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PAGE 1 Investor Presentation D e c e m b e r 1 1 , 2 0 2 4 Q 3 2 0 2 4
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PAGE 2PAGE 2 Forward-Looking Statements Certain information in this presentation contains forward-looking information. This information is based on management’s reasonable assumptions and beliefs in light of the information currently available to us and are made as of December 10, 2024. Actual results and the timing of events may differ materially from those anticipated in the forward-looking information as a result of various factors. Information regarding our expectations of future results, performance, achievements, prospects or opportunities or the markets in which we operate is forward-looking information. Statements containing forward-looking information are not facts but instead represent management’s expectations, estimates and projections regarding future events or circumstances. Many factors could cause our actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward-looking statements. See “Forward-Looking Information” and “Risk Factors” in the Company’s Fiscal 2023 MD&A and/or Annual Information Form dated April 9, 2024, which are available on SEDAR+ at www.sedarplus.ca, for a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements. Readers are urged to consider the uncertainties, risks and assumptions carefully in evaluating the forward-looking information and are cautioned not to place undue reliance on such information. We have no intention and undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities law. All figures discussed in this presentation are stated in $CAD millions, unless otherwise noted.
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PAGE 3 To Inspire the World to be At Home with Nature O U R M I S S I O N
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PAGE 4 Our Roots Roots was founded in 1973 by Michael Budman and Don Green, who met at summer camp in Algonquin Park, where they first fell in love with the ideals and beauty of Canada. Starting from a little cabin, they were inspired by nature and Canada's wilderness to create Roots. With its uncompromising comfort and exceptional quality, Roots has become one of the most well-known and iconic Canadian clothing brands with a global presence. RIGHT: THE ORIGINAL ROOTS ‘LITTLE CABIN’ ON SMOKE LAKE, ALGONQUIN PARK, ONTARIO, CANADA
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PAGE 5PAGE 5 Our History 1973 Michael Budman and Don Green founded Roots, centered around the beauty found in nature and Canada’s wilderness. Signature negative heel shoe becomes popular. Roots moves onto its core business – selling athletic and lifestyle apparel. Roots has created the Olympic outfits of several nations, starting in 1998 with the Canadian Winter team and following suit in 2002 by outfitting the US, UK and Barbados Olympic teams. Searchlight Capital Partners acquires 80% position in Roots, Roots founders retain 20% ownership. New executive leadership team. Focus on strengthening fundamentals of business for longer term global growth. Roots launched 50th anniversary celebrations with a curated assortment of limited- edition products, collaborations, and events to generate excitement among long- time and new customers. 1980 20231998 2015 2020
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PAGE 6PAGE 6 Iconic Canadian Brand with a Global Community Rich heritage of delivering high-quality, versatile and stylish products to customers that span all ages and genders High-Quality, Versatile, Purpose-Driven Products Mix of iconic classics and new pieces that resonate with customers Omni-Channel Strategy, Built for the Future Strong store base and e-commerce presence with omni-channel capabilities Scalable, Best-in-Class Organization and Operations Well-invested infrastructure and refined operating strategies Compelling Financial Performance Strong balance sheet and focus on long-term profitable growth 1 2 3 4 5
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PAGE 7PAGE 7 Our Values | What Guides Us We always strive to do what’s right and to build trust and lasting relationships with our brand community. IntegrityAuthenticity While we draw inspiration from the world around us, we never forget where we have come from – our heritage and Canadian beginnings. Community We are a place of inclusivity, diversity and open- mindedness. We support one another and the communities where we live and work. Freedom We celebrate the individuality of style as a form of self-expression. We believe everyone should enjoy everyday adventures, living life on their own terms.
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PAGE 8PAGE 8 Q3 Financial Highlights • Sales of $66.9M, compared to $63.5M last year o DTC sales were $54.2M compared to $52.2M last year o DTC comparable sales growth was +5.8% o P&O sales were $12.7M compared to $11.3M last year • DTC gross margin improved 160bps year-over-year o DTC product margin increased by 250bps, driven from improved product costing and lower discounting o Partially offset by unfavorable foreign exchange impacts • Adjusted EBITDA was $7.1M vs. $5.5M last year • Continued improvements in inventory and balance sheet o Net debt declined by 11.3% year-over-year
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PAGE 9PAGE 9 Brand & Customer Engagement • Built on our brand ambassador program that launched in Q1 and continued to generate organic connections with our target audience, resulting in strong engagement metrics. • Our “back-to-school” and newly launched Fall campaigns provided consumers with a new, modern perspective of Roots. • Our holiday campaign, Anything Roots, Everything Roots, aimed to connect with consumers through multiple touchpoints, messaging that Roots is the perfect thoughtful gift during the holidays. • Launched a partnership with the Nature Conservancy of Canada.
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PAGE 10PAGE 10 Product Highlights • Fall Signature collection, the first collection fully influenced by our Creative Director, Joey Gollish, offered consumers a modern logo and innovative styling options to complement our core collections. • Activewear achieved another quarter of double-digit growth, continuing to resonate well with our consumer as a core offering of Roots. • Our core fleece collections experienced strong year-over-year growth, benefiting from the improved inventory position and marketing campaign focuses. • In October, Roots was recognized at the Canadian Arts and Fashion Awards for outstanding achievement, celebrating the brand’s rich heritage and commitment to quality, authenticity, and innovation.
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PAGE 11PAGE 11 Operational Highlights • Completed phase one of our new Robson Street flagship store, which will feature new contemporary design concepts and modern digital features focused on improving the customer shopping experience. • First anniversary of our endless aisle program, improving customers’ access to our entire inventory collection when they visit in-store. • Continued progress on AI adoption initiatives to improve operating efficiency: o Experienced notable improvements in our inventory efficiency metrics at stores through AI-driven replenishment o Launched the first phase of or AI-driven online solution that provides curated messaging to customers
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PAGE 12PAGE 12 Looking Ahead • Optimistic about maintaining the positive momentum into the holiday period, while navigating the evolving consumer landscape. o As a reminder, there was an extra week in the fourth quarter of fiscal 2023, which represented $2.2M of sales last year • Continued product margin tailwinds into 2025 through refined sourcing processes o To be partially offset by the higher U.S. dollar FX rate relative to last year • Excited to welcome our new Head of Design, Bea Nam, who brings two decades of fashion design, product development and brand strategy experience.
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PAGE 13 PAGE 13 P&O Sales $11.3M $12.7M Q3-2023 • Strengthened sales in active and core fleece collections • Improved inventory position led to improvement in store conversion • Partially offset by closures from our store consolidation strategy Total Sales $63.5M $66.9M Q3-2023 Q3-2024 Third-Quarter Sales • Increased sales to Taiwan due to timing shifts of orders • Higher licensing royalties of our brand to select manufacturing partners (in millions of $CAD) DTC Sales $52.2M $54.2M Q3-2023 Q3-2024Q3-2024 • DTC comparable sales grew 5.8% • P&O sales increased from higher sales in Taiwan, in addition to higher royalties from the licensing of the Roots brand
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PAGE 14PAGE 14 Gross Margin 58.4% 62.4% 60.0% 64.0% Q3-2023 Q3-2024 Q3-2023 Q3-2024 DTCTotal • Increased product margin expansion (+) • Increased mix of royalties from licensing of the Roots brand (+) • Unfavourable foreign exchange impact on U.S. dollar purchases (-) • Improved product costing and lower discounting (+) • Unfavourable foreign exchange impact on U.S. dollar purchases (-)
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PAGE 15PAGE 15 DTC Gross Margin Bridge 160 basis points increase in DTC gross margin Q3-2023 Q3-2024 62.4% 64.0% Product Margin Expansion 250 bps Improved product costing and lower discounting Unfavourable FX (90) bps
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PAGE 16PAGE 16 SG&A Expenses $33.8M $34.5M 51.6% of sales Q3-2023 Q3-2024 • Increased personnel costs as a result of legislative minimum wage increases • Higher variable selling costs from increased DTC sales • Scaling as a percentage of sales 53.2% of sales
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PAGE 17PAGE 17 Profitability (1) Adjusted EBITDA is a non -IFRS measure. See "Appendix" at the end of this presentation. Adjusted EBITDA (1) Q3-2023 Q3-2024 Net Income $0.5M Q3-2023 Q3-2024 $5.5M $7.1M$2.4M
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PAGE 18PAGE 18 Balance Sheet & Cash Flow (1) Net Debt is a non -IFRS measure defined as long -term debt less cash (net of bank indebtedness). Leverage Ratio is a non -IFRS ratio defined as net debt over trailing 12 - month Adjusted EBITDA. Free cash flow is a non -IFRS measure defined as cash flow generated from ongoing operations, calculated as our cash from operati ng activities less cash used in investing activities and the payment of principal on lease liabilities net of lease incentives. See "Append ix" at the end of this presentation. Net Debt (1) $52.9M $46.9M ($6.0M) Free Cash Flow (1) Q3-2023 Q3-2024 ~2.4x Leverage Ratio (1) Inventory $60.4M (1.6% YoY reduction)
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PAGE 19PAGE 19 Summary • Pleased with our third quarter results and the continued momentum into early Q4, as we begin the holiday season. • Marketing and operational enhancements are working in unison, leading to refined brand messaging and an improved omni- channel experience, heading into the holiday season. • Improved inventory composition and healthier balance sheet we enter Q4 and next year.
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PAGE 20PAGE 20 Appendix
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PAGE 21PAGE 21 This presentation makes reference to certain non-IFRS measures including certain metrics specific to the industry in which we operate. These measures are not recognized measures under International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS"), do not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management's perspective. Accordingly, these measures are not intended to represent, and should not be considered as alternatives to net income or other performance measures derived in accordance with IFRS as measures of operating performance or operating cash flows or as a measure of liquidity. In addition to our results determined in accordance with IFRS, we use non-IFRS measures including EBITDA, Adjusted EBITDA, Adjusted Net Income (Loss), and Net Debt; and non-IFRS ratios including Adjusted Net Income (Loss) per Share, and Leverage Ratio. We believe these non-IFRS measures and industry metrics provide useful information to both management and investors in measuring our financial performance and condition and highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. For further information regarding these non-IFRS measures, please refer to "Cautionary Note Regarding Non-IFRS Measures and Industry Metrics" and "Reconciliation of Non-IFRS Measures" in our Management's Discussion and Analysis (MD&A) for Q3 2024, which is incorporated by reference herein and is available on SEDAR+ at www.sedarplus.ca. Non-IFRS Measures and Industry Metrics
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