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CST: 22/09/2019 11:03:16   

Sportsman's Warehouse Holdings, Inc. Announces Second Quarter 2019 Financial Results

24 Days ago

MIDVALE, Utah, Aug. 28, 2019 (GLOBE NEWSWIRE) -- Sportsman's Warehouse Holdings, Inc. ("Sportsman's" or the “Company”) (Nasdaq:SPWH) today announced financial results for the thirteen and twenty-six weeks ended August 3, 2019.

Jon Barker, Chief Executive Officer, stated, “We are pleased with our second quarter results, which were above our expectations on the top line, including a comparable store sales increase of 1.7%, and towards the high end of our outlook on the bottom line. This performance is a testament to our strong competitive positioning, as we remain one of few national retailers dedicated to outdoor sports, including hunting, with an expansive breadth of assortment at everyday low prices and a high level of customer service. This, combined with the ongoing success of our merchandising initiatives, customer acquisition and engagement focus, and omni-channel strategy, is driving our outperformance relative to the industry.”

Mr. Barker continued, “We will continue to focus on our strategic growth priorities in the second half of the year with an increased focus on innovation through various initiatives including a small format concept test shop, expansion of our partnerships with select licensed firearms dealers across the country, and the continued roll out of our used firearm program. We expect continued progress against these strategic priorities which, combined with our omni-channel focus, will reinforce our competitive positioning and drive market share gains.”

For the thirteen weeks ended August 3, 2019:

  • Net sales increased by 4.2% to $211.8 million from $203.3 million in the second quarter of fiscal year 2018 primarily due to new store openings and increased demand for firearms and ammunition due to legislative changes in some states in which the Company operates. Same store sales increased by 1.7% from the comparable prior year period.
     
  • Income from operations was $9.8 million compared to $13.2 million in the second quarter of fiscal year 2018. Adjusted income from operations was $10.0 million in the second quarter of fiscal 2019, which excludes expenses related to the recruitment and hiring of various key members of the senior management team. Adjusted income from operations was $13.2 million in the second quarter of fiscal 2018. (see “GAAP and Non-GAAP Measures”).
     
  • The Company opened two new stores in the second quarter of fiscal 2019 and ended the quarter with 94 stores in 24 states, or square footage growth of 2.4% from the end of the second quarter of fiscal year 2018.
     
  • Interest expense decreased to $2.3 million from $4.3 million in the second quarter of fiscal year 2018. Interest expense for the second quarter of fiscal year 2018 included a $1.6 million write-off of debt discount and deferred financing fees associated with the Company’s prior term loan.
     
  • Net income was $5.5 million compared to net income of $6.6 million in the second quarter of fiscal year 2018. Adjusted net income in the second quarter of fiscal 2019 was $5.7 million, which excludes expenses incurred relating to the recruitment and hiring of various key members of the senior management team. Adjusted net income in the second quarter of fiscal 2018 was $7.8 million, which excludes the write-off of deferred financing fees and debt discount associated with the Company’s old term loan (see “GAAP and Non-GAAP Measures”).
     
  • Diluted earnings per share was $0.13 compared to diluted earnings per share of $0.15 for the second quarter of fiscal year 2018. Adjusted diluted earnings per share was $0.13 in the second quarter of fiscal 2019 compared to adjusted diluted earnings per share of $0.18 in the second quarter of fiscal 2018 (see “GAAP and Non-GAAP Measures”).
     
  • Adjusted EBITDA was $15.8 million compared to $19.0 million in the second quarter of fiscal year 2018 (see "GAAP and Non-GAAP Measures").

For the twenty-six weeks ended August 3, 2019:

  • Net sales increased by 0.6% to $385.8 million from $383.3 million in the first half of fiscal year 2019 primarily due to new store openings. Same store sales decreased by 1.8% from the comparable prior year period.
     
  • Income from operations was $4.4 million compared to $9.5 million in the first half of fiscal year 2018. Adjusted income from operations was $5.0 million in the first half of fiscal 2019, which excludes expenses related to the transition of our CFO and recruitment and hiring of various key members of the senior management team. Adjusted income from operations was $12.2 million in the second quarter of fiscal 2018, which excludes charges incurred with the retirement of the Company’s former CEO (see “GAAP and Non-GAAP Measures”).
     
  • Interest expense decreased to $4.5 million from $7.9 million in the first half of fiscal year 2018. Interest expense for the first half of fiscal year 2018 included a $1.6 million write-off of debt discount and deferred financing fees associated with the Company’s prior term loan. 
     
  • Net income was $0.04 million compared to net income of $0.7 million in the first half of fiscal year 2018. Adjusted net income in the first half of fiscal 2019 was $0.5 million, which excludes expenses incurred relating to the transition of our CFO and the recruitment and hiring of various key members of the senior management team. Adjusted net income in the first half of fiscal 2018 was $4.2 million, which excludes the write-off of deferred financing fees and debt discount associated with the Company’s prior term loan and the charges incurred with the retirement of the Company’s former CEO (see “GAAP and Non-GAAP Measures”).
     
  • Diluted earnings per share was $0.00 compared to diluted earnings per share of $0.02 for the first half of fiscal year 2018. Adjusted diluted earnings per share was $0.01 in the first half of fiscal 2019 compared to adjusted diluted earnings per share of $0.10 in the first half of fiscal 2018 (see “GAAP and Non-GAAP Measures”).
     
  • Adjusted EBITDA was $16.2 million compared to $23.8 million in the first half of fiscal year 2018 (see "GAAP and Non-GAAP Measures").

Balance sheet highlights as of August 3, 2019:                                                             

  • Total debt: $158.8 million consisting of $127.1 million outstanding under the Company’s revolving credit facility and $31.7 million outstanding under the term loan, net of unamortized debt issuance costs.
     
  • Total liquidity (cash plus $51.6 million of availability on revolving credit facility): $53.1 million

Third Quarter and Fiscal Year 2019 Outlook:

For the third quarter of fiscal year 2019, net sales are expected to be in the range of $231.0 million to $239.0 million based on a change in same store sales in the range of 1.5% to 4.5% compared to the corresponding period of fiscal year 2018. Net income is expected to be in the range of $9.0 million to $11.7 million with diluted earnings per share of $0.21 to $0.27 on a weighted average of approximately 43.2 million estimated common shares outstanding.

For fiscal year 2019, net sales are expected to be in the range of $866.0 million to $884.0 million based on a change in same store sales in the range of 0.0% to 2.0% compared to fiscal year 2018. Adjusted net income is expected to be in the range of $20.8 million to $26.0 million with adjusted earnings per diluted share of $0.48 to $0.60 on a weighted average of approximately 43.2 million estimated common shares outstanding, when adjusted for the executive transition costs incurred in the first half of fiscal 2019 relating to the transition of the Company’s CFO and the recruitment and hiring of various key members of the senior management team (see “GAAP and Non-GAAP Measures”).

Conference Call Information:

A conference call to discuss second quarter fiscal 2019 financial results is scheduled for today, August 28, 2019, at 4:30 PM Eastern Time. The conference call will be webcast and may be accessed via the Investor Relations section of the Company’s website at www.sportsmans.com.

Non-GAAP Information

This press release includes the following financial measures defined as non-GAAP financial measures by the Securities and Exchange Commission (the “SEC”): adjusted income from operations, adjusted net income, adjusted diluted earnings per share and Adjusted EBITDA. We define adjusted income from operations and adjusted net income as income from operations and net income, respectively, in each case, plus expenses incurred relating to the transition of our CFO and the recruitment and hiring of various other key members of management, charges incurred in conjunction with the retirement of the Company’s former CEO and the write-off of deferred financing fees and debt discount associated with the Company’s prior term loan refinanced in the second fiscal quarter of 2018, as applicable. Adjusted diluted earnings per share is diluted earnings per share excluding the impact of expenses incurred relating to the transition of our CFO and the recruitment and hiring of  other key members of management, charges incurred in conjunction with the retirement of the Company’s former CEO and the write-off of deferred financing fees and debt discount associated with the Company’s prior term loan refinanced in the second fiscal quarter of 2018, as applicable. We define Adjusted EBITDA as net income plus interest expense, income tax (benefit) expense, depreciation and amortization, stock-based compensation expense, pre-opening expenses, and other gains, losses and expenses that we do not believe are indicative of our ongoing expenses. The Company has reconciled these non-GAAP financial measures with the most directly comparable GAAP financial measures under “GAAP and Non-GAAP Measures” in this release, except for adjusted interest expense which is reconciled above. The Company believes that these non-GAAP financial measures not only provide its management with comparable financial data for internal financial analysis but also provide meaningful supplemental information to investors. Specifically, these non-GAAP financial measures allow investors to better understand the performance of the Company’s business and facilitate a more meaningful comparison of its diluted earnings per share and actual results on a period-over-period basis. The Company has provided this information as a means to evaluate the results of its ongoing operations. Other companies in the Company’s industry may calculate these items differently than the Company does. Each of these measures is not a measure of performance under GAAP and should not be considered as a substitute for the most directly comparable financial measures prepared in accordance with GAAP. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company’s results as reported under GAAP.

Forward-Looking Statements 

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Forward-looking statements in this release include, but are not limited to, statements regarding our strategic initiatives and our outlook for the third quarter and full fiscal year 2019.  Investors can identify these statements by the fact that they use words such as "continue", "expect", "may", “opportunity”, "plan", "future", “ahead” and similar terms and phrases. The Company cannot assure investors that future developments affecting the Company will be those that it has anticipated. Actual results may differ materially from these expectations due to risks relating to the Company’s ability to integrate its new Chief Financial Officer; the Company’s retail-based business model, general economic conditions and consumer spending, the Company’s concentration of stores in the Western United States, competition in the outdoor activities and sporting goods market, changes in consumer demands, the Company’s expansion into new markets and planned growth, current and future government regulations, risks related to the Company’s continued retention of its key management, the Company’s distribution center, quality or safety concerns about the Company’s merchandise, events that may affect the Company’s vendors, trade restrictions, and other factors that are set forth in the Company's filings with the SEC, including under the caption “Risk Factors” in the Company’s Form 10-K for the fiscal year ended February 2, 2019 which was filed with the SEC on March 29, 2019 and the Company’s other public filings made with the SEC and available at www.sec.gov. If one or more of these risks or uncertainties materialize, or if any of the Company’s assumptions prove incorrect, the Company’s actual results may vary in material respects from those projected in these forward-looking statements. Any forward-looking statement made by the Company in this release speaks only as of the date on which the Company makes it. Factors or events that could cause the Company’s actual results to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by any applicable securities laws.

About Sportsman's Warehouse Holdings, Inc.

Sportsman's Warehouse is an outdoor sporting goods retailer focused on meeting the everyday needs of the seasoned outdoor veteran, the first-time participant and every enthusiast in between. Our mission is to provide outstanding gear and exceptional service to inspire outdoor memories.

For press releases and certain additional information about the Company, visit the Investor Relations section of the Company's website at www.sportsmans.com.

Investor Contact:
ICR, Inc.
Rachel Schacter
(203) 682-8200
investors@sportsmanswarehouse.com

SPORTSMAN’S WAREHOUSE HOLDINGS, INC.
Consolidated Statements of Income (Unaudited)
(in thousands, except per share data)
               
               
  For the Thirteen Weeks Ended
               
  August 3, 2019   % of net
sales
  August 4, 2018   % of net
sales
               
Net sales $ 211,766   100.0 %   $ 203,288   100.0 %
Cost of goods sold   138,544   65.4 %     131,011   64.4 %
Gross profit   73,222   34.6 %     72,277   35.6 %
               
Operating expenses:              
Selling, general and administrative expenses   63,460   30.0 %     59,088   29.1 %
Income from operations   9,762   4.6 %     13,189   6.5 %
Interest expense   2,353   1.1 %     4,334   2.1 %
Income before income tax expense   7,409   3.5 %     8,855   4.4 %
Income tax expense   1,911   0.9 %     2,304   1.1 %
Net income $ 5,498   2.6 %   $ 6,551   3.3 %
               
Earnings per share              
Basic $ 0.13       $ 0.15    
Diluted $ 0.13       $ 0.15    
               
Weighted average shares outstanding              
Basic   43,130         42,896    
Diluted   43,155         42,921    
               


SPORTSMAN’S WAREHOUSE HOLDINGS, INC.
Consolidated Statements of Income (Unaudited)
(in thousands, except per share data)
               
               
  For the Twenty-six Weeks Ended
               
  August 3, 2019   % of net
sales
  August 4, 2018   % of net
sales
               
Net sales $ 385,783     100.0 %   $ 383,347   100.0 %
Cost of goods sold   258,388     67.0 %     255,504   66.7 %
Gross profit   127,395     33.0 %     127,843   33.3 %
               
Operating expenses:              
Selling, general and administrative expenses   122,990     31.9 %     118,305   30.9 %
Income from operations   4,405     1.1 %     9,538   2.4 %
Interest expense   4,458     1.2 %     7,891   2.1 %
(Loss) income before income tax expense   (53 )   (0.1 %)     1,647   0.3 %
Income tax (benefit) expense   (92 )   0.0 %     925   0.2 %
Net Income $ 39     (0.1 %)   $ 722   0.1 %
               
Earnings per share              
Basic $ 0.00         $ 0.02    
Diluted $ 0.00         $ 0.02    
               
Weighted average shares outstanding              
Basic   43,065           42,812    
Diluted   43,090           42,837    
               


SPORTSMAN’S WAREHOUSE HOLDINGS, INC. 
Consolidated Balance Sheets (Unaudited)
(in thousands)
       
       
Assets      
  August 3, 2019   February 2, 2019
Current assets:      
Cash $ 1,475   $ 1,547  
Accounts receivable, net   239     249  
Merchandise inventories   289,311     276,600  
Income tax receivable   1,080     -  
Prepaid expenses and other   10,653     15,174  
Total current assets   302,758     293,570  
Operating lease right of use asset   183,486     -  
Property and equipment, net   97,984     92,084  
Deferred income taxes   -     2,997  
Definite lived intangible assets, net   233     246  
Total assets $ 584,461   $ 388,897  
       
Liabilities and Stockholders’ Equity      
Current liabilities:      
Accounts payable $ 64,890   $ 24,953  
Accrued expenses   58,051     56,384  
Operating lease liability, current   32,483     -  
Income taxes payable   -     1,838  
Revolving line of credit   127,126     144,306  
Current portion of long-term debt, net of discount and debt issuance costs   7,915     7,915  
Current portion of deferred rent   -     5,270  
Total current liabilities   290,465     240,666  
       
Long-term liabilities:      
Long-term debt, net of discount, debt issuance costs, and current portion   23,760     27,717  
Deferred income taxes   412     -  
Operating lease liability, noncurrent   181,117     -  
Deferred rent, noncurrent   -     41,854  
Total long-term liabilities   205,289     69,571  
Total liabilities   495,754     310,237  
       
Stockholders’ equity:      
Common stock   432     430  
Additional paid-in capital   85,422     84,671  
Accumulated earnings (deficit)   2,853     (6,441 )
Total stockholders’ equity   88,707     78,660  
Total liabilities and stockholders' equity $ 584,461   $ 388,897  
       


SPORTSMAN’S WAREHOUSE HOLDINGS, INC.
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
         
    August 3, 2019   August 4, 2018
CASH FLOWS FROM OPERATING ACTIVITIES        
Net Income   $ 39     $ 722  
Adjustments to reconcile net income to net        
cash provided by (used in) operating activities:        
Depreciation and amortization     9,245       8,887  
Amortization and write-off of discount on debt and deferred financing fees   170       1,893  
Amortization of Intangible     13       276  
Change in deferred rent     -       (865 )
Gain on asset dispositions     (311 )     -  
Noncash lease expense     14,895       -  
Deferred income taxes     307       120  
Stock based compensation     948       2,054  
Change in assets and liabilities:        
Accounts receivable, net     10       (69 )
Operating lease liabilities     (15,788 )     -  
Merchandise inventory     (12,710 )     (58,474 )
Prepaid expenses and other     634       (1,804 )
Accounts payable     39,040       36,332  
Accrued expenses     1,860       3,420  
Income taxes payable and receivable     (2,918 )     (3,676 )
Net cash provided by (used in) operating activities     35,434       (11,184 )
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchase of property and equipment     (14,761 )     (10,585 )
Proceeds from sale of property and equipment     311       -  
Net cash used in investing activities     (14,450 )     (10,585 )
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Net (payments) borrowings on line of credit     (17,180 )     113,829  
Increase in book overdraft     319       5,860  
Proceeds from issuance of common stock per employee stock purchase plan   174       202  
Payment of withholdings on restricted stock units     (369 )     (699 )
Borrowings on term loan     -       40,000  
Payment of deferred financing costs     -       (1,331 )
Principal payments on long-term debt     (4,000 )     (135,127 )
Net cash (used in) provided by financing activities     (21,056 )     22,734  
         
Net change in cash     (72 )     965  
Cash at beginning of year     1,547       1,769  
Cash at end of period   $ 1,475     $ 2,734  
         


SPORTSMAN’S WAREHOUSE HOLDINGS, INC.
GAAP and Non-GAAP Measures (Unaudited)
(in thousands, except per share data)
                 
Reconciliation of GAAP income from operations to adjusted income from operations:        
                 
    For the Thirteen Weeks Ended   For the Twenty-six Weeks Ended
                 
    August 3, 2019   August 4, 2018   August 3, 2019   August 4, 2018
Income from operations $   9,762     $   13,189     $   4,405     $   9,538  
Executive transition costs (1)     266         -          623         -   
CEO retirement (2)     -          -          -          2,647  
Adjusted income from operations $   10,028     $   13,189     $   5,028     $   12,185  
                 
Reconciliation of GAAP net income and GAAP diluted weighted average shares outstanding        
to adjusted net income and adjusted weighted average shares outstanding:            
                 
Numerator:              
  Net income $   5,498     $   6,551     $   39     $   722  
  Executive transition costs (1)     266         -          623         -   
  CEO retirement (2)     -          -          -          2,647  
  Deferred financing fee write-off (3)     -          1,617         -          1,617  
  Less tax benefit     (69 )       (414 )       (161 )       (813 )
  Adjusted net income $   5,695     $   7,754     $   501     $   4,173  
                 
Denominator:              
  Diluted weighted average shares outstanding     43,155         42,921         43,090         42,837  
                 
Reconciliation of earnings per share:              
Dilutive earnings per share $   0.13     $   0.15     $   -      $   0.02  
Impact of adjustments to numerator and denominator     -          0.03         0.01         0.08  
Adjusted diluted earnings per share $   0.13     $   0.18     $   0.01     $   0.10  
                 
Reconciliation of net income to adjusted EBITDA:              
Net income $   5,498     $   6,551     $   39     $   722  
Interest expense     2,353         4,334         4,458         7,891  
Income tax expense (benefit)     1,911         2,304         (92 )       925  
Depreciation and amortization     4,645         4,500         9,258         9,163  
Stock-based compensation expense (4)     494         482         947         967  
Pre-opening expenses (5)     672         795         1,001         1,511  
Executive transition costs (1)     266         -          623         -   
CEO retirement (2)     -          -          -          2,647  
Adjusted EBITDA $   15,839     $   18,966     $   16,234     $   23,826  
                 
(1) Expenses incurred relating to the transition of our CFO (incurred only in Q1 2019) and the recruitment and hiring of various key members of our senior management team. These events are not expected to be recurring.
(2) Expenses incurred in conjunction with the retirement of our former CEO during Q1 2018. 
(3) Write-off of deferred financing fees and debt discount relating to our prior term loan. 
(4) Stock-based compensation expense represents non-cash expenses related to equity instruments granted to employees under our 2019 Performance
Incentive Plan and employee stock purchase plan. 
(5) Pre-opening expenses include expenses incurred in the preparation and opening of a new store location, such as payroll, travel and supplies, but do
not include the cost of the initial inventory or capital expenditures required to open a location. 
                 


SPORTSMAN’S WAREHOUSE HOLDINGS, INC.
GAAP and Non-GAAP Measures (Unaudited)
(in thousands, except per share data)
                 
Reconciliation of third quarter and 2019 full year guidance:              
                 
    Estimated Q3 '19   Estimated FY '19
    Low   High   Low   High
Numerator:              
  Net income $ 9,000   $ 11,700   $ 20,300   $ 25,500
  Executive transition costs (1) -    -     462     462
  Adjusted net income $ 9,000   $ 11,700   $ 20,762   $ 25,962
Denominator:              
  Diluted weighted average shares outstanding   43,200     43,200     43,200     43,200
                 
Reconciliation of earnings per share:              
Diluted earnings per share $ 0.21   $ 0.27   $ 0.47   $ 0.59
Impact of adjustments to numerator and denominator   -     -     0.01     0.01
Adjusted diluted earnings per share $ 0.21   $ 0.27   $ 0.48   $ 0.60
                 
(1) Expenses incurred relating to the transition of our CFO and the recruitment and hiring of various key members of our senior management team, net of tax. These events are not expected to be recurring.

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