2Q18 9
Operating cash generation - EBITDA LTM EBITDA 1 in R$ million 240.9 249.0 248.2 184.8 203.6 2Q14 2Q15 2Q16 2Q17 2Q18 1 In recurring terms, excluding non-recurring results of R$ 17.1 million in 2Q15 and R$ 7.2 million in 4Q16 10
Working capital decreased by R$ 21 million, or 2.2%, yoy In R$ million Working Capital Variation 2Q18-2Q17 (%) 932 1,027 992 956 935 Suppliers Advances to suppliers +5.0% +12.7% Inventories +2.4% Accounts receivable -6.3% Working capital -2.2% 2Q14 2Q15 2Q16 2Q17 2Q18 11
2Q18 Highlights - South America - Wholesale Net revenue of R$ 264.5 million 1, 14.1% lower yoy, negatively impacted by the truck drivers strike in Brazil and by the recession in Argentina Higher share of Bedding, Tabletop and Bath line products, with higher value added, in our sales mix Gross profit of R$ 77.1 million, with an improvement yoy Gross margin of 29.1%, versus 24.7 % in 2Q17 EBITDA of R$ 44.3 million, 9.7% superior than 2Q17 EBITDA margin of 16.7%, versus 13.1% in 2Q17 1 Including intracompany revenue of R$ 15.5 million 12
Financial Performance - South America - Wholesale in R$ million Revenue 1 Gross profit and Gross margin (%) 350 307.8 120 40% 300 250 275.8 260.8 253.1 264.5 100 80 29.8% 30.1% 82.1 78.4 29.3% 29.1% 24.7% 74.2 75.9 77.1 30% 20% 200 150 60 10% 100 40 0% 50 20-10% 0 2Q14 2Q15 2Q16 2Q17 2Q18 0 2Q14 2Q15 2Q16 2Q17 2Q18-20% Revenue Gross profit Gross margin 2Q18/2Q17-14.1% + 1.6% + 4.5 pp 1 Including intracompany revenue 13
2Q18 Highlights - South America - Retail Sell-out revenue of R$ 119.9 million, 2.7% higher than 2Q17 Net revenue of R$ 58.8 million Growth of 115% in e-commerce revenue Three new stores and one conversion Gross profit of R$ 31.1 million, 1.0% higher yoy Gross margin of 52.9%, with an increase of 1.2 pp EBITDA was a loss of R$ 0.4 million, with a decrease of R$ 0.7 million yoy, due to higher SG&A expenses 14
Financial Performance - South America - Retail in R$ million 80 Revenue Gross profit and Gross margin (%) 50 60% 70 66.4 63.2 40 48.2% 48.7% 52.8% 51.7% 52.9% 60 59.7 59.6 58.8 30 32.0 30.8 31.5 30.8 31.1 45% 50 20 40 30% 30 10 20 2Q14 2Q15 2Q16 2Q17 2Q18 0 2Q14 2Q15 2Q16 2Q17 2Q18 15% Revenue Gross profit Gross margin 2Q18/2Q17-1.3% + 1.0% + 1.2 pp 15
Progress of retail strategy Entrance on retail In 2009, through the acquisition of MMartan Strenght of digital operation Internal team dedicated to grow the digital channels 2011 2018 2009 2017 Launch of Artex stores We expanded our B2C presence with the Artex stores Launch of new channels and digital services - Digital franchise - Santista e-commerce - PIX System 16
PIX - Point of Incredible Experiences A store front system that brings the multichannel concept, already present in our digital channel, to our physical stores. It provides personalized service and product recommendations, based on information from previous purchases or by the customer profile mapped. When we acquired MMartan, we also acquired a point-of-sale system and an opportunity to transform it in a multichannel platform to leverage sales. Hence, the PIX has turned to a tool that enables our multibrand clients to also become service providers, offering a better shopping experience to theirs consumers. Currently it permits: Personalized service, product recommendation, sales training, market data acquisition and more. The PIX system will be present in all our stores by the end of 3Q18 17
Pix A store front solution that enables the multichannel concept, empowers the salesperson and provides a better shopping experience to customers.
Pix PIX enables the seller to service several clients at the same time and to get valuable insights about their consumer profile, preferences, and previous purchases information. During the sales process, PIX also appoints missing steps or information. Total control over sales process.
Pix Better shopping experience to customer Exuberant customer Show the Safari product line New order from multichannel Separate products Last sale is still open Continue and good luck! For our consumer, experience. For our stores, optimization of sales. For our multibrand clients, transform them to fulfillment centers.
2Q18 Highlights North America - Wholesale Net revenue of R$ 215.9 million, with a yoy increase of 13.9%, positively impacted by the US dollar appreciation yoy Gross profit totaled R$ 32.7 million, with an improvement of 9.0% Gross margin of 15.1%, versus 15.8 % in 2Q17, negatively impacted by higher polyester price EBITDA of R$ 12.0 million, with EBITDA margin of 5.6% 21
Financial Performance North America - Wholesale in R$ million Revenue Gross profit and Gross margin (%) 250 200 199.8 218.4 189.6 215.9 50 40 11.8% 16.0% 17.8% 38.9 15.8% 15.1% 20% 15% 150 148.7 30 31.9 30.0 32.7 10% 5% 0% 100 20 17.5-5% 50 10-10% -15% 0 2Q14 2Q15 2Q16 2Q17 2Q18 0 2Q14 2Q15 2Q16 2Q17 2Q18-20% Revenue Gross profit Gross margin 2Q18/2Q17 + 13.9% + 9.0% - 0.7 pp 22
Opportunities for 2018 Expansion of consumption and sales of our products, increasing the utilization rate of existing plants Expansion of e-commerce sales, due to: digital franchises digital marketing New franchise stores Financial deleverage Better cash generation from operations Reduction of the cost of debt Monetization of non operational assets 23
Launch of Santista s virtual store in August 2018 24
The consumer as the center of our business The strategy to place the consumer in the center of our business enables the strength of our brands, generates strong and lasting relationships, and, most importantly, creates value to the Company. 25
SPRINGS GLOBAL B3: SGPS3 www.springs.com/ri ri@springs.com