vertical branding otc bb: vbdg. vbdg.ob safe harbor statements forward-looking statements: certain...
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Vertical Branding
OTC BB: VBDG
VBDG.OB
Safe Harbor Statements
Forward-looking statements:Certain statements in this presentation may contain forward-looking information within the meaning of Rule 175 under the Securities Act of 1933 and Rule 3b-6 under the Securities Exchange Act of 1934, and are subject to the Safe Harbor created by those rules. Other than statements of historical fact, any statements included in this presentation, including without limitation statements regarding potential future plans and objectives of the company, are forward-looking statements that involve risks and uncertainties that could cause actual results or events to differ materially from those anticipated in such statements. Some of these risks, uncertainties and other factors are described in the Company’s periodic filings with the Securities and Exchange Commission (available at www.sec.gov), such as the company’s most recent Form 10-KSB filing and registration statement on Form S-1. Forward-looking statements reflect present intentions and available information only, and many facts, circumstances or events could arise in the future that might prevent the achievement of any objectives, or the implementation of any strategically significant plan(s), outlined herein, or that might cause the company to reconsider such objectives or plans. The company undertakes no obligation to publicly update or revise any statements in this presentation whether as a result of new information, future events or otherwise.
Non-GAAP financial measures:This presentation contains references to adjusted EBITDA, a non-GAAP financial measure, which management believes provides better insights into Company performance than GAAP metrics. Please consult the Company’s SEC filings and press releases for reconciliations of EBITDA with GAAP measures.
VBDG.OB
Who We Are
Vertical Branding is a consumer products company selling high quality household, beauty and personal care products at affordable prices.
The Company sells directly to consumers through television, Internet and print advertising as well as wholesale to many of the country’s largest retailers and drugstore chains, catalogs, home shopping channels and international distributors.
The Company’s hottest-selling products and brands currently include My Place, Steam Buddy, Hercules Hook, Zorbeez, EZ-FoldZ Step Stool and StarMaker Cosmetics.
VBDG.OB
What you’re about to hear…
What is Unique & Compelling about Vertical Branding
All About Our Products
Our Marketing & Sales Approach
Financial Information
Management
VBDG.OB
What is Unique & Compelling about VBI
Our Track Record – demonstrated ability to develop and/or identify quality, high margin yet inexpensive products that appeal to a core demographic and high success rate bringing those products to market;
Our Products - New product introductions through a robust product pipeline, as well as line extensions on existing and future products, fuel growth while recurring sales from an ever-expanding product portfolio provides a stable base of revenues;
Our Advertising Strategy - Multi-media (TV, Internet, Print, Radio), ROI-based transactional advertising strategy that creates brand awareness and promotes retail sell-through while simultaneously generating revenues through direct response sales;
Continually Testing - Metric-driven testing of new products and marketing campaigns avoids large capital expenditure prior to market validation;
Strong year over year revenue growth;
Experienced, high caliber management.
VBDG.OB
Current Products
Product Pipeline
Product Development and Selection
It’s all about the Products…
VBDG.OB
My PlaceTM Steam BuddyTM
Current Product Overview
Vertical
Branding’s
products make
life easier
and/or more
affordable by
answering
unique
consumer
needs in
innovative
ways
VBDG.OB
VBI Product Pipeline
Develop our own proprietary products and brands
License products from third parties
Dozens of potential new product opportunities reviewed every month submitted by inventors, vendors, manufacturers, trade shows, etc.
Vertical
Branding’s
track record
of success
makes us
attractive to
inventors and
license holders
as a potential
home for their
products
VBDG.OB
Expertise in Product Development & Selection
Unique, top-quality, compelling value proposition
Affordable price points ($9.99 - $29.99)
Resonate with core demographic (women 28 – 55)
Potential to sell >50 million households
Each product gets rigorous in-house evaluation (financial, operational, quality assurance & legal)
VBDG.OB
Creating and testing the campaign
Transactional Marketing
Retail Sales
Deepening relationship with retailers as “category captain” and reliable source of popular products
Catalog and Home Shopping Sales
International Distribution
Future trends and focus
Our Marketing and Sales Approach
Transactional
Marketing
Media
generates
revenues on
the “front end”
while creating
Brand
Awareness
used to drive
Retail Sales
VBDG.OB
Television commercials, Internet marketing, and print advertising is created and tested
Limited amount of media is purchased during testing phase
Results are then analyzed, gauging response and profitability prior to national media rollout
Creating & Testing the Campaign
Transactional
Marketing
allows
continual
testing and
refinement of
the marketing
message and
the value
proposition
VBDG.OB
Simultaneously generates revenues and builds brands
Transactional media net costs are a fraction of conventional brand/image advertising
Immediate, lasting return on marketing investment
Response is measurable
Creation of a direct, lasting customer relationship
Gives management sound basis for marketing tactics
Enables metrics-based marketing and management
Transactional Marketing Highlights
“Brand”
advertisers
now engaged
in direct
marketing on
TV and online:
P&G
GM
Ford
TiVo
Kodak
Discover
VBDG.OB
Currently in 30,000 traditional retail outlets, growing to 40,000 by 2008
Wal-Mart, Target, Costco, CVS, Bed, Bath & Beyond, GNC, Kohl’s, Home Depot, Rite-Aid, Best Buy, Staples
Net margins range from 30% to 34%
Retail Distribution Highlights
As we continue to develop new products, our base of retailer customers continues to grow…new retail accounts in 2008 include Staples, Office Depot, Best Buy and Albertsons
My Place units prominently displayed at Bed Bath & Beyond
VBDG.OB
Retail channel leverages prior investments in transactional and continuity marketing
Retailers grant more and better display space for products that generate additional customer traffic
Unit sales at retail are 3x - 5x better for products with strong transactional marketing track records
Transactional/Retail Synergies
VBDG.OB
The acceptance of our products and our responsiveness has led to deepening relationships with many of our retail customers
We have been named “Category Captain” by several major retail chains which gives us an opportunity to greatly expand our distribution to those stores with both our own products and third party products
New product opportunities have arisen directly from retail buyers
Deepening Relationship with Retailers
The EZ-FoldZ Step Stool was brought to Vertical Branding by a Wal-Mart buyer due to the retail success of Hercules Hook and other products
VBDG.OB
Currently in 30,000 traditional retail outlets, growing to 40,000 in 2008
Net margins: 30% to 34% --
Retail chains are bringing VBI new product opportunities
New products gain entrée with new retailers (e.g., MyPlace made VBI category captain with Staples)
Category Captain –VBI Partners with its Own Retailer Customers
As category
captain, VBI
controls high-
traffic “As Seen
on TV” end-cap
shelf sections for
leading retailers,
gains direct PoP
data and new
product ideas,
selects and
merchandises its
own products
and other
manufacturers’
items
VBDG.OB
Catalog
Home Shopping Channels
International Distribution
Other Wholesale Channels
Vertical
Branding’s
media exposure
creates
tremendous
appeal among
transactional
marketers…
having multiple
distribution
channels helps
fuel our growth
VBDG.OB
Financial Information
VBDG.OB
FY 2007 revenues up 57% year over year, to $36.3 million
FY ‘07 adjusted EBITDA swung to $1.8 million from FY ’06 equivalently calculated loss of $(1.2 million)
Annual revenue run rate per employee: approx. $1.25 million
Revenue guidance for 2008: $47 million to $50 million, 29% to 38% Y-o-Y growth
Financial Highlights
Since acquiring
retail division in
August 2006,
revenues,
margins and
profitability
have shown
dramatic,
sustained
improvement
VBDG.OB
Financial Highlights, continued
Achieving the
mid-point of
2008 revenue
guidance
would result
in a CAGR
since 2005 of
81.6%
8.1
23.1
36.4
48.5 E
0
10
20
30
40
50
60
$
MILLIONS
2005 2006 2007 2008 E(midrange)
112% CAGR
81.6% CAGR
Revenues
VBDG.OB
Selected Income Statement Data
Twelve months ended December 31,
2006 2007 Change
Revenues $23.1 million $36.3 million +57%
Gross profit $13.4 million $19.8 million +47.9%
Gross margin * 58% 54.6%
Net income (loss) ** ($2.8 million) ($3.4 million) + $690 K
GAAP operating loss ** ($2.6 million) ($3.6 million) + $1.0 mm
Adjusted EBITDA ($1.1 million) $1.8 million + $3.0 mm
* Year-over-year gross margin decline reflects 2007 strategic shift into retail
** 2007 figures include other charges of $1.1 million stemming from Q2-Q3 non-performance by third-party order fulfillment vendor; may result in restitution to VBI by bankruptcy court in 2008-2009
VBDG.OB
Selected Balance Sheet Items
* Excludes legacy commercial real estate operations
November, 2007:
RENN Capital
made a $4
million equity
investment in
Vertical
Branding,
allowing
favorable
restructuring
of long-term
debt
(Dollars in thousands) Dec. 31, 2006 Dec. 31, 2007
Cash & Equivalents
$105
$30
Current Assets
$7,926
$8,089
Total Assets *
$17,737
$17,147
Current Liabilities
$7,291
$7,845
Long-term debt
$6,550
$4,451
Minority Voting Interest in Subs.
$580
$528
Shareholders’ Equity
$2,804
$4,323
VBDG.OB
Corporate Snapshot
Corporate HQ Los Angeles, CA
Ticker Symbol VBDG
Exchange Traded OTC BB
Industry Consumer Products
No. of Employees 29
52-Week High/Low (as of 4/25/08) $0.85/$0.27
Shares Outstanding, Basic 30.0 million
Shares Outstanding, Fully Diluted 50.7 million
Market Capitalization $12.6 million
FY ‘07 Revenues $36.3 million
FY ‘07 Adjusted EBITDA $1.8 million
One possible
thumbnail
description of
Vertical
Branding:
A mini-
Procter &
Gamble …
VBDG.OB
Vertical Branding’s price-to-sales ratio is 0.34 (4/25/08),low relative to other transactional marketing companies:
NutriSystem (NTRI): 0.83xMore limited consumer base than Vertical Branding(specializes in diet products)
Bare Escentuals (BARE): 4.03x Specializes exclusively in beauty products,less diversified than Vertical in distribution channels
AeroGrow (AERO): 1.18xHighly specialized in indoor gardening products/supplies;only two years of operations
Peer Company Comparisons
Vertical
Branding
is trading at
approximately
one-third of
its sales per
share, a
significant
discount to
peer
companies …
VBDG.OB
Nancy Duitch – Founder, Chief Executive Officer and Director
Dan McCleerey – Chief Financial Officer
John Cammarano – President, Retail Sales
Chris Lipp – Vice President and Corporate Counsel
Evan Warshawsky – Vice President, Strategic Development
Management Team
The
Company’s
management
team has
over 75 years
of combined
experience,
cumulative
lifetime track
record of
billions of
dollars in
sales
VBDG.OB
Strong track record of successfully selecting popular products and mass-marketing them through multiple sales channels
Transactional marketing strategy “road-tests” products, builds brands, optimizes retail channel sell-through
Margins and profitability trends improving
Scalable business model leverages profits from successful mature products to support robust new product pipeline
Investment Highlights
Vertical
Branding
has a rare
combination of
track record,
sustainable
and scalable
business
model and
deep
management
expertise
VBDG.OB
Vertical Branding
OTC BB: VBDG
VBDG.OB
Appendix – GAAP Reconciliation
(Dollars in thousands) Three months ended Twelve months ended December 31, December 31, 2007 2006 2007 2006
Net income (loss) for the period $ (3,781) $ 307 $ (3,447) $ (2,757) Interest expense, net 251 328 1,228 614 Provision for income taxes 1,021 46 1,047 53 Depreciation and amortization 314 240 1,240 561 Other charges 875 - 1,052 - Non-cash stock based compensation 136 96 570 218 Legal settlement 120 - 120 - Loss from discontinued operations - - 28 141
Adjusted EBITDA $ (1,064) $ 1,017 $ 1,838 $ (1,170)
EBITDA is a non-GAAP financial measure which management believes provides better insights into Company performance than GAAP metrics. Please consult the Company’s SEC filings and press releases for further discussion of Company results as reflected by both EBITDA and GAAP measures.