Samsonite International S.A. (OTCPK:SMSOF) Q4 2020 Earnings Conference Call March 17, 2021 9:00 AM ET Company Participants William Yue - Senior Director, Investor Relations Kyle Gendreau - Chief Executive Officer Reza Taleghani - Chief Financial Officer Conference Call Participants Erwan Rambourg - HSBC Luzi Li - Bank of America Anne Ling - Jefferies Dustin Wei - Morgan Stanley Hong Kong Terrance Liu - CLSA Hong Kong Operator Good morning, good afternoon, and good evening ladies and gentlemen. Welcome to th ...

Samsynte 2020 ANNUAL RESULTS MARCH 17, 2021 Samsonite International S.A. Stock Code: 1910 Disclosure Statement This presentation and the accompanying slides (the "Presentation") which have been prepared by Samsonite International S.A. ("Samsonite" or the "Company") do not constitute any offer or invitation to purchase or subscribe for any securities, and shall not form the basis for or be relied on in connection with any contract or binding commitment whatsoever. This Presentation has been prepared by the C ...

COVID-19 Impact - Samsonite demonstrated remarkable agility in adapting its organization and cost base in response to the unprecedented challenges posed by the COVID-19 pandemic[2]. - The recovery from the impacts of the COVID-19 pandemic is expected to be protracted compared to prior downturns, but the long-term growth prospects for travel and tourism remain optimistic[2]. - The pandemic has significantly negatively impacted the Group's performance for the first six months of 2020, with adverse effects expected on full-year 2020 results[31]. - The Company expects the recovery from the pandemic to take longer than previous disruptions, but believes it can effectively manage through the current environment[16]. - The Group's overall performance was adversely affected by COVID-19, leading to declines across all brands and product categories[132][152]. - The impacts of COVID-19 have significantly reduced demand for the Group's products due to store closures and decreased consumer spending[109]. - The Group anticipates a prolonged recovery period due to the impacts of COVID-19, despite having sufficient liquidity to navigate the current environment[118]. Financial Performance - For the six months ended June 30, 2020, net sales decreased by 54.3% to $802.3 million compared to $1,755.7 million in the same period of 2019[35]. - The operating loss for the period was $1,062.9 million, a significant decline from an operating profit of $124.0 million in the prior year[35]. - Profit attributable to equity holders for the period was a loss of $974.0 million, compared to a profit of $49.1 million in the same period of 2019[35]. - Adjusted EBITDA for the first half of 2020 was a loss of $122.9 million, down from a profit of $213.5 million in the same period of 2019[35]. - The adjusted EBITDA margin fell to -15.3% from 12.2% in the previous year[35]. - The Group incurred a loss of $975.9 million for the six months ended June 30, 2020, compared to a profit of $58.3 million for the same period in the previous year, primarily due to the negative impacts from the COVID-19 pandemic[47]. - The Group's net sales decreased by US$953.4 million, or 54.3% year-on-year for the first half of 2020 due to the impacts of COVID-19[108]. Cost Management - Significant actions have been taken to preserve cash and implement permanent cost-saving measures to reduce the fixed cost base[16]. - The Company continues to implement aggressive cost-cutting measures to navigate current and anticipated impacts from the pandemic[31]. - The Group expects to achieve close to US$600 million in cash savings through aggressive reductions in SG&A expenses, a freeze on capital expenditures, and stringent management of product purchases and working capital[55]. - The Group implemented cost-saving initiatives including permanent headcount reductions and significant reductions in capital expenditures and marketing expenses[115]. - No cash distribution will be paid to shareholders in 2020 as part of the cost-saving measures[115]. Liquidity and Financing - The Company has approximately US$1.6 billion in liquidity as of June 30, 2020, providing confidence to navigate challenges from the COVID-19 pandemic[16]. - On March 20, 2020, the Company borrowed US$810.3 million under its amended revolving credit facility to ensure access to liquidity amid the pandemic[50]. - The Group entered into a Third Amended Credit Agreement on April 29, 2020, to suspend the requirement to test financial covenants from the beginning of Q2 2020 through the end of Q2 2021[50]. - A Fourth Amended Credit Agreement was established on May 7, 2020, providing an additional term loan B facility with an aggregate principal amount of US$600.0 million to enhance financial flexibility[50]. - The Group's liquidity was enhanced by increasing the maximum borrowings under its revolving credit facility by US$200 million to US$850 million[114]. Sales Performance - The Group's net sales decreased by US$953.4 million, or 54.3%, for the six months ended June 30, 2020, compared to the same period in 2019[120]. - The travel product category experienced a significant decrease in net sales of US$614.5 million, or 58.5%, compared to the prior year[152]. - Non-travel category net sales decreased by US$338.9 million, or 48.1%, with business products down by US$160.4 million, or 49.4%[152]. - The Group's direct-to-consumer (DTC) e-commerce channel saw a net sales decrease of 35.6% year-on-year, compared to declines of 60.2% and 53.3% in DTC retail and wholesale channels, respectively[74]. - Net sales in North America for the first half of 2020 were US$321.0 million, representing 40.0% of total net sales, a decrease of 50.9% compared to 2019[125]. Strategic Initiatives - The company aims to increase shareholder value through sustainable revenue and earnings growth, focusing on free cash flow generation[12]. - Samsonite plans to increase the proportion of net sales from the direct-to-consumer channel by growing e-commerce net sales and enhancing its retail presence[13]. - The company will continue to invest in research and development to create lighter and stronger materials, advanced manufacturing processes, and innovative designs[13]. - Samsonite's strategy includes leveraging its regional management structure and marketing expertise to expand into new markets and deepen penetration in existing channels[13]. - The company is committed to incorporating its environmental, social, and governance (ESG) philosophy into its core business practices[13].

Financial Performance - Net sales reported at $3,638.8 million, a decrease of 4.2% compared to the previous year[21]. - Operating profit decreased to $283.0 million, down 39.4% from the prior year[21]. - Profit for the year was $153.4 million, reflecting a 40.3% decline year-over-year[21]. - Profit attributable to equity holders was $132.5 million, a decrease of 44.0% compared to the previous year[21]. - Adjusted Net Income was $215.9 million, down 26.7% from the prior year[21]. - Adjusted EBITDA reported at $492.2 million, a decrease of 19.8% year-over-year[21]. - Adjusted EBITDA Margin was 13.5%, down from 16.2% in the previous year[21]. - Basic earnings per share (EPS) was $0.093, a decline of 44.1% compared to the previous year[21]. - Diluted EPS also reported at $0.093, down 43.8% year-over-year[21]. - Adjusted Basic EPS was $0.151, reflecting a decrease of 26.9% from the prior year[21]. Market Strategy - Samsonite aims to increase shareholder value through sustainable revenue and earnings growth, focusing on free cash flow generation[11]. - The company plans to enhance direct-to-consumer sales, targeting an increase in e-commerce net sales and expanding its physical retail presence[11]. - Samsonite's strategy includes leveraging regional management and distribution expertise to penetrate new markets and deepen existing channels[11]. - The company continues to diversify its business across geographies, brands, product categories, and distribution channels to enhance long-term growth and shareholder value[39]. - The Group's strategy includes investing resources to support the growth of its DTC e-commerce business and targeted expansion of its bricks-and-mortar retail business[117]. Brand Performance - The Group's diversified brand portfolio includes well-known names such as Samsonite®, Tumi®, and American Tourister®, catering to various consumer price points[10]. - The Tumi brand saw net sales growth of 1.8% in 2019, with significant gains in Asia (+8.7%), Europe (+15.0%), and Latin America (+42.4%), despite a decline in North America[40]. - American Tourister recorded a 1.0% increase in sales, while Samsonite brand sales remained stable with a slight decrease of 0.5%[43]. - Tumi brand net sales increased by US$24.0 million, or 14.6% (+14.9% constant currency) for the year ended December 31, 2019, compared to the previous year[146]. Cost Management - The company took decisive actions to manage business challenges and enhance competitive advantages for long-term growth[39]. - The company’s management team is focused on tightening expense and working capital controls to improve profitability going forward[42]. - Marketing expenses decreased by US$31.7 million or 14.3% to US$189.5 million for the year ended December 31, 2019, representing 5.2% of net sales[25]. - The Group recognized a non-cash impairment charge of US$86.4 million during the year, including US$48.0 million for eBags assets[26]. - The Group's profit improvement initiatives included costs that impacted the overall financial performance for the year[31]. Cash Flow and Debt - The Group generated $576.2 million of cash from operating activities during the year ended December 31, 2019, compared to $307.4 million for the previous year[32]. - As of December 31, 2019, the Group had cash and cash equivalents of $462.6 million and outstanding financial debt of $1,768.0 million[32]. - The net debt position of the Group was $1,305.3 million as of December 31, 2019, compared to $1,508.2 million in the previous year[32]. - The Group's pro forma net leverage ratio as of December 31, 2019, was 2.63:1.00, and the pro forma consolidated cash interest coverage ratio was 8.16:1.00 for the year ended December 31, 2019[45]. Sustainability Initiatives - The company is committed to incorporating environmental, social, and governance (ESG) principles into its core business practices[12]. - The Group is committed to sustainability, launching a global strategy titled 'Our Responsible Journey' on March 11, 2020[46]. - The long-term goal for the Group is to become carbon neutral by 2025, as part of its sustainability strategy launched on March 11, 2020[68]. - Since 2018, the Group has launched more than 50 collections worldwide that include sustainable materials, such as recycled PET and recycled nylon[67]. Challenges and Risks - The document contains forward-looking statements regarding future performance and market conditions, which are subject to risks and uncertainties[16]. - The decrease in operating profit and net income indicates challenges in the market environment and operational efficiency[2]. - The Group's performance was negatively impacted by headwinds in key markets including the U.S., Hong Kong, South Korea, and Chile, with a planned reduction in B2B sales in China during the first half of 2019[78]. - Due to uncertainties from the COVID-19 outbreak, the Board decided not to recommend a cash distribution to shareholders in 2020, with intentions to resume in future years post-recovery[45].

Company Overview - Samsonite International S.A. is the world's largest travel luggage company, with over 100 years of heritage[18]. - The company operates multiple brands across various price points, focusing on expanding its presence in both travel and non-travel product categories[18]. - The company has transformed its business model from reliance on a single brand to operating multiple brands globally[14]. Strategic Goals - The company aims to increase shareholder value through sustainable revenue and earnings growth, targeting a higher proportion of net sales from direct-to-consumer channels[18]. - The company plans to invest in research and development to create lighter and stronger materials and innovative functionalities[18]. - The company emphasizes the growth of its direct-to-consumer e-commerce sales and targeted expansion of its retail presence[18]. - Continued investment in marketing is aimed at supporting the global expansion of Tumi and enhancing visibility for other brands[18]. - The company leverages its regional management structure and distribution expertise to penetrate new markets and deepen existing channels[18]. - Samsonite's strategy includes developing a well-diversified, multi-brand, multi-category, and multi-channel business model[18]. - The Group's strategy focuses on diversifying its business across geographical markets, brands, product categories, and distribution channels to enhance resilience[44]. Financial Performance - The Group reported unaudited consolidated interim financial statements for the six months ended June 30, 2019, alongside comparative figures for the same period in 2018[23]. - Net sales for the six months ended June 30, 2019, were reported at $1,755.7 million, a decrease of 5.0% compared to $1,848.7 million in the same period of 2018[27]. - Operating profit decreased by 38.5% year-on-year to $124.0 million from $201.8 million[27]. - Profit for the period fell by 25.1% to $58.3 million compared to $77.9 million in the previous year[27]. - Profit attributable to equity holders decreased by 27.5% to $49.1 million from $67.8 million in the same period last year[27]. - Adjusted Net Income decreased by 19.0% to $97.0 million compared to $119.8 million in the previous year[27]. - Adjusted EBITDA was reported at $213.5 million, a decrease of 22.9% from $276.8 million in the same period of 2018[27]. - Basic earnings per share (EPS) decreased by 27.8% to $0.034 from $0.048 in the previous year[27]. - Diluted EPS also decreased by 27.2% to $0.034 from $0.047 in the same period last year[27]. - Adjusted Basic EPS decreased by 19.3% to $0.068 compared to $0.084 in the previous year[27]. - Adjusted EBITDA margin was reported at 12.2%, down from 15.0% in the same period of 2018[27]. Market Challenges - The company faced headwinds in the U.S., China, South Korea, and Chile, impacting overall sales performance[33]. - The strengthening of the US Dollar negatively impacted reported net sales by approximately US$65.2 million year-on-year, resulting in a 5.0% decrease in reported net sales to US$1,755.7 million[41]. - The company anticipates a more volatile second half of 2019 due to escalating U.S.-China trade tensions and other geopolitical factors[55]. Brand Performance - Tumi brand net sales grew by 4.8% in the first half of 2019, with significant increases in Asia (+11.9%), Europe (+20.4%), and Latin America (+178.2%), despite a 2.9% decline in North America[48]. - Samsonite brand net sales decreased by 2.4% in the first half of 2019, but new product launches are expected to improve performance[52]. - American Tourister brand net sales decreased by 0.8% year-on-year, following a strong first half in 2018 with 24.2% growth[51]. Cost Management - The management team implemented tighter expense and working capital controls, which began to positively impact profitability in the second quarter of 2019[42]. - The Group is focused on managing its cost base to position for future growth and has implemented expense and working capital controls[65]. - The company plans to moderate marketing spend in the second half of 2019 to address current business challenges[48]. Cash Flow and Debt - The Group generated $192.6 million of cash from operating activities during the six months ended June 30, 2019, compared to $56.2 million for the same period in the previous year[38]. - Cash and cash equivalents as of June 30, 2019, were $489.3 million, with outstanding financial debt of $1,922.1 million, resulting in a net debt position of $1,432.8 million[38]. - The Group's net debt position was US$1,432.8 million as of June 30, 2019, a reduction of US$155.6 million compared to the same date a year ago[55]. Future Outlook - The Group expects profit improvement initiatives to enhance results going into the remainder of 2019 and into 2020[44]. - The company aims to enhance profitability through cost-cutting initiatives and targeted retail expansion while maintaining control over non-advertising SG&A expenses[71]. - Significant investments in product research and development are planned to drive global brand success, with a strong new product pipeline for the remainder of the year[70].

Financial Performance - Samsonite reported a continuous annual increase in turnover for the seventh consecutive year since its flotation in 2011, indicating strong business fundamentals [2]. - For the year ended December 31, 2018, the Group's net sales reached a record level of US$3,797.0 million, reflecting an increase of 8.8% from the previous year [10]. - Gross profit margin increased to 56.5% for the year ended December 31, 2018, up from 56.1% for the year ended December 31, 2017 [10]. - Operating profit increased by US$43.5 million, or 10.3%, year-on-year to US$467.4 million [11]. - Adjusted Net Income increased by US$34.0 million, or 13.0%, to US$294.5 million for the year ended December 31, 2018 [11]. - The Group's reported net income decreased by US$98.2 million, or 27.6%, to US$257.2 million due to non-cash expenses and tax impacts [12]. - Profit attributable to equity holders increased by US$53.3 million, or 23.9% (+23.0% constant currency), excluding certain non-cash charges and tax impacts, while reported profit decreased by US$97.5 million, or 29.2%, to US$236.7 million [13]. - Adjusted EBITDA increased by US$33.4 million, or 5.8% (+5.7% constant currency), to US$613.6 million, with an adjusted EBITDA margin of 16.2% compared to 16.6% the previous year [13]. - The Group's financial metrics are presented alongside non-IFRS measures to provide a comprehensive view of operational performance [10]. Market Strategy and Growth - The company aims to increase shareholder value through sustainable revenue and earnings growth, focusing on free cash flow generation [6]. - Samsonite plans to enhance its direct-to-consumer channel, targeting an increase in e-commerce net sales and expanding its physical retail presence [6]. - The company will continue to invest in marketing to support the global expansion of Tumi and enhance visibility for its other brands, including Samsonite and American Tourister [6]. - The management emphasizes the importance of leveraging regional management structures and marketing expertise to penetrate new markets [6]. - Samsonite's strategic focus includes increasing the proportion of net sales from direct-to-consumer channels [6]. - The company aims to diversify into a multi-brand, multi-category, and multi-channel luggage and accessories business [6]. - The company is focused on expanding Tumi's international presence and investing in product launches and marketing for core brands [36]. - The long-term outlook for the global bags and luggage market remains promising, with continued investment planned to drive future growth [68]. Sales Performance by Region and Brand - Net sales in North America increased by 6.5% year-on-year to US$1,483.0 million, with organic growth of 3.9% excluding eBags [48]. - The Group's net sales in Asia increased by 10.2% to US$1,324.2 million, driven by strong performances from Tumi, American Tourister, and Samsonite brands [48]. - Tumi achieved an 11.9% increase in net sales to US$762.1 million in 2018 [28]. - American Tourister recorded net sales of US$667.8 million in 2018, an increase of 16.5% compared to 2017 [29]. - Net sales in Europe increased by 8.6% to US$809.9 million in 2018, driven by strong performances in Italy (+8.1%), the UK (+10.3%), Spain (+5.7%), and Russia (+25.8%) [49]. - Latin America saw a 15.5% year-on-year increase in net sales to US$176.4 million, with Mexico growing by 12.0% and Brazil by 43.1% [51]. E-commerce and Direct-to-Consumer Sales - DTC e-commerce net sales increased by 31.3% to US$378.8 million in 2018, with a growth of 28.4% excluding eBags [33]. - Total retail net sales growth was 11.6%, driven by a 3.2% same-store sales increase and the addition of 84 new company-operated retail stores in 2018 [33]. - DTC net sales as a percentage of total business rose from 33.4% in 2017 to 35.9% in 2018 [33]. - Overall DTC sales increased by 16.5% to $1,361.5 million, representing 35.9% of total net sales, up from 33.4% in the previous year [61]. - E-commerce sales accounted for $580.8 million, or 15.3%, of total net sales in 2018, representing a year-on-year increase of $92.8 million, or 19.0% [110]. Financial Health and Debt Management - The Group generated US$307.4 million of cash from operating activities, down from US$341.3 million in 2017, with cash and cash equivalents of US$427.7 million and outstanding financial debt of US$1,935.8 million as of December 31, 2018 [13]. - The Group's net debt position improved by US$100.9 million year-on-year to US$1,508.2 million as of December 31, 2018 [26]. - The refinancing involved the issuance of €350.0 million 3.500% senior notes due 2026, which were used to refinance original senior credit facilities and cover associated costs [13]. - The new senior credit facilities include a US$828.0 million senior secured term loan A facility and a US$665.0 million senior secured term loan B facility, with lower interest rates compared to the original facilities [16]. - Pro forma total net leverage ratio improved to 2.45:1.00 as of December 31, 2018, compared to 2.74:1.00 at the same date the previous year [68]. Operational Efficiency and Cost Management - Distribution expenses as a percentage of net sales increased to 31.9% in 2018, up from 30.7% in 2017 [63]. - General and administrative expenses decreased by US$6.9 million, or 2.9%, to US$233.0 million, representing 6.1% of net sales [187]. - Average inventory turnover days increased to 133 days in 2018 from 120 days in 2017, attributed to higher inventory to support customer demand and retail store expansion [66]. - Net working capital efficiency improved from 14.0% at the end of H1 2018 to 13.6% at the end of 2018 [34]. Research and Development - Research and development investments will focus on creating lighter and stronger materials, advanced manufacturing processes, and innovative designs [6]. - The company is diversifying its supplier base to improve sourcing capabilities while maintaining quality and cost control [36]. - Significant investments in product research and development and marketing are planned to fuel brand success globally [68].