Ermenegildo Zegna Group Reports Strong Fiscal Year 2021 Results

Strong Overall Performance with 2021 Results One Year Ahead of Plan¹

2022 Outlook confirmed: Low-teens Revenue Growth and continued improvement in Adjusted EBIT² after exceeding own expectations in 2021

• Full-year results for 2021 exceeded Plan¹ published in July 2021, with €145 million Cash Surplus²
• Zegna One Brand strategy in full swing; Thom Browne maintains strong momentum
• 2022 outlook confirmed, with low-teens revenue growth expected, continued improvement to Adjusted EBIT² over the better-than-guidance 2021 basis, and higher Cash Surplus

Ermenegildo Zegna N.V. (NYSE:ZGN) (“Zegna Group,” “the Group,” or “the Company”), the first Italian luxury fashion house listed on the New York Stock Exchange (NYSE) and owner of the Zegna and Thom Browne brands, today filed its Annual Report on Form 20-F with the U.S. Securities and Exchange Commission (“SEC”), reporting Adjusted EBIT² of €149 million, with an incidence on revenues of 11.5%, above the guidance of “around 10%” published on February 1, 2022. Diluted Loss per share² was €0.67 and Adjusted diluted earnings per share2 was €0.33. Adjustments from the reported Loss for the year of €128 million to the Adjusted Profit of €75 million relate to net charges of €203 million, mostly non-cash accounting adjustments, of which €205 million related to the December 2021 Business Combination³. As reported on February 1, 2022, the Group’s overall performance exceeded the Plan¹ shared last year ahead of the start of public trading, with revenues up 27% year-over-year, totaling approximately €1,292 million.

Ermenegildo “Gildo” Zegna, Chairman and CEO of the Zegna Group, said: “2021 was an epic year for the Zegna Group, and I am very proud of the journey that has brought us here today. I am also especially proud that we continue to achieve significant milestones while staying true to our roots and the heritage of sustainability my grandfather instilled in the Company 111 years ago. The Zegna brand continues to strengthen its position as a global leader in the luxury industry, and our continued focus on luxury leisurewear – ca. 50% of the brand’s revenues – enhanced by the One Brand strategy, now in full swing, and by a further increase in pricing in-season, has proven to be successful with both recurring and new customers. In addition to the strength shown by our namesake brand, I am extremely pleased by the growth of Thom Browne, and the significant appeal this iconic brand has among younger consumers around the world.”

“I am deeply saddened by the tragic events in Ukraine, which all of us are following closely and with great concern. Zegna Group joined forces with the Camera Nazionale della Moda Italiana and provided a significant donation to the United Nations High Commissioner for Refugees at the onset of this tragedy. We also committed to integrate as many as 30 Ukrainian refugees in our factories beginning in April 2022.

“However,” he added, “ours is a multi-year journey and as we continue to monitor the ongoing developments of the COVID-19 pandemic around the world, especially the recent spike in China, we are already ahead of our Plan and remain positive about our growth in 2022. I am particularly excited to see our US and UAE business continue to grow while our business in Europe continues to see a post-lockdown rebound. We remain vigilant, but our 2021 results and our flexibility give me confidence that we are on the right track to reaching the targets set out in our Plan last year and the Group’s longer-term ambitions even sooner than we anticipated.”

Key Highlights from 2021

Net Revenues: For the year ended December 31, 2021, Zegna Group posted revenues of €1,292 million, up 27% from 2020. This strong performance was driven by a continued rebound of the Zegna segment, whose revenues increased 23% year-over-year to €1,035 million. The other primary driver was the exceptional performance of the Thom Browne segment, whose revenues were up 47% over 2020, reaching €264 million.

(Loss)/Profit for the year and Adjusted Profit/(Loss) ²: The Group’s 2021 Loss for the year was €128 million due to mostly non-cash accounting adjustments, including of €205 million related to the December 2021 Business Combination³. Adjusted Profit was €75 million. For additional information regarding Adjusted Profit/(Loss), which is a non-IFRS measure, please see page 4.

Adjusted EBIT ²: The Group’s Adjusted EBIT for the year was €149 million, up more than 7 times from €20 million recorded in 2020. Adjusted EBIT percentage incidence on revenues for the year exceeded the Group’s prior guidance thanks to higher full-price sales in the mix and higher realized efficiencies. Adjusted EBIT for the Zegna segment was €111 million. As a percentage of revenues, Adjusted EBIT was 10.7% compared to 7.8% in 2019. This was driven by better sales mix, cost efficiencies and positive operating leverage. For the Thom Browne segment, Adjusted EBIT² was €38 million, more than doubled from €16 million in 2019 due to a lower pace of cost growth in the 2019-2021 period, compared to the 64% increase in sales in the same period. Compared to 2020, Adjusted EBIT in 2021 grew 31% from €29 million. As a percentage of revenues, Adjusted EBIT was 14.4%, down slightly from the level of 16.1% in 2020. The strength in Thom Browne’s top line was partly offset, as expected, by an increase in costs driven by higher volumes and growth-related expenses, including costs for expanding the direct-to-consumer store network and investments to improve central administrative functions and processes. For additional information regarding Adjusted EBIT, which is a non-IFRS measure, see page 4.

Net Financial Indebtedness/(Cash Surplus), Trade Working Capital and Capital Expenditure: Cash Surplus² was €145 million as of December 31, 2021, with €139 million in proceeds from the Business Combination³, compared to Net Financial Indebtedness² of €7 million as of December 31, 2020. Trade Working Capital² at year-end was €276 million, 21% of revenues, compared to 27% on December 31, 2020. Capital expenditure for 2021 totaled €48 million⁴, up from €39 million in 2020, reflecting mainly investments in the store network, the IT and production areas. For additional information regarding Net Financial Indebtedness/(Cash Surplus), Trade Working Capital and Capital Expenditure, which are non-IFRS measures, see page 4.

Fiscal Year 2022 Outlook

The start of 2022 has been marked by considerable geopolitical uncertainty, adding to the volatility of the ongoing global health crisis. Assuming no further deterioration or geographic extension of the war in Ukraine, a normalization of the COVID-19 pandemic in Greater China before the summer, and no other unforeseen events, the Group is forecasting revenue growth in the low-teens. The Group also expects to continue to see improvement in its Adjusted EBIT building on the accelerated expansion achieved in 2021, when the Group delivered an Adjusted EBIT of 11.5% as a percentage of revenues, exceeding its own guidance of “around 10%”.

Annual Report on Form 20-F

The Form 20-F, including financial statements for the fiscal year ended December 31, 2021, can be downloaded from the Company’s website (www.zegnagroup.com) under the section Investors / Financials / SEC Filings, or from the SEC’s website (www.sec.gov). Shareholders may request a hard copy of complete audited financial statements contained in the Form 20-F, free of charge, through the contacts below.

Investor Day on May 17

The Company will host an investor day on May 17, 2022, at Oasi Zegna, where it expects to unveil its sustainability strategy and its medium- to long-term financial goals.

Conference Call

As previously announced, at 8:00 a.m. ET (2:00 p.m. CET), the Company plans to host a webcast and conference call. A live webcast of the conference call will also be available on the Company’s website at ir.zegnagroup.com. To participate in the call, please dial:

Italy dial-in number (Local): 39 069 450 0327

United States: 1 844 200 6205

United States (Local): 1 646 904 5544

United Kingdom (Toll Free): 44 808 189 6484

All other locations: +1 929 526 1599

Access code: 512734

An online archive of the broadcast will be available on the website shortly after the live call and will be available for twelve months. An online archive of the broadcast will be available on the website shortly after the live call and will be available for twelve months.

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¹ The Zegna Group’s Plan was published at the time of the announcement of the business combination between the Company and Investindustrial Acquisition Corp. (“IIAC”). The Group’s Plan was also disclosed in the Company’s registration statement on Form F-4 filed with the SEC (File No. 333-259139), under “Certain Unaudited Zegna Prospective Financial Information”.

² Adjusted EBIT, Adjusted Profit/(Loss), Net Financial Indebtedness/(Cash Surplus), Adjusted Basic Earnings per Share, Adjusted Diluted Earnings per Share, Trade Working Capital and Capital Expenditure are non-IFRS financial measures. See the Non-IFRS Financial Measures section starting on page 4 of this communication for the definition of such non-IFRS measures and a reconciliation of such non-IFRS measures to the most directly comparable IFRS measures.

³ “Business Combination” means the business combination between Zegna and Investindustrial Acquisition Corp., which was completed on December 17, 2021.

⁴ Excludes the purchase of the building in New Bond Street, London that was subsequently part of the Disposition of certain of Zegna’s businesses, completed on November 1, 2021 through the statutory demerger under Italian law to a new company owned by its then existing shareholders.

Non-IFRS Financial Measures

Zegna’s management monitors and evaluates operating and financial performance using several non-IFRS financial measures including: adjusted earnings before interest and taxes (“Adjusted EBIT”), adjusted earnings before interest, taxes, Adjusted Profit/(Loss), Adjusted Basic Earnings per Share and Adjusted Diluted Earnings Per Share, Net Financial Indebtedness/(Cash Surplus), Trade Working Capital and Capital Expenditure. Zegna’s management believes that these non-IFRS financial measures provide useful and relevant information regarding Zegna’s financial performance and financial condition, and improve the ability of management and investors to assess and compare the financial performance and financial position of Zegna with those of other companies. They also provide comparable measures that facilitate management’s ability to identify operational trends, as well as make decisions regarding future spending, resource allocations and other strategic and operational decisions. While similar measures are widely used in the industry in which Zegna operates, the financial measures that Zegna uses may not be comparable to other similarly named measures used by other companies nor are they intended to be substitutes for measures of financial performance or financial position as prepared in accordance with IFRS.

Adjusted EBIT

Adjusted EBIT is defined as profit or loss before income taxes plus financial income, financial expenses, exchange losses/(gains), result from investments accounted for using the equity method, impairments of investments accounted for using the equity method, adjusted for income and costs which are significant in nature and that management considers not reflective of underlying operating activities, including, for one or all of the years presented, costs related to the Business Combination, severance indemnities and provision for severance expenses, impairment of property, plant and equipment and right-of-use assets, certain costs related to lease agreements and certain other items.

The following table sets forth a reconciliation of (Loss)/Profit for the year to Adjusted EBIT for the periods indicated.

Adjusted Profit/(Loss)

Adjusted Profit/(Loss) represents profit or loss adjusted for income and costs (net of tax effects) which are significant in nature and that management considers not reflective of underlying activities, including, for one or all of the years presented, costs related to the Business Combination, severance indemnities and provision for severance expenses, impairment of property, plant and equipment and right-of-use assets, certain costs related to lease agreements, gains on the Thom Browne option realized in connection with the exercise of the option, impairment of equity method investments and certain other items (as further described below), as well as the tax effects of the adjusting items (calculated based on the applicable tax rates of the jurisdictions where the adjustments relate).

The following table sets forth a reconciliation of (Loss)/Profit for the year to Adjusted Profit for the periods indicated.

Adjusted Basic Earnings per Share and Adjusted Diluted Earnings per Share

Adjusted Basic Earnings per Share and Adjusted Diluted Earnings per Share represent basic earnings per share and diluted earnings per share adjusted for income and costs (net of tax effects) which are significant in nature and that management considers not reflective of underlying activities, including, for one or all of the years presented, costs related to the Business Combination, severance indemnities and provision for severance expenses, impairment of property, plant and equipment and right-of-use assets, certain costs related to lease agreements, gains on the Thom Browne option realized in connection with the exercise of the option, impairment of equity method investments and certain other items (as further described below), as well as the tax effects of the adjusting items (calculated based on the applicable tax rates of the jurisdictions where the adjustments relate).

Zegna’s management uses Adjusted Basic Earnings per Share and Adjusted Diluted Earnings per Share to understand and evaluate Zegna’s underlying performance. Zegna’s management believes this non-IFRS measure is useful because it excludes items that it does not believe are indicative of its underlying performance and allows it to view operating trends, perform analytical comparisons and benchmark performance between periods. Accordingly, management believes that Adjusted Basic and Diluted Earnings per Share provides useful information to third party stakeholders in understanding and evaluating Zegna’s operating results.

For the calculation of both Adjusted Basic Earnings per Share and Adjusted Diluted Earnings per Share, basic earnings per share and diluted earnings per share the number of ordinary and potential ordinary shares outstanding for all periods reflects the share split performed as part of the Business Combination.

The following table sets forth the calculation of Adjusted Basic and Diluted Earnings per Share and provides a reconciliation of (Loss)/Profit for the year to these non-IFRS measures for the periods indicated.

Net Financial Indebtedness/(Cash Surplus)

Net Financial Indebtedness/(Cash Surplus) is defined as the sum of financial borrowings (current and non-current), derivative financial instruments and bonds, loans and certain other financial liabilities (recorded within other non-current financial liabilities in the consolidated statement of financial position), net of cash and cash equivalents, derivative financial instruments and certain other current financial assets.

The following table sets forth the calculation of Net Financial Indebtedness/(Cash Surplus) as of the dates indicated:

Trade Working Capital

Trade Working Capital is defined as current assets less current liabilities adjusted for derivative assets and liabilities, tax assets and liabilities, cash and cash equivalents, assets and liabilities held for sale, borrowings, lease liabilities, and other assets and liabilities.

The following table sets forth the calculation of Trade Working Capital at December 31, 2021 and 2020:

Capital Expenditure

Capital expenditure is defined as the sum of cash outflows that result in additions to property, plant and equipment and intangible assets.

The following table shows a breakdown of capital expenditure by category for each of the years ended December 31, 2021, 2020 and 2019:

About Ermenegildo Zegna Group

Founded in 1910 in Trivero, Italy by Ermenegildo Zegna, the Zegna Group designs, creates and distributes luxury menswear and accessories under the Zegna brand, as well as womenswear, menswear and accessories under the Thom Browne brand. Through its Luxury Textile Laboratory Platform – which works to preserve artisanal mills producing the finest Italian fabrics – the Zegna Group manufactures and distributes the highest quality fabrics and textiles. Group products are sold through over 500 stores in 80 countries around the world, of which 297 are directly operated by the Group as of December 31, 2021 (245 Zegna stores and 52 Thom Browne stores). Over the decades, Zegna Group has charted Our Road: a unique path that winds itself through era-defining milestones that have seen the Group grow from a producer of superior wool fabric to a global luxury group. Our Road has led us to New York, where the Group has been listed on the New York Stock Exchange since December 20, 2021. And while we continue to progress on Our Road to tomorrow, we remain committed to upholding our founder’s legacy – one that is based upon the principle that a business’s activities should help the environment. Today, the Zegna Group is creating a lifestyle that marches to the rhythm of modern times while continuing to nurture bonds with the natural world and with our communities that create a better present and future.

Forward Looking Statements

This communication, including the section “Outlook”, contains forward-looking statements that are based on beliefs and assumptions and on information currently available to the Company. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” “target,” “seek” or the negative or plural of these words, or other similar expressions that are predictions or indicate future events or prospects, although not all forward-looking statements contain these words. Any statements that refer to expectations, projections or other characterizations of future events or circumstances, including strategies or plans, are also forward-looking statements. These statements involve risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although the Company believes that it has a reasonable basis for each forward-looking statement contained in this communication, the Company cautions you that these statements are based on a combination of facts and factors currently known and projections of the future, which are inherently uncertain. In addition, risks and uncertainties are described in the Company’s filings with the SEC. These filings may identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. Most of these factors are outside the Company’s control and are difficult to predict. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by the Company and its directors, officers or employees or any other person that the Company will achieve its objectives and plans in any specified time frame, or at all. The forward-looking statements in this communication represent the views of Zegna as of the date of this communication. Subsequent events and developments may cause that view to change. However, while Zegna may elect to update these forward-looking statements at some point in the future, the Company disclaims any obligation to update or revise publicly forward-looking statements. You should, therefore, not rely on these forward-looking statements as representing the views of the Company as of any date subsequent to the date of this communication.

FY 2021 Summary Tables

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