Statement of Financial Position and Statement of Cash Flows Information

Assets

At the end of December 2023, total assets were down 11% to € 18,020 million from € 20,296 million in the prior year as the decrease in inventories, accounts receivable and right-of-use assets more than offset the increase of cash and cash equivalents.

Total current assets decreased 16% to € 9,809 million at the end of December 2023 compared to € 11,732 million in 2022. Cash and cash equivalents were up 79% to € 1,431 million at the end of December 2023 from € 798 million in the prior year. This increase is mainly due to the positive cash flow from operating activities resulting from the significant reduction of operating working capital compared to the prior year. This rise was only partly offset by the repayment of the eurobond, repayments of lease liabilities, interest paid as well as the dividend payment for the year 2022. Inventories decreased by almost € 1,500 million, or 24%, to € 4,525 million at the end of December 2023 from € 5,973 million in 2022. The decrease was mainly driven by the company’s initiatives toward a more effective inventory management including significantly reduced buying patterns. On a currency-neutral basis, inventories decreased 22%. SEE NOTE 07

Inventories € in millions

Accounts receivable decreased 25% to € 1,906 million at the end of December 2023 (2022: € 2,529 million), mainly reflecting the company’s disciplined sell-in efforts to reduce inventory levels in the market as well as a more effective collection compared to the prior year. On a currency-neutral basis, receivables were down 23%. Other current financial assets were down to € 755 million (2022: € 1,014 million), mainly related to the closing of the deferred considerations with regard to the divestiture of the Reebok business and the decrease in the fair value of financial instruments. Other current assets were down 24% to € 1,003 million at the end of December 2023 (2022: € 1,316 million) due to the decrease of tax receivables. SEE NOTE 05 SEE NOTE 06 SEE NOTE 08

Accounts receivable € in millions

Total non-current assets decreased 4% to € 8,211 million at the end of December 2023 from € 8,563 million in 2022. This development is mainly related to a decrease in fixed assets and was only partly offset by an increase of deferred tax assets.

Fixed assets were down 8% to € 6,386 million at the end of December 2023 versus € 6,935 million in 2022. Right-of-use assets decreased 16% to € 2,247 million (2022: € 2,665 million) mainly due to depreciation, only partly offset by additions. Goodwill was down 2% to € 1,238 million (2022: € 1,260 million) reflecting negative currency effects. Other intangible assets increased 3% to € 442 million (2022: € 429 million), mainly due to additions in software including own-created software. Other non-current financial assets increased 24% to € 418 million from € 336 million at the end of 2022, mainly related to the increase of the fair value of the earn-out component with regard to the divestiture of the Reebok business in the prior year. Deferred tax assets amounted to € 1,358 million compared to € 1,216 million in 2022. SEE NOTE 34

Liabilities and equity

Total current liabilities were down 13% to € 8,043 million at the end of December 2023 from € 9,257 million in 2022. Short-term borrowings increased only slightly to € 549 million at the end of December 2023 (2022: € 527 million), as the reclassification of the eurobond in an amount of € 500 million due to its maturity in 2024 was offset by the repayment of the equity-neutral convertible bond of € 500 million in September 2023. Accounts payable were down 22% to € 2,276 million at the end of December 2023 versus € 2,908 million in 2022, mainly reflecting lower sourcing volumes. On a currency-neutral basis, accounts payable decreased 21%. Current lease liabilities decreased to € 545 million at the end of December 2023 versus € 643 million in 2022, mainly due to lease modifications and remeasurements. Other current financial liabilities were down 37% to € 266 million from € 424 million in 2022, mainly related to reduced customs liabilities as well as the lower fair value of financial instruments. Other current provisions decreased 17% to € 1,323 million at the end of December 2023 versus € 1,589 million in 2022, mainly due to lower provisions for returns and a reclassification of provisions for customs from current to non-current. Current accrued liabilities were down 6% to € 2,273 million at the end of December 2023 from € 2,412 million in 2022, mainly due to lower accruals for discounts and outstanding invoices, only partly offset by higher accruals of personnel and marketing costs. Other current liabilities were up 8% to € 488 million at the end of December 2023 from € 452 million in 2022. This increase is related to donations in connection with the sale of parts of the Yeezy inventory. SEE NOTE 20 SEE NOTE 21

Accounts payable € in millions

Total non-current liabilities decreased 11% to € 5,052 million at the end of December 2023 compared to € 5,688 million in the prior year.

Long-term borrowings were down 18% to € 2,430 million at the end of December 2023 compared with € 2,946 million in the prior year. This decrease is mainly due to the reclassification of the eurobond of € 500 million to short-term borrowings due to its maturity in 2024. Non-current lease liabilities declined 13% to € 2,039 million at the end of December 2023 from € 2,343 million in the prior year as a result of a reduction in the number of lease contracts and currency effects. Other non-current financial liabilities were down 86% to € 6 million at the end of December 2023 from € 44 million in the prior year, related to the fair value of financial instruments. Deferred tax liabilities increased 9% to € 147 million at the end of December 2023 from € 135 million in the prior year. Other non-current provisions were up 113% to € 188 million at the end of December 2023 from € 88 million in the prior year, reflecting a reclassification of provisions for customs from current to non-current and higher provisions for personnel. Other non-current liabilities were up € 96 million to € 103 million at the end of December 2023 from € 6 million in 2022. This increase is related to donations in connection with the sale of parts of the Yeezy inventory. SEE NOTE 22

Shareholders’ equity decreased 8% to € 4,580 million at the end of December 2023 versus € 4,991 million in 2022, mainly driven by negative currency effects, the decrease of hedging reserves, as well as the dividend paid to shareholders for the full year 2022. The equity ratio increased to 25.4% compared to 24.6% in the prior year, as the decrease in shareholders’ equity was more than offset by the decrease of total liabilities and equity. SEE NOTE 25

Equity ratio¹ in %

Operating working capital

Operating working capital decreased 26% to € 4,154 million at the end of December 2023 compared to € 5,594 million in 2022. On a currency-neutral basis, operating working capital was down 23%. Average operating working capital as a percentage of sales increased 1.6 percentage points to 25.7% (2022: 24.0%), reflecting the slight increase of average operating working capital against the background of lower net sales in 2023 compared to 2022.

Average operating working capital^1,2 in % of net sales³

Investment analysis

Capital expenditure is defined as the total cash expenditure for the purchase of tangible and intangible assets (excluding acquisitions and right-of-use assets according to IFRS 16). Capital expenditure decreased 27% to € 504 million (2022: € 695 million). Capital expenditure for property, plant, and equipment was down 28% to € 363 million compared to € 504 million in the prior year. The company invested € 141 million in intangible assets (2022: € 191 million). Depreciation and amortization, excluding impairment losses and reversal of impairment losses of tangible and intangible assets, decreased 3% to € 505 million in 2023 (2022: € 530 million).

Controlled space initiatives, which comprise investments in new or remodeled own retail and franchise stores as well as in shop-in-shop presentations of our products in our customers’ stores, accounted for 45% of total capital expenditure (2022: 43%). Expenditure for IT and logistics represented 32% and 9%, respectively (2022: 29% and 12%, respectively). In addition, expenditure for administration accounted for 14% (2022: 15%). From a segmental perspective, the majority of the capital expenditure was recorded centrally at headquarter level, which accounted for 38% (2022: 46%). From a regional perspective, capital expenditure in EMEA accounted for 24% (2022: 21%) of the total capital expenditure, followed by North America with 15% (2022: 11%), Greater China with 10% (2022: 11%), Asia-Pacific with 7% (2022: 8%), and Latin America with 6% (2022: 4%).

Capital expenditure by type in %

Capital expenditure by segments in %

Liquidity analysis

Net cash generated from operating activities amounted to € 2,630 million in 2023 (2022: € 479 million net cash used). Net cash generated from continuing operating activities was € 2,630 million (2022: € 394 million net cash used). This development was mainly due to the reduction of operating working capital in 2023 compared to the prior year.

In 2023, net cash used in investing activities reached a level of € 450 million compared to net cash of € 495 million generated in 2022. This development was mainly due to the proceeds related to the divestiture of the Reebok business in 2022.

Net cash used in financing activities amounted to € 1,425 million (2022: € 2,963 million) and net cash used in continuing financing activities amounted to € 1,425 million (2022: € 2,957 million). This is a result of the repayment of the eurobond, repayments of lease liabilities, interest paid as well as the dividend payment for the year 2022.

Adjustments according to IAS 29 ‘Financial Reporting in Hyperinflationary Economies’ are required to be separately disclosed and had an impact of € 82 million on the company’s 2023 operating, investing and financing cash flows and € 64 million on the 2022 values.

Exchange rate effects negatively impacted the company’s cash position by € 40 million (2022: € 39 million).

As a result of all these developments, cash and cash equivalents increased by € 633 million to € 1,431 million at the end of December 2023 compared to € 798 million at the end of December 2022.

Change in cash and cash equivalents € in millions

Adjusted net borrowings at December 31, 2023, amounted to € 4,518 million, compared to € 6,047 million in 2022. The company’s ratio of adjusted net borrowings over EBITDA amounted to 3.3 at the end of December 2023 (2022: 3.2). SEE TREASURY

Adjusted net borrowings/EBITDA^1,2,3 € in millions

Off-balance-sheet items

The company’s most significant off-balance-sheet items are commitments for promotion and advertising, for service arrangements as well as for other contracts. At the end of December 2023, financial commitments for promotion and advertising increased 30% to € 6,418 million in 2023 (2022: € 4,942 million). adidas has outsourced certain logistics and information technology functions, for which it has entered into long-term contracts. For these service arrangements, financial commitments increased 65% to € 1,454 million in 2023 (2022: € 881 million). Minimum future payments for other contracts were € 214 million at December 31, 2023, compared to € 356 million at the end of December 2022, representing a decrease of 40%. SEE NOTE 37 SEE NOTE 38