- Q4 net sales increased 21%;
comparable store sales increased 2.1%
- Q4 operating income increased 22%;
Q4 adjusted operating income(1) increased 8%
- Fiscal 2019 net sales increased 23%;
comparable store sales increased 2.7%
- Fiscal 2019 EPS increased 48% to
$0.74; pro forma adjusted EPS(1) increased 38% to
$1.30
At Home Group Inc. (NYSE:HOME), the home décor superstore, today
announced its financial results for the fourth quarter and fiscal
year ended January 26, 2019.
Lee Bird, Chairman and Chief Executive Officer, stated: “We are
pleased with our fourth quarter results that exceeded both our
topline guidance and the midpoint of our pro forma adjusted
earnings outlook as we continued investing across the business for
the long term. The fourth quarter was our 19th consecutive quarter
of over 20% sales growth and our 20th straight quarter of positive
comparable store sales increases, capping another strong year for
At Home.”
“Through sales growth of nearly 23%, we became a billion-dollar
retailer in fiscal 2019. On the bottom line, we delivered EPS of
$0.74 and increased pro-forma adjusted EPS1 38% to $1.30,” Mr. Bird
continued. “We also expanded our footprint to 180 stores in 37
states as we progress toward our long-term goal of more than 600
stores nationwide. Our fiscal 2019 new store class once again
delivered record new store productivity, demonstrating the
continued strength of our highly differentiated, value-focused
model.”
Mr. Bird added, “We look forward to another great year in fiscal
2020, notwithstanding a softer start to the first quarter due to
unfavorable weather and a late-season Easter. We remain committed
to our proven playbook, the strategic priorities that have driven
our success and our philosophy of reinvestment as we open our
second distribution center this year. With the compelling strength
and depth of our new store pipeline, the effectiveness of our
merchandising initiatives and our progress in elevating the
customer experience, we look forward to delivering on our goals for
fiscal 2020 and beyond.”
For the Thirteen Weeks Ended January
26, 2019
- Net sales increased 20.6% to $354.1
million from $293.7 million in the quarter ended January 27, 2018,
driven by the net addition of 31 stores since the fourth quarter of
fiscal 2018 and a comparable store sales increase of 2.1%.
- We expanded our store footprint by
opening seven new stores in the fourth quarter of fiscal 2019. We
ended the quarter with 180 stores in 37 states, which represents a
20.8% increase in stores since January 27, 2018.
- Gross profit increased 18.0% to $117.2
million from $99.4 million in the fourth quarter of fiscal 2018.
Gross margin decreased 70 basis points to 33.1% from 33.8.% in the
prior year period primarily due to an adjustment to our inventory
shrink reserves. Product margin improvement, including direct
sourcing benefits, was largely offset by increased occupancy costs
resulting from our fiscal 2019 sale-leaseback transactions.
- Selling, general and administrative
expenses (“SG&A”) increased 20.6% to $71.1 million from $58.9
million in the prior year period primarily due to the net addition
of 31 stores, preopening expenses related to our second
distribution center, increased advertising to support our growth
strategies and expenses associated with the transition of our
former chief financial officer. These costs were partially offset
by the non-recurrence of IPO-related stock-based compensation
expense.
- Adjusted SG&A1 increased 25.8% to
$69.3 million compared to $55.1 million in the fourth quarter of
fiscal 2018. Adjusted SG&A1 as a percentage of net sales
increased 90 basis points to 19.6% primarily due to preopening
expenses related to our second distribution center and increased
advertising.
- Operating income increased 22.2% to
$44.6 million compared to $36.5 million in the fourth quarter of
fiscal 2018.
- Adjusted operating income1 increased
8.4% to $46.3 million from $42.7 million in the fourth quarter of
fiscal 2018. Adjusted operating margin1 decreased 150 basis points
to 13.1 % of net sales driven by an adjustment to our inventory
shrink reserves, preopening expenses related to our second
distribution center and increased advertising.
- Interest expense increased to $7.6
million from $5.8 million in the fourth quarter of fiscal 2018 due
to a year-over-year increase in interest rates as well as increased
borrowings under our revolving credit facility (“ABL Facility”) to
support our growth strategies.
- Income tax expense was $7.3 million
compared to $20.8 million in the fourth quarter of fiscal 2018. A
revaluation of deferred tax assets related to the federal tax
legislation enacted in December 2017 (the “Tax Act”), partially
offset by recognition of excess tax benefits related to stock
option exercises, unfavorably impacted our effective tax rate in
the fourth quarter of fiscal 2018.
- Net income was $29.6 million compared
to $9.9 million in the fourth quarter of fiscal 2018. Pro forma
adjusted net income1 was $31.3 million compared to $32.3 million in
the fourth quarter of fiscal 2018.
- EPS was $0.45 compared to $0.15 in the
fourth quarter of fiscal 2018. Pro forma adjusted EPS1 was $0.47
compared to $0.50 in the fourth quarter of fiscal 2018.
- Adjusted EBITDA1 increased 11.3% to
$64.7 million from $58.1 million in the fourth quarter of fiscal
2018.
For the Fiscal Year Ended January 26,
2019
- Net sales increased 22.7% to $1,165.9
million from $950.5 million in fiscal 2018 driven by the net
addition of 31 stores and a comparable store sales increase of
2.7%.
- Gross profit increased 25.7% to $385.9
million from $307.0 million in fiscal 2018. Gross margin expanded
by 80 basis points to 33.1% from 32.3% primarily due to product
margin improvement and the non-recurrence of prior year
distribution costs associated with inventory investments, partially
offset by increased occupancy costs resulting from our fiscal 2019
and 2018 sale-leaseback transactions.
- SG&A increased 43.8% to $303.5
million from $211.1 million in fiscal 2018 primarily due to $41.5
million of one-time, non-cash CEO stock-based compensation expense
recognized in the second quarter of fiscal 2019, the net addition
of 31 stores, increased labor hours related to strategic in-store
projects and inventory processing, and advertising to support our
growth strategies. These costs were partially offset by the
nonrecurrence of IPO-related stock-based compensation expense.
- Adjusted SG&A1 increased 28.6% to
$255.0 million compared to $198.3 million in fiscal 2018. Adjusted
SG&A1 as a percentage of net sales increased 100 basis points
to 21.9% primarily due to increased store labor hours and
advertising.
- Operating income decreased to $76.0
million from $87.4 million in fiscal 2018 primarily due to $41.5
million of one-time, non-cash CEO stock-based compensation expense
recognized in the second quarter of fiscal 2019.
- Adjusted operating income1 increased
21.4% to $124.5 million from $102.5 million in fiscal 2018.
Adjusted operating margin1 decreased by 10 basis points to 10.7%
driven by increased store labor hours and advertising, partially
offset by gross margin improvement.
- Interest expense increased to $27.1
million from $21.7 million in fiscal 2018 due to an increase in
interest rates as well as increased borrowings under our ABL
Facility to support our growth strategies.
- Income tax benefit was nominal compared
to expense of $33.8 million in fiscal 2018. A pre-tax loss in the
second quarter of fiscal 2019 and a decrease in statutory tax rates
as a result of the Tax Act favorably impacted our effective tax
rate in fiscal 2019. Additionally, we recognized $9.8 million in
excess tax benefits related to stock option exercises in fiscal
2019 compared to $5.8 million in fiscal 2018.
- Net income increased 54.0% to $49.0
million from $31.8 million in fiscal 2018. Pro forma adjusted net
income1 grew 43.8% to $86.0 million from $59.8 million in fiscal
2018.
- EPS grew 48.0% to $0.74 from $0.50 in
fiscal 2018. Pro forma adjusted EPS1 increased 38.3% to $1.30 from
$0.94 in fiscal 2018.
- Adjusted EBITDA1 increased 22.1% to
$196.4 million from $160.8 million in fiscal 2018.
Balance Sheet Highlights as of January
26, 2019
- Net inventories increased 41.6% to
$382.0 million compared to $269.8 million as of January 27, 2018,
primarily due to a 20.8% increase in the number of open stores, the
year-over-year timing of inventory purchases as a result of
tariff-related port congestion and Chinese New Year, and an
accelerated cadence of expected new store openings versus the prior
year.
- Total liquidity (cash plus $120.5
million of availability under our ABL Facility) was $131.5
million.
- Total debt was $346.2 million compared
to $299.5 million as of January 27, 2018. There was $221.0 million
outstanding under the ABL Facility as of January 26, 2019.
Outlook & Key
Assumptions
Chief Financial Officer Jeff Knudson stated: “We expect fiscal
2020 to be another strong year from a top line perspective in line
with our long-term growth targets as the benefits of our fiscal
2020 merchandising and marketing initiatives ramp through the year.
We will continue to make investments to drive our business forward,
including growing our store base by 18%, elevating our marketing
efforts and, most importantly, thoughtfully opening our new
distribution center. We are confident that these strategic
investments will position us for long-term success as we continue
to strengthen the At Home value proposition. Within the first
quarter and fiscal year 2020, timing dynamics related to our second
distribution center, new store preopening, advertising, and
non-product costs will influence the cadence of earnings growth.
However, on a lease-adjusted basis we continue to expect full year
adjusted operating margin1 to be relatively flat excluding the
impact of the new distribution center.”
“Below is an overview of our outlook and related assumptions for
selected first quarter and fiscal year 2020 financial data. We are
implementing the new lease accounting standard at the beginning of
fiscal 2020. ASC 842 “Leases” requires, among other things, a
change to the accounting treatment of sale-leaseback transactions
and the reclassification of certain of our financing obligations.
For illustrative purposes only, we have provided the table below
based on management estimates in order to assist investors in
understanding the impact of ASC 842 for comparability purposes to
fiscal 2019.”
Illustrative
Fiscal 2019 Impact of ASC 842 Fiscal 2019
Fiscal 2020 Outlook as Reported on Fiscal
2019(3) as Recast(4) Store
growth 32 net (36 gross)
Sales
$1,390.0 million to $1,410.0
million,representing growth of 19% to 21%
Comp store sales increase
Low single digits
Gross margin
31.0% to 31.2%, inclusive of 100 to 110
bpsimpact of second DC
33.1% (90) bps 32.2%
Adjusted operating margin(1)(2)
8.5% to 8.7%, inclusive of 90 to 100
bpsimpact of second DC
10.7% (120) bps 9.5%
Interest expense, net Approximately
$31.0 million $27.1 million $(2.4) million $24.7 million
Effective tax rate(5) 23%, as compared to 0% in
fiscal 2019
Pro forma adjusted net income(1)(2)
$67.5 million to $71.0 million, inclusive
ofapproximately $(9.5) million to $(11.0) millionimpact of second
DC
$86.0 million $(8.8) million $77.2 million
Pro forma adjusted
EPS(1)(2)
$1.02 to $1.08, inclusive of $(0.14) to
$(0.17)impact of second DC
$1.30 $ (0.13) $1.17
Diluted weighted average shares
outstanding Approximately 66 million
Capital
expenditures
$215 to $235 million, net of
approximately$70 million of sale-leaseback proceeds
Illustrative Q1 Fiscal 2019 Impact of ASC 842
Q1 Fiscal 2019 Q1 Fiscal 2020 Outlook as
Reported on Q1 Fiscal 2019(3) as
Recast(4) Store growth 11 net (11 gross)
Sales
$300.0 million to $305.0 million,
representinggrowth of 17% to 19%
Comp store sales increase Flat to slightly positive
Adjusted operating margin(1)(2)
3.5% to 3.7%, inclusive of approximately
150 bpsimpact of second DC
10.2%
(110) bps
9.1%
Effective tax rate(5) 23%, as compared to 0.3% in Q1
fiscal 2019
Pro forma adjusted net income(1)(2)
$2.0 million to $3.0 million, inclusive
ofapproximately $(3.5) million impact of second DC
$20.1 million $(1.9) million $18.2 million
Pro forma adjusted
EPS(1)(2)
$0.03 to $0.04, inclusive of $(0.05)
impact ofsecond DC
$0.31 $ (0.03) $0.28
Diluted weighted average shares
outstanding Approximately 66 million
______________________________
(1) Represents a non-GAAP financial measure. For additional
information about non-GAAP measures, including, where applicable,
reconciliations to the most directly comparable financial measures
presented in accordance with GAAP, please see “Non-GAAP Measures”
below. (2) We have not presented a quantitative
reconciliation of the forward-looking non-GAAP measures adjusted
operating margin, pro forma adjusted net income and pro forma
adjusted EPS to their most directly comparable GAAP financial
measures because it is impractical to forecast certain items
without unreasonable efforts due to the uncertainty and inherent
difficulty of predicting the occurrence and financial impact of
such items as well as the periods in which such items may be
recognized. Such items include the potential gain to be recognized
as a result of future sale-leaseback transactions as well as the
tax impact of certain stock-based compensation events. (3)
Based on management estimates, for illustrative purposes.
(4) Represents first quarter and fiscal year 2019 results as
adjusted for illustrative purposes to reflect the impact of ASC
842. (5) We have not included an estimate of any potential
impact on our forward-looking effective tax rate of certain
stock-based compensation events, including the vesting of
restricted stock units or the tax benefit from stock option
exercises, due to the uncertainty and inherent difficulty of
predicting the occurrence and financial impact of such items as
well as the periods in which such items may be recognized. The
impact of these events in any particular period may have a material
effect on our effective tax rate for such period.
Conference Call Details
A conference call to discuss the fourth quarter and fiscal year
2019 financial results is scheduled for today, March 27, 2019, at
8:30 a.m. Eastern Time. Investors and analysts interested in
participating in the call are invited to dial 877-407-0789
(international callers please dial 201-689-8562) approximately 10
minutes prior to the start of the call. A live audio webcast of the
conference call, together with certain supplemental materials, will
be available online at investor.athome.com.
A recorded replay of the conference call will be available
within two hours of the conclusion of the call and can be accessed
online at investor.athome.com for 90 days.
We define certain terms used in this release as follows:
"Adjusted EBITDA" means net income before net interest expense,
income tax provision, depreciation and amortization, losses related
to the disposal of buildings and costs associated with the
resignation of our former Chief Financial Officer (the “CFO
Transition”), adjusted for the impact of certain other items as
defined in our debt agreements, including certain legal settlements
and consulting and other professional fees, stock-based
compensation expense and non-cash rent.
“Adjusted Net Income” means net income, adjusted for impairment
charges, loss on modification of debt, initial public offering
related non-cash stock-based compensation expense and related
payroll tax expenses and the income tax impact associated with the
special one-time initial public offering bonus stock option
exercises, non-cash stock-based compensation expense related to the
special one-time grant of stock options to our Chairman and Chief
Executive Officer (the “CEO grant”), the CFO Transition,
transaction costs related to our initial public offering and the
registration and sale of shares of our common stock on behalf of
our Sponsors, losses related to the disposal of buildings and tax
impacts associated with the Tax Act.
“adjusted operating income” means operating income (loss)
adjusted for certain one-time expenses associated with our IPO and
the registration and sale of shares of our common stock on behalf
of our Sponsors as well as non-cash stock-based compensation
expense related to a special one-time IPO bonus grant, the payroll
tax expenses associated with the special one-time IPO bonus grant
stock option exercises, non-cash stock-based compensation expense
related to the CEO grant and expenses associated with the CFO
transition.
“adjusted SG&A” means selling, general and administrative
expenses adjusted for certain one-time expenses associated with our
IPO and the registration and sale of shares of our common stock on
behalf of our Sponsors as well as non-cash stock-based compensation
expense related to a special one-time IPO bonus grant, the payroll
tax expenses associated with the special one-time IPO bonus grant
stock option exercises, non-cash stock-based compensation expense
related to the CEO grant, expenses associated with the CFO
transition and losses related to the disposal of buildings.
"comparable store sales" means, for any reporting period, the
change in period-over-period net sales for the comparable store
base, beginning with stores on the second day of the sixteenth full
fiscal month following the store's opening. When a store is being
relocated or remodeled, we exclude sales from that store in the
calculation of comparable store sales until the first day of the
sixteenth full fiscal month after it reopens. As it relates to At
Home, “two-year comparable store sales basis” refers to the sum of
the increase in comparable store sales for each of the current and
preceding fiscal years.
“EPS” means diluted earnings per share.
“GAAP” means accounting principles generally accepted in the
United States.
“pro forma adjusted net income” means Adjusted Net Income
adjusted for, in certain periods, normalization of income tax rates
to reflect comparability between periods.
“pro forma adjusted EPS” means pro forma adjusted net income
divided by diluted weighted average shares outstanding.
“Store-level Adjusted EBITDA” means Adjusted EBITDA, adjusted
further to exclude the impact of costs associated with new store
openings and certain corporate overhead expenses which we do not
consider in our evaluation of the ongoing performance of our stores
from period to period.
Forward-Looking
Statements
This release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
You can generally identify forward-looking statements by our use of
forward-looking terminology such as "anticipate", "are confident",
"assumed", "believe", "continue", "could", "estimate", "expect",
"intend", “look forward”, "may", "might", "on track", “outlook”,
"plan", "potential", "predict", “reaffirm”, "seek", "should", or
"vision", or the negative thereof or other variations thereon or
comparable terminology. In particular, statements about our outlook
and assumptions for financial performance for the first quarter and
fiscal year 2020, as well as statements about the markets in which
we operate, expected new store openings, our real estate strategy,
potential growth opportunities, impact of expected stock option
exercises and future capital expenditures and our expectations,
beliefs, plans, strategies, objectives, prospects, assumptions or
future events or performance contained in this document are
forward-looking statements.
We have based these forward-looking statements on our current
expectations, assumptions, estimates and projections. While we
believe these expectations, assumptions, estimates and projections
are reasonable, such forward-looking statements are only
predictions and involve known and unknown risks and uncertainties,
many of which are beyond our control. These and other important
factors, including those factors described in “Item 1A. Risk
Factors” of our Annual Report on Form 10-K for the fiscal year
ended January 26, 2019 and other reports that we file with the
Securities and Exchange Commission (“SEC”), may cause our actual
results, performance or achievements to differ materially from any
future results, performance or achievements expressed or implied by
these forward-looking statements. Given these risks and
uncertainties, you are cautioned not to place undue reliance on
such forward-looking statements. The forward-looking statements
contained in this release are not guarantees of future performance
and our actual results of operations, financial condition and
liquidity, and the development of the industry in which we operate,
may differ materially from the forward-looking statements contained
in this release. In addition, even if our results of operations,
financial condition and liquidity, and events in the industry in
which we operate, are consistent with the forward-looking
statements contained in this release, they may not be predictive of
results or developments in future periods.
Any forward-looking statement that we make in this release
speaks only as of the date of such statement. Except as required by
law, we do not undertake any obligation to update or revise, or to
publicly announce any update or revision to, any of the
forward-looking statements, whether as a result of new information,
future events or otherwise, after the date of this document.
About At Home Group Inc.
At Home (NYSE:HOME), the home décor superstore, offers more than
50,000 on-trend home products to fit any budget or style, from
furniture, mirrors, rugs, art and housewares to tabletop, patio and
seasonal décor. At Home is headquartered in Plano, Texas, and
currently operates 188 stores in 38 states. For more information,
please visit us online at investor.athome.com.
-Financial Tables to Follow-
AT HOME GROUP INC.
Consolidated Balance Sheets (in thousands, except share
and per share data) January 26, 2019 January
27, 2018 Assets Current assets: Cash and cash
equivalents $ 10,951 $ 8,525 Inventories, net 382,023 269,844
Prepaid expenses 7,949 7,911 Other current assets 13,626
14,653 Total current assets 414,549 300,933
Property and equipment, net 682,663 466,263 Goodwill 569,732
569,732 Trade name 1,458 1,458 Debt issuance costs, net 1,539 1,978
Restricted cash 2,515 — Noncurrent deferred tax asset 52,805 33,561
Other assets 945 316 Total assets $ 1,726,206 $
1,374,241
Liabilities and Shareholders' Equity Current
liabilities: Accounts payable $ 115,821 $ 79,628 Accrued and
other current liabilities 117,508 89,499 Revolving line of credit
221,010 162,000 Current portion of deferred rent 11,364 9,072
Current portion of long-term debt and financing obligations
4,049 3,474 Total current liabilities 469,752
343,673 Long-term debt 336,435 289,902 Financing obligations 35,038
19,690 Deferred rent 169,339 124,054 Other long-term liabilities
4,556 6,043 Total liabilities 1,015,120
783,362
Shareholders' Equity Common stock; $0.01 par value;
500,000,000 shares authorized; 63,609,684 and 61,423,398 shares
issued and outstanding, respectively 636 614 Additional paid-in
capital 643,677 572,488 Retained earnings 66,773
17,777 Total shareholders' equity 711,086 590,879
Total liabilities and shareholders' equity $ 1,726,206 $ 1,374,241
AT HOME GROUP
INC. Consolidated Statements of Income (in thousands,
except share and per share data) Thirteen Weeks
Ended Fiscal Year Ended January 26, 2019
January 27, 2018 January 26, 2019 January 27,
2018 Net sales $ 354,065 $ 293,668 $ 1,165,899 $
950,528
Cost of sales 236,826 194,282
780,048 643,570
Gross profit 117,239
99,386 385,851 306,958
Operating
expenses Selling, general and administrative expenses 71,055
58,898 303,453 211,057 Impairment charges — 2,422 — 2,422
Depreciation and amortization 1,616 1,596
6,363 6,118 Total operating expenses 72,671
62,916 309,816 219,597
Operating income
44,568 36,470 76,035 87,361 Interest expense, net 7,606
5,770 27,056 21,704
Income before income
taxes 36,962 30,700 48,979 65,657 Income tax provision
(benefit) 7,349 20,845 (17) 33,845
Net income $ 29,613 $ 9,855 $ 48,996 $ 31,812
Earnings per share: Net income per common share: Basic $
0.47 $ 0.16 $ 0.78 $ 0.53 Diluted $ 0.45 $ 0.15 $ 0.74 $ 0.50
Weighted average shares outstanding: Basic 63,592,382
60,816,799 62,936,959 60,503,860 Diluted
65,887,848 65,042,226 66,299,646 63,712,003
AT HOME GROUP INC.
Consolidated Statements of Cash Flows (in thousands)
Fiscal Year Ended January 26, 2019 January
27, 2018 Operating Activities Net income $ 48,996 $
31,812 Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 56,529 48,777
Loss on disposal of fixed assets 553 100 Impairment charges — 2,422
Non-cash interest expense 2,181 2,060 Amortization of deferred gain
on sale-leaseback (8,751 ) (6,267 ) Deferred income taxes (19,244 )
7,174 Stock-based compensation 49,526 13,764 Changes in operating
assets and liabilities Inventories (112,179 ) (26,049 ) Prepaid
expenses and other current assets 989 (13,495 ) Other assets (629 )
233 Accounts payable 29,261 25,247 Accrued liabilities 19,156
14,285 Income taxes payable — (7,265 ) Deferred rent 19,946
13,220 Net cash provided by operating
activities 86,334 106,018
Investing
Activities Purchase of property and equipment (357,521 )
(232,698 ) Net proceeds from sale of property and equipment
148,398 62,422 Net cash used in investing
activities (209,123 ) (170,276 )
Financing
Activities Payments under lines of credit (721,177 ) (389,126 )
Proceeds from lines of credit 780,187 449,551 Payment of debt
issuance costs (1,009 ) (1,906 ) Proceeds from issuance of
long-term debt 50,000 6,162 Payments on financing obligations (265
) (176 ) Proceeds from financing obligations 1,625 — Payments on
long-term debt (3,316 ) (9,729 ) Proceeds from exercise of stock
options 21,685 10,433 Net cash provided
by financing activities 127,730 65,209
Increase in cash, cash equivalents and restricted cash 4,941
951
Cash, cash equivalents and restricted cash, beginning of
period 8,525 7,574
Cash, cash
equivalents and restricted cash, end of period $ 13,466
$ 8,525
Supplemental Cash Flow Information
Cash paid for interest $ 23,297 $ 19,284 Cash paid for income taxes
$ 17,013 $ 42,979
Supplemental Information for Non-cash
Investing and Financing Activities Increase (Decrease) in
current liabilities of property and equipment $ 14,297 $ (1,210 )
Property and equipment reduction due to sale-leaseback $ (111,932 )
$ (46,184 ) Property and equipment acquired under capital lease $ —
$ 1,006 Property and equipment additions due to build-to-suit lease
transactions $ 13,679 $ —
Non-GAAP Measures
Certain financial measures presented in this release, such as
comparable store sales, Adjusted EBITDA, adjusted SG&A,
adjusted operating income, Adjusted Net Income, pro forma adjusted
net income, pro forma adjusted EPS and Store-level Adjusted EBITDA,
are not recognized under GAAP.
We present comparable store sales, which is not a recognized
financial measure under GAAP, because it allows us to evaluate how
our store base is performing by measuring the change in
period-over-period net sales in stores that have been open for the
applicable period. We present Adjusted EBITDA and Store-level
Adjusted EBITDA, which are not recognized financial measures under
GAAP, because we believe they assist investors and analysts in
comparing our operating performance across reporting periods on a
consistent basis by excluding items that we do not believe are
indicative of our core operating performance, such as interest,
depreciation, amortization, loss on extinguishment of debt,
impairment charges and taxes. We present adjusted SG&A,
adjusted operating income, Adjusted Net Income, pro forma adjusted
net income and pro forma adjusted EPS, which are not recognized
financial measures under GAAP, because we believe investors’
understanding of our operating performance is enhanced by the
disclosure of selling, general and administrative expenses,
operating income, net income and earnings per diluted share
adjusted for nonrecurring charges associated with events such as
our IPO and refinancing transactions.
You are encouraged to evaluate each of these adjustments and the
reasons we consider them appropriate for supplemental analysis. In
evaluating our non-GAAP measures, you should be aware that in the
future we may incur expenses that are the same as or similar to
some of the adjustments in such presentations. In particular,
Store-level Adjusted EBITDA does not reflect costs associated with
new store openings, which are incurred on a limited basis with
respect to any particular store when opened and are not indicative
of ongoing core operating performance, and corporate overhead
expenses that are necessary to allow us to effectively operate our
stores and generate Store-level Adjusted EBITDA. Our presentation
of non-GAAP financial measures should not be construed as an
inference that our future results will be unaffected by unusual or
non-recurring items. There can be no assurance that we will not
modify the presentation of our non-GAAP financial measures in the
future, and any such modification may be material. In addition,
comparable store sales, Adjusted EBITDA, adjusted SG&A,
adjusted operating income, Adjusted Net Income, pro forma adjusted
net income, pro forma adjusted EPS and Store-level Adjusted EBITDA
may not be comparable to similarly titled measures used by other
companies in our industry or across different industries.
Comparable store sales, Adjusted EBITDA, adjusted SG&A,
adjusted operating income, Adjusted Net Income, pro forma adjusted
net income, pro forma adjusted EPS and Store-level Adjusted EBITDA
have limitations as analytical tools and you should not consider
them in isolation, or as a substitute for analysis of our results
as reported under GAAP. We compensate for these limitations by
relying primarily on our GAAP results and using comparable store
sales, Adjusted EBITDA, adjusted SG&A, adjusted operating
income, Adjusted Net Income, pro forma adjusted net income, pro
forma adjusted EPS and Store-level Adjusted EBITDA only as
supplemental information.
The Company has not presented a quantitative reconciliation of
the forward-looking non-GAAP measures adjusted operating income,
pro forma adjusted net income and pro forma adjusted EPS to their
most directly comparable GAAP financial measures because it is
impractical to forecast certain items without unreasonable efforts
due to the uncertainty and inherent difficulty of predicting the
occurrence and financial impact of and the periods in which such
items may be recognized.
AT HOME GROUP INC. Supplemental
Information - Reconciliation of GAAP to Non-GAAP Financial
Measures (in thousands, except share and per share
data)(Unaudited)
The tables below reconcile the non-GAAP financial measures of
adjusted SG&A, adjusted operating income, Adjusted Net Income,
pro forma adjusted net income, pro forma adjusted EPS, Adjusted
EBITDA and Store-level Adjusted EBITDA to their most directly
comparable GAAP financial measures.
Reconciliation of selling, general and administrative
expenses as reported to adjusted SG&A
Thirteen Weeks
Ended Fiscal Year Ended January 26, 2019
January 27, 2018 January 26, 2019 January 27,
2018 Selling, general and administrative expenses as
reported $ 71,055 $ 58,898 $ 303,453 $ 211,057 Adjustments:
Stock-based compensation related to special one-time IPO bonus
grant(a) — (3,117 ) (2,521 ) (11,273 ) Payroll tax expense related
to special one-time IPO bonus stock option exercises(b) (5 ) — (69
) — Stock-based compensation related to one-time CEO grant(c) — —
(41,475 ) — CFO Transition costs(d) (1,264 ) — (2,393 ) — Loss on
disposal of building(e) (500 ) — (500 ) — Transaction costs(f)
— (726 ) (1,478 ) (1,450 )
Adjusted selling, general and administrative expenses $
69,286 $ 55,055 $ 255,017 $ 198,334
Reconciliation of operating income as reported to adjusted
operating income
Thirteen Weeks
Ended Fiscal Year Ended January 26, 2019
January 27, 2018 January 26, 2019 January 27,
2018 Operating income as reported $ 44,568 $
36,470 $ 76,035 $ 87,361 Adjustments: Impairment charges — 2,422 —
2,422 Stock-based compensation related to special one-time IPO
bonus grant(a) — 3,117 2,521 11,273 Payroll tax expense related to
special one-time IPO bonus stock option exercises(b) 5 — 69 —
Stock-based compensation related to one-time CEO grant(c) — —
41,475 — CFO Transition costs(d) 1,264 — 2,393 — Loss on disposal
of building(e) 500 — 500 — Transaction costs(f) —
726 1,478 1,450
Adjusted operating income $ 46,337 $ 42,735 $
124,471 $ 102,506
Adjusted operating margin
13.1 % 14.6 % 10.7 % 10.8 %
Reconciliation of net income as reported to pro forma
adjusted net income
Thirteen Weeks
Ended Fiscal Year Ended January 26, 2019
January 27, 2018 January 26, 2019 January 27,
2018 Net income $ 29,613 $ 9,855 $ 48,996 $
31,812 Adjustments: Impairment charges — 2,422 — 2,422 Loss on
modification of debt(g) — — — 179 Stock-based compensation related
to special one-time IPO bonus grant(a) — 3,117 2,521 11,273 Payroll
tax expense related to special one-time IPO bonus stock option
exercises(b) 5 — 69 — Stock-based compensation related to one-time
CEO grant(c) — — 41,475 — CFO Transition costs(d) 1,264 — 2,393 —
Loss on disposal of building(e) 500 — 500 — Transaction costs(f) —
726 1,478 1,450 Tax impact of adjustments to net income(h) (94 )
(847 ) (10,810 ) (4,003 ) Tax impact (benefit) related to special
one-time IPO bonus stock option exercises(i) (28 ) — (593 ) —
Deferred tax impact related to Tax Act(h) —
16,694 — 16,694
Adjusted Net
Income 31,260 31,967 86,029 59,827 Adjustments for
comparability between periods: Tax rate adjustments(j) —
350 — —
Pro
forma adjusted net income $ 31,260 $ 32,317 $
86,029 $ 59,827 Diluted weighted average shares
outstanding 65,887,848 65,042,226
66,299,646 63,712,003
Pro forma
adjusted EPS $ 0.47 $ 0.50 $ 1.30 $ 0.94
______________________________
(a) Non-cash stock-based compensation expense associated
with a special one-time initial public offering bonus grant to
certain members of senior management (the “IPO grant”), which we do
not consider in our evaluation of our ongoing performance. The IPO
grant was made in addition to the ongoing equity incentive program
that we have in place to incentivize, retain and motivate our
employees, officers, consultants and non-employee directors and was
made to reward certain senior executives for historical performance
and allow them to benefit from future successful outcomes for our
Sponsors. (b) Payroll tax expense related to stock option
exercises associated with the IPO grant, which we do not consider
in our evaluation of our ongoing performance. (c) Non-cash
stock-based compensation expense associated with a special one-time
grant of stock options to our Chairman and Chief Executive Officer
that vested and was fully recognized in the second fiscal quarter
2019 (the “CEO grant”), which we do not consider in our evaluation
of our ongoing performance. (d) Costs related to the CFO
Transition in the fourth quarter and fiscal year ended January 26,
2019, respectively. (e) One-time loss incurred related to
the acquisition of land for the purposes of building a new store in
fiscal year 2020 that had a pre-existing unusable structure on the
premises that was demolished. (f) Charges incurred in
connection with the sale of shares of our common stock on behalf of
our Sponsors, which we do not consider in our evaluation of our
ongoing performance. (g) Non-cash loss due to a change in
the ABL Facility lenders under the ABL Amendment resulting in
immediate recognition of a portion of the related unamortized
deferred debt issuance costs. (h) Represents the income tax
impact of the adjusted expenses using the annual effective tax rate
excluding discrete items for fiscal year 2019 and excluding the
revaluation of net deferred tax assets as a result of the Tax Act
for fiscal year 2018. After giving effect to the adjustments to net
income, the adjusted effective tax rates for the thirteen weeks
ended January 26, 2019 and January 27, 2018 were 19.3% and 13.5%,
respectively. The adjusted effective tax rates for fiscal years
2019 and 2018 were 11.7% and 26.1%, respectively. (i)
Represents the income tax impact (benefit) related to stock option
exercises associated with the IPO grant. (j) Represents the
tax impact of the revaluation of net deferred tax assets in
accordance with the Tax Act.
Reconciliation of net income to EBITDA, Adjusted EBITDA and
Store-level Adjusted EBITDA
Thirteen Weeks
Ended Fiscal Year Ended January 26, 2019
January 27, 2018 January 26, 2019 January 27,
2018 Net income $ 29,613 $ 9,855 $ 48,996 $
31,812 Interest expense, net 7,606 5,770 27,056 21,704 Income tax
provision (benefit) 7,349 20,845 (17 ) 33,845 Depreciation and
amortization(a) 15,746 13,835 56,529
48,777
EBITDA $ 60,314 $ 50,305 $ 132,564 $ 136,138
Consulting and other professional services(b) 808 1,181 5,990 5,734
Stock-based compensation expense(c) 1,220 696 5,530 2,491
Stock-based compensation related to special one-time IPO bonus
grant(d) — 3,117 2,521 11,273 Stock-based compensation related to
one-time CEO grant(g) — — 41,475 — Non-cash rent(f) 579 1,170 4,499
3,334 Other(g) 1,743 1,624 3,827
1,829
Adjusted EBITDA $ 64,664 $ 58,093 $ 196,406 $
160,799 Costs associated with new store openings(h) 5,627 3,990
18,656 16,504 Corporate overhead expenses(i) 22,173
19,705 90,839 75,149
Store-level Adjusted
EBITDA $ 92,464 $ 81,788 $ 305,901 $ 252,452
______________________________
(a) Includes the portion of depreciation and amortization
expenses that are classified as cost of sales in our consolidated
statements of income. (b) Primarily consists of (i)
consulting and other professional fees with respect to projects to
enhance our merchandising and human resource capabilities and other
company initiatives; and (ii) charges incurred in connection with
the sale of shares of our common stock on behalf of our Sponsors.
(c) Non-cash stock-based compensation expense related to the
ongoing equity incentive program that we have in place to
incentivize, retain and motivate our employees, officers,
consultants and non-employee directors. (d) Non-cash
stock-based compensation expense associated with the IPO grant,
which we do not consider in our evaluation of our ongoing
performance. The IPO grant was made in addition to the ongoing
equity incentive program that we have in place to incentivize,
retain and motivate our employees, officers, consultants and
non-employee directors and was made to reward certain senior
executives for historical performance and allow them to benefit
from future successful outcomes for our Sponsors. (e)
Non-cash stock-based compensation expense associated with the CEO
grant, which we do not consider in our evaluation of our ongoing
performance. The CEO grant vested and was fully recognized in the
second fiscal quarter 2019. (f) Consists of the non-cash
portion of rent, which reflects (i) the extent to which our GAAP
straight-line rent expense recognized exceeds or is less than our
cash rent payments, partially offset by (ii) the amortization of
deferred gains on sale-leaseback transactions that are recognized
to rent expense on a straight-line basis through the applicable
lease term. The offsetting amounts relating to the amortization of
deferred gains on sale-leaseback transactions were $(2.3) million
and $(1.7) million during the thirteen weeks ended January 26, 2019
and January 27, 2018, respectively, and $(8.8) million and $(6.3)
million during the fiscal year ended January 26, 2019 and January
27, 2018, respectively. The GAAP straight-line rent expense
adjustment can vary depending on the average age of our lease
portfolio, which has been impacted by our significant growth. For
newer leases, our rent expense recognized typically exceeds our
cash rent payments while for more mature leases, rent expense
recognized is typically less than our cash rent payments.
(g) Other adjustments include amounts our management believes are
not representative of our ongoing operations, including costs
related to the CFO Transition, payroll tax expense related to the
exercise of stock options, a one-time loss incurred during the
thirteen weeks and fiscal year ended January 26, 2019 related to
the acquisition of land for the purposes of building a new store in
fiscal year 2020 that had a pre-existing unusable structure on the
premises that was demolished, as well as an impairment charge of
$2.4 million following the resolution of a legal matter in the
thirteen weeks and fiscal year ended January 27, 2018. (h)
Reflects non-capital expenditures associated with opening new
stores, including marketing and advertising, labor and cash
occupancy expenses. Costs related to new store openings represent
cash costs, and you should be aware that in the future we may incur
expenses that are similar to these costs. We anticipate that we
will continue to incur cash costs as we open new stores in the
future. We opened seven and five new stores during the thirteen
weeks ended January 26, 2019 and January 27, 2018, respectively,
and 34 and 28 new stores during fiscal years 2019 and 2018,
respectively. (i) Reflects corporate overhead expenses,
which are not directly related to the profitability of our stores,
to facilitate comparisons of store operating performance as we do
not consider these corporate overhead expenses when evaluating the
ongoing performance of our stores from period to period. Corporate
overhead expenses, which are a component of selling, general and
administrative expenses, are comprised of various home office
general and administrative expenses such as payroll expenses,
occupancy costs, marketing and advertising, and consulting and
professional fees. Store-level Adjusted EBITDA should not be used
as a substitute for consolidated measures of profitability or
performance because it does not reflect corporate overhead expenses
that are necessary to allow us to effectively operate our stores
and generate Store-level Adjusted EBITDA. We anticipate that we
will continue to incur corporate overhead expenses in future
periods.
HOME-F
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version on businesswire.com: https://www.businesswire.com/news/home/20190327005228/en/
Investor Relations:ICR, Inc.Farah Soi/Rachel
Schacter203.682.8200Farah.Soi@icrinc.comRachel.Schacter@icrinc.com
At HomeBethany Perkins972.265.1326InvestorRelations@AtHome.com
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