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Mar 28, 2018

Sportsman's Warehouse Holdings, Inc. Announces Fourth Quarter and Full Year 2017 Financial Results

MIDVALE, Utah, March 28, 2018 (GLOBE NEWSWIRE) -- Sportsman's Warehouse Holdings, Inc. ("Sportsman's" or the “Company”) (Nasdaq:SPWH) today announced financial results for the fourteen and fifty-three weeks ended February 3, 2018.

Jon Barker, Chief Executive Officer, stated, “In 2017, despite a difficult backdrop and a heightened promotional environment in the second half, we successfully completed our 12 planned new store openings, generated important learnings that are informing our omni-channel strategy, delivered an over 80% increase in website driven sales year-over-year, increased customer engagement with our growing loyalty member base and targeted marketing efforts, generated free cash flow, and reduced debt by $2.3 million.  We finished the year with fourth quarter topline sales growth of 9.8% which was in-line with our expectations while our bottom line results were impacted by an elevated promotional backdrop and a tax-reform driven investment in our associates.”

Mr. Barker added, “Looking ahead, our 2018 priorities are focused on our omni-channel strategy encompassing both store growth and e-commerce platform enhancements, customer acquisition and engagement, and merchandising. We will continue to operate with great discipline and look forward to strengthening our competitive position in 2018 as our extensive offering of brand name products, everyday low pricing strategy and knowledgeable customer service, combined with our focused market specific localization strategy continue to resonate with our loyal customers.”

The Company’s fiscal year 2017 ended on February 3, 2018, resulting in an extra week of operations in the fourth quarter of fiscal 2017 ("53rd week") as compared to the fourth quarter of fiscal 2016. The 53rd week contributed approximately $10.6 million in sales. There was no impact to same store sales, which are presented on a 52 week comparative basis.

Also, starting with this fiscal quarter and going forward, the Company will be including e-commerce in same store sales. The Company has historically excluded e-commerce from same store sales. For purposes of this earnings release, the Company is providing same store sales both including and excluding e-commerce for the fourth quarter and full year 2017.

For the fourteen weeks ended February 3, 2018:

  • Net sales increased by 9.8% to $243.2 million from $221.4 million in the fourth quarter of fiscal year 2016. Same store sales decreased by 4.5%, or 5.2% excluding e-commerce, over the same period. 
     
  • Income from operations was $16.6 million compared to $21.1 million in the fourth quarter of fiscal year 2016. Adjusted income from operations, which excludes the write-off of an IT related asset was $17.1 million, compared to adjusted income from operations of $21.1 million for the fourth quarter of fiscal year 2016 (see “GAAP and Non-GAAP Measures).
     
  • The Company opened one new store in the fourth quarter of fiscal 2017 and ended the quarter with 87 stores in 22 states, or square footage growth of 11.3% from the end of the fourth quarter of fiscal year 2016.
     
  • Interest expense increased to $3.7 million from $3.3 million in the fourth quarter of fiscal year 2016. 
     
  • Net income was $5.9 million compared to $10.5 million in the fourth quarter of fiscal year 2016. Adjusted net income, which excludes the write-off of an IT related asset and the impact of the Tax Cuts and Jobs Act (“US Tax Reform”) was $8.4 million compared to adjusted net income of $10.5 million for the fourth quarter of fiscal year 2016 (see “GAAP and Non-GAAP Measures”).
     
  • Diluted earnings per share were $0.14 compared to $0.25 in the fourth quarter of fiscal year 2016. Adjusted diluted earnings per share were $0.20 compared to $0.25 in the fourth quarter of fiscal year 2016 (see “GAAP and Non-GAAP Measures”).
     
  • Adjusted EBITDA was $23.0 million compared to $26.4 million in the fourth quarter of fiscal year 2016 (see "GAAP and Non-GAAP Measures").

For the fifty-three weeks ended February 3, 2018:

  • Net sales increased by 3.8% to $809.7 million from $780.0 million in fiscal year 2016. Same store sales decreased by 6.5%, or 6.9% excluding e-commerce, over the same period.
     
  • Income from operations was $46.6 million compared to $60.7 million in fiscal year 2016. Adjusted income from operations, which excludes professional and other fees incurred in connection with the evaluation of a strategic acquisition and the write-off of an IT related asset was $48.8 million, compared to adjusted income from operations of $60.8 million for fiscal year 2016, which excludes secondary offering expenses (see “GAAP and Non-GAAP Measures).
     
  • The Company opened twelve new stores in fiscal year 2017 or square footage growth of 11.3% from fiscal year 2016.
     
  • Interest expense increased to $13.7 million in fiscal year 2017 compared to $13.4 million in fiscal year 2016. 
     
  • Net income was $17.7 million compared to $29.7 million in fiscal year 2016. Adjusted net income, which excludes professional and other fees incurred in connection with the evaluation of a strategic acquisition, the write-off of an IT related asset, and the impacts of US Tax Reform, was $21.3 million compared to adjusted net income, which excludes secondary offering expenses and prior-year tax credits, of $29.2 million for fiscal year 2016 (see “GAAP and Non-GAAP Measures”).
     
  • Diluted earnings per share were $0.42 compared to $0.70 in fiscal year 2016. Adjusted diluted earnings per share were $0.50 compared to $0.69 in fiscal year 2016. (See “GAAP and Non-GAAP Measures”).
     
  • Adjusted EBITDA was $72.8 million compared to $82.3 million in fiscal year 2016 (see "GAAP and Non-GAAP Measures").

Balance sheet highlights as of February 3, 2018:                                                                        

  • Total debt: $193.3 million consisting of $60.0 million outstanding under the Company’s revolving credit facility and $133.3 million outstanding under the term loan, net of unamortized discount and debt issuance costs.
  • Total liquidity (cash plus $66.9 million of availability on revolving credit facility): $68.7 million

First Quarter and Fiscal Year 2018 Outlook:

For the first quarter of fiscal year 2018, net sales are expected to be in the range of $173.0 million to $180.0 million based on a same store sales increase in the range of 2.0% to 6.0% compared to the corresponding period of fiscal year 2017. Adjusted net income is expected to be in the range of ($3.6) million to ($4.6) million with adjusted diluted earnings per share of ($0.08) to ($0.11) on a weighted average of approximately 42.8 million estimated common shares outstanding, when adjusted for the one-time expense incurred in connection with the announcement of the retirement of the Company’s former Chief Executive Officer, John Schaefer, in the first quarter of fiscal 2018 (see “GAAP and Non-GAAP Measures”).

For fiscal year 2018, net sales are expected to be in the range of $830 million to $860.0 million based on same store sales in the range of (1.0%) to 2.0% compared to fiscal year 2017. Adjusted net income is expected to be in the range of $22.2 million to $27.3 million with adjusted earnings per diluted share of $0.52 to $0.64 on a weighted average of approximately 43.0 million estimated common shares outstanding, when adjusted for the one-time expense incurred in connection with the announcement of the retirement of the Company’s former Chief Executive Officer, John Schaefer, in the first quarter of fiscal 2018 (see “GAAP and Non-GAAP Measures”).

Conference Call Information:

A conference call to discuss fourth quarter and fiscal 2017 financial results is scheduled for today, March 28, 2018, 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.sportsmanswarehouse.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 defined adjusted income from operations and adjusted net income as income from operations and net income, respectively, in each case, plus professional and other fees incurred in connection with the evaluation of a strategic acquisition, secondary offering expenses, an asset write-off, impact of the Tax Cuts and Jobs Act, and prior year tax credits, as applicable.  Adjusted diluted earnings per share is diluted earnings per share excluding the impact of professional and other fees incurred in connection with the evaluation of a strategic acquisition, secondary offering expenses and prior year tax credits. We define Adjusted EBITDA as net income plus interest expense, income tax expense, depreciation and amortization, stock-based compensation expense, pre-opening expenses, secondary offering expenses, professional fees, as asset write-off, impact of the Tax Cuts and Jobs Act, 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. 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 income 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 competitive position and our outlook for the fourth quarter and full fiscal year 2018.  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 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 January 28, 2017 which was filed with the SEC on March 24, 2017 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 a high-growth 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 a one-stop shopping experience that equips our customers with the right quality, brand name hunting, shooting, fishing and camping gear to maximize their enjoyment of the outdoors.

For press releases and certain additional information about the Company, visit the Investor Relations section of the Company's website at www.sportsmanswarehouse.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 share and per share data)  
                                 
                                 
  For the Fourteen/Thirteen Weeks Ended       For the Fifty-three/Fifty-two Weeks Ended      
                                 
  February 3, 2018   % of net
sales
  January 28, 2017   % of net
sales
  February 3, 2018   % of net
sales
  January 28, 2017   % of net
sales
 
                                 
Net sales $   243,165     100.0 %   $   221,376     100.0 %   $   809,671     100.0 %   $   779,956     100.0 %  
Cost of goods sold     163,501     67.2 %       147,068     66.4 %       535,811     66.2 %       516,726     66.3 %  
Gross profit     79,664     32.8 %       74,308     33.6 %       273,860     33.8 %       263,230     33.7 %  
                                 
Operating expenses:                                
Selling, general and administrative expenses     63,083     25.9 %       53,194     24.0 %       227,292     28.1 %       202,543     26.0 %  
Income from operations     16,581     6.9 %       21,114     9.6 %       46,568     5.7 %       60,687     7.7 %  
Interest expense     (3,658 )   (1.5 %)       (3,271 )   (1.5 %)       (13,738 )   (1.7 %)       (13,402 )   (1.7 %)  
Income before income tax expense     12,923     5.4 %       17,843     8.1 %       32,830     4.0 %       47,285     6.0 %  
Income tax expense     (7,035 )   (2.9 %)       (7,303 )   (3.3 %)       (15,088 )   (1.9 %)       (17,616 )   (2.3 %)  
Net income $   5,888     2.5 %   $   10,540     4.8 %   $   17,742     2.1 %   $   29,669     3.7 %  
                                 
Earnings per share                                
Basic $   0.14         $   0.25         $   0.42         $   0.70        
Diluted $   0.14         $   0.25         $   0.42         $   0.70        
                                 
Weighted average shares outstanding                                
Basic     42,592             42,253             42,496             42,187        
Diluted     42,699             42,557             42,522             42,485        
                                 

 

         
SPORTSMAN’S WAREHOUSE HOLDINGS, INC.   
Consolidated Balance Sheets (Unaudited)   
(in thousands)   
         
         
Assets        
  February 3, 2018   January 28, 2017  
Current assets:        
Cash and cash equivalents $   1,769     $   1,911    
Accounts receivable, net     319         411    
Merchandise inventories     270,594         246,289    
Prepaid expenses and other     8,073         7,313    
Total current assets     280,755         255,924    
Property and equipment, net     94,035         83,109    
Deferred income taxes     4,595         5,097    
Definite lived intangible assets, net      276         2,118    
Total assets $   379,661     $   346,248    
         
Liabilities and Stockholders’ Equity        
Current liabilities:        
Accounts payable $   36,788     $   31,549    
Accrued expenses     50,602         49,586    
Income taxes payable     2,586         979    
Revolving line of credit     59,992         60,972    
Current portion of long-term debt, net of discount and debt issuance costs     990         983    
Current portion of deferred rent     4,593         3,150    
Total current liabilities     155,551         147,219    
         
Long-term liabilities:        
Long-term debt, net of discount, debt issuance costs, and current portion     132,349         133,721    
Deferred rent credit, net of current portion     41,963         35,307    
Total long-term liabilities     174,312         169,028    
Total liabilities     329,863         316,247    
         
Stockholders’ equity:        
Common stock     426         422    
Additional paid-in capital     82,197         80,146    
Accumulated deficit     (32,825 )       (50,567 )  
Total stockholders’ equity     49,798         30,001    
Total liabilities and stockholders' equity $   379,661     $   346,248    
         
         

 

         
SPORTSMAN’S WAREHOUSE HOLDINGS, INC. 
Consolidated Statements of Cash Flows (Unaudited) 
(in thousands) 
         
    February 3, 2018   January 28, 2017
CASH FLOWS FROM OPERATING ACTIVITIES         
Net income    $   17,742     $   29,669  
Adjustments to reconcile net income to net         
cash provided by operating activities:         
Depreciation and amortization        15,864         12,169  
(Gain) on asset disposition        516         -  
Amortization of discount on debt and deferred financing fees        708         1,122  
Amortization of Intangible        1,842         1,805  
Change in deferred rent        8,098         6,307  
Deferred taxes        502         167  
Excess tax benefits from stock-based compensation arrangements        -         (449 )
Stock based compensation        2,294         3,186  
Change in assets and liabilities:         
Accounts receivable, net        92         58  
Merchandise inventory        (24,305 )       (28,495 )
Prepaid expenses and other        (681 )       (1,064 )
Accounts payable        7,536         (15,530 )
Accrued expenses        (1,040 )       6,888  
Income taxes        1,607         (351 )
Net cash provided by operating activities        30,775         15,482  
         
CASH FLOWS FROM INVESTING ACTIVITIES:         
Purchase of property and equipment        (41,172 )       (39,417 )
Proceeds from sale of property and equipment        14         -  
Proceeds from sale-leaseback transactions        9,022         11,923  
Net cash used in investing activities        (32,136 )       (27,494 )
         
CASH FLOWS FROM FINANCING ACTIVITIES:         
Net borrowings on line of credit        (980 )       35,709  
Increase in book overdraft        4,589         (1,827 )
Payments of deferred financing fees        (551 )       -  
Payment of withholdings on restricted stock units        (635 )       (1,228 )
Principal payments on long-term debt        (1,600 )       (21,273 )
Issuance of common stock per employee stock purchase plan        396         433  
Net cash provided by financing activities        1,219         11,814  
         
Net change in cash and cash equivalents        (142 )       (198 )
Cash and cash equivalents at beginning of year        1,911         2,109  
Cash and cash equivalents at end of period    $   1,769     $   1,911  
         

 

                     
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 Fourteen/Thirteen Weeks Ended   For the Fifty Three/Fifty Two-Weeks Ended    
                     
    February 3, 2018   January 28, 2017   February 3, 2018   January 28, 2017    
Income from operations $   16,581     $   21,114   $   46,568     $   60,687      
Secondary offering expenses (1)     -          -        -          143      
Professional fees (2)     -          -        1,744         -       
Asset Write-off (3)     516         -        516         -       
Adjusted income from operations $   17,097     $   21,114   $   48,828     $   60,830      
                     
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 $   5,888     $   10,540   $   17,742     $   29,669      
  Secondary offering expenses (1)     -          -        -          143      
  Prior year tax credits (4)     -          -        -          (602 )    
  Professional fees (2)     -          -        1,744         -       
  Asset Write-Off (3)     516         -        516         -       
  Impact of Tax Reform (5)     2,153         -        2,153         -       
  Less tax benefit     (194 )       -        (850 )       -       
  Adjusted net income  $   8,363     $   10,540   $   21,305     $   29,210      
                     
Denominator:                  
  Diluted weighted average shares outstanding     42,699         42,557       42,522         42,485      
                     
Reconciliation of earnings per share:                  
Dilutive earnings per share $   0.14     $   0.25   $   0.42     $   0.70      
Impact of adjustments to numerator and denominator     0.06         -        0.08         (0.01 )    
Adjusted diluted earnings per share $   0.20     $   0.25   $   0.50     $   0.69      
                     
Reconciliation of net income to adjusted EBITDA:                  
Net income $   5,888     $   10,540   $   17,742     $   29,669      
Interest expense     3,658         3,271       13,738         13,402      
Income tax expense     7,035         7,303       15,088         17,616      
Depreciation and amortization     4,800         3,812       17,707         13,974      
Stock-based compensation expense (6)     854         685       2,294         3,186      
Pre-opening expenses (7)     279         755       3,970         4,264      
Secondary offering expenses (1)     -          -        -          143      
Professional fees (2)     -          -        1,744         -       
Asset Write-off (3)     516         -        516         -       
Adjusted EBITDA $   23,030     $   26,366   $   72,799     $   82,254      
                     
(1) Expenses paid by us in connection with a secondary offering of our common stock by affiliates of Seidler Equity Partners III, L.P.    
(2) Professional and other fees incurred in connection with the evaluation of a strategic acquisition.            
(3) Write-off of IT related asset not yet placed in-service and deemed to be abandoned            
(4) Tax credits recognized in the year that were not previously taken in prior years.              
Incentive Plan and Employee Stock Purchase Plan.                  
(5) Impact of the Tax Cuts and Jobs Act passed on December 22, 2017.                 
(6) Stock-based compensation expense represents non-cash expenses related to equity instruments granted to employees under our 2013 Performance  
(7) 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 first quarter and 2018 full year guidance:              
                 
    Estimated Q1 '18   Estimated FY '18
                 
    Low   High   Low   High
                 
Numerator:              
  Net income $   (6,800 )   $   (5,800 )   $   19,910   $   25,100
  Severance (1)     2,235         2,235         2,235       2,235
  Adjusted net income  $   (4,565 )   $   (3,565 )   $   22,145   $   27,335
                 
Denominator:              
  Diluted weighted average shares outstanding     42,800         42,800         43,000       43,000
                 
Reconciliation of earnings per share:              
Diluted earnings per share $   (0.11 )   $   (0.08 )   $   0.46   $   0.58
Impact of adjustments to numerator and denominator     -          -          0.05       0.05
Adjusted diluted earnings per share $   (0.11 )   $   (0.08 )   $   0.52   $   0.64
                 
(1) One-time severance expense incurred in connection with retirement of former CEO            
                 

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Source: Sportsman's Warehouse Holdings, Inc.