yliving discussion q3 hindsight & q4 priorities 2013

YLighting Acquisition, LLC – Proprietary and Confidential

YLiving.com Discussionq3 Hindsight & q4 priorities 2013


Session Objectives

• Review of 2013 YTD Performance – Financial and Operational

• Align on Q4 Forecast and Key Priorities


2013 YTD Recap (through 9/30/13)

• Financial– Year-to-date YCS Bookings $8.2M vs. plan $9.9M (-20%) & +31% comp to LY – Q3 Results were tough; -$1.5M to plan (-37%); -620k (-19%) to revised forecast;

• to forecast $200k Knoll miss, $60k bath, $360k balance – Q4 forecast resubmitted to reflect an additional $800k of risk ($400k bath; $400k YV); bringing

total Q4 miss to plan to $1.15M (-27%) – Total YCS demand forecasted to miss annual plan by -20% and deliver a 27% comp. – GAAP Revenues forecasted to miss annual plan by -18% and deliver a 31% comp. – Gross Margin is 31.3% YTD vs. 32.5% target, forecasted at 31.9% on annual basis.

• Improved a bit in q3 with August Margin rate @ 32.2% (highest of the year) • Should continue to improve as we take advantage of inventory @ a discount, adjust

shipping methods/fees to control COGS worst offenders, implement brand shipping policies, allow upgraded WG)

– Freight revenue is becoming material: projected at $200k TY vs. $40k LY– New Brand additions are driving significant growth:

• Revenue attributed to NEW vendors that were not in our matrix in 2012 represent appx. 15% of September revenue and 8% YTD. Key additions from Spacify include: Catellan Italia, Steelcase & Rossetto.

• Significant Brands exceeding plan: Modloft, Bludot, Tom Dixon, Modernica, Loll, Modern Fan, Fiam

• HMM & Knoll are around +15% comp—outperforming flat plans (but with volatility) • Significant Brands missing plan: Calligaris, Domitalia, Emeco, Vitra, Gus • Kartell had a promotional shift in July, so is now -7% to LY, but should recoup that in

October; will still miss plan for the year.


2013 q3 Recap – Marketing Metrics & Performance

YLiving

Q3 Recap

Web Metrics + Online Marketing

Web Metrics* 2013A 2013P 2012A % Plan % LY % Ttl '13 % Ttl '12

Visits 571,933 --- 453,474 --- 26.1% --- ---

Page Views 2,085,757 --- 2,042,363 --- 2.1% --- ---

Pages/Visit 3.6 --- 4.5 --- -19.0% --- ---

New Visitors 330,291 --- 276,483 --- 19.5% --- ---

Visits by Source

CPC 208,919 --- 75,079 --- 178.3% 36.5% 16.6%

Referral 178,725 --- 187,295 --- -4.6% 31.2% 41.3%

Direct 91,003 --- 58,326 --- 56.0% 15.9% 12.9%

Organic 90,552 --- 132,722 --- -31.8% 15.8% 29.3%

Other 2,734 --- 52 --- 5157.7% 0.5% 0.0%

Visits by Country

US 489,237 --- 380,089 --- 28.7% 85.5% 83.8%

Canada 15,509 --- 13,112 --- 18.3% 2.7% 2.9%

Other 67,187 --- 60,273 --- 11.5% 11.7% 13.3%

Visits by Device

Desktop 433,297 --- 374,230 --- 15.8% 75.8% 82.5%

Tablet 95,856 --- 56,823 --- 68.7% 16.8% 12.5%

Mobile 42,780 --- 22,420 --- 90.8% 7.5% 4.9%

Visits by Entry

Homepage 74,895 --- 46,997 --- 59.4% 13.1% 10.4%

Other 497,038 --- 406,477 --- 22.3% 86.9% 89.6%

* source: Google Analytics


Online Marketing** 2013A 2013P 2012A % Plan % LY % Ttl '13 % Ttl '12

pRev $ 1,228,146 $ 1,512,745 $ 891,573 -18.8% 37.8% 44.0% 33.8%Spend $ 310,217 $ 291,543 $ 181,413 6.4% 71.0% --- --- pROAS 395.9% 518.9% 491.5% -23.7% -19.4% --- --- pRev by OLM Channel

SEM $ 604,413 765,740 $ 494,475 -21.1% 22.2% 21.6% 18.8%

PLAs $ 202,569 369,388 78,017 -45.2% --- 7.3% ---

CSE $ 55,106 171,251 170,374 -67.8% --- 2.0% ---

Affiliates $ 217,272 38,056 39,706 470.9% --- 7.8% ---

Houzz $ 91,460 101,535 70,093 -9.9% --- 3.3% ---

Retargeting $ 48,898 65,238 $ 36,730 -25.0% 33.1% 1.8% 1.4%

Content/Beta $ 8,428 1,537 2,178 448.3% --- 0.3% ---

Subtotal $ 1,228,146 $ 1,512,745 $ 891,573 -18.8% 37.8% 44.0% 33.8% pRev by All Sources

Direct $ 463,696 --- $ 499,822 --- -7.2% 16.6% 19.0%

Organic nonbrand $ 451,228 --- $ 317,850 --- 42.0% 16.2% 12.1%

PPC nonbrand $ 382,798 --- $ 353,824 --- 8.2% 13.7% 13.4%

Affiliate $ 373,693 --- $ 44,064 --- 748.1% 13.4% 1.7%

PPC brand $ 248,077 --- $ 156,430 --- 58.6% 8.9% 5.9%

PPC Google Product $ 147,701 --- $ 43,018 --- 243.3% 5.3% 1.6%

Newsletter $ 106,046 --- $ 84,415 --- 25.6% 3.8% 3.2%

CSE $ 105,271 --- $ 188,673 --- -44.2% 3.8% 7.2%

Phone Nocode $ 48,325 --- $ 521,576 --- -90.7% 1.7% 19.8%

Organic brand $ 28,024 --- $ 29,790 --- -5.9% 1.0% 1.1%

Social $ 18,578 --- $ 25,241 --- -26.4% 0.7% 1.0%

Other $ 418,623 --- $ 370,847 --- 12.9% 15.0% 14.1%

Total $ 2,792,060 --- $ 2,635,550 --- 5.9% 100.0% 100.0%

** sources: Convertro, PLM reporting

2013 q3 Recap – Marketing Metrics & Performance


2013 YTD Recap (through q3)

• Marketing – Total Traffic soft to plan: forecast at 32% growth for the year (1.8M uniques); YV experiencing

high variability in traffic comp’s with significant weakness since May. – Organic traffic is in freefall: q3 -31.1% comp; – PPC/SEM ROAS is underperforming; We are spending to plan for less than planned results– Direct P-rev showed growth in q3 +38% to LY – We have executed promotions well to mixed results:

• Gus Sale in January –flat performance to LY • Knoll Sale in Feb/March was successful +110% comp; YET September dropped 50%• HMM Sale was flat even though we did everything possible to drive results; next big one 11/25-

12/12 – We have executed more editorial oriented home page & email messages than LY.

• Sales – Sales team in flux: Allison went to a competitor; Amy is selling a ton, but with training

opportunities, Craig is new. Opportunities to implement more formal processes with lead follow up should be addressed.

– Drupal cart impacts quoting system in that orders aren’t pushed into YCS w/o payment; follow up on quotes is made more difficult; impact was felt during Knoll sale for the first time.

• Site Experience – We have made slight site improvements as we work toward shared templates but there is

much to be done. • Launched new home page with Bath • We had major hiccups with cart on first/last day of Knoll sale where prices were not

syncing in cart quickly enough and there was clear business impact. • SOLR search launched


2013 YTD Recap (through q3)

• Operational– The core product/merchandising team is adjusting well to the realignment. Early

indications are good that the level of engagement is improved and the team is working together more closely with a shared definition of success.

• We have pivoted to execute the Holiday site experience which includes October BIG brand promotions as well as a gifting experience.

• Queue work is centered on refreshes and accessories for holiday; We launched 1566 products in q3 which was just short of plan 1600 & an improvement vs. 2232 in the entire first half.

• We fully refreshed Knoll, Kartell, GUS & Vitra in the quarter. 4/5 Tier 1’s now refreshed.

• Site reviews are driving best practice conversations & training the team– We have increased our investment in inventory in order to compete and improve

gross margins; this has stressed the team/systems as our tools/reporting/processes are laborious and involve many pass-offs

– But, Alex is catching up and making a dent on inventory management; On YV we have reviewed most BOX based vendors; updated assortments.

– Pro-actively for holiday, we have reviewed (hope to get to all by eom October) all box-based YV vendors to ensure assortments are current and stocked where appropriate.

– Swatch follow up process is very much needing retooling; feedback from Sales that customers aren’t getting their swatches in a timely manner from vendors; no clear reporting or visibility with current process.


2013 Q4 Forecast and Key Focus Areas

• Annual forecasted GAAP of -18% to plan is the RISK. While we’re projecting growth of 31%, it is not plan of 60%. There is more opportunity to capture and groundwork to lay for 2014 growth.

• YV needs to focus on execution to deliver as close as possible to plan by: – Continuing to launch new brands that will deliver meaningful SALES and build out furniture

categories that are strategically relevant. – Refreshing all brands to ensure assortment is current-now moving through tier 2– Hitting the targets of product additions (1500 per quarter average)– Execute Holiday promotions flawlessly with full support –Herman Miller, Kartell, Vitra, Gus – Delivering a compelling Gift experience on 11/4 – Align approach for ensuring Holiday orders are a great customer experience; review site

assortment to reduce discontinued items; out-of-stocks; order promptly when needed from vendor;

– Competing for conversion with inventory availability where possible.

• To drive future growth, it is critical that YV take advantage of the full Ybrand platform, sharing a site/cart with Ylighting and deliver improvements to our site experience

– Building the foundation for this tabbed site/shared cart experience is the goal of q4• YV template improvements to be consistent w/ YL • Global Navigation/footer launch • Improvements to cart; 1.5 release


Q4 Priorities1. Category/Assortment Strategy

– Continue to recruit brands to fill out major furniture categories; Recruit kids brands; Great gifts– Execute Compelling Holiday Gfit Guide including Gift Wrap, Gift Message, Gift Card and “order by messaging” – Execute BIG SALE events (Kartell, HMM, Vitra, GUS) holistically & try to capitalize

2. Product Data Management – Fully refresh —Calligaris, Modernica, Modloft, Copeland– Launch new products from existing brands concurrent with availability (as prioritized via mm)– Target : Add 1200 products

3. Improve Site experience – Standardize YV templates with YL new standard to prepare for future – Launch new YV homepage with Global navigation/footer/lightbox/TOPNAV/homepage templates (11/4) – Continuously improve search results with improved data – RTI on 70% of applicable business by end of year– Deliver Cart 1.5

4. Marketing & Sales – SEO improvements; focus on important categories/brands – Continue to refine PPC /retargeting—targeting 95% vs. Plan – Support marketing initiatives: Initiate engagement with relevant Editorial content and more planful approach to 2014 – Support planning for integrated brand campaign in q1 2014– Support customer retention OFI--Grow Email database--Opt-in swatch email addresses, light-box homepage signup– Sales lead process for HMM Sale in November –swatch follow up process

5. Improve Operations/Logistics– Continuous improvement on customer experience; WG upgrades, reduction of damages and improvement in margin – Tighten up gift order delivery; build process to ensure orders aren’t sitting, waiting to be passed to vendor; – Box –Thanksgiving coverage?

6. People– Fully onboard merchandise manager & recruit 1 additional ; Onboard Inventory planner & Content Lead & Establish criteria for

success – Define role for Sales ops, Recruit & onboard– Team transformation to high-performing! Focus on team dynamic between YV merch/product content/CS/Sales –

align expectations, process and goals.

yliving discussion q3 hindsight & q4 priorities 2013

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