Fourth Quarter Highlights:
- Sales decreased 2.9% year-over-year to
$108.2 million - DTC sales decreased 0.8% to
$97.8 million
- DTC sales decreased 0.8% to
- Gross margin was 58.6% compared to 56.5% in fourth quarter of 2022
- DTC gross margin increased to 59.9% from 58.7%
- Net income totaled
$14.6 million compared to$13.0 million in the fourth quarter of 2022 - Adjusted EBITDA amounted to
$23.2 million versus$23.5 million in the fourth quarter of 2022
Fiscal 2023 Highlights:
- Sales decreased 3.5% year-over-year to
$262.7 million - Gross margin was 58.0% compared to 57.7% in 2022
- DTC gross margin increased to 61.1% from 60.8%
- Net income totaled
$1.8 million compared to$6.7 million in 2022 - Adjusted EBITDA amounted to
$19.9 million compared to$27.0 million in 2022 - Inventory of
$36.2 million compared to$55.0 million in 2022 - Net debt reduced 31.6% year-over-year to
$17.0 million - Repurchased 1,438,318 shares for a total consideration of
$4.4 million
"As we close another year, I want to acknowledge the resilience and hard work of the team at Roots in the face of a challenging economic environment. We continue to take significant steps to enhance our operations, strengthen our relationships with our customers, and make exceptional products. I remain confident in the longer-term growth prospects for the brand as the market normalizes," commented
SELECT FINANCIAL INFORMATION (in '000s of CAD$, except where noted) | Fourth quarter ended | Year-to-date | ||||
|
| Change |
|
| Change | |
Total sales | 108,234 | 111,461 | (2.9 %) | 262,668 | 272,116 | (3.5 %) |
Direct-to-Consumer ("DTC") sales | 97,755 | 98,533 | (0.8 %) | 222,467 | 231,230 | (3.8 %) |
Partners & Other ("P&O") sales | 10,479 | 12,928 | (18.9 %) | 40,201 | 40,886 | (1.7 %) |
Gross profit | 63,416 | 62,984 | +0.7 % | 152,456 | 156,976 | (2.9 %) |
Gross margin1 | 58.6 % | 56.5 % | +210 bps5 | 58.0 % | 57.7 % | +30 bps5 |
Selling, General and Administrative ("SG&A") expenses | 41,199 | 42,864 | (3.9 %) | 140,331 | 138,625 | +1.2 % |
Subsidies and abatements2 | - | - | - | - | 456 | (100.0 %) |
Net income | 14,621 | 12,980 | +12.6 % | 1,840 | 6,693 | (72.5 %) |
Net income per share | 0.36 | 0.31 | +16.1 % | 0.05 | 0.16 | (68.8 %) |
Adjusted EBITDA3 | 23,164 | 23,524 | (1.5 %) | 19,855 | 26,967 | (26.4 %) |
Free Cash Flow4 | 36,059 | 34,753 | +3.8 % | 12,358 | 4,306 | +187.0 % |
1 Gross margin is a supplementary financial measure that measures our gross profit as a percentage of sales. |
2 Subsidies and abatements are reported as a reduction to the related expense, either as a decrease to cost of goods sold or to SG&A expenses. |
3 Adjusted EBITDA is a non-IFRS Measure. See "Non-IFRS Measures and Industry Metrics" below. |
4 Free cash flow is a supplementary financial measure that reflects cash flow generated from ongoing operations, calculated as our cash from operating activities less cash used in investing activities and the payment of principal on lease liabilities net of tenant allowance. |
5 Basis points ("bps"). |
"We have reduced our inventory balance by 34% year-over-year while maintaining our gross profit margin," stated
Total sales were
P&O sales (wholesale Roots branded products, licensing to select manufacturing partners and the sale of certain custom products) amounted to
Gross profit reached
SG&A expenses totaled
Net income totaled
Adjusted EBITDA amounted to
Total sales decreased 3.5% to
P&O sales amounted to
Gross profit reached
SG&A expenses were
Net income was
Adjusted EBITDA totaled
Inventory was
As at
Under its Normal Course Issuer Bid ("NCIB") program, Roots repurchased 1,438,318 common shares of the Company ("Shares") for a total consideration of
Roots will hold a conference call to review its fourth quarter 2023 results on
A live audio webcast of the conference call will be available on the Events and Presentations section of the Company's investor website at https://investors.roots.com or by following the link here. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. An archived replay of the webcast will be available on the Company's website for one year.
This press release 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
We believe these non-IFRS measures and industry metrics provide useful information to both management and investors in measuring our financial performance and condition and highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. For further information regarding these non-IFRS measures, please refer to "Cautionary Note-Regarding Non-IFRS Measures and Industry Metrics" in our management's discussion and analysis for F2023, which is incorporated by reference herein and is available on SEDAR+ at www.sedarplus.ca or the Company's Investor Relations website at https://investors.roots.com.
The table below provides a reconciliation of net income to EBITDA and Adjusted EBITDA for the periods presented:
CAD $000s | Q4 2023 | Q4 2022 | F2023 | F2022 | |||
Net income | 14,621 | 12,980 | 1,840 | 6,693 | |||
Adjust for the impact of: | |||||||
Interest expense (a) | 2,346 | 2,320 | 9,470 | 8,756 | |||
Income taxes expense (a) | 5,250 | 4,820 | 815 | 2,902 | |||
Depreciation and amortization (a) | 7,460 | 7,636 | 29,706 | 29,324 | |||
EBITDA | 29,677 | 27,756 | 41,831 | 47,675 | |||
Adjust for the impact of: | |||||||
COGS: Inventory provision (b) | – | 977 | – | 977 | |||
SG&A: Rent expense excluded from net income due toIFRS 16 (a) | (7,901) | (5,789) | (25,253) | (23,194) | |||
SG&A:IFRS 16: Impairment ofROU assets (a) | 61 | 79 | 61 | 79 | |||
SG&A: Purchase accounting adjustments (c) | (14) | (13) | (47) | (18) | |||
SG&A: Stock option expense (d) | 122 | (29) | 454 | 380 | |||
SG&A: Fixed asset impairment (e) | – | 356 | – | 356 | |||
SG&A: Changes in key personnel (f) | 1,133 | 130 | 2,586 | 125 | |||
SG&A: Non-recurring legal fees (g) | 41 | 57 | 128 | 587 | |||
SG&A: Other non-recurring items (h) | 45 | – | 95 | – | |||
Adjusted EBITDA (i) | 23,164 | 23,524 | 19,855 | 26,967 |
_____________ | |
(a) | The impact of IFRS 16 in Q4 2023 and Q4 2022 was: (i) a decrease to selling, general, and admin ("SG&A") expenses of |
(b) | Represents the portion of non-cash inventory provision on items that no longer align with the Company's strategic product direction. In Q4 2023 and F2023, there was no provision. In Q4 2023 and F2023, the inventory provision captured items that were part of normal operations and was not included in the reconciliation of Adjusted EBITDA. |
(c) | As a result of the Company's acquisition of assets from |
(d) | Represents non-cash share-based compensation expense in respect of our Legacy Equity Incentive Plan, Legacy Employee Option Plan, and Omnibus Equity Incentive Plan. |
(e) | Represents a non-cash impairment charge (net of reversals) taken against certain fixed assets for stores where the recoverable amount is deemed to be below the carrying value. |
(f) | Represents expenses incurred in respect of the Company's efforts to recruit for vacancies in key management positions and severance costs associated with reorganizations of key functional areas, such as at our leather factory, marketing, and product teams. |
(g) | Represents non-recurring legal costs that are outside the scope of normal operations. |
(h) | Represents one-time costs incurred that do not reflect the underlying profitability of the business, including consulting fees related to inventory and brand valuations used to explore alternative financing options with lower interest costs. |
(i) | Adjusted EBITDA excludes the impact of IFRS 16. If the impact of IFRS 16, net of impairments on the ROU assets, was included for Q4 2023 and F2023, Adjusted EBITDA would have been |
Established in 1973, Roots is a global lifestyle brand. Starting from a small cabin in northern
Certain information in this press release 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 is made as of the date of this press release. Actual results and the timing of events may differ materially from those anticipated in the forward-looking information as a result of various factors. Information regarding our expectations of future results, performance, achievements, prospects or opportunities or the markets in which we operate is forward-looking information. Statements containing forward-looking information are not facts but instead represent management's expectations, estimates and projections regarding future events or circumstances. Many factors could cause our actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward-looking statements.
See "Forward-Looking Information" and "Risk Factors" in the Company's current Annual Information Form for a discussion of the uncertainties, risks and assumptions associated with these statements. Readers are urged to consider the uncertainties, risks and assumptions carefully in evaluating the forward-looking information and are cautioned not to place undue reliance on such information. We have no intention and undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities law.
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