Guess', Inc. (NYSE:GES) Q4 2021 Earnings Conference Call March 16, 2022 4:45 PM ET Company Participants Fabrice Benarouche - VP, Finance and IR Carlos Alberini - CEO Katie Anderson - CFO Conference Call Participants Corey Tarlowe - Jefferies Dana Telsey - Telsey Advisory Group Susan Anderson - B. Riley, FBR Omar Saad - Evercore ISI Operator Good day, everyone, and welcome to the Guess Fourth Quarter Fiscal 2022 Earnings Conference Call. I would like to turn the call over to Fabrice Benarouche, Vice Presiden ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 30, 2021 OR (Registrant's telephone number, including area code) ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 1-11893 GUESS?, INC. (Exact name of registrant as specified in its ch ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, highlighting a significant recovery with **$61.1 million** net earnings for the quarter [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of July 31, 2021, total assets were **$2.46 billion**, liabilities **$1.82 billion**, and stockholders' equity **$632.0 million** [Condensed Consolidated Statements of Income (Loss)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20(Loss)) For Q2 2021, the company reported **$628.6 million** net revenue and **$63.1 million** net earnings, a turnaround from a **$20.7 million** net loss in the prior year [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Total comprehensive income for Q2 2021 was **$60.2 million**, a significant increase from **$2.8 million** in Q2 2020 [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended July 31, 2021, net cash from operating activities was **$43.0 million**, resulting in a **$10.2 million** net decrease in cash [Condensed Consolidated Statements of Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Total stockholders' equity increased from **$565.6 million** to **$632.0 million** at July 31, 2021, primarily driven by net earnings [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of accounting policies, segment performance, debt obligations, and subsequent events - The COVID-19 pandemic continued to impact the business, but as of July 31, 2021, almost all stores were open[25](index=25&type=chunk)[26](index=26&type=chunk) - The company has five reportable segments: Americas Retail, Americas Wholesale, Europe, Asia, and Licensing; for Q2 2021, Europe was the largest revenue contributor with **$322.7 million**[68](index=68&type=chunk)[70](index=70&type=chunk) - The company has **$300 million** in **2.00%** convertible senior notes due 2024, with a net carrying amount of **$264.6 million** as of July 31, 2021[84](index=84&type=chunk)[89](index=89&type=chunk) - Subsequent to the quarter's end, on August 25, 2021, the Board authorized a new **$200 million** share repurchase program and declared a quarterly dividend of **$0.1125** per share[152](index=152&type=chunk)[153](index=153&type=chunk) Condensed Consolidated Balance Sheet Highlights (as of July 31, 2021) | Metric | Value (in thousands) | | :--- | :--- | | **Total Assets** | $2,456,901 | | Cash and cash equivalents | $458,914 | | Total current assets | $1,263,889 | | **Total Liabilities** | $1,820,804 | | Total current liabilities | $715,152 | | **Total Stockholders' Equity** | $632,023 | Condensed Consolidated Statements of Income Highlights | Period | Net Revenue (in thousands) | Net Earnings (Loss) Attributable to Guess?, Inc. (in thousands) | Diluted EPS (Loss) | | :--- | :--- | :--- | :--- | | **Three Months Ended Jul 31, 2021** | $628,624 | $61,062 | $0.91 | | **Three Months Ended Aug 1, 2020** | $398,539 | $(20,358) | $(0.31) | | **Six Months Ended Jul 31, 2021** | $1,148,626 | $73,068 | $1.10 | | **Six Months Ended Aug 1, 2020** | $658,790 | $(178,024) | $(2.72) | - For the six months ended July 31, 2021, net cash provided by operating activities was **$43.0 million**, a slight improvement from **$40.7 million** in the prior-year period[14](index=14&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes the company's strong Q2 fiscal 2022 recovery, with **$628.6 million** revenue and **13.9%** operating margin - The company's strategic priorities include brand relevancy, product excellence, customer centricity, global footprint optimization, and improving functional capabilities[169](index=169&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk) Q2 FY2022 vs. Q2 FY2021 Performance | Metric | Q2 FY2022 | Q2 FY2021 | % Change | | :--- | :--- | :--- | :--- | | Net Revenue | $628.6M | $398.5M | +57.7% | | Earnings (Loss) from Operations | $87.4M | $(14.3)M | -709.0% | | Operating Margin | 13.9% | -3.6% | +17.5% | Q2 FY2022 vs. Q2 FY2020 (Pre-COVID) Performance | Metric | Q2 FY2022 | Q2 FY2020 | % Change | | :--- | :--- | :--- | :--- | | Net Revenue | $628.6M | $683.2M | -8.0% | | Earnings from Operations | $87.4M | $46.0M | +90.0% | | Operating Margin | 13.9% | 6.7% | +7.2% | - The company ended the quarter with a strong liquidity position, holding **$458.9 million** in cash and cash equivalents[197](index=197&type=chunk)[267](index=267&type=chunk) [Results of Operations](index=46&type=section&id=Results%20of%20Operations) This section details financial results for the three and six-month periods, showing a **9.9%** increase in gross margin to **46.8%** YoY for Q2 2021 - Gross margin for Q2 2021 increased to **46.8%** from **36.9%** in the prior-year period, primarily due to lower occupancy rates and higher product margins from reduced markdowns[199](index=199&type=chunk) Segment Operating Earnings (Loss) - Q2 2021 vs Q2 2020 (in thousands) | Segment | Q2 2021 | Q2 2020 | | :--- | :--- | :--- | | Americas Retail | $37,916 | $(4,704) | | Americas Wholesale | $12,944 | $1,688 | | Europe | $51,417 | $20,795 | | Asia | $(4,847) | $(3,367) | | Licensing | $20,154 | $11,511 | [Liquidity and Capital Resources](index=58&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity relies on cash from operations and credit facilities, with **$458.9 million** cash and a new **$200 million** share repurchase program - The company anticipates satisfying its cash requirements for the next 12 months with cash flow from operations and existing cash balances, supplemented by borrowings if needed[264](index=264&type=chunk) - On August 25, 2021, the Board authorized a new **$200 million** share repurchase program, which includes the **$48 million** remaining from the previous program[284](index=284&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=62&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines the company's exposure to market risks, primarily foreign currency and interest rates, mitigated by derivatives - The company is exposed to foreign currency risk as more than two-thirds of its product sales are denominated in currencies other than the U.S. dollar[292](index=292&type=chunk) - As of July 31, 2021, the company had outstanding forward contracts of **US$114.0 million** designated as cash flow hedges for its European operations to hedge forecasted merchandise purchases[298](index=298&type=chunk) - A sensitivity analysis indicates that a **10%** uniform weakening of the U.S. dollar would decrease the fair value of its foreign exchange derivatives by **$14.3 million**[303](index=303&type=chunk) [Item 4. Controls and Procedures](index=65&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of July 31, 2021, with no material changes in internal control - The company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of the end of the quarterly period[311](index=311&type=chunk) - No material changes to the company's internal control over financial reporting occurred during the second quarter of fiscal 2022[312](index=312&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=66&type=section&id=Item%201.%20Legal%20Proceedings) This section directs readers to Note 13 of the financial statements for detailed information regarding ongoing legal proceedings - For disclosures about legal and other proceedings, the report refers to "Part I, Item 1. Financial Statements – Note 13 – Commitments and Contingencies – Legal and Other Proceedings"[314](index=314&type=chunk) [Item 1A. Risk Factors](index=66&type=section&id=Item%201A.%20Risk%20Factors) The company reports no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for FY2021 - There have been no material changes in Risk Factors from those disclosed in the Annual Report on Form 10-K for the year ended January 30, 2021[315](index=315&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=66&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No shares were repurchased in Q2 FY2022, with **$47.8 million** remaining under the program, and a new **$200 million** program approved - No shares were repurchased under the company's publicly announced program during the second quarter of fiscal 2022[316](index=316&type=chunk) - On August 25, 2021, the Board of Directors authorized a new **$200 million** share repurchase program, which incorporates the **$47.8 million** remaining from the previous program[318](index=318&type=chunk) [Item 6. Exhibits](index=67&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate documents, compensatory plans, and CEO/CFO certifications - The report includes a list of filed exhibits, such as management contracts, compensatory plans, and certifications by the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[320](index=320&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended May 1, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 1-11893 GUESS?, INC. (Exact name of registrant as specified in its charter) Delaware 95-3679695 (State or other jurisdiction of ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended January 30, 2021 OR ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission File Number 1-11893 GUESS?, INC. (Exact name of registrant as specified in its charter) Delaware 95-3679695 (State or other jurisdiction of inc ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 1-11893 GUESS?, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended August 1, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 1-11893 GUESS?, INC. (Exact name of registrant as specified in its charter) Delaware 95-3679695 (State or other jurisdiction ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended May 2, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 1-11893 GUESS?, INC. (Exact name of registrant as specified in its charter) Delaware 95-3679695 (State or other jurisdiction of ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Delaware 95-3679695 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number) FORM 10-K ☒ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended February 1, 2020 OR ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission File Number 1-11893 GUESS?, INC. (Exac ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended November 2, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 1-11893 GUESS?, INC. (Exact name of registrant as specified in its charter) Delaware 95-3679695 (State or other jurisdicti ...