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"We had another year of strong cash flow generation and achieved meaningful reductions to our net debt," said Leon Wu, Chief Financial Officer of Roots Corporation. "Combined with a healthy inventory composition, we are well set-up to build on our momentum going into 2025."

FOURTH QUARTER OVERVIEW

Total sales were $110.8 million in Q4 2024, representing an increase of 2.4% from $108.2 million in the fourth quarter of fiscal 2023 ("Q4 2023"). Excluding the $2.2 million impact of the additional fiscal week in Q4 2023, total sales increased 4.5% year-over-year. DTC sales (corporate retail store and eCommerce sales) were $101.2 million, a 3.6% increase from $97.8 million, or an increase of 6.0% excluding the additional fiscal week in Q4 2023. DTC comparable sales growth was 7.5% in Q4 2024, up across both channels, and was driven by strong performances in core fleece and active collections.

P&O sales (wholesale Roots branded products, licensing to select manufacturing partners and the sale of certain custom products) amounted to $9.6 million in Q4 2024 as compared to $10.5 million in Q4 2023. While the underlying sales generated by our international operating partner grew year-over-year, there was a temporary decline in wholesale sales as a result of our partner optimizing their inventory levels. This decline was partially offset by strong double-digit growth in our licensing business and China Tmall eCommerce sales.

Gross profit reached $68.0 million in Q4 2024 compared to $63.4 million in Q4 2023, representing a year-over-year increase of 7.2%. Gross margin was 61.3% in Q4 2024, up 270 bps as compared to 58.6% in Q4 2023. DTC gross margin was 62.4% in Q4 2024, up 250 bps from 59.9% in Q4 2023. The 250 bps DTC gross margin increase was driven by 280 bps of product margin expansion, comprised of improved product costing and lower discounting, partially offset by the unfavourable foreign exchange impact on U.S. dollar inventory purchases.

SG&A expenses totaled $45.2 million in Q4 2024, up 9.6% from $41.2 million in Q4 2023. The increase was primarily driven by $2.2M of lower gains from non-cash accounting lease modifications under IFRS 16 Leases ("IFRS 16") and $0.7M of unfavourable revaluation impacts from cash settled instruments under our share-based compensation plan. Excluding these two items, SG&A expenses increased 2.3%, reflecting investments in marketing and higher sales-driven variable costs.

Net income (loss) totaled ($21.7) million as compared to $14.6 million in Q4 2023 and net income (loss) per share was ($0.54) as compared to $0.36 per share in Q4 2023. This decline was entirely driven by a non-cash impairment charge on intangible assets and the associated deferred tax impacts, as described below. Excluding this impairment charge, net income would have totaled $15.0 million, up 2.9% compared to $14.6 million in Q4 2023 and net income per share would have been $0.37, an increase of 2.8% from $0.36 per share in Q4 2023.

Adjusted EBITDA amounted to $25.3 million in Q4 2024, up 9.1% compared to $23.2 million in Q4 2023.

FISCAL YEAR RESULTS

Total sales were $262.9 million in F2024, up 0.1% from $262.7 million in fiscal 2023 ("F2023"). Excluding the $2.2 million impact of the additional fiscal week in F2023, total sales increased 0.9% year-over-year. DTC sales were $223.3 million, a 0.4% increase from $222.5 million, or an increase of 1.4% excluding the additional fiscal week in F2023. DTC sales growth was driven by strong momentum in the second half of the year from compelling brand messaging, omnichannel enhancements, and curated product assortments, including the replenishment of shortages in core collections that had negatively impacted sales in the first half of the year.

P&O sales amounted to $39.7 million in F2024 as compared to $40.2 million in F2023.

Gross profit reached $157.1 million in F2024 as compared to $152.5 million in F2023, representing a year-over-year increase of 3.1%. Gross margin was 59.8%, up 180 bps as compared to 58.0% in F2023. DTC gross margin was 62.6% in F2024, up 150 bps from 61.1% in F2023.

SG&A expenses were $143.5 million in F2024, up 2.3% from $140.3 million in F2023.

Net income (loss) totaled ($33.4) million as compared to $1.8 million in F2023, and net income (loss) per share was ($0.83) as compared to $0.05 per share in F2023. This decline was entirely driven by a non-cash impairment charge on intangible assets and the associated deferred tax impacts. Based on conservative perspectives of the global economy due to the current market dynamics, the impairment of intangible assets accounting adjustment is calculated through our comparison of the Company’s estimated recoverable value against its carrying value. The Company does not expect the impairment charge to have any impact on its future operations and long-term growth potential, nor affect its liquidity, cash flows, or compliance with any financial and operating covenants. Excluding this impairment charge, net income would have totaled $3.3 million, up 79.7% compared to $1.8 million in F2023, and net income per share was $0.08, an increase of 60.0% from $0.05 per share in F2023.

Adjusted EBITDA amounted to $21.3 million in F2024, up 7.3% compared to $19.9 million in F2023.

FINANCIAL POSITION

Inventory was $41.0 million at the end of F2024, as compared to $36.2 million at the end of F2023, representing an increase of $4.8 million, or 13.4%. The year-over-year increase in inventory was driven by an increase in certain core collections on-hand, addressing the inventory shortages in these areas ending F2023, and higher in-transit inventory to support the seasonal assortment in the upcoming year.

Free cash flow was $39.4 million in Q4 2024, as compared to $36.1 million in Q4 2023. The increase in free cash flow was driven by higher sales and lower cash taxes paid during the quarter.

As at February 1, 2025, Roots had net debt of $7.4 million, a reduction of 56.7% as compared to $17.0 million a year earlier. The Company’s leverage ratio, defined as total net debt to trailing 12-months Adjusted EBITDA, was less than 0.4x at the end of the year. Roots has $42.2 million outstanding under its credit facilities and total liquidity of $94.0 million, including $34 million of cash and $60 million borrowing capacity available under its revolving credit facility.

NORMAL COURSE ISSUER BID

In a separate press release issued today, the Company announced its intention to commence a normal course issue bid for its Common Shares through the facilities of the Toronto Stock Exchange (or other alternative Canadian trading system) to repurchase for cancellation up to 1,347,118 of its Common Shares, representing approximately 10% of the Company’s "public float", during the 12-month period commencing April 11, 2025 and ending April 10, 2026.

CONFERENCE CALL AND WEBCAST INFORMATION

Roots will hold a conference call to review its fourth quarter 2024 results on April 9, 2025 at 8:00 a.m. ET. All interested parties can join the call by dialing 1-226-828-7575 or 1-833-950-0062 and using conference ID: 008112. Please dial in 15 minutes prior to the call to secure a line. The conference call will be archived for replay until April 16, 2025, at midnight, and can be accessed by dialing 1-226-828-7578 or 1-833-950-0062 and entering the replay passcode: 978251.

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.

NON-IFRS MEASURES AND INDUSTRY METRICS

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 International Accounting Standards Board ("IFRS"), do not have a standardized meaning prescribed by IFRS and, therefore, may not be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management’s perspective. Accordingly, these measures are not intended to represent, and should not be considered as alternatives to net income or other performance measures derived in accordance with IFRS as measures of operating performance or operating cash flows or as a measure of liquidity. In addition to our results determined in accordance with IFRS, we use non-IFRS measures including "EBITDA", "Adjusted EBITDA", "Adjusted Net Income", "Adjusted Net Income per share", "Net Debt"; and non-IFRS ratio: "leverage ratio". This press release also makes reference to "gross margin", "DTC gross margin", and "comparable sales", which are commonly used metrics in our industry but that may be calculated differently compared to other companies. Gross margin, DTC gross margin and comparable sales are considered supplementary financial measures under applicable securities laws.

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 F2024, 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 tables below provides a reconciliation of net income (loss) to EBITDA, Adjusted EBITDA, Adjusted Net Income, and Adjusted Net Income per share for the periods presented:

Reconciliation of long-term debt to net debt and leverage ratio:

ABOUT ROOTS

Established in 1973, Roots is a global lifestyle brand. Starting from a small cabin in northern Canada, Roots has become a global brand with over 100 corporate retail stores in Canada, two stores in the United States, and an eCommerce platform, roots.com. We have more than 100 partner-operated stores in Asia, and we also operate a dedicated Roots-branded storefront on Tmall.com in China. We design, market, and sell a broad selection of products in different departments, including women’s, men’s, children’s, and gender-free apparel, leather goods, footwear, and accessories. Our products are built with uncompromising comfort, quality, and style that allows you to feel At Home With Nature^TM. We offer products designed to meet life’s everyday adventures and provide you with the versatility to live your life to the fullest. We also wholesale through business-to-business channels and license the brand to a select group of licensees selling products to major retailers. Roots Corporation is a Canadian corporation doing business as "Roots".

FORWARD-LOOKING INFORMATION

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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Contacts

Roots Investor Relations
Investors@roots.com
1-844-762-2343

For media or partnership inquiries, please contact:
Nicole Legate
Director of PR
nlegate@roots.com
647-828-5128