8-K
BUILD-A-BEAR WORKSHOP INC (BBW)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 11, 2022
Build-A-Bear Workshop, Inc.
(Exact Name of Registrant as Specified in Its Charter)
| Delaware | 001-32320 | 43-1883836 |
|---|---|---|
| (State or Other Jurisdiction | (Commission | (IRS Employer |
| of Incorporation) | File Number) | Identification No.) |
| 415 South 18th St., St. Louis, Missouri | 63103 | |
| --- | --- | |
| (Address of Principal Executive Offices) | (Zip Code) |
(314) 423-8000
(Registrant’s Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the
following provisions \(see General Instruction A.2. below\):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $0.01 per share | BBW | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On January 11, 2022, Build-A-Bear Workshop, Inc. (the “Company”) issued a press release setting forth certain expectations for the Company’s 2021 fiscal year (52 weeks ending January 29, 2022), including total revenue; pre-tax income; earnings before interest, taxes, depreciation and amortization (EBITDA); and capital expenditures. A copy of the Company’s press release is being furnished as Exhibit 99.1 and hereby incorporated by reference.
Item 7.01. Regulation FD Disclosure.
On January 11, 2022, Build-A-Bear Workshop, Inc. (the “Company”) will participate in a fireside chat at the ICR Conference 2022 held virtually on Tuesday, January 11, 2022. Sharon Price John, President and Chief Executive Officer, and Voin Todorovic, Chief Financial Officer, will host the presentation at 3:30 p.m. Eastern Standard Time. The audio portion of the fireside chat will be available on the Company’s Investor Relations website, http://IR.buildabear.com and will remain available for 90 days following the event. The investor presentation is attached hereto as Exhibit 99.2 and is incorporated herein by reference. A copy of the investor presentation is also available on the Investor Relations section of the Company’s web site at http://IR.buildabear.com.
To supplement its financial statements presented in accordance with GAAP, the Company used, in its investor presentation, certain non-GAAP measures of financial performance. The Company believes that these non-GAAP measures will allow for a better evaluation of the operating performance of the business and facilitate a meaningful comparison of the Company’s results in the current period to those in prior periods and future periods. Reference to these non-GAAP measures should not be considered as a substitute for results that are presented in a manner consistent with GAAP. These non-GAAP measures are provided to enhance investors’ overall understanding of the Company’s financial performance.
* * * * *
The information furnished in, contained, or incorporated by reference into Item 2.02 and Item 7.01 above, including Exhibits 99.1 and 99.2 attached hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 (the “Securities Act”), as amended, or the Exchange Act, regardless of any general incorporation language in such filing. In addition, this report (including Exhibits 99.1 and 99.2) shall not be deemed an admission as to the materiality of any information contained herein that is required to be disclosed solely as a requirement of Items 2.02 and 7.01.
This Current Report on Form 8-K and the press release and investor presentation attached hereto as Exhibits 99.1 and 99.2, respectively, contain certain statements that may be deemed to be “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements in this report and in such exhibits not dealing with historical results are forward-looking and are based on various assumptions. The forward-looking statements in this report and in such exhibits are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by the statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among other things: statements regarding the Company’s goals, intentions, and expectations; business plans and growth strategies; estimates of the Company’s risks and future costs and benefits; forecasted demographic and economic trends relating to the Company’s industry; and other risk factors referred to from time to time in filings made by the Company with the Securities and Exchange Commission. Forward-looking statements speak only as to the date they are made. The Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made. The Company disclaims any intent or obligation to update these forward-looking statements.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| Exhibit Number | Description of Exhibit |
|---|---|
| 99.1 | Press Release dated January 11, 2022 |
| 99.2 | Investor Presentation—January 11,<br> 2022 |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| BUILD-A-BEAR WORKSHOP, INC. | |||
|---|---|---|---|
| Date: January 11, 2022 | By: | /s/ Voin Todorovic | |
| Name: | Voin Todorovic | ||
| Title: | Chief Financial Officer |
Exhibit 99.1
Build-A-Bear Workshop, Inc. Again Raises Guidance for Expected Fiscal 2021 Financial Results
Company to present at ICR Conference 2022 Tuesday, January 11th at 3:30 p.m. EST
ST. LOUIS--(BUSINESS WIRE)--January 11, 2022--Build-A-Bear Workshop, Inc. (NYSE: BBW) updated its financial guidance for the 2021 fiscal year in advance of its participation at the ICR Conference 2022. The Company believes that its projected results reflect continued progress in its strategic initiatives including the acceleration of its digital transformation, the rapid evolution of its omnichannel capabilities and the ability to leverage its financial strength to drive profitable growth. The Company expects its fiscal 2021 results to reflect the highest profitability in its nearly 25-year history.
On a preliminary basis for the 2021 fiscal year (52 weeks ending January 29, 2022 compared to the 52 weeks ended January 30, 2021), the Company currently expects:
- Total revenues for the fiscal year to be in the range of $408 million to $412 million, an increase from its previous expectation for total revenues in the range of $390 million to $400 million. The Company reported total revenues of $255.3 million in the 2020 fiscal year and $338.5 million in the 2019 fiscal year;
- Pre-tax income to be in the range of $49 million to $51 million compared to pre-tax loss of ($20.2) million in fiscal 2020 and pre-tax income of $1.6 million in fiscal 2019;
- Earnings before interest, taxes, depreciation and amortization (EBITDA) in fiscal 2021 to be in the range of $61.5 million to $63.5 million, an increase from its previous expectation for EBITDA in the range of $55 million to $60 million. The Company reported EBITDA of ($7.0) million in the 2020 fiscal year and $15.3 million in the 2019 fiscal year; and
- Capital expenditures to be in the range of $7 million to $8 million and depreciation and amortization to be approximately $12.5 million in fiscal 2021.
The Company notes that its updated guidance assumes no additional material COVID impact either in its supply chain or store operations.
Sharon Price John, Build-A-Bear Workshop President and Chief Executive Officer commented, “We have continued to see positive momentum in our business throughout the current fourth quarter and combined with our record-breaking profit in the first nine-month period, we expect fiscal 2021 to deliver the Company’s highest profitability as it enters its 25^th^ year of operations. We also expect to deliver growth in total revenues including the strongest digital demand in our history, reaching nearly 20% of net retail sales. We have remained focused on the disciplined execution of our strategic initiatives even with ongoing external volatility and COVID impacts. We believe that we have fundamentally evolved our company and built a solid foundation to further advance our digital transformation, expand our omnichannel capabilities and leverage our positive financial position to support investments intended to drive future growth.”
The Company is scheduled to participate at the ICR Conference 2022 being held virtually on January 10, 2022 and January 11, 2022. The Company expects to conduct a fireside chat presentation on Tuesday, January 11, 2022, at 3:30 p.m. EST. The audio portion of the presentation will be broadcast over the internet and can be accessed at the Company’s investor relations website, http://IR.buildabear.com. A replay of the broadcast will remain on the Company’s investor relations website for one year.
The Company noted that it expects to report full results for the fourth quarter and fiscal 2021 year in March 2022.
Note Regarding Non-GAAP Financial Measures:
In this press release, the Company’s financial results are provided both in accordance with generally accepted accounting principles (GAAP) and using certain non-GAAP financial measures. In particular, the Company provides projected and historic EBIT, which is a non-GAAP financial measure. These projections and results are included as a complement to results provided in accordance with GAAP because management believes these non-GAAP financial measures help identify underlying trends in the Company’s business and provide useful information to both management and investors by excluding certain items that may not be indicative of the Company’s core operating results. These measures should not be considered a substitute for or superior to GAAP results. These non-GAAP financial measures are defined and reconciled to the most comparable GAAP measure later in this document.
About Build-A-Bear Build-A-Bear is a multi-generational global brand focused on its mission to “add a little more heart to life” appealing to a wide array of consumer groups who enjoy the personal expression in making their own “furry friends” to celebrate and commemorate life moments. Nearly 500 interactive brick-and-mortar retail locations operated through a variety of formats provide guests of all ages a hands-on entertaining experience, which often fosters a lasting and emotional brand connection. The company also offers engaging e-commerce/digital purchasing experiences on www.buildabear.com including its online “Bear-Builder” as well as the new “Bear Builder 3D Workshop”. In addition, extending its brand power beyond retail, Build-A-Bear Entertainment, a subsidiary of Build-A-Bear Workshop, Inc., is dedicated to creating engaging content for kids and adults that fulfills the company’s mission, while the company also offers products at wholesale and in non-plush consumer categories via licensing agreements with leading manufacturers. Build-A-Bear Workshop, Inc. (NYSE: BBW) posted total revenue of $255.3 million in fiscal 2020. For more information, visit the Investor Relations section of buildabear.com.
Forward-Looking Statements: This press release contains certain statements that are, or may be considered to be, “forward-looking statements” for the purpose of federal securities laws, including, but not limited to, statements that reflect our current views with respect to future events and financial performance. We generally identify these statements by words or phrases such as “may,” “might,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “intend,” “predict,” “future,” “potential” or “continue,” the negative or any derivative of these terms and other comparable terminology. All of the information concerning our future liquidity, future revenues, margins and other future financial performance and results, achievement of operating of financial plans or forecasts for future periods, sources and availability of credit and liquidity, future cash flows and cash needs, success and results of strategic initiatives and other future financial performance or financial position, as well as our assumptions underlying such information, constitute forward-looking information.
These statements are based only on our current expectations and projections about future events. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by these forward-looking statements, including those factors discussed under the caption entitled “Risks Related to Our Business” and “Forward-Looking Statements” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on April 15, 2021 and other periodic reports filed with the SEC which are incorporated herein.
All of our forward-looking statements are as of the date of this Press Release only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of or any material adverse change in one or more of the risk factors or other risks and uncertainties referred to in this Press Release or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the SEC could materially and adversely affect our continuing operations and our future financial results, cash flows, available credit, prospects and liquidity. Except as required by law, the Company does not undertake to publicly update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.
All other brand names, product names, or trademarks belong to their respective holders.
| * Non-GAAP Financial Measures | ||||||
|---|---|---|---|---|---|---|
| BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES <br><br> Reconciliation of GAAP to Non-GAAP Results<br><br> (dollars in millions) | ||||||
| New<br><br> Projected<br><br> 2021 | Previous<br><br> Projected<br><br> 2021 | Actual<br><br> 2020 | Actual<br><br> 2019 | |||
| Income (loss) before income taxes (pre-tax) | $49.0 - $51.0 | $42.0 - $46.0 | $ | (20.2) | $ | 1.6 |
| Interest expense (income), net | - | - | - | - | ||
| Depreciation & Amortization | 12.5 | 13 - 14 | 13.2 | 14 | ||
| Earnings before interest, taxes, depreciation and amortization (EBITDA) | $61.5 - $63.5 | $55.0 - $60.0 | $ | (7.0) | $ | 15.3 |
Contacts
Investors:
Voin Todorovic
Build-A-Bear Workshop
314.423.8000 x5221
Media:
Public Relations
PR@buildabear.com
Exhibit 99.2
ICR CONFERENCE 2022
FORWARD LOOKING AND CAUTIONARY STATEMENTS 2 This presentation contains certain statements that are, or may be considered to be, “forward-looking statements” for the purpose of federal securities laws, including, but not limited to, statements that reflect our current views with respect to future events and financial performance. We generally identify these statements by words or phrases such as “may,” “might,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “intend,” “predict,” “future,” “potential” or “continue,” the negative or any derivative of these terms and other comparable terminology. Forward-looking statements are based on current expectation and assumptions that are subject to risks and uncertainties which may cause results to differ materially from the forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or otherwise. Risks and uncertainties to which our forward-looking statements are subject include: (1) macroeconomic and industry risks such as (a) the COVID-19 pandemic has had and is expected to continue to have an adverse effect on our business; (b) continued or further declines in consumer traffic at malls and tourist locations could adversely affect our financial performance and profitability; (c) general global economic conditions could lead to disproportionately reduced discretionary consumer spending and demand for our products; (d) consumer interests change rapidly and our success depends on the ongoing effectiveness of our marketing and online initiatives to build consumer affinity for our brand and drive consumer demand for key products and services; (e) our profitability could be adversely impacted by fluctuations in petroleum products prices; and (f) our business may be adversely impacted by a variety of significant competitive threats; (2) operational risks such as: (a) we may be unable to generate demand for our interactive retail experience and products, including timely responses to consumer preferences; (b) we are subject to risks associated with technology and digital operations;(c) we may be unable to renew, renegotiate our store leases or enter into new store leases on favorable terms; (d) our company-owned distribution center and our third-party distribution center providers may experience disruptions or operate inefficiently; and (e) we may not be able to evolve our store locations to align with market trends, successfully diversify our store models and formats, or otherwise effectively manage our overall portfolio of stores; (3) international risks such as: (a) we may not be able to operate our international corporately-managed locations profitably; (b) we rely on a few global supply chain vendors to supply substantially all of our merchandise, and significant price increases or disruption in their ability to deliver merchandise could harm our ability to source products and supply inventory to our stores; (c) our merchandise is manufactured by foreign manufacturers and the availability and costs of our products, as well as our product pricing, may be negatively affected by risks associated with international manufacturing and trade and foreign currency fluctuations; and (d) we may be unable to effectively manage our international franchises, attract new franchisees or the laws relating to our international franchises change; (4) Legal, technology and intellectual property risks such as: (a) we are subject to a number of risks related to disruptions, failures or security breaches of our information technology infrastructure; (b) we may fail to renew, register or otherwise protect our trademarks or other intellectual property and may be sued by third parties for infringement or misappropriation of their proprietary rights; (c) we may suffer negative publicity or be sued if the manufacturers of our merchandise or Build-A-Bear branded merchandise sold by our licensees ship products that do not meet current safety standards or production requirements or if such products are recalled or cause injuries; (d) we may suffer negative publicity or be sued if the manufacturers of our merchandise violate labor laws or engage in practices that consumers believe are unethical; and (e) we may suffer negative publicity or a decrease in sales or profitability if the products from other companies that we sell in our stores do not meet our quality standards or fail to achieve our sales expectations; (5) Risks related to owning our common stock such as: (a) fluctuations in our operating results could reduce cash flow or result in restrictions under our credit agreement and we may be unable to repurchase shares; (b) fluctuations in our quarterly results of operations could cause the price of our common stock to substantially decline; (c) the market price of our common stock is subject to volatility, which could in turn attract the interest of activist shareholders; and (d) provisions of our corporate governing documents and Delaware law may prevent or frustrate attempts to replace or remove our management by our stockholders, even if such replacement or removal may be in our stockholders’ best interests; and (6) general risks such as: (a) we may not be able to operate successfully if we lose key personnel; and (b) we may be unsuccessful in acquiring businesses or engaging in other strategic transactions, which may negatively affect our financial condition and profitability. For additional information concerning factors that could cause actual results to materially differ from those projected herein, please refer to our most recent reports on Form 10-K, Form 10-Q and Form 8-K. © 2022 Build-A-Bear Workshop, Inc.
EXECUTIVE SUMMARY
A DIVERSIFIED COMPANY WITH A MULTI-GENERATIONAL BRAND ~1/3 of stores arenot located in atraditional mall United States 359 131 International 3,500+ Associates Known, emotional and leverageable brand equity NEARLY 500GLOBAL LOCATIONS* MULTI-GENERATIONALAPPEAL DEEP AND EXTENSIVELICENSING RELATIONSHIPS Covering over 75entertainment, sports andpop culture properties SKILLED PASSIONATE EMPLOYEES POWERFUL BRAND 90%+ Aided brand awareness** * Store count at end of Q3 2021. US store count includes seasonal locations, 57 third-party retail locations and excludes vending machines; International includes corporately-managed stores in Canada, the UK and Ireland as well as 73 franchise shops and 3 third-party retail locations** US Moms of Kids ages 2-12 in the US, C&R Research Started asan experientialmall-based retailerfocused on children Has transformed into a multi-dimensional, digital, growingbusiness with a broad anddiverse consumer demographic EXPANDED OMNICHANNEL CAPABILITIESDRIVING DIGITAL DEMAND Sustained growth in digital demandwhich is projected to be nearly 20% of net retail sales for FY2021 >40%of sales are to tweens, teens and adults DIVERSIFIEDPORTFOLIO 4 © 2022 Build-A-Bear Workshop, Inc. 200MM+ Furry friends soldin nearly 25 years CONNECTED
KEY INVESTOR CONSIDERATIONS Accomplished team created an expanding and profitable business now focused on delivering sustained diversified and profitable growth Returned business to profitability while simultaneously building infrastructure to support a multi-dimensional, digital, growing business with a broad and diverse consumer base Profitable business with high margins and free cash flow 2021 projected total revenues of $410MM and pre-tax income of $50MM, the highest in the company's nearly 25-year history*$48.5MM in cash and equivalents at end of Q3 2021; Company paid a special dividend in Q4 2021 and announced a share repurchase program of up to $25MM through Nov 30, 2023 Successfully proven and growing diversified omnichannel business model Offerings include experiential brick-and-mortar stores with 1:1 interactive engagement that deliver profitability while supporting omnichannel fulfillment for growing digital demand as well as diverse e-commerce shopping platforms and experiencesExpanding addressable consumer base with new experiences and products targeting tween, teen and adult affinity and gifting segmentsLeverageable brand strength to diversify revenue streams through licensing, content and entertainment development Powerful brand with multi-generational appeal capturing today’s zeitgeist including desire for experience, personalization and “DIY” while recognized as trusted, giving and a part of pop culture Over 10 billion media impressions in 2021 demonstrating strong interest from business, trade, entertainment and consumer outletsOver 3.6MM social media followers (Facebook, Instagram, Twitter, TikTok, Pinterest and YouTube) 5 © 2022 Build-A-Bear Workshop, Inc. * 2021 projections reflect the midpoint of the Company’s most recent guidance
CELEBRATING OUR 25TH ANNIVERSARY IN 2022 Started as a specialty retailer that became a powerful consumer brand Now positioned as an evolved thriving entity that is poised for a compelling future 2022 & moving forward MORE than malls: ~1/3 of stores arein non-traditional locationsMORE than plush toys and MORE than “workshops”:Leveraging brand strength to develop contentand entertainment while outbound licensing owned IP'sMORE than kids:Building a much broader consumerbase and addressable market 2013 Current management joined to drive a successful turnaround that included a comprehensive digital transformation, diversification of retail locations and development of a range of new business models and formats to leverage brand strength 1997 Founded in St. Louis,MO as a groundbreakingexperiential mall-basedspecialty children's retailer 2004 Great success led to IPO on NYSE (BBW); Operated 168 stores in North Americaand 9 international franchise stores with untapped brand equity 2008-2012 Challenging businessperiod with 4 consecutiveyears of pre-tax losses 6 © 2022 Build-A-Bear Workshop, Inc.
BELOVED ICONIC BRAND
BUILD-A-BEAR IS A POWERFUL BRAND 91% aided brand awareness (US Moms of Kids ages 2-12) 79% of those surveyed said Build-A-Bear was “distinctive” Comparative retail brands include American Girl, Disney and LEGO Contributing to balancedbusiness seasonality* Jan-Mar Jul-Sep Apr-Jun Oct-Dec • First party data email contacts in CRM database• Vast majority in Bonus Club loyalty program 12MM+ >60% of store visits areplanned and the topoccasion is a birthday Well-Known Multi-Generational Emotional Trusted Extendable 8 © 2022 Build-A-Bear Workshop, Inc. US data, C&R Research with Moms of kids ages 2-12 AwarenessDistinctiveness * Reflects average results of multiple years
DIVERSE AND HIGHLY COVETED C ONSUMERS Build-A-Bear is uniquely positioned to reach a targeted demographic market with strong purchasing power Wide interest across ages Educated with spending power: Professional careers, Appx 70% attended college Over 80% arehomeowners Approximately 70%are married <$50K H o u s e h o l d i n c o m e $50K-$100K $100-$150K >$150K ~40% ~40% ~20% The profile of Build-A-Bear’s 9 million + active Bonus Club membership: Interests include: Eating out, books/reading, visiting amusement parks ~70% have children giving us reachwithin households to approximately20 million people Household Profile Infant/Toddler Kids Tweens, Teens, Adults Diverse Demographic Over 40% of furry friends are for tweens, teens and adults Source: BBW proprietary loyalty program database 9 © 2022 Build-A-Bear Workshop, Inc.
Our objective is to extend the reach and size of diverse consumer segments through expanded products and licensed relationships, experiences, occasions, partnerships and marketing activities STRATEGIC SHIFT TO CAPTURE OUR SHARE OF DIGITAL ECONOMY RETAIL STORES E-COMMERCE PRIMARYTARGET SECONDARYTARGET FAMILIES WITH CHILDREN COLLECTOR & GIFT GIVERS(TWEENS/TEENS/ADULTS) RETAIL STORE CONSIDERATIONS E-COMMERCE CONSIDERATIONS FAMILIES WITH CHILDREN • Hands on interactive experience as important as the product• Opportunity to engage with brand at younger ages and retain for “one more year” to drive higher “childhood value”• Store positioning where families go for fun and entertainment for ease of shopping • Product foremost with ease and convenience of shopping online• Once challenging to efficiently market, new tools allow us effectively reach teens/adults• Likely to have experienced BABW as a child, they still have strong brand affinity but need a “reason” to reengage COLLECTOR AND GIFT GIVERS(TWEENS/TEENS/ADULTS) Rather than “digitizing” the store experience that families love, a strategic shift to diversify the consumer base fueled strong e-commerce growth after updating and upgrading the digital platform and capabilities with CAGR of 34.5% since 2016 10 © 2022 Build-A-Bear Workshop, Inc.
BUILD-A-BEAR GETS NOTICED Over 10 Billion media impressions in 2021 (and 2020) 11 © 2022 Build-A-Bear Workshop, Inc.
BUILD-A-BEAR IS POP CULTURE Our brand is regularly mentioned on popular TV shows, movies and in celebrity news 12 © 2022 Build-A-Bear Workshop, Inc.
BUILD-A-BEAR PARTNERS WITH LEADING BRANDS License relationships with over 75 world-class collaborators from film, TV, art, games,sports and more support collectible, affinity and gifting business with appeal toexpanded consumer demographics 13 © 2022 Build-A-Bear Workshop, Inc.
STRONG AFFINITY AND BRAND LOYALTY – HIGHLY MONETIZABLE “When you buysomething at Build-A-Bear… there’s an emotionalattachment …The thingabout Build-A-Bear is thatit isn’t just for kids.Whatever you’re into, andwhatever your age, Build-A-Bear probably has astuffed animal accessoryfor you.” Consumers' emotional connection with the Build-A-Bear brand position it to be moreresilient with the ability to diversify beyond toys, beyond kids and beyond malls 14 © 2022 Build-A-Bear Workshop, Inc.
GROWING OMNICHANNEL REVENUE MODEL
A MODEL OF CONTINUOUS ENGAGEMENT …EVEN IN THECOVID DISRUPTION Leverage the POWER andEMOTIONAL CONNECTIONCREATED by THE ONE-TO-ONEretail guest engagement & marketingmodel to DRIVE BRAND EQUITY RETAIL MONETIZE the earnedBRAND EQUITY inCATEGORIES &CHANNELS beyondtraditional “retail” BRAND EQUITY BRAND LEVERAGE Into NEW CATEGORIES & CHANNELS CONSUMER Expand the CONSUMER BASE & ENGAGEMENT byenabling participation in the brand in multiple ways A continuous circle of engagement driving retail and leveraging brand equity isdesigned to build a more powerful and profitable business model 16 © 2022 Build-A-Bear Workshop, Inc.
PROFITABLE STORES BUILD BRAND AND SUPPORT OMNICHANNEL 98% of corporately-managed stores inNorth America are projected to be profitablein 2021 with over 25% average store contribution Iconic hands-on store experience builds emotionalconnection and brand awareness creating consumerloyalty that becomes a driver to build e-commerce and other revenue streams A range of store formats and designs allows retail locations to operate with less total square footage and higher productivity per square foot Physical stores act as mini distribution centers for increased digital demand fulfillment (no additional labor or overhead needed) 17 © 2022 Build-A-Bear Workshop, Inc.
OUR EXPERIENCES CREATE MEMORIES Plan a family visit tobuild (stuff) a furryfriend for an engagingexperience that formsan emotionalconnection and makesa shared specialmemory Celebrate specialoccasions withfriends and loved onesincluding birthdays andholidays. Host a "Build-A-Party" for a sharedgroup memory Make a gift that ispersonal and from theheart for family, friendsor a favorite teacher.Personalize it with arecorded messagethat goes in the bear From Valentine's Dayto anniversaries, givea hug that will last alifetime 18 © 2022 Build-A-Bear Workshop, Inc.
GLOBAL LOCATIONS WITH EXPANSION OPPORTUNITIES Corporately-managed and third-party retail locations in North America and Europe;International franchise stores in South America, Africa, Asia and Australia India (14) South Africa (20) Australia (16) Chile (6) US (362) Canada (11) China (10) Middle East (7) UK (42) Ireland (2) Corporately-managed stores in the United States, Canada, the United Kingdom and Ireland as of end of Q3 2021 includes seasonal shops and excludes vending machinesInternational franchise locations in Chile, South Africa, Australia, India, China, Kuwait, Qatar and the United Arab Emirates as of end of Q3 2021 19 © 2022 Build-A-Bear Workshop, Inc.
DIVERSE DIGITAL EXPERIENCES Build-A-Bear offers various online shopping experiences and product options to meetthe preferences of diverse consumer segments for multiple occasions Third party marketplacesallow consumers to shoponline at their preferred site Slightly cooler and slightlyedgier, while still on brand,with many web-exclusive products for teen and adultgift givers and collectors Makes gift shopping easy andfun with options sorted byseason, occasion, recipient,price and category 20 www.buildabear.com An e-commerce option thatdelivers convenience andefficiency; popular with giftgivers and affinity segments A guided process thatgives consumers a highercustomization experiencewith additional engagementfeatures A revolutionary and unique interactive make-your-own animated digital experience to create the perfect furry friend from anywhere the consumer wants to shop A new gifting solution offering stylish, themed, curated gift boxes for a convenient online option for a wide range of adult-to-adult gifting occasions © 2022 Build-A-Bear Workshop, Inc.
GROWING AND PROFITABLE E-COMMERCE PLATFORM 2021 projected to exceed $70MM in sales with a34.5% CAGR since 2016 E-commerce in both US and UK Positive site traffic trends +30% over prior year*Unique visitors average ~2.6M/month**Site visits average ~4.2M/month** Addition of Salesforce technology expanded digital capabilities and efficiencies in marketing and analyticsOngoing digital developments and initiatives planned or underway designed to drive further growth including recently launched experiential Bear Builder 3D WorkshopOrder fulfillment supported by new warehouse management system and omnichannel capabilitiesIn additional to modern warehousing, physical stores serve as mini distribution centers for online orders leveraging existing real estate and labor costs *FY2021 through December**Combined US and UK sites 21 Nearly 20% of net retail sales in 2021, up from 4% in 2012 © 2022 Build-A-Bear Workshop, Inc.
DIGITAL MARKETING CAPABILITIES DRIVING E-COMMERCE DIGITALTRAFFIC AVERAGE ON-LINEORDER VALUE OPTED-INEMAIL LIST DIGITAL RETURN ONAD SPEND (ROAS) +12% +30% +3% +80% INCREASE IN IMPRESSIONSDRIVEN BY DIGITAL ADVERTISING +278% INCREASE IN GOOGLE SEARCHFOR "BUILD-A-BEAR" IN US +36% Traffic driven with messaging to over 12MM opted-in email accounts including over 9MM Bonus Club members as well as social media platforms like Facebook, Instagram, Google Ads (YouTube, Search, Display), TikTok, and programmatic marketing +125% increase in digital transactions from new guests Digital demand +12% 2021 vs 2020 +187% 2021 vs 2019 DIGITAL TRANSACTIONSFROM LAPSED GUESTS +124% Comparisons are for first nine-months of FY2021 compared to first nine-months of FY2020 unless otherwise noted 22 © 2022 Build-A-Bear Workshop, Inc.
DIVERSE FORMATS AND BUSINESS MODEL OPTIONS • Multiple formats serving a wide range of locations including tourist, traditional malls, shop-in-shops including Walmart, seasonal venues or event locations• Can operate for days (events such as the NFL Experience), weeks (Gaylord seasonal shops) to months and years Third-party retail model • Wholesale business model with entertainment and hospitality partners. Top partners include Carnival Cruise Lines and Great Wolf Lodge• Little to no startup capital to open stores and no direct operational overhead (rent, labor, etc) Currently 60 locations with 12 partners/ operators primarily in the US Corporately-managed store model 349 long-term and 8 seasonal locationsin the US, Canada, the UK and Ireland • Over 98% of NA stores projected profitable in FY2021 with over 25% average contribution margin• Omnichannel capabilities drive efficiency Wide range of formats: Multiple business model options: International franchise model Currently 73 locations in 8 countries • Long-term potential for expansion in existing and new territories• Established efficient supply chain support for sourcing products, fixtures and equipment Convenient WalmartShops Traditional MallStores TouristLocations ConcourseModel SeasonalShops VendingMachines Events CruiseShips 23 Store counts at end of Q3 2021 excludes vending machines © 2022 Build-A-Bear Workshop, Inc.
NOT OVERSTORED: FUTURE GROWTH PLANNED IN NORTH AMERICA Build-A-Bear can match the real estate opportunity with the business model andstore format to optimize profitable growth with plans to add 15-20 locations overthe next 2-3 years in North America through a combination of corporately-managedand third-party retail models • Room to profitably expand: Over 98% of NA stores projected profitable in FY2021 with over 25% average contribution margin• Support for digital demand: Omnichannel capabilities drive store efficiency• High flexibility: Strong lease optionality with over 70% of locations having a lease event in next 3 years giving high flexibility to continually refine portfolio• Innovation pipeline - Build-A-Bear Adventure, a destination party-oriented concept, diversifies our location strategy and experiences - New vending machine (Automatic Teddy Machine or “ATM”) is low-labor, efficient way to add non-traditional locations such as airports, children’s hospitals and more - Hybrid center locations extend reach beyond enclosed traditional malls 24 © 2022 Build-A-Bear Workshop, Inc.
LEVERAGING BRAND STRENGTH TO DIVERSIFY REVENUE STREAMS OUTBOUND LICENSING leverages the emotional connection and trust that consumers have for Build-A-Bear allowing for expansion into non-plush products sold in other retailers 25 © 2022 Build-A-Bear Workshop, Inc.
LEVERAGING BRAND STRENGTH TO DEVELOP CONTENT & ENTERTAINMENT The emotional connection with the brand makes content and story-telling a central part of consumer engagement. Build-A-Bear Entertainment creates original music, videos and movies in partnership with leaders in the entertainment industry that serves as marketing to drive interest in other revenue channels MOVIES RADIO MUSIC 26 © 2022 Build-A-Bear Workshop, Inc.
FINANCIALS
FIRST NINE-MONTHS 2021 FINANCIAL SNAPSHOT TOTAL REVENUES $281.6MM +74.2% OVER 2020+20.3% OVER 2019 PRE-TAX INCOME +$61.6MM OVER 2020+$36.6MM OVER 2019 HIGHEST FOR FIRST NINE-MONTH PERIOD IN NEARLY25-YEAR HISTORY CASH AND EQUIVALENTS $48.5MM +$22.7MM OVER 2020+$42.3MM OVER 2019 GROSS PROFIT MARGIN 52.7% +2,150 BPS VS 2020+960 BPS VS 2019 THE MOST PROFITABLE FIRST NINE-MONTHPERIOD IN BBW HISTORY • The combination of the most profitable first half and third quarter in BBW’s history resulted in the most profitable first nine-months in our company’s history• Business trends have continued to be positive into the current fourth quarter and while we are navigating an environment with higher costs and a tight supply chain as well as monitoring the ongoing evolution of the pandemic, we are optimistic about our full-year performance and have again raised our annual guidance $30.6MM 28 © 2022 Build-A-Bear Workshop, Inc.
UPDATED GUIDANCE FOR Q4 2021 AND FISCAL 2021 TOTAL REVENUES ~$128.4MM VS $93.7MM IN Q4 2020VS $104.6MM IN Q4 2019 PRE-TAX INCOME VS $10.8MM IN Q4 2020VS $7.6MM IN Q4 2019 EBITDA ~$22.9MM ~$19.4MM 29 © 2022 Build-A-Bear Workshop, Inc. Q4 2021 PROJECTED RESULTS AT THE MIDPOINT OF THE UPDATED GUIDANCE FISCAL 2021 PROJECTED RESULTS AT THE MIDPOINT OF THE UPDATED GUIDANCE TOTAL REVENUES ~$410MM VS $255.3MM IN FY2020VS $338.5MM IN FY2019 PRE-TAX INCOME ~$50MM VS $14.1MM IN Q4 2020VS $10.9MM IN Q4 2019 VS ($20.2MM) IN FY2020VS $1.6MM IN FY2019 VS ($7.0MM) IN FY2020VS $15.3MM IN FY2019 EBITDA ~$62.5MM Guidance range of $408MM-$412MMvs previous guidance of $390MM-$400MM HIGHEST IN NEARLY25-YEAR HISTORY Guidance range of $49MM-$51MM Guidance range of $61.5MM-$63.5MM vs previous guidance of $55MM-$60MM The updated guidance assumes no additional material COVID impact either in our supply chain or store operations
CURRENT MANAGEMENT LED SUCCESSFUL BUSINESS TURNAROUND 2021 reflects management’s current projections for the fiscal year. Total revenues and EBITDA reflect the mid-point of the Company’s latest annual guidance $384 $410 2012 2021 In millions TOTAL REVENUES 2021 highest level in over a decade EBITDA Over $80MM swing in profitability PROFITABLE STORES In North America LOCATION DIVERSIFICATION More than doubled non-traditional locations AVERAGE DOLLARS PER TRANSACTION Over 50% appreciation in Avg DPT Contributionmargin <10% Contributionmargin >25% 2012 2021 $35.50 ~$54.00 15% ~33% 2012 2021 % of locations in non-traditional malls 80% 98% 2012 2021 % of NA stores that are profitable DIGITAL DEMAND Digital revenue has grown to >$70MM 2012 2021 % of Net Retail Sales 4% 20% ~ In millions 30 © 2022 Build-A-Bear Workshop, Inc. $62.5
CAPITAL MARKETS SUMMARY* Board authorized a share repurchase program of up to$25MM effective through November 30, 2023 Exchange and Ticker NYSE: BBW Corporate Headquarters St. Louis, MO 15.4MM 16.1MM $23.34 / $4.09 $284.1MM $0 Basic Shares Outstanding* Diluted Shares Outstanding* 52 Week High/Low Market Capitalization Borrowings on Credit Facility Information on Shares, Market Capitalization and Borrowings on Credit Facility as of December 31, 2021* Basic and Diluted shares are the year-to-date weighted average as of December 31, 2021 31 © 2022 Build-A-Bear Workshop, Inc.
ACCOMPLISHED & DRIVEN TEAM FOCUSED ON DIVERSIFIED GROWTH
2020 RAPID AND DISCIPLINED COVID RESPONSE Focused immediately onpreserving CASH andreducing EXPENSES Shifted to VIRTUALworkforce at HQ Pivoted to manage TRIPLE-DIGITincrease in e-commerce demand Furloughed over 90% of workforce;Salaries temporarily reduced for all others Simultaneously executed key initiatives with emphasis on driving growth Accelerated the digital transformation to drive awareness, demand and revenue • Drove demand with key licensed products with e-commerce first strategy • Innovated with digital only promotions and eventsRapidly evolved retail leveraging rent optionality and safely reopening with modified service model • Implemented omnichannel initiatives with Buy Online Ship From or Pickup in Store leveraging available labor and inventory • Over 99% of leases were renegotiated in NA (and >90% in EU)Secured financial stability and well-being • Secured new asset-based credit agreement • Restructured organization and reduced corporate overhead Initial crisis management when governmental mandates forced all stores to temporarily close 33 © 2022 Build-A-Bear Workshop, Inc.
2021: SHIFT TO DELIVERING PROFITABLE GROWTH Further acceleration of digital transformation Leverage financial position to drive growth Expand digital capabilities and drive optimization across the entire organization to grow revenues and improve profitability including content and entertainment initiatives Extend ways to connect with and meet the changing needs of consumers across all retailchannels while driving omnichannel engagement and expanded delivery options Maintain the financial discipline required to support our business while leveraging strong balance sheet to make select strategic investments designed for future growth while continuing to manage through ongoing COVID impacts Rapidly evolve omnichannel retail capabilities 34 © 2022 Build-A-Bear Workshop, Inc.
2022: PLANS FOR SUSTAINED PROFITABLE GROWTH Increase repeat purchases leveraging the addition of new advanced digital capabilitiesExpand addressable consumer base beyond kids with new products and incremental purchase occasionsUtilize digital media, content & entertainment as marketing and brand-building tools to engage consumers and drive sales Strategically add locations in North America over the next 2-3 years thru corporate and third-party retail focused on tourist locationsCapitalize on BAB’s 25th celebration to drive incremental visits and salesRe-introduce in-store parties (after COVID hibernation) with a fresh take and homage to our 25th “birthday”Develop new digital experiences such as the recently launched Bear Builder 3D Workshop to drive digital demand 2 Leverage omnichannel capabilities while evolving retail experiences 1 Leverage ongoing digital transformation to drive growth Maintain disciplined expense management, including SG&A, as well as ongoing lease negotiations retaining optionality while continuing to evolve real estate portfolio and navigate ongoing COVID disruptionStrategically manage capital to support key initiatives and innovation developments 3 Leverage financial strength and drive sustained profitability © Build-A-BearWorkshop, Inc. 35 © 2022 Build-A-Bear Workshop, Inc.
2022 SELECT PLANNED INITIATIVES Leverage omnichannel capabilitieswhile evolving retail experiences Leverage financial strength and drive sustained profitability Leverage ongoing digitaltransformation to drive growth …To reach more consumersDrive lifetime value: leverage advanced capabilities including new loyalty module to use our first party and rich first party CRM databaseExpand lead acquisition: Expand addressable market with focus on gifting, affinity and collectible consumers…To offer more experiencesExpect to add 15-20 locations in North America in the next 2-3 years through the planned expansion of corporate and third-party retail focused on tourist locationsCapitalize on the 25th celebration throughout 2022 with exclusive products and eventsAfter not celebrating birthdays and parties in our Workshops due to COVID for nearly 2 years, we expect to reintroduce in-store parties, that historically accounted for 5% of retail salesLeverage digital experiences such as Build-A-Bear Gift Shop, the Bear Builder, Bear Cave and the recently launched Bear Builder 3D Workshop and HeartBox gifting option…To fuel innovationExpand newly created vending machine model or ATM’s (Automatic Teddy Machines) through a relationship with Hudson, a leader in travel retail, adding 25-50 ATM’s/locations in airports over the next 2 yearsExpected launch of a new retail concept called BUILD-A-BEAR ADVENTURE in off-mall locations that includes party rooms, game room, the Build-A-Bear experience and e-commerce fulfillment capabilities 36 © 2022 Build-A-Bear Workshop, Inc.
PROVEN MANAGEMENT TEAM Sharon Price John President and Chief Executive Officer Former President of Stride Rite Children’s Group LLC,a division of Wolverine World Wide, Inc. Also: Hasbro,Inc., VTech Industries, Inc. and Mattel, Inc. Eric Fencl Chief Administrative Officer,General Counsel and Secretary Former Executive Vice President, General Counsel andSecretary: Outsourcing Solutions Inc.; Legal positions at Monsanto Company, McDonnell Douglas Corporationand Bryan Cave LLP. Also: Arthur Young & Company Jennifer Kretchmar Chief Digital & Merchandising Officer Former Senior Vice President of Product and BrandManagement of Stride Rite Children’s Group LLC,a division of Wolverine World Wide, Inc. Also: The Timberland Company, Goldbug, and the United States Department of Agriculture Foreign Service Chief Operations Officer J. Christopher Hurt Former Senior Vice President, North America and VicePresident/ General Manager - Factory, Canada, Mexico RetailAmerican Eagle Outfitters, Inc.; Also: Polo Ralph Lauren andThe Procter & Gamble Company Voin Todorovic Chief Financial Officer Former Head of Finance and Operations Lifestyle GroupWolverine World Wide, Inc.; Vice President - Finance andAdministration of the Stride Rite Children’s Group. Also:Collective Brands, Inc. and Payless ShoeSource 37 © 2022 Build-A-Bear Workshop, Inc. Passionate and driven management team that returned the company to profitability while simultaneously executing a multi-faceted diversification strategy to leverage the strength of the brand while developing an integrated omnichannel platform, restructuring the organization and adding critical talent, creating new retail business models and systematically rebuilding IT infrastructure to support strategy and growth
ACCOMPLISHED BOARD OF DIRECTORS George Carrara Director Narayan Iyengar Director Maxine Clark Director and Founder Sharon Price John Director, President and Chief Executive Officer Director Robert L. Dixon Jr. Non-Executive Chairman Craig Leavitt Lesli Rotenberg Director Former CEO/Director: Kate Spade & Company;President Global Retail: Link Theory Holdings.Also: Diesel, S.p.A, and Polo Ralph Lauren CEO: Clark-Fox Family Foundation, Founder andFormer Chief Executive Bear: Build-A-Bear Workshop.Also: Payless ShoeSource and The May DepartmentStores Company Former President of Stride Rite Children’s Group LLC,a division of Wolverine World Wide, Inc. Also: Hasbro,Inc., VTech Industries, Inc. and Mattel, Inc. Former Chief Programming Executive & General Manager,Children’s Media & Education of the Public Broadcasting Service(PBS); Senior management at Discovery Communications, Inc. Former Senior Vice President, Digital and E-Commerce: AlbertsonsCompanies; Vice President, E‑Commerce and Digital Analytics: TheWalt Disney Company. Also McKinsey & Company Former President and Chief Operating Officer: Kate Spade &Company; Chief Operating Officer: Tommy Hilfiger North America.Also: Mirage Apparel Group and Price Waterhouse Owner: The RD Factor, Inc.; Former Global Chief InformationOfficer and Senior Vice President of PepsiCo, Inc. Also: Procter& Gamble Company 38 © 2022 Build-A-Bear Workshop, Inc.
BUILD-A-BEAR IN SUMMARY Highly profitable business with strong profit marginsand significant cash resources Strong brand that connects emotionally with global reach Poised for future advancement with an established platformreaching broad consumer segments through a diversified omnichannelbusiness model Led by a seasoned and accomplished management team thattransformed the business into a profitable, digital, growth company 39 © 2022 Build-A-Bear Workshop, Inc.
Explanatory Note on Non-GAAP Financial Measures 40 © 2022 Build-A-Bear Workshop, Inc. Build-A-Bear Workshop (NYSE: BBW) reports it financial results in accordance with generally accepted accounting principles (GAAP). We have supplemented the reporting of our financial information determined in accordance with GAAP with certain non-GAAP financial measures. These results are included as a complement to results provided in accordance with GAAP because management believes these non-GAAP financial measures help identify underlying trends in the Company’s business and provide useful information to both management and investors by excluding certain items that may not be indicative of the Company’s core operating results. These measures should not be considered a substitute for or superior to GAAP results. These non-GAAP financial measures are defined and reconciled to the most comparable GAAP measure within this appendix.
Reconciliation of Non-GAAP Measures:Updated Guidance for Q4 2021 and Fiscal 2021 41 © 2022 Build-A-Bear Workshop, Inc. $ in millions Q4 FY21 FY21 Midpoint FY21 Range Previous Guidance Income before income taxes (pre-tax) $19.4 $50.0 $49.0 - $51.0 $42.0 - $46.0 Interest $0 $0 $0 $0 Depreciation & Amortization $3.5 $12.5 $12.5 $13.0 - $14.0 Earnings before interest, taxes, depreciation and amortization (EBITDA) $22.9 $62.5 $61.5 - $63.5 $55.0 - $60.0
Reconciliation of Non-GAAP Measures:Q4 and Fiscal 2020; Q4 and Fiscal 2019 42 © 2022 Build-A-Bear Workshop, Inc. $ in millions Q4 FY20 FY20 Income before income taxes (pre-tax) $10.8 ($20.2) Interest $0 $0 Depreciation & Amortization $3.3 $13.2 Earnings before interest, taxes, depreciation and amortization (EBITDA) $14.1 ($7.0) $ in millions Q4 FY19 FY19 Income before income taxes (pre-tax) $7.6 1.6 Interest $0 $0 Depreciation & Amortization $3.3 $13.7 Earnings before interest, taxes, depreciation and amortization (EBITDA) $10.9 15.3
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