Ollie’s Bargain Outlet Holdings, Inc. Reports Second Quarter Fiscal 2018 Financial Results
Second Quarter Summary:
- Total net sales increased 13.1% to
$288.1 million . - Comparable store sales increased 4.4%.
- The Company opened six stores and entered one new state during the quarter, ending the period with a total of 282 stores in 22 states, an increase in store count of 12.8% year over year.
- Operating income increased 16.9% to
$34.9 million and operating margin increased 40 basis points to 12.1%. - Net income increased 51.4% to
$29.8 million and net income per diluted share increased 50.0% to$0.45 . - Adjusted net income(1) increased 46.2% to
$26.1 million and adjusted net income per diluted share(1) increased 48.1% to$0.40 . - Adjusted EBITDA(1) increased 15.4% to
$40.3 million .
(1) | As used throughout this release, adjusted net income, adjusted net income per diluted share, EBITDA and adjusted EBITDA are not measures recognized under U.S. generally accepted accounting principles (“GAAP”). Please see the accompanying financial tables which reconcile these non-GAAP measures to GAAP. |
Second Quarter Results
Net sales increased 13.1% to
Gross profit increased 12.4% to
Operating income increased 16.9% to
Net income increased 51.4% to
Adjusted EBITDA(1) increased 15.4% to
Balance Sheet and Cash Flow Highlights
The Company's cash balance as of the end of the second quarter of fiscal 2018 was
Inventory as of the end of the second quarter of fiscal 2018 increased 13.6% to
Capital expenditures in the second quarter of fiscal 2018 totaled
Outlook
Based on year-to-date results and expectations for the second half of fiscal 2018, Ollie’s is raising sales and earnings guidance for the full-year fiscal 2018. The Company is now estimating the following:
- Total net sales of
$1.222 billion to $1.227 billion ; - Comparable store sales growth of 2.5% to 3.0%;
- The opening of 36 to 38 new stores and one relocation;
- Operating income of
$154.0 million to $156.0 million ; - Adjusted net income(2) of
$114.0 million to $116.0 million and adjusted net income per diluted share(2) of$1.73 to $1.76 , both of which exclude excess tax benefits related to stock-based compensation and the after-tax loss on extinguishment of debt; - An effective tax rate of 26.0%, which excludes excess tax benefits related to stock-based compensation;
- Diluted weighted average shares outstanding of 66.0 million; and
- Capital expenditures of
$70.0 million to $75.0 million , largely reflecting the Company’s recent purchase of 12 former Toys “R” Us properties.
(2) | The guidance ranges as provided for adjusted net income and adjusted net income per diluted share exclude the after-tax loss on extinguishment of debt and excess tax benefits related to stock-based compensation reported for the 26-weeks ended August 4, 2018 as well as any future related estimates as the Company cannot predict such estimates without unreasonable effort. |
Conference Call Information
A conference call to discuss second quarter fiscal 2018 financial results is scheduled for today,
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,
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, including our fiscal 2018 business outlook or financial guidance, and industry outlook. 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, including recently enacted tax legislation, and the following: our failure to adequately procure and 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 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; risks associated with the timely and effective deployment and protection of computer networks and other electronic systems; 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 together with the other factors set forth under “Risk Factors” in our filings with the
Investor Contact:
ICR
646-277-1214
Jean.Fontana@icrinc.com
Media Contact:
Vice
717-657-2300
dhaines@ollies.us
Ollie’s Bargain Outlet Holdings, Inc. | |||||||||||||||
Condensed Consolidated Statements of Income | |||||||||||||||
(In thousands except for per share amounts) | |||||||||||||||
(Unaudited) | |||||||||||||||
Thirteen weeks ended | Twenty-six weeks ended | ||||||||||||||
August 4, | July 29, | August 4, | July 29, | ||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Condensed consolidated statements of income data: | |||||||||||||||
Net sales | $ | 288,098 | $ | 254,645 | $ | 563,837 | $ | 482,247 | |||||||
Cost of sales | 175,474 | 154,419 | 338,337 | 289,086 | |||||||||||
Gross profit | 112,624 | 100,226 | 225,500 | 193,161 | |||||||||||
Selling, general and administrative expenses | 72,990 | 65,778 | 145,354 | 127,509 | |||||||||||
Depreciation and amortization expenses | 2,854 | 2,375 | 5,617 | 4,647 | |||||||||||
Pre-opening expenses | 1,917 | 2,255 | 3,681 | 3,853 | |||||||||||
Operating income | 34,863 | 29,818 | 70,848 | 57,152 | |||||||||||
Interest expense, net | 278 | 1,124 | 816 | 2,458 | |||||||||||
Loss on extinguishment of debt | - | - | 100 | 397 | |||||||||||
Income before income taxes | 34,585 | 28,694 | 69,932 | 54,297 | |||||||||||
Income tax expense | 4,737 | 8,982 | 9,630 | 15,619 | |||||||||||
Net income | $ | 29,848 | $ | 19,712 | $ | 60,302 | $ | 38,678 | |||||||
Earnings per common share: | |||||||||||||||
Basic | $ | 0.48 | $ | 0.32 | $ | 0.97 | $ | 0.63 | |||||||
Diluted | $ | 0.45 | $ | 0.30 | $ | 0.92 | $ | 0.60 | |||||||
Weighted average common shares outstanding: | |||||||||||||||
Basic | 62,444 | 61,194 | 62,306 | 61,037 | |||||||||||
Diluted | 65,868 | 64,889 | 65,745 | 64,640 | |||||||||||
Percentage of net sales (1): | |||||||||||||||
Net sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||
Cost of sales | 60.9 | 60.6 | 60.0 | 59.9 | |||||||||||
Gross profit | 39.1 | 39.4 | 40.0 | 40.1 | |||||||||||
Selling, general and administrative expenses | 25.3 | 25.8 | 25.8 | 26.4 | |||||||||||
Depreciation and amortization expenses | 1.0 | 0.9 | 1.0 | 1.0 | |||||||||||
Pre-opening expenses | 0.7 | 0.9 | 0.7 | 0.8 | |||||||||||
Operating income | 12.1 | 11.7 | 12.6 | 11.9 | |||||||||||
Interest expense, net | 0.1 | 0.4 | 0.1 | 0.5 | |||||||||||
Loss on extinguishment of debt | — | — | 0.0 | 0.1 | |||||||||||
Income before income taxes | 12.0 | 11.3 | 12.4 | 11.3 | |||||||||||
Income tax expense | 1.6 | 3.5 | 1.7 | 3.2 | |||||||||||
Net income | 10.4 | % | 7.7 | % | 10.7 | % | 8.0 | % | |||||||
(1) Components may not add to totals due to rounding. | |||||||||||||||
Ollie’s Bargain Outlet Holdings, Inc. | |||||||
Condensed Consolidated Balance Sheets | |||||||
(In thousands) | |||||||
(Unaudited) | |||||||
August 4, | July 29, | ||||||
Assets | 2018 | 2017 | |||||
Current assets: | |||||||
Cash and cash equivalents | $ | 29,415 | $ | 24,820 | |||
Inventories | 287,440 | 253,008 | |||||
Accounts receivable | 1,602 | 766 | |||||
Prepaid expenses and other assets | 9,918 | 4,193 | |||||
Total current assets | 328,375 | 282,787 | |||||
Property and equipment, net | 57,991 | 49,975 | |||||
Goodwill | 444,850 | 444,850 | |||||
Trade name and other intangible assets, net | 232,472 | 232,806 | |||||
Other assets | 4,081 | 2,319 | |||||
Total assets | $ | 1,067,769 | $ | 1,012,737 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Current portion of long-term debt | $ | 10,178 | $ | 8,887 | |||
Accounts payable | 69,015 | 53,276 | |||||
Income taxes payable | - | 1,936 | |||||
Accrued expenses and other | 51,762 | 37,040 | |||||
Total current liabilities | 130,955 | 101,139 | |||||
Revolving credit facility | - | - | |||||
Long-term debt | 11,516 | 119,552 | |||||
Deferred income taxes | 57,184 | 87,600 | |||||
Other long-term liabilities | 7,961 | 6,675 | |||||
Total liabilities | 207,616 | 314,966 | |||||
Stockholders’ equity: | |||||||
Common stock | 63 | 61 | |||||
Additional paid-in capital | 592,446 | 573,693 | |||||
Retained earnings | 267,730 | 124,103 | |||||
Treasury - common stock | (86 | ) | (86 | ) | |||
Total stockholders’ equity | 860,153 | 697,771 | |||||
Total liabilities and stockholders’ equity | $ | 1,067,769 | $ | 1,012,737 | |||
Ollie’s Bargain Outlet Holdings, Inc. | ||||||||||||||||
Condensed Consolidated Statements of Cash Flows | ||||||||||||||||
(In thousands) | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Thirteen weeks ended | Twenty-six weeks ended | |||||||||||||||
August 4, | July 29, | August 4, | July 29, | |||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net cash provided by (used in) operating activities | $ | 7,181 | $ | (4,603 | ) | $ | 22,529 | $ | (2,684 | ) | ||||||
Net cash used in investing activities | (5,490 | ) | (5,705 | ) | (10,198 | ) | (8,650 | ) | ||||||||
Net cash provided by (used in) financing activities | 110 | 1,408 | (22,150 | ) | (62,529 | ) | ||||||||||
Net increase (decrease) during period in cash and cash equivalents | 1,801 | (8,900 | ) | (9,819 | ) | (73,863 | ) | |||||||||
Cash and cash equivalents at beginning of period | 27,614 | 33,720 | 39,234 | 98,683 | ||||||||||||
Cash and cash equivalents at end of period | $ | 29,415 | $ | 24,820 | $ | 29,415 | $ | 24,820 | ||||||||
Ollie’s
Supplemental Information
Reconciliation of GAAP to Non-GAAP Financial Measures
(Dollars in thousands)
(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 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 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 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 to the after-tax loss on extinguishment of debt and excess tax benefits related to stock-based compensation, which may not occur with the same frequency or magnitude in future periods. 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 and non-cash purchase accounting items, 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 to 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.
Ollie’s Bargain Outlet Holdings, Inc. | |||||||||||||||
Supplemental Information | |||||||||||||||
Reconciliation of GAAP to Non-GAAP Financial Measures | |||||||||||||||
(In thousands except for per share amounts) | |||||||||||||||
(Unaudited) | |||||||||||||||
Reconciliation of GAAP net income to adjusted net income | |||||||||||||||
Thirteen weeks ended | Twenty-six weeks ended | ||||||||||||||
August 4, | July 29, | August 4, | July 29, | ||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income | $ | 29,848 | $ | 19,712 | $ | 60,302 | $ | 38,678 | |||||||
Loss on extinguishment of debt | - | - | 100 | 397 | |||||||||||
Adjustment to provision for income taxes (1) | - | - | (25 | ) | (153 | ) | |||||||||
Excess tax benefits related to stock-based compensation (2) | (3,796 | ) | (1,893 | ) | (7,728 | ) | (5,124 | ) | |||||||
Adjusted net income | $ | 26,052 | $ | 17,819 | $ | 52,649 | $ | 33,798 | |||||||
(1) The effective tax rate used for the adjustment to the provision for income taxes was the normalized effective tax rate in the quarter in which the related costs (loss on extinguishment of debt) were incurred. | |||||||||||||||
(2) Amount represents the impact from the recognition of excess tax benefits pursuant to Accounting Standards Update 2016-09, Stock Compensation. | |||||||||||||||
Reconciliation of GAAP net income per diluted share to adjusted net income per diluted share | ||||||||||||||||
Thirteen weeks ended | Twenty-six weeks ended | |||||||||||||||
August 4, | July 29, | August 4, | July 29, | |||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net income per diluted share | $ | 0.45 | $ | 0.30 | $ | 0.92 | $ | 0.60 | ||||||||
Adjustments as noted above, per dilutive share: | ||||||||||||||||
Loss on extinguishment of debt, net of taxes | - |
- | - | - | ||||||||||||
Excess tax benefits related to stock-based compensation | (0.06 | ) | (0.03 | ) | (0.12 | ) | (0.08 | ) | ||||||||
Adjusted net income per diluted share (1) | $ | 0.40 | $ | 0.27 | $ | 0.80 | $ | 0.52 | ||||||||
Diluted weighted-average common shares outstanding | 65,868 | 64,889 | 65,745 | 64,640 | ||||||||||||
(1) Totals may not foot due to rounding | ||||||||||||||||
Ollie’s Bargain Outlet Holdings, Inc. | |||||||||||||||
Supplemental Information | |||||||||||||||
Reconciliation of GAAP to Non-GAAP Financial Measures | |||||||||||||||
(Dollars in thousands) | |||||||||||||||
(Unaudited) | |||||||||||||||
Reconciliation of GAAP net income to EBITDA and adjusted EBITDA | |||||||||||||||
Thirteen weeks ended | Twenty-six weeks ended | ||||||||||||||
August 4, | July 29, | August 4, | July 29, | ||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income | $ | 29,848 | $ | 19,712 | $ | 60,302 | $ | 38,678 | |||||||
Interest expense, net | 278 | 1,124 | 816 | 2,458 | |||||||||||
Loss on extinguishment of debt | - | - | 100 | 397 | |||||||||||
Depreciation and amortization expenses | 3,497 | 2,976 | 6,890 | 5,838 | |||||||||||
Income tax expense | 4,737 | 8,982 | 9,630 | 15,619 | |||||||||||
EBITDA | 38,360 | 32,794 | 77,738 | 62,990 | |||||||||||
Non-cash stock-based compensation expense | 1,910 | 2,128 | 3,510 | 4,039 | |||||||||||
Non-cash purchase accounting items | - | (20 | ) | (1 | ) | (42 | ) | ||||||||
Adjusted EBITDA | $ | 40,270 | $ | 34,902 | $ | 81,247 | $ | 66,987 | |||||||
Key Statistics | ||||||||||||||||
Thirteen weeks ended | Twenty-six weeks ended | |||||||||||||||
August 4, | July 29, | August 4, | July 29, | |||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Number of stores open at the beginning of period | 276 | 239 | 268 | 234 | ||||||||||||
Number of new stores | 6 | 11 | 14 | 16 | ||||||||||||
Number of stores open at end of period | 282 | 250 | 282 | 250 | ||||||||||||
Average net sales per store (1) | $ | 1,032 | $ | 1,031 | $ | 2,043 | $ | 1,993 | ||||||||
Comparable stores sales change | 4.4 | % | 4.5 | % | 3.2 | % | 3.2 | % | ||||||||
Comparable store count – end of period | 238 | 206 | 238 | 206 | ||||||||||||
(1) | Average net sales per store represents the weighted average of total net sales divided by the number of stores open at the end of each week in a fiscal quarter for the respective periods presented. |