Slide 1: Investor Presentation Q3 2023
Investor Presentation Q3 2023 December 6, 2023 PAGE 1
Slide 2: Forward-Looking Statements
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 5, 2023. Actual results and the tim
Slide 3: Who We Are
Who We Are 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 uncompromis
Slide 4: Our History
Our History 1973 1980 1998 2015 2020 2023 Michael Budman and Roots moves onto its Roots has created the Searchlight Capital New executive Roots launched 50th Don Green founded core business – selling Olympic outfits of Partners acquires 80% leadership team. Focus anniversary celebrations Roots, cent
Slide 5: Iconic Canadian Brand with a Global Community
Iconic Canadian Brand with a Global Community 1 Rich heritage of delivering high-quality, versatile and stylish products to customers that span all ages and genders High-Quality, Versatile, Purpose-Driven Products 2 Mix of iconic classics and new pieces that resonate with customers Omni-Channel Stra
Slide 6: Our Values
OUR VALUES Community Be Genuine Integrity Freedom We are a place of While we draw inspiration We always strive to do We celebrate the inclusivity, diversity and from the world around us, what’s right and to build individuality of style as a open-mindedness. We we never forget where we trust and last
Slide 7: Quarterly Highlights and Trends
Quarterly Highlights and Trends • Sales momentum in full-price offerings, offset by lower off-price sales o Total sales decline of 9.0% YoY, DTC sales decline of 8.2%: o Full-price sales grew 3% YoY from continued efforts to strengthen product portfolio and positive brand excitement o Decline in off
Slide 8: Quarterly Highlights and Trends
Quarterly Highlights and Trends • Continued momentum in the Active collection o Active collection sales increased over 50% YoY for the third consecutive quarter o Active remains an important future growth category • Brand excitement through collaboration with Barbie o Products included a Roots Barbi
Slide 9: Operational Highlights
Operational Highlights • Enabled fulfillment of US eCommerce orders from Canadian stores o Part of our ongoing focus on our omnichannel experience o Drove double-digit US online sales growth • Expanded endless aisle capabilities with NewStore o Increases customer access to our products across the ch
Slide 10: Black Friday Highlights
Black Friday Highlights • Advanced our Black Friday promotion by a week to reflect evolving Canadian consumer trends and provided compelling offerings • Offering was well received, resulting in improved YoY trends in comparison to Q3 • Remain prudently cautious about the remainder of Q4 due to the o
Slide 11: Third-Quarter Sales
Third-Quarter Sales Total Sales DTC Sales P&O Sales $69.8M $56.9M $12.9M $63.5M $52.2M $11.3M Q3-2022 Q3-2023 Q3-2022 Q3-2023 Q3-2022 Q3-2023 • Decline in lower off-price sales from promotional • Decline from timing shifts on certain wholesale discipline (-) orders (-) • Partially offset by strength
Slide 12: Gross Margin
Gross Margin Total DTC 62.4% 60.7% 58.4% 56.5% Q3-2022 Q3-2023 Q3-2022 Q3-2023 • Lower freight costs (+) • Lower freight costs (+) • Higher margins on P&O wholesale products (+) • Unfavourable FX impact (-) • Unfavourable FX impact (-) • Increased mix of full price sales, offset by higher product co
Slide 13: DTC Gross Margin Bridge
DTC Gross Margin Bridge Increased mix of full-price sales, offset by higher product costs from transition to sustainable materials 230 bps Flat -60 bps 62.4% 60.7% Q3-2022 Unfavorable FX rates Q3-2023 Product Reduced use in partially offset by lower Margin Air Freight freight rates 170 basis points
Slide 14: SG&A Expenses
SG&A Expenses $33.8M $33.8M Q3-2022 Q3-2023 • Lower shipping rates and variable transaction costs (+) • Higher personnel costs (-) • Increased marketing investments (-) PAGE 14
Slide 15: Profitability
Profitability Net Income Adjusted EBITDA 1 $2.2M $7.3M $5.5M $0.5M Q3-2022 Q3-2023 Q3-2022 Q3-2023 1 Adjusted EBITDA is a non-IFRS measure. See "Appendix" at the end of this presentation. (in millions of $CAD) PAGE 15
Slide 16: Inventory Bridge
Inventory Bridge -$4.0M -$7.5M $72.9M $61.4M Q3-2022 Decrease in on- Reduced in-transit Q3-2023 hand inventory inventory from lower buys Healthy inventory balance down 16% year-over-year (in millions of $CAD) PAGE 16
Slide 17: Solid Financial Position
Solid Financial Position Net Debt $58.1M $58.7M Total liquidity $52.9M ~2.6x Net leverage ratio (1) Q3-2022 Q3-2023 $0.3M Value of shares repurchased under NCIB in Q3 (in millions of $CAD) (1) Defined as total net debt over trailing 12-month Adjusted EBITDA PAGE 17
Slide 18: Summary
Summary • Short-term headwinds, but excited about long-term upside from ongoing investments o Product margin upside anticipated in 2024 from investments made in sourcing function • Significant progress made to right-size inventory without reliance of increasing discounting o Well-positioned to suppo
Slide 19: Appendix
Appendix PAGE 19
Slide 20: Non-IFRS Measures and Industry Metrics
Non-IFRS Measures and Industry Metrics 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 Ac
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