Slide 1: Investor Presentation Q4 2022
Investor Presentation Q4 2 0 2 2 April 5, 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 April 4, 2023. Actual results and the timing
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 team. Roots, centered around
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, President & CEO
Meghan Roach President & Chief Executive Officer PAGE 7
Slide 8: Progress Against Growth Pillars—F2022
Progress Against Growth Pillars—F2022 • Elevated omnichannel experience for customers o Completed website re-platforming in September o Leveraged order management and store fulfillment solutions from NewStore o Appointed new paid media agency in Q1 2023 • Global brand positioning o Strong sales resu
Slide 9: Progress Against Growth Pillars—F2022
Progress Against Growth Pillars—F2022 • Corporate social responsibility (CSR) o Made significant strides in establishing a broader foundation for program o Created Senior Director of Sustainability role o Conducted risk assessments, peer benchmarking, materiality analysis and stakeholder surveys • K
Slide 10: Progress Against Growth Pillars—F2022
Progress Against Growth Pillars—F2022 • Financial overview o Challenging market conditions in second half drove sales and earnings lower on a full-year basis o Sales declined 8.1% year-over-year in Q4 2022 and 0.6% in F2022 o Adjusted EBITDA1 totaled $23.5 million in Q4 2022 compared to $30.6 millio
Slide 11: Outlook
Outlook • Sales and margins to remain under pressure in the short-term • Entering F2023 with a solid financial position o Ample liquidity and cash flow generation o Making investments in several growth areas • Targeting core Canadian market o Focusing on customer acquisitions and increased lifetime
Slide 12: Leon Wu, Chief Financial Officer
Leon Wu Chief Financial Officer PAGE 12
Slide 13: Fourth-Quarter Sales
Fourth-Quarter Sales Total Sales DTC Sales P&O Sales $121.3M $111.5M $110.6M $12.9M $10.7M $98.5M Q4-2021 Q4-2022 Q4-2021 Q4-2022 Q4-2021 Q4-2022 • Economic headwinds (-) • Higher sales to international trading partner • Promotional environment (-) in Taiwan (+) • Sales in emerging collections deliv
Slide 14: Gross Margin
Gross Margin Total DTC 61.3% 59.7% 58.7% 56.5% Q4-2021 Q4-2022 Q4-2021 Q4-2022 • Higher product costs from transition to sustainable • Higher inventory provision (-) materials (-) • Lower air freight costs (+) • Increased discounts on targeted inventory (-) PAGE 14
Slide 15: DTC Gross Margin Bridge
DTC Gross Margin Bridge Mainly driven by higher product costs from transition to sustainable materials and discounts on targeted inventory 170 bps -80 bps 61.3% -350 bps 58.7% Q4-2021 Product Freight Inventory Q4-2022 Margin Premiums Provision Difference of 180 bps excluding inventory provision PAGE
Slide 16: SG&A Expenses
SG&A Expenses $45.7M $42.9M Q4-2021 Q4-2022 • Reduced corporate payroll costs (+) • Higher store labour costs (-) • Lower variable selling expenses (+) • Increased eCommerce fulfillment expenses (-) PAGE 16
Slide 17: Profitability
Profitability Net Income Adjusted EBITDA 1 $30.6M $18.1M ($1.2M) $23.5M $13.0M ($3.2M) Q2-2021 Q2-2022 Q4-2021 Q4-2022 Q4-2021 Q4-2022 1Adjusted EBITDA is a non-IFRS measure. See "Appendix" at the end of this presentation. PAGE 17
Slide 18: Inventory Cost Bridge
Inventory Cost Bridge $4.1M $1.7M $3.5M $4.4M $55.0M $41.3M Q4-2021 In-Transit Pack and Cost On-Hand Q4-2022 Hold Increase On-hand inventory units increased 20.5% Y/Y, of which nearly half are attributable to pack-and-hold strategy on core collections PAGE 18
Slide 19: Solid Financial Position—F2022
Solid Financial Position—F2022 Net Debt $31.9M Cash position $26.6M $24.8M $91.9M Total liquidity $2.0M Q4-2021 Q4-2022 Value of shares repurchased under NCIB Net leverage ratio of 0.9X as at Jan. 28, 2023 (in millions of $CAD) PAGE 19
Slide 20: Summary
Summary • Navigating challenging environment o Strategically managing inventory o Maintaining strong liquidity o Benefiting from a robust balance sheet o Disciplined approach to managing cash flows • Generating long-term shareholder value o Driving operational efficiencies o Focusing on prudent capi
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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