Tile Shop Holdings, Inc. · OTC:TTSH
Tile Shop — Investor Presentation (January 2013)
34 slides from Tile Shop's investor presentation, Jan 17, 2013
Slide 1: Tileshop.com Investor Presentation January 2013
TILESHOP.COM INVESTOR PRESENTATION January 2013
Slide 2: Forward Looking Statements and Non-GAAP Information
TILESHOP.COM Forward Looking Statements and Non - GAAP Information 2 These slides and accompanying oral presentation contain forward - looking statements . These statements relate to future events or to future financial performance and involve known and unknown risks, uncertainties, and other factor
Slide 3: Leading Specialty Retailer of Tile
TILESHOP.COM LEADING SPECIALTY RETAILER OF TILE 3 Founded in 1985 by CEO Bob Rucker Dedicated retailer to the h ome t ile m arket Products include c eramic t ile, s tone t ile , a pplication m aterial and accessories Broad, d iverse offering of ~ 4,000 products 68 s tores in 22 s tates; th
Slide 4: The Tile Shop Business Model
TILESHOP.COM THE TILE SHOP BUSINESS MODEL 4
Slide 5: Tile Shop's Keys to Continued Success
TILESHOP.COM TILE SHOP’S KEYS TO CONTINUED SUCCESS 5 Better Buying Unique Sourcing Model Better Presentation Eye - Catching Product Layout Better Selling Incentivized and Knowledgeable Sales Team Best - in - Class EBITDA margins 2 8 % (1) Adjusted EBITDA as of LTM September 30, 2012 , s ee adjusted
Slide 6: Vertically Integrated Value Chain
TILESHOP.COM VERTICALLY INTEGRATED VALUE CHAIN 6 Value Chain Typical Retailer Final Retail Sale 3 rd Party Sourcing Final Retail Sale Direct Sourcing Raw Materials Consult & Influence Manufacturing Process Acquire Finished Stone & Ceramic in Origin Country Self Manufacture of Setting Materials Contr
Slide 7: Broad Product Assortment and Service
TILESHOP.COM BROAD PRODUCT ASSORTMENT AND SERVICE 7 Stone Products Ceramic Products Setting and Maintenance Products With Over 4,000 SKUs Tile Shop is a “One - Stop” Customer Tile and Décor Destination Essential & Complementary Products… …Bring Vision to Reality TTS Product Systems TTS Product Syste
Slide 8: Extensive Selection of Tile Accessories
TILESHOP.COM EXTENSIVE SELECTION OF TILE ACCESSORIES 8 HAND CARVED SINKS VESSEL SINK Contemporary, elegant and rustic appeal WALL & COUNTER EDGES PRESCOTT SINK RAIL Chair rail or counter top edge MARTEL & OUT CORNER Cap a partially tiled wall BARNES & OUT CORNER Cap a partially tiled wall CAPITAL &
Slide 9: Striking Visual Product Presentation
TILESHOP.COM STRIKING VISUAL PRODUCT PRESENTATION 9 ~60 Full Size Room Displays Showcasing Creative Ideas and Unique Combinations
Slide 10: Customer Empowerment
TILESHOP.COM CUSTOMER EMPOWERMENT 10 Free, Weekly Do - It - Yourself Classes
Slide 11: Knowledgeable and Motivated Sales Force
TILESHOP.COM KNOWLEDGEABLE AND MOTIVATED SALES FORCE 11 ▪ Highly trained design / sales consultants Average tenure of store managers ~5 years Store managers promoted from within ▪ Manager and salesforce compensation tied to store level profitability Compensation well above industry standards
Slide 12: Tile Shop Investment Considerations
TILESHOP.COM TILE SHOP INVESTMENT CONSIDERATIONS 12
Slide 13: What Makes The Tile Shop Compelling?
TILESHOP.COM WHAT MAKES THE TILE SHOP COMPELLING? 13 Management Team 1 No Established National Player 5 Consistent Comps 2 Dramatic Growth Opportunity 4 Control Branding 6 Best - in - Class Margins 9 Compelling New Store Returns 3 (1) Refers to specialty tile retailers . Favorable Macr
Slide 14: Experienced Management Team
TILESHOP.COM EXPERIENCED MANAGEMENT TEAM 14 Bob Rucker — Founder & CEO Tim Clayton — CFO Joseph Kinder — Sr VP, Operations Carl Randazzo — Sr VP, Retail Founded Tile Shop in 1985 Personally involved in “sourcing” Oversees management team and high level company operations 30 years of financia
Slide 15: Industry Leading Performance
TILESHOP.COM 9.9% 3.1% 5.9% Q1 2012 Q2 2012 Q3 2012 11.2% 3.4% (3.4%) (4.6%) 6.4% 5.5% 9.7% (7.5%) (13.2%) 5.3% 4.1% 11.4% 2006 2007 2008 2009 2010 2011 2012 YTD INDUSTRY LEADING PERFORMANCE 15 Same Store Sales Growth 200 6 – 2012 YTD Same Store Sales Growth Consistently Better than Industry Average
Slide 16: Superior Unit Economics
TILESHOP.COM SUPERIOR UNIT ECONOMICS 16 Cash Payback 2. 5 Years New Store Assumptions (1 ) Annualized Q4 run rate store level operating profit before pre - opening cost, depreciation and amortization . (2) Includes gross capex (net of tenant improvements) and inventory. (3) Average adjusted 4 - wall
Slide 17: Dramatic Growth Potential
TILESHOP.COM DRAMATIC GROWTH POTENTIAL 17 4 Double The Store Base Over Next Several Years (1) As of December 31, 2012. (1) 130 - 140 14 18 20 28 32 33 39 42 43 48 53 68 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008A 2009A 2010A 2011A Today Future
Slide 18: National Distribution Capability
TILESHOP.COM 2 DC’s and $10MM FROM NATIONAL DIST. CAPABILITY 18 Infrastructure Currently in Place for Next 100 Stores (1) Represents the potential location of future d istribution f acilities for illustrative purposes only . 5 Future Distribution Facilities States with (1) 1 1 6 3 5 2 2 7 4 2 3 2 2
Slide 19: No National Specialty Tile Retailer
TILESHOP.COM NO NATIONAL SPECIALTY TILE RETAILER 19 5 Regional Flooring Local Flooring Factory - Direct National Aspirations (1) Store count as of December 31, 2012. (1) Competitor # of Stores Customer Focus Primary Region / # of States Arizona Tile 44 Contractor Western / 7 Floor & Décor 32 Home Ow
Slide 20: Virtually All Products Are Control Branded
TILESHOP.COM VIRTUALLY ALL PRODUCTS ARE “CONTROL” BRANDED 20 6 2011 Sales by Segment ▪ Vertically integrated process ▪ Over 4,000 SKUs of “control” branded products ▪ “Control” branding provides a competitive advantage: ▪ Cost Benefit: Better Pricing Exceptional Consumer Value High Margins ▪ P
Slide 21: Compelling Industry Dynamics
TILESHOP.COM 21 7 COMPELLING INDUSTRY DYNAMICS Volume Share by Flooring Category 2006 – Present Hard Surface +7% Market Share Source: Catalina U.S. Floor Coverings Industry Trends July 2012 and Catalina Floor Coverings Quarterly Update September 2012. (1) As of September 30, 2012. (2) LTM growth per
Slide 22: Macro Indicators Support Industry Growth
TILESHOP.COM MACRO INDICATORS SUPPORT INDUSTRY GROWTH 22 Source: National Association of Realtors, Thomson Reuters / University of Michigan. Note: Data represents quarter over quarter growth. 16.6% 8.0% (3.0%) 12.3% 2.6% 4.9% 4.5% 11.0% (17.5%) (5.6%)(5.3%) (20.0%) (15.0%) (10.0%) (5.0%) 0.0% 5.0% 1
Slide 23: Best-in-Class Margins
TILESHOP.COM 30% 28% 12% 11% 20% 11% 13% 11% 10% 26% 27% 28% 28% 28% 27% 19% 2008A 2009A 2010A 2011A LTM LULU FRAN KORS MFRM TFM AZO GNC DKS HD TSCO LL BEST - IN - CLASS MARGINS 23 The Tile Shop vs. Peers: LTM Adj. EBITDA Margins Source: Company SEC filings, LTM Adj. EBITDA margins based on most rec
Slide 24: Consistent Financial Performance
TILESHOP.COM (4.6%) 11.4% 6.4% 5.5% 2009 2010 2011 YTD Sept 2012 $32 $38 $43 $49 2009 2010 2011 LTM Sept 2012 $116 $135 $153 $174 2009 2010 2011 LTM Sept 2012 CONSISTENT FINANCIAL PERFORMANCE 24 ($ in Millions) % Margin ($ in Millions) Same Store Sales Adj. EBITDA (1) Number of Stores Net Sales 27%
Slide 25: Cash Flow Funds Planned Growth
TILESHOP.COM 2009 2010 2011 LTM Sept 2012 1 5 5 9 2009 2010 2011 YTD Sept 2012 $13 $11 $11 $11 2009 2010 2011 LTM Sept 2012 $32 $38 $43 $49 $20.0 $25.0 $30.0 $35.0 $40.0 $45.0 $50.0 $55.0 2009 2010 2011 LTM Sept 2012 CASH FLOW FUNDS PLANNED GROWTH 25 (1) See Adjusted EBITDA reconciliation in appendi
Slide 26: Tile Shop - Compelling Investment Opportunity
TILESHOP.COM TILE SHOP - COMPELLING INVESTMENT OPPORTUNITY 26 Proven and Successful Business Model 1 Favorable Macro Economic Trends 2 Consistent Strong Financial Performance 3 Early In Expansion Life Cycle 4 Internally Generated Cash Funds Future Growth 5 In Summary…Tile Shop Rocks!
Slide 27: Appendix
TILESHOP.COM 27 APPENDIX
Slide 28: Expected Incremental Costs
TILESHOP.COM EXPECTED INCREMENTAL COSTS 28 The Company expects to incur non - cash stock - based compensation costs of $2 - 3 million, annually Incremental costs are expected to reduce EBITDA margins in the near term, attributable to: Public company costs, including: » Sarbanes - Oxley complia
Slide 29: Compelling YTD Sept. 2012 Results
TILESHOP.COM $115 $136 9M Sept 2011 9M Sept 2012 29 COMPELLING YTD SEPT. 2012 RESULTS Net Sales Adj. EBIT (1) Number of Stores Adj. EBITDA (1) (1) See Adjusted EBITDA reconciliation in appendix for detail. $33 $39 9M Sept 2011 9M Sept 2012 ($ in Millions) 53 62 Sept 2011 Sept 2012 $27 $31 9M Sept 20
Slide 30: New Store Sales Ramp / Unit Cost
TILESHOP.COM NEW STORE SALES RAMP / UNIT COST 30 One Year Sales Ramp Assumptions (1) Non - cash expense . (2) Includes gross capex (net of tenant improvements) and inventory. Pre-Open Q1 Q2 Q3 Q4 Expenses (1) ($80,000) -- -- -- -- Net Cash Investment (2) ($1,400,000) -- -- -- -- Store Sales -- $300,
Slide 31: Illustrative Cash Flow Detail
TILESHOP.COM ILLUSTRATIVE CASH FLOW DETAIL 31 2009 2010 2011 2012 New Stores Added 1 5 5 9 Adjusted EBITDA (1) $32 $38 $43 $49 Less: Taxes (2) 8 11 11 13 Less: Interest (3) 2 2 2 2 Leveraged Free Cash Flow $21 $26 $29 $34 Total CapEx $8 $14 $19 $23 Net Cash Flow (4) $13 $11 $11 $11 Historical Note:
Slide 32: Adjusted EBITDA Reconciliation
TILESHOP.COM ADJUSTED EBITDA RECONCILIATION 32 ($ in Millions) 2009 2010 2011 2011 2012 2012 Net Sales $116 $135 $153 $115 $136 $174 Net Income (loss) $23 $30 $31 $25 $31 $37 Interest Expenses 1 0 0 0 1 1 Income Taxes 1 1 1 1 (4) (4) Depreciation & Amortization 7 7 9 6 8 10 Deferred Compensation Exp
Slide 33: Share Count Reconciliation
TILESHOP.COM SHARE COUNT RECONCILIATION 33 ($ in Millions) Illustrative Share Count at Various Prices Note: Analysis assumes treasury method. Share Price $10.00 $12.00 $14.00 $16.00 $18.00 $20.00 Public Shareholders 7.0 7.0 7.0 7.0 7.0 7.0 Tile Shop Current Owners 32.0 32.0 32.0 32.0 32.0 32.0 JWCAC
Slide 34: Capitalization
TILESHOP.COM 2012 Cash and Equivalents $6 Long-Term Liabilities: Long-Term Debt, Net of Current 1 Deferred Rent 18 Capital Leases, Net of Current 1 Promissory Notes 66 Total Long-Term Liabilities $87 Total Stockholder's Equity $42 Total Capitalization $129 LTM Financial Data Adj. EBITDA $49 Interest
Tile Shop Holdings — Investor Presentation (January 2013) on 6ix