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Ollie’s Bargain Outlet Holdings, Inc. Announces Fiscal 2016 Third Quarter Financial Results

HARRISBURG, Pa., Dec. 07, 2016 (GLOBE NEWSWIRE) -- Ollie’s Bargain Outlet Holdings, Inc. (NASDAQ:OLLI) (“Ollie’s” or the “Company”) today announced financial results for the third quarter ended October 29, 2016.

Third Quarter Summary:

  • Total net sales increased 15.7% to $202.0 million;
  • Comparable store sales increased 1.8%;
  • The Company opened 16 new stores during the quarter and ended the quarter with a total of 232 stores in 19 states, an increase of 16.0% year over year;
  • Operating income increased 33.8% to $18.6 million;
  • Net income increased 54.7% to $10.5 million and Net income per diluted share increased 54.5% to $0.17;
  • Adjusted net income(1) increased 60.0% to $10.8 million and Adjusted net income per diluted share(1) increased 54.5% to $0.17; and
  • Adjusted EBITDA(1) increased 34.0% to $23.6 million.

Mark Butler, Chairman, President and Chief Executive Officer, stated, “We are pleased with our strong third quarter results and the continued momentum of our business. It’s been over a year since we laid out our long-term growth targets with our initial public offering, and we continue to deliver against those objectives. We are opening stores in the mid-teens rate, growing comparable store sales, leveraging expenses, growing net income greater than 20%, building deeper vendor relationships, and gaining greater access to product. We know how to drive bottom line results through a balanced approach and consistent execution of our business model, and we have been doing it for the past 34 years. We think our strong third quarter results demonstrate this ability.”

(1) Adjusted operating income, Adjusted net income, Adjusted net income per diluted share, EBITDA, and Adjusted EBITDA are not measures recognized under generally accepted accounting principles (“GAAP”). Please see the reconciliation of GAAP to non-GAAP tables included later in this release.

Third Quarter Results

Net sales increased 15.7% to $202.0 million in the third quarter of fiscal 2016 from $174.6 million in the third quarter of fiscal 2015. The increase in net sales was driven by a 1.8% increase in comparable store sales and increased store count compared to the third quarter of fiscal 2015. The Company opened 16 stores in the third quarter and ended the quarter with 232 stores compared to 200 stores at the end of the third quarter in fiscal 2015.

Gross profit increased 20.4% to $84.2 million in the third quarter of fiscal 2016 from $69.9 million in the third quarter of fiscal 2015 and gross margin increased 160 basis points to 41.7% from 40.1% in the same respective periods. The gross margin increase was due to lower transportation and distribution costs as a percent of net sales.

Operating income increased 33.8% to $18.6 million in the third quarter of fiscal 2016 from $13.9 million in the third quarter of fiscal 2015. As a percent of net sales, operating income increased 120 basis points to 9.2% in the third quarter of fiscal 2016.  Included in operating income in the third quarter of fiscal 2016 are $586,000 of transaction related expenses incurred primarily in connection with the Company’s secondary stock offering on September 6, 2016. Excluding these transaction related expenses, Adjusted operating income(1) increased 38.0% to $19.2 million in the third quarter of fiscal 2016 from $13.9 million in the third quarter of 2015, and as a percent of net sales, Adjusted operating income increased 150 basis points to 9.5% in the third quarter of fiscal 2016.

Net income increased 54.7% to $10.5 million, or $0.17 per diluted share in the third quarter of fiscal 2016 from $6.8 million, or $0.11 per diluted share, in the third quarter of fiscal 2015. Excluding the transaction related expenses described above, net of taxes, Adjusted net income (1) increased 60.0% to $10.8 million, or $0.17 per diluted share, in the third quarter of fiscal 2016 from $6.8 million, or $0.11 per diluted share, in the third quarter of fiscal 2015.

Adjusted EBITDA(1) increased 34.0% to $23.6 million, or 11.7% of net sales, in the third quarter of fiscal 2016 from $17.6 million, or 10.1% of net sales, in the third quarter of fiscal 2015. Adjusted EBITDA excludes non-cash stock based compensation expense, non-cash purchase accounting items and transaction related expenses.

Balance Sheet and Cash Flow Highlights

The Company's cash balance as of the end of third quarter of fiscal 2016 was $36.0 million compared to $4.0 million at the end of third quarter fiscal 2015.  The Company had no borrowings under its $100.0 million revolving credit and $98.3 million of availability under the facility at the end of the third quarter of fiscal 2016.  The Company ended the third quarter of fiscal 2016 with total debt of $196.3 million compared to $232.0 million at the end of the third quarter of fiscal 2015.

Inventory at the end of the third quarter of fiscal 2016 increased 13.3% to $240.8 million compared to $212.6 million at the end the third quarter of fiscal 2015, due primarily to new store growth.

Capital expenditures for the third quarter of fiscal 2016 totaled $4.3 million compared to $4.9 million for the third quarter of fiscal 2015.

(1) Adjusted operating income, Adjusted net income, Adjusted net income per diluted share, EBITDA, and Adjusted EBITDA are not measures recognized under generally accepted accounting principles (“GAAP”). Please see the reconciliation of GAAP to non-GAAP tables included later in this release.

Outlook

Ollie’s currently estimates the following results for the fiscal year ending January 28, 2017:

  • Total net sales of $882 million to $885 million;
  • Comparable store sales growth of 2.5% to 3.0%;
  • The opening of 31 new stores and no planned closures;
  • Operating income of $100 million to $101 million;
  • Net income per diluted share of $0.91 to $0.92;
  • Excluding transaction expenses, Adjusted net income per diluted share(2) of $0.92 to $0.93;
  • Estimated weighted diluted average shares outstanding of approximately 62.5 million; and
  • Capital expenditures of $17.0 million to $18.0 million.

Conference Call Information

A conference call to discuss the fiscal 2016 third quarter financial results is scheduled for today, December 7, 2016, at 4:30 p.m. Eastern Time. Investors and analysts can participate on the conference call by dialing (800) 219-7052 or (574) 990-1029 and using conference ID #23161803. Interested parties can also listen to a live webcast or replay of the conference call by logging on to the Investor Relations section on the Company’s website at http://investors.ollies.us/.  The replay of the conference call webcast will be available at the investor relations Web site for one year.

About Ollie’s                              

We are a highly differentiated and fast growing, extreme value retailer of brand name merchandise at drastically reduced prices. We are known for our assortment of merchandise offered as Good Stuff Cheap®.  We offer name brand products, Real Brands! Real Bargains!®, in every department, including housewares, food, books and stationery, bed and bath, floor coverings, toys, hardware and other categories.  We currently operate 234 store locations in 19 states across the Eastern portion of the United States. For more information, visit www.ollies.us.

(2) Adjusted net income per diluted share is not a measure recognized under GAAP.  For a definition of Adjusted net income per diluted share, please see the disclosures related to the reconciliation of GAAP to non-GAAP tables elsewhere in this release. The $0.01 per diluted share difference between the guidance ranges for Net income per diluted share and Adjusted net income per diluted share reflects the transaction related expenses already incurred and reported for the thirty-nine weeks ended October 29, 2016.  The Company cannot predict future transaction related estimates without unreasonable effort and therefore excludes any such estimates from its Outlook.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.  Forward-looking statements can be identified by words such as “could,” “may,” “might,” “will,” “likely,” “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “continues,” “projects” and similar references to future periods, or by the inclusion of forecasts or projections, the outlook for the Company’s future business, prospects, financial performance, industry outlook, our fiscal 2016 business outlook and financial guidance. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions and the following: our failure to adequately manage our inventory or anticipate consumer demand; changes in consumer confidence and spending; risks associated with intense competition; our failure to open new profitable stores, or successfully enter new markets, on a timely basis or at all; our ability to manage our inventory balances; our failure to hire and retain key personnel and other qualified personnel; our inability to obtain favorable lease terms for our properties; the loss of, or disruption in the operations of, our centralized distribution centers; fluctuations in comparable store sales and results of operations, including on a quarterly basis; risks associated with our lack of operations in the growing online retail marketplace; our inability to successfully implement our marketing, advertising and promotional efforts; the seasonal nature of our business; the risks associated with doing business with international manufacturers; changes in government regulations, procedures and requirements; and our ability to service our indebtedness and to comply with our financial covenants and our ability to comply with enhanced disclosure and other requirements when we cease to be an emerging growth company together with the other factors set forth under “Risk Factors” in our filings with the United States Securities and Exchange Commission (“SEC”). Any forward-looking statement made by us in this press release speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible to predict all of them. Ollie’s undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.  You are advised, however, to consult any further disclosures we make on related subjects in our public announcements and SEC filings.

 

Ollie’s Bargain Outlet Holdings, Inc.
Condensed Consolidated Statements of Income
(In thousands except for per share amounts)
(Unaudited)
    Thirteen weeks ended   Thirty-nine weeks ended  
    October 29,    October 31,   October 29,    October 31,  
      2016       2015       2016       2015    
Condensed consolidated statements of income data:                  
Net sales   $ 201,985     $ 174,565     $ 606,960     $ 518,968    
Cost of sales     117,795       104,641       359,941       314,943    
Gross profit     84,190       69,924       247,019       204,025    
Selling, general and administrative expenses     60,522       51,796       173,068       147,242    
Depreciation and amortization expenses     2,142       1,810       6,188       5,265    
Pre-opening expenses     2,879       2,380       6,152       5,252    
Operating income     18,647       13,938       61,611       46,266    
Interest expense, net     1,405       3,289       4,540       12,286    
Loss on extinguishment of debt     -       -       -       2,351    
Income before income taxes     17,242       10,649       57,071       31,629    
Income tax expense     6,781       3,887       21,727       11,854    
Net income   $ 10,461     $ 6,762     $ 35,344     $ 19,775    
Earnings per common share:                  
Basic   $ 0.17     $ 0.12     $ 0.59     $ 0.38    
Diluted   $ 0.17     $ 0.11     $ 0.57     $ 0.37    
Weighted average common shares outstanding:                  
Basic     60,301       58,478       60,005       52,259    
Diluted     62,515       60,704       62,247       54,102    
Percentage of net sales (1):                  
Net sales     100.0 %     100.0 %     100.0 %     100.0 %  
Cost of sales     58.3       59.9       59.3       60.7    
Gross profit     41.7       40.1       40.7       39.3    
Selling, general and administrative expenses     30.0       29.7       28.5       28.4    
Depreciation and amortization expenses     1.1       1.0       1.0       1.0    
Pre-opening expenses     1.4       1.4       1.0       1.0    
Operating income     9.2       8.0       10.2       8.9    
Interest expense, net     0.7       1.9       0.7       2.4    
Loss on extinguishment of debt     -       -       -       0.5    
Income before income taxes     8.5       6.1       9.4       6.1    
Income tax expense     3.4       2.2       3.6       2.3    
Net income     5.2 %     3.9 %     5.8 %     3.8 %  
           

 (1) Components may not add to totals due to rounding

 

Ollie’s Bargain Outlet Holdings, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
    October 29,    October 31,
Assets     2016       2015  
Current assets:        
Cash and cash equivalents   $ 35,961     $ 3,960  
Inventories     240,767       212,581  
Accounts receivable     283       418  
Deferred income taxes     -       4,559  
Prepaid expenses and other assets     5,363       6,771  
Total current assets     282,374       228,289  
Property and equipment, net     46,890       38,726  
Goodwill     444,850       444,850  
Trade name and other intangible assets, net     233,070       233,291  
Other assets     2,400       2,175  
Total assets   $ 1,009,584     $ 947,331  
Liabilities and Stockholders’ Equity        
Current liabilities:        
Current portion of long-term debt   $ 5,091     $ 3,367  
Accounts payable     58,011       50,995  
Accrued expenses     43,211       31,321  
Total current liabilities     106,313       85,683  
Revolving credit facility     -       18,054  
Long-term debt     190,105       206,070  
Deferred income taxes     85,982       91,673  
Other long-term liabilities     5,332       4,099  
Total liabilities     387,732       405,579  
Stockholders’ equity:        
Common stock     61       59  
Additional paid-in capital     560,872       532,182  
Retained earnings     61,005       9,597  
Treasury - common stock     (86 )     (86 )
Total stockholders’ equity     621,852       541,752  
Total liabilities and stockholders’ equity   $ 1,009,584     $ 947,331  
         

 

Ollie’s Bargain Outlet Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
                 
    Thirteen weeks ended   Thirty-nine weeks ended
    October 29,    October 31,   October 29,    October 31,
      2016       2015       2016       2015  
Net cash provided by (used in) operating activities   $   5,847     $   1,772     $   4,161     $   (15,383 )
Net cash used in investing activities       (4,236 )       (4,893 )       (14,218 )       (10,894 )
Net cash provided by financing activities       3,618         6,299         15,759         8,285  
Net increase (decrease) during period in cash       5,229         3,178         5,702         (17,992 )
Cash and cash equivalents at the beginning of the period       30,732         782         30,259         21,952  
Cash and cash equivalents at the end of the period   $   35,961     $   3,960     $   35,961     $   3,960  
                 
                 

Ollie’s Bargain Outlet Holdings, Inc.

 Supplemental Information – Consolidated Adjusted Operating Income

 Reconciliation of GAAP to Non-GAAP Financial Measures

 (In thousands except for per share amounts)

 (Unaudited)

The Company reports its financial results in accordance with U.S. generally accepted accounting principles ("GAAP"). We have included the non-GAAP measures of Adjusted operating income, EBITDA, Adjusted EBITDA, Adjusted net income and Adjusted net income per diluted share in this press release as these are key measures used by our management and our board of directors to evaluate our operating performance and the effectiveness of our business strategies, make budgeting decisions, and evaluate compensation decisions.  Management believes it is useful to investors and analysts to evaluate these non-GAAP measures on the same basis as management uses to evaluate the Company’s operating results. We believe that excluding items that may not be indicative of, or are unrelated to, our core operating results, and that may vary in frequency or magnitude, from Operating income, Net income and Net income per diluted share, enhances the comparability of our results and provides a better baseline for analyzing trends in our business. 

The tables below reconcile the non-GAAP financial measures of Adjusted operating income to Operating income, Adjusted net income to Net income, Adjusted net income per diluted share to Net income per diluted share, and EBITDA and Adjusted EBITDA to Net income, in each case the most directly comparable GAAP measure.
           
Adjusted net income and Adjusted net income per diluted share give effect, net of tax, to transaction related expenses and loss on extinguishment of debt, which may not occur with the same frequency or magnitude in future periods. Adjusted operating income also gives effect to transaction related expenses.  We define EBITDA as net income before net interest expense, loss on extinguishment of debt, depreciation and amortization expenses and income taxes. Adjusted EBITDA represents EBITDA as further adjusted for non-cash stock based compensation expense, non-cash purchase accounting items, and transaction related expenses, which we do not consider representative of our ongoing operating performance. 

Non-GAAP financial measures should be viewed as supplementing, and not as an alternative or substitute for, the Company’s financial results prepared in accordance with GAAP. Certain of the items that may be excluded or included in non-GAAP financial measures may be significant items that could impact the Company's financial position, results of operations and cash flows and should therefore be considered in assessing the Company's actual financial condition and performance. The methods used by the Company to calculate its non-GAAP financial measures may differ significantly from methods used by other companies to compute similar measures. As a result, any non-GAAP financial measures presented herein may not be comparable to similar measures provided by other companies.

Reconciliation of GAAP operating income to Adjusted operating income

    Thirteen weeks ended
  Thirty-nine weeks ended    
    October 29, 
  October 31,
  October 29, 
  October 31,    
      2016       2015       2016       2015      
Operating income   $ 18,647     $ 13,938     $ 61,611     $ 46,266      
Transaction related expenses     586       -       1,736       322      
Adjusted operating income   $ 19,233     $ 13,938     $ 63,347     $ 46,588      
                                     


Ollie’s Bargain Outlet Holdings, Inc.

Supplemental Information – Adjusted Net Income and Adjusted Net Income Per Diluted Share

Reconciliation of GAAP to Non-GAAP Financial Measures

 (Dollars in thousands)

 (Unaudited)

Reconciliation of GAAP net income to Adjusted net income

    Thirteen weeks ended   Thirty-nine weeks ended  
    October 29,    October 31,   October 29,    October 31,    
      2016       2015       2016       2015      
Net income   $ 10,461     $ 6,762     $ 35,344     $ 19,775    
Transaction related expenses     586         -       1,736       322    
Loss on extinguishment of debt     -       -       -       2,351    
Adjustment to provision for income taxes (1)     (230 )       -       (673 )     (986 )  
Adjusted net income   $ 10,817     $ 6,762     $ 36,407     $ 21,462    
                                     

(1) The effective tax rate used for the provision for income taxes was 39.3% for the thirteen weeks ended October 29, 2016, 38.1% for the thirteen weeks ended October 31, 2015, 36.5% for the thirty-nine weeks ended October 29, 2016 and 37.5% for the thirty-nine weeks ended October 31, 2015.  The adjustment to the provision for income taxes includes the tax effect for the transaction related expenses and loss on extinguishment of debt.

Reconciliation of Adjusted net income per diluted share

    Thirteen weeks ended   Thirty-nine weeks ended
    October 29,    October 31,   October 29,    October 31,
      2016       2015       2016       2015  
Net income per share, diluted   $ 0.17     $ 0.11     $ 0.57     $ 0.37  
Adjustments     0.01       -       0.02       0.03  
Adjusted net income per share, diluted (1)   $ 0.17     $ 0.11     $ 0.59     $ 0.40  
                 
Weighted-average common shares outstanding, diluted     62,515       60,704       62,247       54,102  
 

(1) Totals may not foot due to rounding

Ollie’s Bargain Outlet Holdings, Inc. 
Supplemental Information – Consolidated EBITDA, and Adjusted EBITDA and Key Statistics

Reconciliation of GAAP to Non-GAAP Financial Measures

 (Dollars in thousands)

 (Unaudited)

Reconciliation of net income to EBITDA and Adjusted EBITDA

  Thirteen weeks ended   Thirty-nine weeks ended    
    October 29,    October 31,   October 29,    October 31,    
      2016       2015       2016       2015      
Net income   $ 10,461     $ 6,762     $ 35,344     $ 19,775      
Interest expense, net     1,405       3,289       4,540       12,286      
Loss on extinguishment of debt     -       -       -       2,351      
Depreciation and amortization expenses     2,669       2,358       7,770       6,901      
Income tax expense     6,781       3,887       21,727       11,854      
EBITDA     21,316       16,296       69,381       53,167      
Non-cash stock based compensation expense     1,707       1,372       4,979       3,667      
Non-cash purchase accounting items     (22 )     (65 )     (112 )     (232 )    
Transaction related expenses     586       -       1,736       322      
Adjusted EBITDA   $ 23,587     $ 17,603     $ 75,984     $ 56,924      
                                     


Key Statistics

    Thirteen weeks ended   Thirty-nine weeks ended
    October 29,    October 31,   October 29,    October 31,
    2016       2015       2016       2015  
         
Number of stores open at the beginning of period     216       187       203       176  
New stores openings     16       13       29       25  
Store closings     -       -       -       (1 )
Number of stores open at end of period     232       200       232       200  
                 
Average net sales per store (1)   $ 903     $ 904     $ 2,839     $ 2,802  
Comparable stores sales change     1.8 %     3.2 %     3.7 %     6.5 %
Comparable store count – end of period     186       165       186       165  
       

(1) Average net sales per store represents the weighted average of total net sales divided by the number of stores open, in each case at the end of each week in a fiscal quarter.

Investor Contact:
John Rouleau
ICR
203-682-8200
John.Rouleau@icrinc.com

Media Contact:
Dan Haines
Vice President – Marketing & Advertising
717-657-2300
dhaines@ollies.us

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Ollie's Bargain Outlet