Slide 1: Investor Presentation Q4 2023
Investor Presentation Q4 2023 April 10, 2024 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 April 9, 2024. Actual results and the timing
Slide 3: Our Mission
OUR MISSION To Inspire the World to be At Home with Nature PAGE 3
Slide 4: Our Roots
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 uncompromisi
Slide 5: 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 – Olympic outfits of Partners acquires leadership team. anniversary celebrations Roots, centered selling athle
Slide 6: 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 7: Our Values | What Guides Us
Our Values | What Guides Us Community Authenticity Integrity Freedom We are a place of inclusivity, diversity and open- While we draw inspiration from We always strive to do We celebrate the individuality of mindedness. the world around us, we never what’s right and to build style as a form of self-
Slide 8: Quarterly Highlights and Trends
Quarterly Highlights and Trends • Despite macroeconomic headwinds impacting the fourth quarter, improved trends were noted on several key metrics and great progress has been made on key strategic initiatives o Total sales decline of 2.9% YoY, DTC sales decline of 0.8% o Positive traffic trends acros
Slide 9: Product & Brand Highlights
Product & Brand Highlights • Our core collections continue to drive positive momentum o Active collection sales increased 45% annually and grew as a percentage of total sales o Cooper fleece stabilized and achieved growth in the quarter o >90% of our products are made with sustainable materials • En
Slide 10: Operational Highlights
Operational Highlights • Drove double-digit US online sales growth o Enabled fulfillment of US eCommerce orders from Canadian stores o Part of our ongoing focus on our omnichannel experience • Positive momentum in Asia o China business shifted to more established partner on Tmall; supporting positiv
Slide 11: Looking Ahead to 2024
Looking Ahead to 2024 • Product margin upside anticipated in 2024 from investments made in sourcing function o True product cost savings achieved through sourcing strategies that do not reduce product quality • Continue to make investments in data analytics to enable AI-driven personalization and om
Slide 12: Fourth-Quarter Sales
Fourth-Quarter Sales Total Sales DTC Sales P&O Sales $111.5M $108.2M $98.5M $97.8M $12.9M $10.5M Q4-2022 Q4-2023 Q4-2022 Q4-2023 Q4-2022 Q3-2023 • Reduction of wholesale orders as Roots • Positive traffic improvement in DTC channel • Impact of extra fiscal week in Q4/FY2023: decided to not repeat a
Slide 13: Gross Margin
Gross Margin Total DTC 59.9% 58.6% 58.7% 56.5% Q4-2022 Q4-2023 Q4-2022 Q4-2023 • Improved product costing (+) • Higher mix of higher-margin DTC sales (+) • Higher mix of Black Friday/ Cyber Monday sales, driving a higher • Lower inventory provisions due to healthier inventory (+) discount rate (-) •
Slide 14: DTC Gross Margin Bridge
DTC Gross Margin Bridge Higher discounts due to larger mix of BF/CM sales, and unfavourable FX, partially offset by improved product costing 120 bps 60 bps 59.9% 58.7% (60 bps) Q4-2022 Product Margin offset Lower Air Lower Inventory Q4-2023 by unfavourable FX Freight Provision rates 120 basis points
Slide 15: SG&A Expenses
SG&A Expenses $42.9M $41.2M Q4-2022 Q4-2023 • Gains from lease modifications under IFRS 16 Leases • Lower variable selling costs • Higher corporate and store compensation costs, including impacts of Ontario minimum wage PAGE 15
Slide 16: Profitability
Profitability Net Income Adjusted EBITDA1 $14.6M $23.5M $23.2M $13.0M Q4-2022 Q4-2023 Q4-2022 Q4-2023 1 Adjusted EBITDA is a non-IFRS measure. See "Appendix" at the end of this presentation. (in millions of $CAD) PAGE 16
Slide 17: Inventory Bridge
Inventory Bridge ($12.0M) ($6.8M) $55.0M $36.2M Q4-2022 Decrease in on- Reduced in-transit Q4-2023 hand inventory inventory from lower buys Healthy inventory balance; down 34% year-over-year While pleased with the inventory reduction, strong sales in certain core collections during Q4 could lead to
Slide 18: Solid Financial Position
Solid Financial Position Net Debt $88.0M $24.8M Total liquidity $17.0M ~0.9x Net leverage ratio (1) Q4-2022 Q4-2023 $12.4M (+187% YoY) Annual Free Cash Flow (2) (in millions of $CAD) (1) Defined as total net debt over trailing 12-month Adjusted EBITDA (2) Free cash flow is a supplementary financial
Slide 19: Summary
Summary • Improved inventory health to end the year from strategically managing purchases and working through pack-and-hold collections o Stronger fourth quarter sales in certain core collections may lead to missed sales opportunities in H1 2024 • Short-term headwinds expected to persist in early 20
Slide 20: Appendix
Appendix PAGE 20
Slide 21: 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
Slide 22: PAGE 22
PAGE 22