Duluth Holdings Inc. · NASDAQ:DLTH
Duluth — Q2 2018 Earnings Presentation
25 slides from Duluth's earnings presentation, Sep 6, 2018
Slide 1: Investor Presentation Second Quarter 2018
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation dated September 6, 2018 indudes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts included in this presentation, including statements concerni
Slide 3: Introduction to Duluth Trading Co.
Introduction to Duluth Trading Co.
Slide 4: Workwear Heritage is the Foundation of our Authentic, Everyday Lifestyle Brand
= Workwear Heritage is the Foundation of our Authentic, Everyday Lifestyle Brand = Long History of Product Innovation and Solution-Based Design = Humorous and Distinctive Marketing = Outstanding and Engaging Customer Experience = Nationwide Omnichannel Presence with Controlled Distribution September
Slide 5: Rapidly growing lifestyle brand with well-established direct business
Rapidly growing lifestyle brand with well-established direct business Multiple revenue growth opportunities > Build brand awareness to expand customer base > Expand retail presence with attractive unit economics > Grow women’s business > Broaden men’s assortment Strategic investments support long-te
Slide 6: Net Sales and Adjusted EBITDA
rd Adustod EBMDA = Strong track record of 20%+ revenue and Adjusted EBITDA growth = Strategic investments support long-term objectives (Sin millions) (Sin millions) 2014 2015 2016 2017 2018E 2014 2015 2016 2017 2018E DUES EY cone teencenscrmensencoe September 6, 2018
Slide 7: Growth Strategy
Growth Strategy
Slide 8: Growth Strategies
Growth Strategies TRADING DULUTH elows STORES ak ee Ss50+ 4.7585 STARS! ou wn 0 AFL oe TR ATED ToT DULUTHTRADING.COM DuamtH September 6, 2018 3 Grow Women's Business 4 Broaden Assortmentin Select Men's Product Categories
Slide 9: Build Brand Awareness
eae Pav ey Build Brand Awareness “i = Digital Advertising > Paid-for search and banner ads > Social media (organic and sponsored) “ > Targeted emails el WATCH #@ TV ADS = TV Advertising >» Strategically placed national ads -~ - a » Memorable, humorous ads I — ice. a0 = Catalog > Captivating storytel
Slide 10: Identified markets with ~100 potential store locations
= Identified markets with ~100 potential store locations > Utilize direct segment data to determine markets with existing customer base >» Focuson regions with demographic that aligns with target customer >» Geographic diversity indicates significant white space opportunity > 39 stores opened at end
Slide 11: Markets Grow with New Stores & Improve Over Time
7 1 Markets Grow with New Stores & Improve Over Time Direct sales growth accelerates in store markets 18 to 24 months Total Sales in a store market grow up to 3X with the presence of retail after opening, as evidenced by the higher growth rates in older store markets Average Increase in Total Sales
Slide 12: Retail Stores Attract New, More Valuable Customers
Retail Stores Attract New, More Valuable Customers Retail customers more likely to shop across channels, categories, and spend more Multi-Channel Buyers Multi-Category Buyers Sales Per Customer Retail Buyer Direct Segment Retail Buyer Direct Segment Retail Buyer Direct Segment Buyer Buyer Buyer 2 DU
Slide 13: Grow Women's Business
Grow Women’s Business Net sales increased 37% in 2017 Continued customer acquisition through marketing investments and retail presence Expand product offering to address more of her lifestyle Introduce plus sizes in Fall 2018 (Sin millions) $110 2013 2014 2015 2016 2017 DeantH September 6, 2018 Fr]
Slide 14: Broaden Men's Assortment: Net sales increased 22% in 2017
Net sales increased 22% in 2017 Extend core products through color, fabric and size Increase penetration in spring and transitional product (rain, mid- weight jackets, etc.) Continue to introduce products that expand occasions for wear Expansion of closet share in sub- brands > Duluth-Built Business
Slide 15: Financial Review
Financial Review
Slide 16: Year Ended January 28, 2018
Year Ended January 28, 2018 Gross Profit (Sin miions) 98.3% (Sin mlions) wie EDrect aa wil $261 Retail $376 Y See Yl oui 2016 2017 2016 2017 (1/29/2017) (1/28/2018) (1/29/2017) (1/28/2018) Margin 56.9% 55.4% Adjusted EBITDA Net Income? (Sin millions) $46 (Sin millions) sat $23 $21 2016 2017 2016 201
Slide 17: Three Months Ended June 2018 Results
(Sin mitions) (Sin miions) Direct _ ae _ E 4 | t 3mos, 2017 3 mos. 2018 3 mos. 2017 3 mos. 2018 (er2072017) (612972018) (6/30/2017) (6/29/2018) Margin 56.7% 56.2% Adjusted EBITDA‘ Net Income? (Sin milions) (Sin mlions) $13.4 $6.4 7 LI] 7 3mos. 2017 3mos. 2018 3 mos. 2017 3mos. 2018 (6/30/2017) (6/29
Slide 18: Six Months Ended June 2018 Results
Gross Profit (Sin mlions) 24.1% (Sin mlions) , BRE ggg ee tt stag ™ Retail oh $84 S08 ag Nee | 6 mos. 2017 6 mos. 2018 6 mos. 2017 6 mos, 2018 (6/30/2017) (6/29/2018) (6/30/2017) (6/29/2018) Margin 57.4% 56.0% Adjusted EBITDA‘ Net Income? (Sin milions) (Sin mlions) $5.7 $157 $4.6 $124 LJ 6 mos 2017
Slide 19: Balance Sheet and Liquidity
an. ” Cre 4. St ro As of July 29, ($ in millions) 2018 Cash $ 2.4 Debt: SRV Term Loan 1.5 Line of Credit 35.0 Total Debt 36.5 Total Shareholders’ Equity 145.3 Total Capitalization $ 181.8 Debtto Capital ratio 20.0% Lu + As of July 23, 2018, $1.5 milion of such debt includes noncontroling interest wh
Slide 20: FY 2018 Guidance
FY 2018 Guidance 2017 Actual 2018 dance — Assumptio Net Sales $471.4M $555M to $575M Direct mid-single digit growth; Retail $215M-$225M Adjusted EBITDA $46.4M $51M to $54M. 10% to 16% YOY Growth EPS $0.72 $0.79 to $0.84 26% tax rate and 32.4 million shares o/s CAPEX" $42.8M $45M to $55M. 15 new stor
Slide 21: Long-Term Targets
=< ay Long-Term Targets 2017 Actual Lon Assumptio Net Sales $471.4M ~$1 Billion Open ~15 stores per year 50-60% retail stores / 40-50% direct Adjusted EBITDA 9.8% Low double digits Stable gross margin Margin Rate Leverage expenses Benefits from IT / omnichannel investments CAPEX $42.8M $220M New sto
Slide 22: Rapidly growing lifestyle brand with well-established direct business
Rapidly growing lifestyle brand with well-established direct business Multiple revenue growth opportunities > Build brand awareness to expand customer base > Expand retail presence with attractive unit economics > Grow women’s business > Broaden men’s assortment Strategic investments support long-te
Slide 23: Appendix
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Slide 24: Adjusted EBITDA Reconciliation
3Months Ended 6 Months Ended —_Fiscal Year Ended (Sin millions) July 29, July 30, July 23, July 30, January January 2018 201720182017 ——2018 2017 Net Income $65 $ 44 § 58 § 48 § 26 $ 215 (#) Depreciation & Amorization 28 °«17~~«OA 33 73°47 (4) Interest Expense, net 1200424 05 20 02 (4) Income Tax Ex
Slide 25: Retail Store Locations
Anchorage, AK West Fargo, ND Colorado Springs, CO Lubbock, TX Denton, TX Portland, OR Columbus, OH Arlington, TX Golden, CO Ramsey, NJ Canton, OH Greensboro, NC * Oklahoma City, OK South Portland, ME Cary, NC Friendswood, TX Katy, TX Wichita, KS Spokane Valley, WA ‘Gross square footage includes spac