Download Vertical Branding Inc.

Vertical Branding
OTC BB: VBDG
Safe Harbor Statements
VBDG.OB
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.
Who We Are
VBDG.OB

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.
What you’re about to hear…
VBDG.OB
What is Unique & Compelling about Vertical Branding

All About Our Products

Our Marketing & Sales Approach

Financial Information

Management
What is Unique & Compelling about VBI
VBDG.OB

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.
It’s all about the Products…
VBDG.OB
Current Products

Product Pipeline

Product Development and Selection
Current Product Overview
VBDG.OB
Vertical
Branding’s
products make
life easier
and/or more
affordable by
answering
My PlaceTM
Steam BuddyTM
unique
consumer
needs in
innovative
ways
VBI Product Pipeline
VBDG.OB
Vertical
Branding’s

Develop our own proprietary products and brands
track record
of success
makes us

License products from third parties
attractive to
inventors and

Dozens of potential new product opportunities
reviewed every month submitted by inventors,
vendors, manufacturers, trade shows, etc.
license holders
as a potential
home for their
products
Expertise in Product Development & Selection
VBDG.OB

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)
Our Marketing and Sales Approach
VBDG.OB

Creating and testing the campaign
Transactional
Marketing

Transactional Marketing
Media
generates


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
revenues on
the “front end”
while creating
Brand
Awareness
used to drive
Retail Sales
Creating & Testing the Campaign
VBDG.OB
Transactional

Television commercials, Internet marketing,
and print advertising is created and tested
Marketing
allows
continual

Limited amount of media is purchased during
testing phase
testing and
refinement of
the marketing

Results are then analyzed, gauging response
and profitability prior to national media rollout
message and
the value
proposition
Transactional Marketing Highlights
VBDG.OB

Simultaneously generates revenues and builds brands
“Brand”
advertisers

Transactional media net costs are a fraction of
conventional brand/image advertising
now engaged
in direct
marketing on

Immediate, lasting return on marketing investment
Response is measurable
Creation of a direct, lasting customer relationship
Gives management sound basis for marketing tactics
TV and online:
P&G
GM
Ford
TiVo

Enables metrics-based marketing and management
Kodak
Discover
Retail Distribution Highlights
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%
My Place units prominently displayed at Bed Bath & Beyond
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
Transactional/Retail Synergies
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
Deepening Relationship with Retailers
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
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
Category Captain –
VBI Partners with its Own Retailer Customers
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)
As category
captain, VBI
controls hightraffic “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
Other Wholesale Channels
VBDG.OB
Catalog

Home Shopping Channels

International Distribution
Vertical
Branding’s media
exposure creates
tremendous
appeal among
transactional
marketers…
having multiple
distribution
channels helps
fuel our growth
VBDG.OB
Financial Information
Financial Highlights
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)
Since acquiring
retail division in
August 2006,


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
revenues,
margins and
profitability
have shown
dramatic,
sustained
improvement
Financial Highlights, continued
VBDG.OB
60
$
48.5 E
50
36.4
M
I
L
L
I
O
N
S
40
Achieving the
30
mid-point of
23.1
2008 revenue
20
10
guidance
8.1
would result
0
in a CAGR
2005
2006
2007
Revenues
2008 E
(midrange)
since 2005 of
81.6%
Selected Income Statement Data
VBDG.OB
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%
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
Gross margin *
* 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
Selected Balance Sheet Items
VBDG.OB
(Dollars in thousands)
Cash & Equivalents
Dec. 31, 2006
November,
2007:
Dec. 31, 2007
$105
$30
Current Assets
$7,926
$8,089
Total Assets *
$17,737
$17,147
million equity
$7,291
$7,845
investment in
Current Liabilities
RENN Capital
made a $4
Vertical
Long-term debt
Minority Voting Interest in Subs.
$6,550
$4,451
$580
$528
Branding,
allowing
favorable
Shareholders’ Equity
$2,804
$4,323
restructuring
of long-term
* Excludes legacy commercial real estate operations
debt
Corporate Snapshot
VBDG.OB
Corporate HQ
Los Angeles, CA
Ticker Symbol
VBDG
Exchange Traded
Industry
No. of Employees
OTC BB
thumbnail
description of
Consumer Products
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
One possible
$1.8 million
Vertical
Branding:
A mini-
Procter &
Gamble …
Peer Company Comparisons
VBDG.OB
Vertical Branding’s price-to-sales ratio is 0.34 (4/25/08),
low relative to other transactional marketing companies:
Vertical
Branding
is trading at

NutriSystem (NTRI): 0.83x
More limited consumer base than Vertical Branding
(specializes in diet products)
approximately
one-third of
its sales per


Bare Escentuals (BARE): 4.03x
share, a
Specializes exclusively in beauty products,
less diversified than Vertical in distribution channels
significant
AeroGrow (AERO): 1.18x
peer
Highly specialized in indoor gardening products/supplies;
only two years of operations
companies …
discount to
Management Team
VBDG.OB

Nancy Duitch – Founder, Chief Executive Officer and Director
The
Company’s
management

Dan McCleerey – Chief Financial Officer
team has
over 75 years
of combined

John Cammarano – President, Retail Sales
experience,
cumulative

Chris Lipp – Vice President and Corporate Counsel
lifetime track
record of
billions of

Evan Warshawsky – Vice President, Strategic Development
dollars in
sales
Investment Highlights
VBDG.OB

Strong track record of successfully selecting popular
products and mass-marketing them through multiple
sales channels
Vertical
Branding
has a rare
combination of

Transactional marketing strategy “road-tests”
products, builds brands, optimizes retail channel sellthrough

Margins and profitability trends improving

Scalable business model leverages profits from
successful mature products to support robust new
product pipeline
track record,
sustainable
and scalable
business
model and
deep
management
expertise
VBDG.OB
Vertical Branding
OTC BB: VBDG
Appendix – GAAP Reconciliation
VBDG.OB
(Dollars in thousands)
Three months ended
December 31,
Twelve months ended
December 31,
Net income (loss) for the period
Interest expense, net
Provision for income taxes
Depreciation and amortization
Other charges
Non-cash stock based compensation
Legal settlement
Loss from discontinued operations
2007
$ (3,781)
251
1,021
314
875
136
120
-
2006
$
307
328
46
240
96
-
2007
$ (3,447)
1,228
1,047
1,240
1,052
570
120
28
2006
$ (2,757)
614
53
561
218
141
Adjusted EBITDA
$ (1,064)
$
$
$ (1,170)
1,017
1,838
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.