Step One Clothing Limited · ASX:STP
Step One Clothing — 1H22 Earnings Presentation
41 slides from Step One Clothing's earnings presentation, Feb 22, 2022
Slide 1: 1H22 Results Presentation
22 FEBRUARY 2022 Greg Taylor, CEO Nigel Underwood, CFO 1
Slide 2: Agenda
01 1H22 Results Highlights 02 About Step One 03 1H22 Results Overview 04 1H22 Financial Summary 05 Market Context and Strategy 06 Outlook 07 Questions 2
Slide 3: 1H22 Results Highlights
1H22 Results Highlights Strong performance across key metrics Revenue Gross Margin $38.1m 83.1% Women’s Line USA launch launch2 up 11% Up 1% AOV Proforma EBITDA Customers Website Visits $74.3 $7.4m1 918,000 7.1m down 1%3 19% of revenue up 193,000 6.3% conversion rate 1. A reconciliation of Statutory
Slide 4: Step One
STEPIONE| ms! ST=P ONE
Slide 5: A Brief History of Step One
A Brief brief History history of Step One STEP ONE Founder-led business with highly scalable model & strong track record of growth SCALE + HELLO UK! HELLO US! WOMEN’S LAUNCH STEP ONE IS BORN PRODUCTION GROWS COMPOSTABLE UK market testing Following a testing New product range Idea, Product Dev & A 2n
Slide 6: Product Features
Product Features Step One underwear is design focused – with UltraGlydeTM panels, comfort pouches, and comfortable organically grown Bamboo – it has revolutionised the underwear market for all genders For Men 3D CROTCH PANEL ULTRAGLYDE™ PANELS • Hidden 3D Elastic Pouch • Reduces friction, reduces ke
Slide 7: Product Range
Product Range A DTC online retailer with a product offering that resonates with a wide range of customers #Steponeforeveryone MEN’S WOMEN’S WINTER 4.7 12,625 reviews2 BOXER BRIEFS (LONGER) 4.8 34,436 reviews2 TRUNK + JUNIORS (SHORTER) 4.7 4,452 reviews2 BOXER BRIEFS + FLY Source: Management 1. Step
Slide 8: Flexible Production Cycle
Flexible Production Cycle A highly flexible production cycle which can be managed to meet demand Production facilities in China and Vietnam: Delays in global export logistics • Maintain flexibility across production cycle are affecting shipping, • Mitigate risk of disruption in one of the jurisdicti
Slide 9: Local Distribution
Local Distribution Local distribution arrangements were under pressure from COVID-19 & BFCM sales volumes • Product is warehoused in each country with 3PLs in Australia East Coast, UK East Coast & USA West Coast • 3PLs manage all inventory & logistics in each country o Receive product from the port
Slide 10: Colour Releases
Colour Releases Increasing the cadence of our colour releases Contribution to Revenue from Limited Edition Colour/Patterns 33% 30% 19% 15% 12% 11% 7% 2% AU UK AU UK AU UK AU UK 2H20 1H21 2H21 1H22 • Regular product drops creating ‘hype’ and a desire to ‘collect them all’, driving “FOMO” • Strong rep
Slide 11: Results Overview
fHZ2/RESULTS, OVERVIEW, ST=P ONE
Slide 12: Operational Highlights
Operational A brief history Highlights of STEP ONE Steady progress delivering on the operational strategy Customer Database Growth (#'000 ) Launch Step Launch of One in the Thermal USA range Launch Successful of Step One BFCM sale with patterns attracting new New Customer Acquisition /prints custome
Slide 13: Strong Online Engagement
Strong Online Engagement Increasing website sessions by 42% accompanied by a high conversion rate WEBSITE SESSIONS AVERAGE CONVERSION RATE 6 months, M 6 months, % 7.1 0.7 9.3% 5.0 7.6% 8.1% 65% 5.0 7.5% 0.4 3.1 6.3% 2.5 2.3 9.3% 9.6% 2.3 8.3% 7.5% 7.5% 7.8% 0.5 6.6% 1.1 3.3 5.5% 2.6 4.5% 2.5 1.9 3.3
Slide 14: International Markets
International Markets Nurturing growth UK growth impacted amidst COVID-19 related logistics headwinds Highlights: • Over 72,000 new customers in 1H22 • Successful BFCM sale with growth in new customers of 17% on pcp • Continued support from existing customers who accounted for 61% of orders in 1H22
Slide 15: Women's Launch
Women’s Launch Step One is now for everyone Product resonates with women • 12,000 new women's product customers in the first 2 weeks after launch (50% of new customers in this period contained a women's product purchase)* • 149 x 5-star reviews in the first month with a 4.6 average • Extends the inc
Slide 16: Step One
ST=P ONE
Slide 17: Financial Highlights
Financial Highlights Strong revenue growth while generating attractive profit margins SALES REVENUE GROSS PROFIT 6 MONTHS, $M 6 MONTHS, $M 38.1 34.1 1.4 27.6 11.0 10.7 83.2% 83.1% 10.3 82.1% 81.6% 81.6% 12.9 9.3 1.0 25.6 23.4 31.7 17.3 28.0 23.0 11.9 9.3 10.6 7.6 1H20 2H20 1H21 2H21 1H22 1H20 2H20 1
Slide 18: Financial Highlights
Financial Highlights Revenue growth and advertising efficiency to drive profit growth PRO FORMA EBITDA ADVERTISING1,2 6 MONTHS, $M 6 MONTHS, $‘000 56.8% 26.9% 40.8% 39.2% 36.3% 32.4% 19.5% 15.7 14.9 18.0% 12.4 1.3 1.0 1.0 2.8 11.0% 4.5 9.2 4.4 7.4 5.3 2.2% 3.0 11.4 9.9 7.4 1.7 1.4 5.3 0.6 3.0 1H20 2
Slide 19: Strong Operational Metrics
Strong Operational Metrics Strong growth in returning customer order rates demonstrates trust in our product CUSTOMER ORDERS1 AVERAGE ORDER VALUE (AOV)2 CUSTOMER MIX 6 MONTHS, $‘000 6 MONTHS, $M 11.9% 81.9 488 436 40% 40% 39% 23 50% 397 79.3 60% 187 179 186 75.0 185 74.3 74.1 60% 60% 61% 22 110 50%
Slide 20: Strong Operational Metrics
Strong Operational Metrics Disciplined approach to marketing and advertising to grow the business MARKETING AND ADVERTISING1,4 COST TO ACQUIRE CUSTOMERS2,3,4 6 MONTHS, % OF SALES REVENUE 6 MONTHS, $ PER CUSTOMER ORDER 56.8% 39.2% 40.8% 36.3% 32.4% 15.7 79.8 77.4 14.9 12.4 45.8 47.7 46.9 $30.2m 39.6
Slide 21: Pro Forma Income Statement
Pro Forma Income Statement 1H21 1H22 Movement Proforma $'000 $'000 $'000 % COMMENTARY Australia 23,358 25,601 2,243 9.6% UK 10,726 11,031 305 2.8% • Revenue growth of 11% on pcp USA 0 1,444 1,444 0.0% Revenue 34,085 38,076 3,992 11.7% predominantly in Australia Gross profit 27,991 31,652 3,662 13.1%
Slide 22: Balance Sheet
Balance Sheet Audited As at 30 June Impact of Other Reviewed As at 31 $’000 2021 the Offer movements December 2021 ASSETS Current Assets Cash and cash equivalents 10,845 32,809 -4,968 38,686 Inventories 9,731 7,806 17,537 Derivative financial instruments 134 -134 - COMMENTARY Related party receivabl
Slide 23: Cash Flow Statement
Cash Flow Statement 1H21 1H22 Movements $'000 $'000 $'000 % COMMENTARY Cash flows from operating activities Receipts form customers (inclusive of • Strong operating metrics GST/VAT) 36,767 40,818 4,051 11.0% Payments to suppliers and employees (inclusive of GST/VAT) (24,692) (42,138) (17,446) 70.7%
Slide 24: 24
24
Slide 25: Large Global Industry
Large Global Industry $150 billion global market & growing MEN’S UNDERWEAR MARKET WOMEN’S UNDERWEAR MARKET 20201 20201 • Entry into Women’s significantly boosts USA USA $6.2b $12.7b addressable market CAGR 6.9% to 2025 CAGR 8.0% to 2025 • N.B. Women’s UK Step One UK underwear includes $1.5b 1% $4.1b
Slide 26: Business Model
Business Model Step One is built on an innovative product and customer engagement model with a strong ESG focus 1. DESIGN 4. ESG FOCUS DESIGN ESG Functional Product Features Our business model is built on a • UltraGlyde™ panels transparent production process • Elastic 3D pouch • Organically grown Ba
Slide 27: Growth Strategy
Growth Strategy Step One strategic initiatives that will deliver growth 5. INTERNATIONAL EXPANSION 4. PRODUCT DEVELOPMENT ✓ UK growth 1. BRAND EQUITY ✓ USA market entry 2. NEW CUSTOMER GROWTH ✓ Women’s line ✓ Testing in other markets 3. CUSTOMER LOYALTY ✓ Thermals • Sports ✓ Targeted Marketing • Adj
Slide 28: Successful Marketing Strategy
Successful Marketing Strategy Highly successful, multi-channel marketing strategy MARKETING STRATEGY MARKETING CHANNELS COLOUR RELEASES PAID DIGITAL Repeat customer purchases SOCIAL MEDIA IN-HOUSE CONTENT Efficient and easy way to test new messages, colours, before TV deployment INFLUENCER Localised
Slide 29: Successful & Evolving Marketing Strategy
Successful & Evolving Marketing Strategy Highly successful, multi-channel marketing strategy MARKETING STRATEGY DIGITAL Email, Social, Video INFLUENCER Growing base of famous influencers & athletes wearing Step Ones TV & LONG TERM PARTNERSHIPS Once athlete/influencer has resonated with audience 29
Slide 30: Ethical & Green Focus
Ethical & Green Focus Market leading sustainable eco-friendly retailer MANUFACTURING, PACKAGING & SOURCING 100% ORGANICALLY GROWN BAMBOO : Eco-cert certified “Sustainability is integral to the design of our products and FAIR WORKING CONDITIONS AND WAGES : company ethos, rather than At our BSCI and S
Slide 31: Step One
ST=P ONE
Slide 32: Guidance
A brief history of STEP ONE Guidance FY22 Revenue growth expected to be 21-25% above prior year with proforma EBITDA of $15m UK US Women's Enhance social proof with Grow brand awareness Increasing awareness of influencers and user with localised marketing the Women's line - created content assets Pr
Slide 33: In Summary
In Summary A Company founded to innovate the innerwear market Cash flow positive & innovative product with strong ESG focus Growth focus 100% Online DTC, 100% brand owned & flexible manufacturing process Laser focused, content driven digital & marketing strategy with strong customer connection WATCH
Slide 34: Thank You! Q+A
Thank You! Q+A Browse our product range on www.stepone.life while we are talking MEN’S WOMEN’S WINTER SPORT 34
Slide 35: Appendix
Sip APPENDIX ST=P ONE
Slide 36: The Step One Customer
The Step One Customer Broad customer demographics GENDER1 60% 40% MALE FEMALE LOCATION2 67% 29% 4% AUSTRALIA UK US 36 36 1As at January 2022 based on Google Analytics. 2. based on Geographic Revenue
Slide 37: Growth Funnels
Growth Funnels Step One has clear marketing initiatives to deliver growth Customer Funnel Awareness and product TOP education ‘Do you suffer from chafing?’ Influencers 4.7 4.8 4.7 12,625 reviews1 34,436 reviews1 34,452 reviews1 MIDDLE Features & Benefits OVER 45,000 5-STAR REVIEWS(2) Re-Engagement B
Slide 38: Proforma Income Statement
Proforma Income Statement FY20 FY21 FY22 $’000 1H20 2H20 1H21 2H21 1H22 Australia 9,304 11,943 23,358 17,309 25,601 UK 0 1,000 10,726 10,323 11,031 USA 0 0 0 0 1,444 COMMENTARY Revenue 9,304 12,943 34,085 27,632 38,076 Cost of sales (1,713) (2,383) (6,094) (4,638) (6,424) Gross profit 7,591 10,560 2
Slide 39: Proforma Adjustments
Proforma Adjustments FY20 FY21 FY22 $’000 1H20 2H20 1H21 2H21 1H22 Statutory NPAT / (NLAT) 1,948 1,649 4,564 (4,683) (3,816) COMMENTARY Less Costs - share based payments 0 133 2,967 4,900 6,076 • IPO costs align to prospectus - IPO costs 0 0 0 605 3,927 • Nature of proforma adjustments - legal fees
Slide 40: Proforma Reconciliation
Proforma Reconciliation 1H21 1H22 Statutory as Retrospective Statutory Proforma Proforma Proforma Statutory Proforma Proforma Proforma previously Adjustment Restated Adjustment / Adjustment Adjustment / Adjustment stated (1) normalisation (3) normalisation (3) (2) (2) Revenue 34,085 34,085 34,085 38
Slide 41: Important Notice
Important Notice The material in this presentation has been prepared by Step One Clothing Limited (ASX: STP) (“Step One” or the “Company") and is general background information about Step One’s activities current as at the date of this presentation. The information is given in summary form and does