Slide 1: Disclaimer
Disclaimer This presentation contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this presentation, including statements regarding our strategy, future operations, future financial position, pro
Slide 2: Today's agenda and presenters
today's agenda and presenters agenda presenters Introduction to DAVIDsTEA Sylvain Toutant CEO & President Investment Highlights Growth Strategy Luis Borgen Chief Financial Officer Financial Overview Q&A 2
Slide 3: Reaffirming Q4 and fiscal 2015 guidance
reaffirming Q4 and fiscal 2015 guidance Q415 guidance C$70.0m - C$72.0m Sales Comp Slightly above the MSD range Adjusted EPS* C$0.42 - C$0.44 FY15 guidance C$175.0m - C$177.0m Sales Comp Slightly above the MSD range Adjusted EPS* C$0.37 - C$0.39 *Adjusted fully diluted income per common share exclud
Slide 4: A modern and accessible take on tea
a modern and accessible take on tea Fast growing, modern tea brand offering innovative loose-leaf tea, tea accessories, and beverages Broad consumer appeal — Health and wellness — Customization Significant momentum — 25 consecutive quarters of positive comp sales growth through 3Q 2015 193 stores in
Slide 5: Our key milestones
our key milestones 2008 August 2008 September 2009 October 2011 November 2011 December Website launched First store Toronto, Ontario First mall store Montreal,QC First U.S. store New York, NY First lifestyle center Uptown, Victoria, BC 2013 December 2014 April Launched customer loyalty program 2014
Slide 6: Our key milestones
our key milestones NASDAQ | a) == DAVIDSTEA -
Slide 7: Competitive strengths
competitive strengths Fast growing, modern brand reinventing the tea experience with a breadth of assortment, innovation and customer service Distinct retail concept and broad demographic appeal reinforces brand and customer loyalty and supports sustainable long-term growth Effective grassroots mark
Slide 8: Modern brand reinventing the tea experience
modern brand reinventing the tea experience -----------------DAVIDsTEA 8
Slide 9: Breadth of unique tea products
breadth of unique tea products GIFTS & PACKAGED TEA TEA ACCESSORIES Cups/Mugs Travel Teapots Infusers LOOSE TEA 8 Categories Straight vs Blended Core vs Seasonal BEVERAGES Hot / Iced Tea TeaPop Tea Latte FOOD Sweeteners Chocolates Other food items Multi-tea samplers Single-tea packages Tea sachets 2
Slide 10: The DAVIDsTEA experience
the DAVIDsTEA experience our tea guides drive the DAVIDsTEA experience examples of our teas Rooibos Green Tea Coconut Pomegranate Pink Peppercorn Rose Hips ADVENTURE… EXPLORATION… KNOWLEDGE… PASSION for TEA 10
Slide 11: Our focus on innovation and design
our focus on innovation and design tea R&D sourcing our teas our research and development team works with our blenders to develop the special tea blends we sell on an exclusive basis BLENDERS SOUTH KOREA JAPAN CHINA NEPAL INDIA TAIWAN VIETNAM BRAZIL KENYA ECUADOR SRI LANKA SOUTHAFRICA ARGENTINA prod
Slide 12: Distinct retail concept with multiple formats
distinct retail concept with multiple formats store formats mall street clean, our “Tea Wall” is the focal point of our stores modern aesthetic lifestyle outlet 12
Slide 13: Positioned in an attractive industry
positioned in an attractive industry… the tea industry is large1… …with a growth opportunity in North America2 7.0 $40 Billion Global Retail Market (in 2014 U.S. dollars) 93% rest of the world 7% Canada & United States 4.8 4.3 1.1 0.5 Turkey #1 Ireland #2 United Kingdom #3 Canada #20 United States #
Slide 14: Benefitting from consumer trends with broad demographic appeal
…and benefitting from consumer trends with broad demographic appeal 2 Year Sales Change For Selected Food Categories in North America Shift to healthier lifestyles 7.0 % Demand for natural and organic products (3.0)% Semi-Healthy Growing tea enthusiasm among millennials Healthy Indulgent 2 Year Sale
Slide 15: Our distinct community-based marketing approach
our distinct community-based marketing approach Hyper-local Events 2,000 events reaching 350,000 people1 OSHEAGA Music Festival (Montreal) TIFF festivities (Toronto) Wanderlust (Whistler, Mont-Tremblant) Ghirardelli Chocolate Festival (San Francisco) Snowboard Jamboree (Quebec) PRIDE (Montreal, Toro
Slide 16: Our loyal customer frequent steeper program
our loyal customer frequent steeper program Customer loyalty program launched April 2014 across North America DAVIDsTEA super fan Rewarding repeat purchases through a points-based program Customers earn points with every purchase ~80% of sales since launch are attributed to new or repeat Frequent St
Slide 17: Strong social media awareness
strong social media awareness social media following 520,000 “Was reminded yesterday how good companies like @DAVIDsTEA are with their social media engagement #loyalcustomer” - @aviash 170,000 65,000 2010 2011 2012 2013 2014 2015 Twitter Total Followers Facebook “@DAVIDsTEA Oh how I can’t stop think
Slide 18: Versatile store model with broad geographic reach
versatile store model with broad geographic reach stores in all 10 Canadian provinces and 11 U.S. states Canada1 province # of stores BC SK MB QC Ontario 54 ON PEI Quebec 36 British Columbia 27 NB WA Alberta 22 ME MT Manitoba 5 ND NS Nova Scotia 3 MN NH OR Saskatchewan 3 WI ID NY SD MA RI CT New Bru
Slide 19: Engaging eCommerce platform
engaging eCommerce platform DAVIDsTEA is a natural fit for eCommerce — — — — Lightweight, easy-to-ship product Encourages research Facilitates online replenishment Compelling and colorful content Website blends product expertise, community and research tools —Shop by ingredient / Tea Finder Strong s
Slide 20: Our core values supported by our experienced management team
our core values supported by our experienced management team name title selected experience / years in industry favorite tea Sylvain Toutant CEO & President Keurig Green Mountain, Reno-Depot, SAQ 25 years Jumpy Monkey Luis Borgen Chief Financial Officer DaVita HealthCare Partners, Staples 16 years Q
Slide 21: Our core values supported by our experienced management team
our core values supported by our experienced management team name title selected experience / year: industry favorite tea Sylvain Toutant CEO & President Keurig Green Mountain, Reno-Depot, SAQ 25 years Jumpy Monkey, Luis Borgen Chief Financial Officer DaVita HealthCare Partners, Staples 16 years. Qu
Slide 22: Our growth strategy
our growth strategy Increase brand awareness Grow our store base Drive comparable sales, including eCommerce Expand adjusted EBITDA margins 22
Slide 23: Increase brand awareness: community-based marketing
increase brand awareness: community-based marketing Build brand awareness and drive traffic through field-based marketing and customer engagement initiatives – Field Marketing and Hyper-Local Social Engagement – Social Media – Public Relations Collaborate with our brand enthusiasts to co-create expe
Slide 24: Increase brand awareness: enhanced eCommerce platform
increase brand awareness: enhanced eCommerce platform Launched our new website to allow customers to more easily discover new products, better connect with others, and get the most of our products 24/7 Full integration with all systems (ERP, ESP, CRM) for improved programmability Open source compati
Slide 25: Targeted retail expansion opportunity to more than triple the store base
increase brand awareness: targeted retail expansion opportunity to more than triple the store base potential for an additional ~75 stores in Canada and ~285 stores in the U.S. 550 Total U.S. Canada 193 154 124 16 105 14 70 2 40 9 1 2008 2009 2010 2011 2012 2013 2014 2015 Total Potential Unit Growth
Slide 26: Hotel, Restaurants and Institutions sector
increase brand awareness: Hotel, Restaurants and Institutions sector HRI sector is a large and growing Canadian market; Tea Association of Canada estimates the size at approximately 550 million cups annually. Announced partnership with Air Canada in October 2015 — Forever Nuts and Cream of Earl Grey
Slide 27: Grow our store base
grow our store base 193 robust real estate development process • In Canada, in-fill across all existing markets In the United States, in-fill existing markets; disciplined new market entry 1 TARGET LIST • 2 MARKET & DEMOGRAPHICS • In Canada, expand already strong brand across the country In the Unit
Slide 28: Target new store model
target new store model Canada (in CAD $K) United States (in US $K) ~CAD $750 ~US $780 year 4 sales year 4 adjusted EBITDA margin 28% 25% ~CAD $290 ~US $310 capex ~2 Years ~3 Years payback 28
Slide 29: U.S. expansion strategy
U.S. expansion strategy Focus on sites with multiple traffic drivers Emphasis on proven shopping destinations to build the brand Move toward balanced portfolio of store formats (mall, street, lifestyle, outlet) Clustering approach to achieve economies of scale; methodical new market entry Discipline
Slide 30: Drive comparable sales growth
drive comparable sales growth Continue to introduce new and unique teas, tea accessories and beverages sales [VALUE]-$177 Continue to drive brand awareness via hyper-local events and public relations outreach $142 $108 $73 Utilize Frequent Steeper program to attract new customers and encourage incre
Slide 31: Expand adjusted EBITDA margins
expand adjusted EBITDA margins key drivers of margin expansion 1 gross profit leverage lower product costs and improve supply chain efficiencies selling and G&A expenses 2 improve operational efficiencies and capture scale savings 3 business mix increase eCommerce sales penetration 15.4% 13.6% 13.1%
Slide 32: Expand adjusted EBITDA margins
expand adjusted EBITDA margins key drivers of margin expan 1) gross profit leverage lower product costs and improve supply chain efficiencies QO selling and G&A expenses © improve operational efcencies and capture sale savings 3 } business mix increase eCommerce sales penetration 15.4% 13.6% 2011 20
Slide 33: Financial history
financial history stores sales 193 $175-177 154 $141.9 124 $108.2 105 $73.1 70 $41.9 2011 2012 2013 2014 2015E 2011 2012 2013 2014 2015E* adjusted EBITDA1 comp sales growth 26.6% $23.5-24.5 $21.9 17.8% $14.2 11.1% 6.5% $7.7 $4.8 2012 2013 2014 YTD 2011 2012 2013 2014 2015E* Data in CAD $M 33 *2015E
Slide 34: Recent quarterly performance
recent quarterly performance Q3 2015 Results 183 stores (+40 new stores vs Q3 2014) # of stores $36.3 million (+32% vs Q3 2014) revenue + 6.3% (16.7% 2-year stack) comparable sales adjusted net loss1 ($0.8 million) adjusted EPS1 ($0.03) Data in CAD $ 34 1) For a reconciliation of adjusted net loss a
Slide 35: Operating cash flow and capital spend summary
operating cash flow and capital spend summary operating cash flow $17.0 $14.2 $3.3 $0.2 2011 2012 2013 2014 capital expenditures $ 13 $ 13 $ 11 $ 9 2011 2012 2013 2014 # of new stores 30 35 20 31 Data in CAD $M 35
Slide 36: Long-term growth targets
long-term growth targets 36 sales growth~20% store unit growthhigh teens comp sales growthlow-to-mid single digits adjusted EBITDA marginhigh teens net income growth~25%
Slide 37: Long-term growth targets
long-term growth targets sales growth store unit growth comp sales growth adjusted EBITDA margin net income growth ~20% high teens low-to-mid single digits high teens ~25% DAVIDSTEA
Slide 38: Adjusted EBITDA reconciliation
adjusted EBITDA reconciliation 2011 2012 2013 2014 Net Income (loss) Finance costs Finance income Depreciation and amortization Loss on disposal of property and equipment Provision for income tax (recovery) EBITDA Stock-based compensation expense Impairment of property and equipment Onerous contract
Slide 39: Adjusted net loss reconciliation
adjusted net loss reconciliation For the three months ended For the nine months ended [Restated] Net loss Stock-based compensation expense for cashless exercise Finance costs related to preferred shares Impairment of property and equipment Provision for onerous contracts Loss on derivative financial
Slide 40: Adjusted net loss reconciliation
adjusted net loss reconciliation For the three months ended For the nine months ended October 31,2015 October25,2014 October31, 2015 OPT 0M Net oss 71) (228) (146,185) (1.476) ‘Stock-based compensation expense for cashless exercise 5 5 4052 Finance costs elated to preferced shares 5 235 an 926 Impai