Slide 1: Investor Presentation Q3 2022
Investor Presentation Q3 2022 December 9, 2022 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 8, 2022. 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 2017 2020 Michael Budman and Roots moves onto its Roots has created the Searchlight Capital Complete IPO on TSX New executive Don Green founded core business – selling Olympic outfits of Partners acquires 80% Searchlight Capital leadership: CEO, CFO, Roots, centered a
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: Third Quarter Overview
Third Quarter Overview • Entered third quarter from position of strength • Notable shift in economy since reporting Q2 2022 o Consumer spending tightened o Discounting more prevalent • Roots has faced diverse market conditions and consumer behaviours for nearly 50 years • Focused on sustainable, pro
Slide 9: Sales Trends
Sales Trends • Economic environment shifted in second half of Q3 and continued into Q4 o Inflation and higher interest rates affected consumer spending o More aggressive promotional environment o Accelerated trend towards lifestyle products from casual wear (e.g. fleece) • Sales decline y/y in Black
Slide 10: Operating Highlights
Operating Highlights • Completed website re-platforming o Generating more real-time data from consumers o Enhancing mobile navigation and search capabilities o Enabling seamless backend for order management and customer support o Delivering added insight into consumer behavior and more frictionless
Slide 11: Operating Highlights (continued)
Operating Highlights (continued) • Initiated Roots Emerging Creators Program with Adidem Asterisks o Design mentorship program offers exposure to emerging brands o Marrying Roots’ heritage with Adidem’s multidisciplinary approach to design & storytelling o Introduced gender-free collection in Novemb
Slide 12: Outlook
Outlook • Expect Q4 and 2023 sales and margins to be under pressure o Targeted discounts on seasonal products o Will remain promotionally disciplined on core categories • Pulling on a number of levers to mitigate effects o Strategically managing inventory o Leveraging strong balance sheet and liquid
Slide 13: Mona Kennedy
Mona Kennedy Chief Financial Officer PAGE 13
Slide 14: Third-Quarter Sales
Third-Quarter Sales Total Sales DTC Sales P&O Sales $76.3M $63.4M $69.8M $56.9M $12.9M $12.9M Q3-2021 Q3-2022 Q3-2021 Q3-2022 Q3-2021 Q3-2022 • Economic headwinds (-) • FX impact on U.S. dollar sales (+) • Promotional environment (-) • Consumer shift from fleece products towards lifestyle assortment
Slide 15: Gross Margin
Gross Margin Total DTC -90 bps excluding premium freight and -135 bps excluding government subsidies premium freight and 65.2% government subsidies 60.8% 60.7% 56.5% Q3-2021 Q3-2022 Q3-2021 Q3-2022 • Temporary premium freight expenses (-) • Higher cost of products from shift to organic cotton (-) •
Slide 16: SG&A and Adjusted EBITDA
SG&A and Adjusted EBITDA1 SG&A expenses Adjusted EBITDA1 $33.8M $19.2M $29.4M $7.3M Q3-2021 Q3-2022 Q3-2021 Q3-2022 Q3-2021 Q3-2022 Q3-2021 Q3-2022 As reported Excluding y/y impact of As reported Excluding y/y impact of subsidies and abatements subsidies and abatements 1 Adjusted EBITDA is a non-IFR
Slide 17: Net Income
Net Income Net income excluding subsidies and Net income abatements $10.8M ($1.2M) $2.2M ($3.2M) Q2-2021 Q3-2021 Q2-2022 Q3-2022 Q3-2021 Q3-2022 PAGE 17
Slide 18: Solid Financial Position
Solid Financial Position Net Debt $74.6M $72.9M Inventory position up 10% y/y $58.7M $56.1M Unused borrowing capacity Q3-2021 Q3-2022 at the end of the third quarter Leverage of 1.7x as at Oct. 29, 2022 (in millions of $CAD) PAGE 18
Slide 19: Summary
Summary • Despite temporary headwinds, Roots is headed in the right direction o Resilient brand with 50 years of heritage o Differentiated product portfolio o Elevated brand equity o Long-time customer loyalty o Omnichannel growth platform o Strong balance sheet • Competitive advantages expected to
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
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