Slide 1: Investor Presentation Q2 2023
Investor Presentation Q2 2023 September 12, 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 September 11, 2023. Actual results and the t
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: Meghan Roach
Meghan Roach President & Chief Executive Officer PAGE 7
Slide 8: Quarterly Highlights and Trends
Quarterly Highlights and Trends • Pleased with Q2 2023 results (~15% of annual sales) o Overall sales growth of 3.4% YoY despite challenging economic conditions o Benefited from earlier order shipments to Taiwanese operating partner, which helped increase P&O sales o Anticipate solid growth from our
Slide 9: Quarterly Highlights and Trends
Quarterly Highlights and Trends • Strong customer traction for Active, One and Beaver Canoe collections o Active collection sales increased 50% YoY for second consecutive quarter, reaching 10% of DTC revenue o Sustained growth in Active driven by new customer acquisitions and expanded styles (golf a
Slide 10: 50th Anniversary Celebrations
50th Anniversary Celebrations • Roots officially turned 50 on August 15th o First product drops included commemorative Roots Sporting Goods and limited-edition Golden Beaver collections o Introduced Roots Stories on website—collection of stories from loyal customers on role of Roots in their lives o
Slide 11: Outlook
Outlook • Good to see early customer response to 50th anniversary collections • Strong balance sheet, with healthy inventory position and ample liquidity, supports growth strategy in current environment • Continue to expect the higher interest rates and current economic environment to weigh on consu
Slide 12: Leon Wu
Leon Wu Chief Financial Officer PAGE 12
Slide 13: Second-Quarter Sales
Second-Quarter Sales Total Sales DTC Sales P&O Sales $47.8M $49.4M $38.5M $37.1M $12.3M $9.3M Q2-2022 Q2-2023 Q2-2022 Q2-2023 Q2-2022 Q2-2023 • Challenging economic conditions (-) • Higher sales to international operating • Competitive promotional environment (-) partner in Taiwan (+) • Softness in
Slide 14: Gross Margin
Gross Margin Total DTC 64.0% 62.7% 59.3% 55.5% Q2-2022 Q2-2023 Q2-2022 Q2-2023 • Higher mix of lower-margin P&O sales (-) • Increased sales mix of discounted products (-) • Higher product costs from transition to sustainable • Unfavourable FX impact (-) materials (-) • Lower freight costs (+) PAGE 1
Slide 15: DTC Gross Margin Bridge
DTC Gross Margin Bridge Higher product costs from transition to sustainable materials and increased sales mix of discounted products. 40 bps 100 bps 64.0% -270 bps 62.7% Q2-2022 Product Lower freight rates Reduced use in Q2-2023 Margin offset by FX Air Freight 130 basis points reduction in DTC gross
Slide 16: SG&A Expenses
SG&A Expenses $30.6M $32.3M Q2-2022 Q2-2023 • Higher personnel costs at stores and corporate offices (-) • Contractual increases in store rent charges (-) PAGE 16
Slide 17: Profitability
Profitability Net Loss Adjusted EBITDA1 ($0.6M) ($3.2M) ($3.0M) ($5.3M) Q2-2022 Q2-2023 Q2-2022 Q2-2023 1 Adjusted EBITDA is a non-IFRS measure. See "Appendix" at the end of this presentation. (in millions of $CAD) PAGE 17
Slide 18: Inventory Bridge
Inventory Bridge $2.6M $3.9M $1.2M -$6.6M $55.9M $54.8M Q2-2022 Pack and Hold Higher Product Costs On-Hand In-Transit Q2-2023 Inventory level on track to be right-sized by end of 2023 (in millions of $CAD) PAGE 18
Slide 19: Solid Financial Position
Solid Financial Position Net Debt $57.8M $50.2M $50.9M Revolving credit facility $61.1M Total liquidity Q2-2022 Q2-2023 $2.7M Value of shares repurchased under NCIB in Q2 (in millions of $CAD) PAGE 19
Slide 20: Summary
Summary • Robust balance sheet and ample liquidity to support current operations, future growth initiatives and capital management strategies • First half of 2023 represents less than 30% of sales • Investing in execution of long-term plans PAGE 20
Slide 21: Appendix
Appendix PAGE 21
Slide 22: 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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