Executive Summary


Company Overview

Third Channel (or the “Company”) is a recognized industry leader in retail technology and workforce solutions for a premier customer base of many of the world’s leading consumer brands. The Company has a profitable and established business model and strong, sustainable competitive advantages. ThirdChannel’s proprietary could-based omni-channel technology platform comprises an end-to-end SaaS solution and analytics engine with millions of aggregated data points made available to brands to optimize in-store and online sales strategies, allocate people and capital more efficiently, and manage thousands of locations from anywhere. The Company’s flexible workforce solution comprises an online marketplace of over 250 thousand independent contractors that may be deployed across hundreds of brand retail locations. ThirdChannel’s end-to-end management of this workforce includes identification and vetting, onboarding and training, scheduling and payment, and performance tracking and analytics. By utilizing the Company’s differentiated solutions, brands optimize their retail touchpoints, resulting in improved retail sales performance and more satisfied consumers. The Company has a profitable and well-established business model and a strong revenue growth trajectory with a significant portion of its revenues generated under a predictable SaaS-based recurring revenue model. ThirdChannel was founded in 2014 and is headquartered in Boston, Massachusetts and currently employs 48 full-time employees. In 2022, ThirdChannel is projected to generate $15.5 million of revenue and $2.6 million of adjusted EBITDA

HISTORICAL & PROJECTED
REVENUE ($m)
HISTORICAL & PROJECTED
ADJUSTED EBITDA ($m)

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EXECUTIVE SUMMARY (CONT.)


Customer Base

ThirdChannel targets premier consumer brands that offer premium-priced,highly-distinguishable products amongst crowded categories. The ideal ThirdChannel customer has national wholesale distribution and meaningful direct-to-consumer and eCommerce penetration. ThirdChannel currently serves roughly 40 total customers including many prominent and globally- recognized brands including Adidas, Yeti, Coach, and Oakley. Through these customers, ThirdChannel’s solutions are powering sales and improving consumer experiences across hundreds of retail stores across the country

SELECT CURRENT CUSTOMERS

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Market Opportunity

ThirdChannel operates in the massive and rapidly-growing global retail technology market which serves the vast global retail market, one of the few major global markets yet to be transformed by technological innovation. The global retail technology market was valued at $144 billion in 2020 and is projected to grow to a staggering $389 billion by 2026. As consumerism forces evolution in retail, there is an increasing necessity for brands to take greater control of and exert more influence on the consumer shopping experience, which is where ThirdChannel comes in. In the modern retail environment, it has become essential for brands to facilitate high-touch, informative, personalized, and convenient shopping experiences if they are to capture incremental consumer wallet share over competitors, and to do so, retailers must have real-time insight into their online and in-store retail sales activity. As brands continue to reform their go-to-market strategies and consider the most efficient strategies and solutions to execute their plans, ThirdChannel’s addressable market will continue to expand.


Competitive Landscape

ThirdChannel competes with pure retail technology companies such as Repsly and GoSpotCheck that provide cloud-based software solutions for analytics and retail execution management to major consumer brands. The Company also competes against services-focused companies such as Field Agent, Winston Retail, and Archrival that have limited technological capabilities. ThirdChannel is differentiated from these competitor groups as the only provider in the retail industry offering an omni-channel solution with both a modern technology platform as well as an extensive and data-driven field force empowered by technology.


Growth Strategy

ThirdChannel’s long-term growth strategy entails capturing additional market share in its current core market and continuing to invest in additional sales employees and marketing initiatives. The Company is focused on growing revenues from existing customers by way of a continued focus on its proven “land and expand” strategy, as well as by bringing new premier brand customers onto its platform


Transaction Dynamics

Having exceeded their financial goals in recent years, the shareholders believe that ThirdChannel will benefit from finding a strategic partner to assist the Company to accelerate future growth and capitalize on a sizable market opportunity. On behalf of ThirdChannel, Capital Clarity is soliciting non-binding Letters of Intent (LOIs) from selected parties interested in pursuing an acquisition of the Company. The Company, together with Capital Clarity, will evaluate each proposal and invite a limited number of parties to proceed with further due diligence, including discussions with ThirdChannel’s leadership team.

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INVESTMENT HIGHLIGHTS

  • Attractive and low-hanging opportunity to materially scale sales and marketing capabilities to realize significant market capture amongst more premier consumer brands.
  • Proven land-and-expand strategy, with the largest customer demonstrating over 270% YoY revenue growth from 2020 to 2021 portfolio sizes of only $2-3mm each.
  • Attractive and low-hanging opportunity to materially scale sales and marketing capabilities to realize significant market capture amongst more premier consumer brands
  • Proven land-and-expand strategy, with the largest customer demonstrating over 270% YoY revenue growth from 2020 to 2021 portfolio sizes of only $2-3mm each.
  • Attractive and low-hanging opportunity to materially scale sales and marketing capabilities to realize significant market capture amongst more premier consumer brands
  • Proven land-and-expand strategy, with the largest customer demonstrating over 270% YoY revenue growth from 2020 to 2021 portfolio sizes of only $2-3mm each.
  • Differentiated omni-channel technology and workforce platform is the only solution for brands seeking a technology- based and data-driven approach to last- mile retail operations management
  • Minimal direct competition with a compelling brand value proposition by improving retail sell-through and overall financial performance.
  • Strong revenue growth trajectory with YoY growth of 58% in 2021 and on track for ~50% YoY growth in 2022
  • Profitable business model with over 50% gross margins and profitability margins of over 15% in 2022 and expected to expand to over 30% by 2024
  • SaaS-based recurring revenues comprise ~40% of total revenues, providing significant visibility into future performance

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Third Channel is a premier provider of a differentiated omni-channel platform that providesmodern technology solutions and services for leading consumer brands seeking to optimize both in-store and online retail operations

COMPANY OVERVIEW

  • Third Channel is the retail industry’s only omni-channel in-store and eCommerce platform providing technology and people that enable premier brands to monitor, manage, and optimize last-mile retail operations from a single dashboard.
  • The Company’s proprietary could-based technology platform comprises an end-to-end SaaS solution and analytics engine with millions of aggregated data points made available to brands to optimize in-store and online sales strategies, allocate people and capital more efficiently, and manage thousands of locations from anywhere
  • Third Channel’s flexible workforce solution comprises an online marketplace of over 250,000 independent contractors deployed across hundreds of brand retail locations; the Company’s end-to-end management of this workforce includes identification and vetting, onboarding and training, scheduling and payment, and performance tracking and analytics

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Company Timeline

Company Founded

ThirdChannel is founded with an initial focus on college campuses and brick and mortar retailers using “brand right” independent contractors to perform work

Executing on Growth Initiatives

Significant investment in recruiting/onboarding, refinement on dispatch work efficiency, data collection in a sustainable and analytical manner and easily digestible data visualiza

Launch of Workforce Management System

Utilizes multiple inputs, demographic data, previous work, labor rates, geolocation and a series of ML based algorithms to automate the process of creating and distributing work; data collection and analytics improvement with the release of data warehouse and Tableau visualization

Renewed Focus on Core Business Post-Pandemic

Expands Adidas relationship into wholesale, upsells all in-place customers and begins integrating Needle acquisition to be able to service in-store and onlines to perform work

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  • 2014
  • 2015
  • 2016
  • 2017
  • 2018
  • 2019
  • 2020
  • 2021
  • 2022

First Major Customers Won

ThirdChannel wins foundational initial customers including Luxottica (Oakley)

Company Founded

Brian Tervo is brought on as President & COO to build out the technology platform and create scalable HR and planso work

Launch of Proprietary Recruiting, Onboarding and Implementation Founded

Integrated framework with robust applicant sourcing and tracking, background checks, and best-in-class learning competencies

Wins Adidas as a Major New Customer and Acquires Needle to Bolster eCommerce Capabilities

Wins a three-year agreement with Adidas for their DTC business and acquires Needle to complement in-store offerings with an componentwork

Go-to-Market Refined and Primed for Accelerated Growth

New functionality allows ThirdChannel to service DTC brick and mortar retailers, and brand manufacturers selling through wholesale and across all digital selling channels; heavily developed product offerings ready for significant sales and marketing spend to spur

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ThirdChannel Platform Overview

ThirdChannel is the only omni-channel in-store and eCommerce platform providing both technology and people that enables premier brands to monitor, manage, and optimize last-mile retail operations from a single dashboarder than 109 months. This figure compares to 10.5% of originations in Monachil’s portfolio.

TECHNOLOGY

ThirdChannel’s innovative cloud-based technology platform comprises an end-to-end solution and analytics engine with millions of aggregated data points that enables customers to optimize in-store and online sales strategies, allocate people and money more efficiently, and manage thousands of locations from anywhere at any time

PEOPLE

ThirdChannel’s technology platform is supported by a large and growing online marketplace of over 250,000 experienced brand experts who support ThirdChannel’s brand customers both online and in-store through visual merchandising, product education, product demonstrations, and eCommerce order fulfillment

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Differentiated Omni-Channel Solution


ThirdChannel maximizes brand ROI by employing its highly-differentiated omni-channel solution which ensures a consistent and seamless brand experience for the consumer both online and inside the store

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Under the traditional retail model, manufacturers spend hundreds of millions of dollars building their brands and bringing products to market, but during the last mile of sale, at the crucial moment when product hits stores, they go dark across thousands of locations with no visibility or ownership in the retail execution of their products

Under ThirdChannel’s optimized retail model, the Company’s sophisticated cloud-based software platform and its vast marketplace of experienced brand experts gives brands full ownership and visibility to consumer interaction, which allows them to continually optimize, personalize, and refine how consumers engage with their products

Brand Expert Matching Process

ThirdChannel follows a proven and well-established process for matching the ideal brand experts to satisfy each brand’s unique in-store and eCommerce needs

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Key In-Store Capabilities

ThirdChannel’s suite of technology-driven, next-generation in-store solutions are designed to optimize last-mile retail execution with up-to-the-minute, real-time visibility into store operations around the world, from anywhere

Inventory Management

Customers get real-time visibility into all of their stores at once to monitor inventory, restock low shelves, and pinpoint constant sales optimization opportunities for their field teams

Visual Merchandising

Monitor placement, location, and compliance for products while crafting in-store displays that allow shoppers to envision a lifestyle that the customer’s product provides, enabling the best result

Consumer Engagement

Customers get real-time visibility into all of their stores at once to monitor inventory, restock low shelves, and pin-point constant sales optimization opportunities for their field teams

Associate Training

Create a lasting brand impression with consumers; brand reps interact with consumers and take the time to intimately understand their needs to assist in sale

Demos & Assisted Selling

Monitoring, managing, and optimizing in-store product demo and sampling efforts to drive higher sales is a lot easier and allows consumers to truly experience the customer’s brand in an authentic way

Competitive Intelligence & Analysis

Customers get real-time visibility into all of their stores at once to monitor inventory, restock low shelves, and pin-point constant sales optimization opportunities for their field team

Store Profile

Store profiles give customers access to basic, universal attributes of stores nationwide, allowing them to identify high-performing locations to push sales as well as under- performing locations to adjust strategies

Visit Detail

Understanding who visited a store when and what motivated or prevented them from making a purchase is critical this information allows ThirdChannel to optimize the customer’s in-store merchandising displays and demos, based on proven results

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KEY ONLINE CAPABILITIES

ThirdChannel’s online solutions enable brands to increase eCommerce revenues by providing authentic online experiences with brand-specific advocates that make the digital shopping experience as personable as possible


PROJECT TITAN ONLINE KEY CAPABILITIES


Brand-Specific Advocates

By matching brands Customers get real-time visibility into all of their stores at once to monitor inventory, restock low shelves, and pinpoint constant sales optimization opportunities for their field teams

Visual Merchandising

Monitor placement, location, and compliance for products while crafting in-store displays that allow shoppers to envision a lifestyle that the customer’s product provides, enabling the best results

Consumer Engagement

Create a lasting brand impression with consumers; brand reps interact with consumers and take the time to intimately understand their needs to assist in sales

Associate Training

Ensure that any associate selling the customer’s product is informed, empowered, inspired, and incentivized – ThirdChannel’s store associate training ensures retail associates fully understand the customer’s product

Demos & Assisted Selling

Monitoring, managing, and optimizing in-store product demo and sampling efforts to drive higher sales is a lot easier and allows consumers to truly experience the customer’s brand in an authentic way

Competitive Intelligence & Analysis

ThirdChannel’s competitive intel reveals how competing brands share the shelf with its customers’ brands, along with all the other products in their category

Store Profile

Store profiles give customers access to basic, universal attributes of stores nationwide, allowing them to identify high-performing locations to push sales as well as underperforming locations to adjust strategies

Visit Details

Understanding who visited a store when and what motivated or prevented them from making a purchase is critical - this information allows ThirdChannel to optimize the customer’s in-store merchandising displays and demos, based on proven results

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Revenue model

ThirdChannel has an attractive revenue model which includes recurring software subscription revenues for its technology platform as well as re-occurring services-related revenues for field work performed by brand experts.


REVENUE MODELS OVERVIEW


SOFTWARE

Software revenue is recurring revenue associated with use of ThirdChannel’s technology platform and includes:

Subscription fees for utilizing ThirdChannel’s software – pricing is variable from customer to customer and is calculated based on usag

The base software package provides access to ThirdChannel’s dashboard, workflow management tools, and mobile applicatio

Add-on packages, such as Advances Analytics & Reporting modules and Chat Integration for eCommerce are availableand are priced based on estimated usage

SERVICES (PEOPLE)

ThirdChannel's services revenue is associated with revenues associated with its People solution and includes:

Revenues generated on an hourly basis from brand expert field work

Fees for ThirdChannel to identify, match, educate, and on-board brand experts to be assigned to the customer

Fees related to customer set-up costs such as brand certification

REVENUE MIX (2019 – 2024E) ($m) (1)

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CUSTOMER BASE

ThirdChannel’s customer base includes many world-renowned consumer brands with service coverage across hundreds of leading national retailers as well as independent and specialty boutiques



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REVENUES BY CUSTOMER

ThirdChannel’s revenues are generated from ~ 40 total current customers and from a combination of SaaS software subscription revenues and value-added services revenues provided by its network of data-driven brand expert.


CUSTOMER BREAKDOWN BY TOTAL REVENUES


  • ThirdChannel’s revenues are generated from ~ 40 total customers with its top five customers comprising ~75% of total revenues in 2021
  • § All top customers generate both software and services revenue as a result of ThirdChannel’s combined omni-channel offering, leveraging leading-edge technology with value-added brand consulting services
  • § Top customers Adidas and Luxottica (Oakley) represent strong and established relationships with Luxottica dating back to 2015 and Adidas dating back to 2019, with significant expansion for each since inception
  • § Revenues from top customer Adidas are diversified across multiple business units including DTC and Wholesale, multiple budget owners, and across many retail channels

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CUSTOMER VALUE PROPOSITION

ThirdChannel’s solution provides a strong financial ROI and value proposition in both online and in-store use cases and across brand customer types

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REVENUES BY CUSTOMER


DIRECT TO CONSUMER (DTC) OVERVIEW



ThirdChannel has an exceptional relationship with Adidas which began in March 2020 when it took over support for Adidas’ entire internal visual support team that services its direct-to-consumer (DTC) stores across the US; Adidas selected ThirdChannel due to its innovative technology platform that would provide direct access to all work being performed in Adidas’ stores and enable Adidas to measure the effectiveness of its DTC retail store operations



2021A: $3.7m
2022E: $5.1m



22 professionals including 16 full-time visual merchandisers and field trainers and 6 full-time contractor



169 total stores (130 factory outlet, 39 concept stores)


WHOLESALE (WHS) OVERVIEW



ThirdChannel was introduced to Adidas’ wholesale (WHS) business team in 2021 following strong results generated in Adidas’ DTC stores; Adidas’ WHS team engaged ThirdChannel for a six-month pilot program to cover its Kohl’s and Macy’s retail partners; following a successful pilot, the WHS team signed a $2 million annual expansion contract and plans to expand beyond Kohl’s and Macy’s in 2022 to its largest wholesale retail partners, Dick’s Sporting Goods and Academy Sports with a $6 million annual expansion contract



2021A: $0.9m
2022E: $1.7m



One full-time account manager and 150+ brand experts



778 total stores (583 Kohl’s, 157 Foot Locker, 17 Champs, 15 Macy’s, and 6 Shoe Palace)


ADIDAS RELATIONSHIP TIMELINE


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REVENUES BY CUSTOMER


ThirdChannel drives significant ROI for Luxottica and Oakley by activating an on-brand field-force and real-time consumer insights Overview of Select Top Customers (cont.)


Revenues

2021A: $2.0M
2022E: $2.1M

Staffing

Approximately 200 brand experts exclusively represent Oakley in-store and capture and report key data on consumer trends

Stores Served

2,000+ locations in 170+ markets

ROI Summar

11x
ROI in
Retail Sales

6x
ROI in
Wholesale Sale


ThirdChannel has dramatically grown its relationship with Yeti and manages all of its in-store operations with leading retailers Dick’s Sporting Goods and Ace Hardware


Revenues

2021A: $0.3M
2022E: $1.1M

Staffing

3,200+ store visits in total across 774 stores during pilot program (despite not being allowed into Dicks and the initial plan initially contemplating only ~517 stores)

Stores Served

3,200+ store visits in total across 774 stores during pilot program (despite not being allowed into Dicks and the initial plan initially contemplating only ~517 stores

ROI Summar

4x
ROI in Retail
Sales

Competitive Positioning

ThirdChannel’s differentiated offering combines a comprehensive modern technology platform with an interconnected and market-leading field force of brand experts

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RETAIL TECHNOLOGY MARKET OVERVIEW

The retail technology market is a massive and rapidly-growing market with tremendous whitespace for innovative solutions providers seeking to enhance traditional brick-and-mortar retail operations


RETAIL TECHNOLOGY MARKET OVERVIEW


From inventory management to check-out, fulfillment to in-store facilities, retail technology includes the implementation of innovative digital solutions in retail and eCommerce processes

The use of retail technology shapes the customer experience, leading both brick-and-mortar and online businesses to invest in many aspects of retail technology, that ultimately factor into commerce management solutions

As a subsegment of the retail technology market, commerce management solutions are tech-enabled processes and systems that support retailer operations across various channels and phases of the customer journey

Commerce management encompasses a broad range of technologies within the retail technology market including point-of-sale (POS), marketplace software, eCommerce platforms, CRM, ERP, order management software, and inventory management

Existing solutions have gradually transitioned from single channel, multi-channel, and omni-channel approaches to unified commerce management, which connects all customer front-ends in a single tight-knit tech stack on the back-end


GLOBAL RETAIL TECHNOLOGY MARKET FORECAST



RETAIL TECHNOLOGY MARKET OVERVIEW


TInteractions

Record all customer interactions in a single view for better service

systems

Achieve unified integration of the tech stack view for better service

Channels

Offer a consistent customer experience across every channe

Products

Maintain consistent, accurate product info across all channels

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RETAIL TECHNOLOGY KEY TRENDS

Today’s gig-economy is enabling an authentic human brand-customer experience, which has become a critical differentiator for brands to effectively compete in the marketplace


CONSUMER SPEND IN CRORE RETAIL MARKETS 1



RETAIL TECHNOLOGY MARKET OVERVIEW



GIG-ECONOMY FREELANCERS IN UNITED



KEY TRENDS IN CONSUMER-BRAND INTERACTIONS



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Brand Investment in a High-Touch Consumer Retail Experience

As brands aggressively compete for customers, delivering a high-touch consumer experience at the top of the funnel has become a critical investment area for in-store and online

Consumer experience is the sum of all interactions that consumers have with a retailer’s products, services, and brand across touchpoints — is especially disconnected at the top of the funnel
Problems are prevalent throughout the shopping journey, but brands rated the biggest challenge as engagement and discovery and awareness and acquisition

As brands look to attract and retain consumers in a hyper-competitive environment, a top-of-funnel focus has become a primary priority

Alignment between key areas of improvement and planned investment suggests that that brand leaders understand their biggest weaknesses and seek to invest where needed most in order to alleviate these issues

A brand seeking to optimize their consumer experience will invest in technology and resources that allow them to more effectively pull consumers into their virtual and physical four walls and engage them throughout the selling process

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Key Strategic Growth Initiatives

ThirdChannel is poised for strong and sustained long-term growth by amplifying its proven historical organic growth strategies through increased investment in sales and marketing and expanding its current brand relationships

SCALE BRAND AWARENESS & CONVERSION WITH TARGETED ACCOUNT-BASED MARKETING

Execute well-developed marketing strategy to build brand awareness amongst premier consumer brands with premium-priced products, wholesale national distribution, and significant operating scale

Invest in scaling out a proven and refined digital marketing team and content enablement strategy to guide top brands through the buyer’s journey from awareness to conversion

ENLARGE DIRECT SALES TEAM TO EXPAND ACCOUNT-BASED COVERAGE AND FOOTPRINT

Double the size of direct sales team to enhance the focus on key strategically-targeted brand accounts, core solutions, and key geographic regions

Add two new account executives to focus exclusively on highly-specific and valuable new brand customer opportunities within the Company’s core market

Add one additional experienced sales deveopment representative to increase the quantity of sales leads generated per month

SCALE BRAND AWARENESS & CONVERSION WITH TARGETED ACCOUNT-BASED MARKETING

EContinue to execute proven and highly-successful “land and expand” strategy for key existing strategic accounts from initial pilot deployment to full-scale enterprise-wide usage

Focus customer success team on upselling and cross-selling both expansion contracts into new distribution channels as well as add-on solutions such as its eCommerce offering to premier existing accounts such as Tapestry, Titleist, and Brooks Running

INTEGRATE PLATFORM WITH SALESFORCE

Migrate current customers utilizing eCommerce chat solution to a new fully-integrated solution with the Salesforce Services Cloud

Through eCommerce chat integration, gain foothold, access, and visibility to a vast base of leading brands and retailers using the Salesforce CRM

Hire an experienced, dedicated channel manager and product marketer to focus only on target market customer opportunities in the Salesforce ecosystem

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Historical & Projected Financial Performance


HISTORICAL & PROJECTED AD-JUSTED EBITDA

COMMENTARY

Over the historical period, revenue growth has been driven by key new customer wins such as Adidas and Yeti, as well as strong subsequent revenue expansion from each of these key customers
During the Covid-19 pandemic in 2020, ThirdChannel’s customer base was hit particularly hard with lockdowns, leading to an unnatural level of churn and down-sell activity

In 2020, ThirdChannel acquired Needle for its eCommerce solutions, enabling ThirdChannel to provide a complete omni-channel suite of commerce optimization solutions both in-store and online

COMMENTARY

In 2021, adjusted EBITDA grew to $1.3M from negative $2.6 million in 2020 driven by strong revenue growth, retail industry
recovery following the Covid-19 pandemic lockdowns, and an increase in software revenue as a percentage of total revenue

§ Adjusted EBITDA margin is expected to grow from 17.0% in 2022 to 32.3% in 2024 driven by strong operating leverage with the administrative, development, and customer success teams in place being capable of handling the additional workload needed to achieved the forecasted revenue growth

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