Q3 FY2021 Earnings Presentation
December 1, 2020
Disclaimer
This presentation contains forward-looking statements made pursuant to and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You can generally identify forward-looking statements by our use of forward-looking terminology such as "anticipate", "are confident", "assume", "believe", "continue", "could", "emerge", "estimate", "expect", "intend", "look ahead", "look forward", "may", "might", "on track", "outlook", "plan", "potential", "predict", "reaffirm", "seek", "should", "trend", or "will", or the negative thereof or comparable terminology regarding future events or conditions. In particular, forward-looking statements in this presentation include, without limitation, statements about our assumptions, goals, outlook, estimates, strategies and plans regarding future financial and operating performance, cash flows, working capital, liquidity, financial condition, debt leverage, the At Home 2.0 strategic plan, inventory, existing or future markets in which we operate, new store openings and growth rates, market share, competition, capital expenditures, customer and macroeconomic trends, and the impact of the COVID-19 pandemic.
Such forward-looking statements are based on our current beliefs and expectations, which we believe are reasonable. However, forward-looking statements are subject to significant known and unknown risks and uncertainties that may cause actual results, performance or achievements in future periods to differ materially from those assumed, projected or contemplated in the forward-looking statements, including, but not limited to, the factors included in our most recent earnings release, "Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended January 25, 2020, and subsequent reports we file with the Securities and Exchange Commission, including our Quarterly Reports on Form 10-Q.
You are cautioned not to place undue reliance on the forward-looking statements included herein, which speak only as of the date hereof or the date otherwise specified herein. Except as required by law, we do not undertake any obligation to update or revise any forward-looking statements for any reason, whether as a result of new information, future events or otherwise.
This presentation includes certain financial measures not presented in accordance with GAAP, including leverage ratio, Net Debt, Adjusted EBITDA, Adjusted EBITDA margin, Store-level Adjusted EBITDA, and Store-level Adjusted EBITDA margin because we use them as important supplemental indicators of financial performance . The non-GAAP financial measures have limitations as analytical tools and you should not consider them in isolation, or as a substitute for financial measures presented in accordance with GAAP. See our most recently issued earnings release dated December 1, 2020 for the definitions of the non-GAAP financial measures, as well as additional information on why we believe the non-GAAP financial measures are useful and their limitations. See the appendix to this presentation for a reconciliation of the non-GAAP financial measures included herein to the most directly comparable GAAP financial measures.
This presentation does not constitute an offer to sell or the solicitation of an offer to buy any security of the Company.
• EDLP+ campaign- driven model
• Drive newness through category reinventions and stronger trend leadership in merchandising
• 2-3 new product/brand collaborations per year
• Be a low-price leader in the marketplace
• Enhance focus on product quality and uniqueness
• Improve inventory management across Everyday and Seasonal assortments
• Drive continuous improvements in our Seasonal business
• BOPIS, Curbside and Delivery launched FY21
• Developing ship-from-store capabilities for FY22
• Enhance loyalty program
• Relentless focus on enabling a frictionless customer experience
• Enhance in-store experience
• Continue efforts to remain cash flow positive
• Reduce debt while expanding the chain
• Consolidate supplier base
• Diversify sourcing footprint geographically
• Expand our direct sourcing capability
• Continue to attract and retain top talent and build a strong pipeline that fuels our growth
• Become an academy for talent (both functional and leadership)
• Level-load the labor to more easily manage stores
Focus on the Home
• Consumers are spending more time in the home than ever before
• Shifting wallet dollars from travel / entertainment to enhance their homes
• Recent performance points to significant demand for home goods and furnishings
• Industry expected to grow at 3%+ CAGR through 2024(1)
Consumers Shifting Spending into Off-Price
Categories
• Economic downturn and elevated unemployment likely to enhance demand for value-oriented offerings
• At Home's value offering is well-positioned to benefit
• At Home's large box, non-mall, one-stop shopping experience is unique
Commitment to Recognizable and
Trusted Brands
• In the face of uncertainty, consumers turn to brands they trust & know
• At Home has developed a distinctive value brand that resonates with today's consumer
Pressure on Brick &
Mortar Creates Opportunities
• Brick & mortar bankruptcies may create opportunities to continue to grow store fleet economically through second generation stores
• As strong performer, At Home expects real estate opportunities to improve
Omnichannel (Store +
Online)
• Large stores allow for social distancing
• Integration of BOPIS, Curbside and Next Day Delivery resonates with customers
(1) Source: Euromonitor Passport Homewares and Home Furnishings USA data. Estimated industry size based on expected 3.6% CAGR for 2019 - 2024.
Significant Momentum Continued in Q3 FY2021
• Record-setting comps and leverage ratio
− Comparable store sales increased 44.1%
− Net sales of $470.0 million increased 47.5% vs. LY
− EPS of $0.71 versus $(0.23) LY
− Adjusted EBITDA of $93.8 million increased 184.9% vs. LY
−
Strongest balance sheet since IPO
• Estimate At Home grew sales several times faster than the broader industry
($Millions)
47.5% Q3 FY21 YOY Growth
$470.0
$318.7
Q3 FY20Q3 FY21
19.0% LTM Q3 YOY Growth
$1,572.8
$1,321.4
LTM Q3 FY20LTM Q3 FY21
($Millions)
• Benefitting from consumer focus on the home, safe social distancing and omni-channel capabilities
• Strong gross margins driven by fixed cost leverage and product margin expansion
• Increased liquidity position to more than $360 million(1) and decreased leverage ratio(2) to 0.9x
(1) Liquidity includes $33.9M of cash and $326.5M in borrowings available under our ABL facility.
184.9% Q3 FY21 YOY Growth
$93.8
$32.9
20.0%
10.3%
Q3 FY20
Q3 FY21
(2) Please refer to the reconciliations of leverage ratio and Adjusted EBITDA in the appendix. Margins defined as relevant metric divided by Net Sales.
69.6% LTM Q3 YOY Growth
$300.3
$177.1
13.4%
19.1%
LTM Q3 FY20LTM Q3 FY21
Committed to delivering positive free cash flow and reducing leverage over time through earnings growth and capital efficiency initiatives
• Implement working capital improvements
• Consolidate supplier base
• Diversify sourcing footprint geographically
• Expand our direct sourcing capability
• Explore build-to-suit and buy-to-suit financing alternatives
• Reduce capital outlay through value engineering, strategic procurement, and a refined market-by-market approach
(1) Please refer to the reconciliation of leverage ratio in the appendix.
5.1
FY2015 FY2016 FY2017 FY2018 FY2019 FY2020
LTM
FY13 % Growth(2)
Gross New Stores
FY14 11
FY15 21
FY16 27
FY17 23
FY18 24
FY19 23
FY20 17
LTM 19
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
LTM
7
10
16
20
24
28
34
36
7
Margin
FY13 26
FY14 28
FY15 27
FY16 27
FY17 26
FY18 27
FY19 26
FY20 22
LTM 27
Margin
FY13 22
FY14 21
FY15 18
FY16 17
FY17 16
FY18 17
FY19 17
FY20 13
LTM 19
(1) The adoption of ASC 842 in Q1 FY20 required, among other things, a change to the accounting treatment of sale-leaseback transactions and the reclassification of certain of our financing obligations. For illustrative and comparative purposes only, ASC 842's adoption would have impacted Store-level Adjusted EBITDA in FY19 by ($2.4M). ASC 842's adoption would have impacted Adjusted EBITDA in FY19 by ($5.2M). Please refer to the reconciliations of Adjusted EBITDA and Store-level Adjusted EBITDA in the appendix. Margins defined as relevant metric divided by Net Sales.
(2) FY15 contained an additional week of business. FY15 and FY16 net sales growth rates have been adjusted to exclude $7.8M in net sales earned in the 53rd week of FY15.
Appendix
($ in thousands)FY2013 1/26/2013
FY2014 1/25/2014
FY2015 1/31/2015
FY2016 1/30/2016
FY2017 1/28/2017
FY2018 1/27/2018
FY2019 1/26/2019
FY2020 1/25/2020
LTM 10/24/2020
Net (loss) income Interest expense, net Income tax (benefit) provision Depreciation and amortization(a)
($9,749) 39,837 (1,558) 12,912 $41,442 - - 20,744
($22,283)
($436) $3,574
41,152 59 13,132 $32,060 - - -
42,382 36,759
4,357 (14,160)
23,317 28,694
$27,066 27,174 15,722 36,925 $106,887
$31,812 21,704 33,845 48,777 $136,138
$48,996 ($214,435)
27,056
($446,495)
31,801 28,233
(17)
23,172 30,439
56,529 $132,564 - - -
69,418 71,644
EBITDA
($90,044)
($316,179)
Gain on sale-leaseback(b) Impairment charges(c)
Loss on extinguishment of debt
Legal settlements and consulting and other professional services(d)
Relocation and employee recruiting(e) Management fees and expenses(f ) Stock-based compensation expense(g) Stock-based compensation related to special one-time IPO bonus grant(h)
Stock-based compensation related to one-time CEO grant(i)
Impairment of trade name(j) Non-cash rent(k)
Other(l)
Adjusted EBITDA, as reported Illustrative impact of ASC 842(o)
3,609 321 3,805 292
2,874 4,442 3,690 4,373
-
-
- - 1,730
- 37,500 1,367
8,567 (1,361)
$69,620 - - -
$54,867 - - 36,046
4,633 2,928 3,596 4,251
3,506 724 3,612 4,663
-
-
- -
- -
1,795 2,398
-
-
-
2,422
2,715
-
2,478 5,734
(17,742)
(2,537)
255,230 569,732
- 3,179
5,990 - - 5,530
2,652 1,034
262 1,847 4,066
- - 2,491
- - 7,423
- - 10,035
5,318
11,273
2,521
-
-
- - 2,320 384 $126,277 - $126,277 12,035 60,675 - $198,987 -
- - 3,334 (593) $160,799 - $160,799 16,504 75,149 - $252,452 -
41,475 - 4,499 3,827 $196,406
- -
- -
1,881 $88,704 - $88,704 6,848 37,570 - $133,122 - $133,122
(347) $105,469 - $105,469 9,801 53,303 - $168,573 - $168,573
15,998 33,493 1,816 1,572
Adjusted EBITDA, as recast
Cost associated with new store openings(m)
Corporate overhead expenses(n)
Less illustrative impact of ASC 842(o)
Store-level Adjusted EBITDA, as reported Illustrative impact of ASC 842(o)
$80,510 - $80,510 1,070 14,146 - $95,726 - $95,726
$84,945 - $84,945 2,023 25,977 - $112,945 - $112,945
(5,161) $191,245 18,656 90,839 5,161 $305,901
$175,333 - $175,333
$300,329 - $300,329
24,166 12,040
95,401 105,103
Store-level Adjusted EBITDA, as recast
$198,987
$252,452
$303,502
(2,399)
- $294,900 - $294,900
- $417,472 - $417,472
Historical Adjusted EBITDA and Store-Level Adjusted EBITDA Reconciliation
(a) Includes the portion of depreciation and amortization expenses that are classified as cost of sales in our consolidated statements of operations.
(b) As of January 27, 2019, we fully recognized the gains on sale-leaseback transactions on the condensed consolidated statements of income in accordance with ASC 842.
(c) For LTM ending 10/24/2020, represents non-cash impairment charges of $569.7 million related to impairment of goodwill. For fiscal year 2020, represents non-cash impairment charges of $250.0 million related to impairment of goodwill and $5.2 million in connection with store closure and relocation decisions. For fiscal year 2018, represents an impairment charge of $2.4 million following the resolution of a legal matter.
(d) 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) transaction costs and charges incurred in connection with the sale of shares of our common stock on behalf of our Sponsors.
(e) Primarily reflects employee recruiting and relocation costs in connection with the build-out of our management team.
(f) Reflects management fees paid to our Sponsors in accordance with our management agreement. In connection with our initial public offering, the management agreement was terminated on August 3, 2016 and our Sponsors no longer receive management fees from us.
(g) 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 and non-employee directors.
(h) 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 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.
(i) 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.
(j) Reflects the impairment of the Garden Ridge trade name as a result of our rebranding initiative.
(k) 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 for periods through Q4 fiscal year 2019. The offsetting amounts relating to the amortization of deferred gains on sale-leaseback transactions were $(8.8) million, $(6.3) million, $(4.7) million, $(3.2) million, $(1.8) million and $(0.3) million during fiscal years 2019, 2018, 2017, 2016, 2015 and 2014, 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.
(l) Other adjustments include amounts our management believes are not representative of our ongoing operations, including:
• for fiscal year 2013, a $5.6 million exit payment to former management;
• for fiscal year 2014, an insurance reimbursement of $(1.6) million and a prior year audit refund of $(0.5) million;
• for fiscal year 2015, asset retirements related to our rebranding of $0.6 million and $0.4 million for a store relocation;
• for fiscal year 2016, gain on the sale of our property in Houston, Texas of $(1.8) million and $(0.3) million related to various refunds for prior period taxes and audits, slightly offset by $0.5 million in expenses incurred for a store closure;
• for fiscal year 2017, a loss of $0.3 million recognized on the sale of land in connection with the expansion of our distribution center;
• for fiscal year 2019, costs incurred of $2.4 million related to the CFO Transition, payroll tax expense of $0.8 million related to the exercise of stock options and $0.5 million related to the 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;
• for fiscal year 2020, costs incurred of $1.4 million related to the restructuring of our merchandising department; and
• for LTM ending 10/24/2020, primarily relates to the write-off of certain site selection costs that occurred as a result of the COVID-19 pandemic.
(m) 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 new stores during the LTM ending 10/24/2020 and 36, 34, 28, 24, 20,16,10 and seven new stores during fiscal years 2020, 2019, 2018, 2017, 2016, 2015, 2014 and 2013, respectively.
(n) 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. See our discussion of the changes in selling, general and administrative expenses presented in "-Results of Operations". Store-level Adjusted EBITDA should not be used as asubstitute 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.
(o)
Represents the necessary adjustments to reflect management's estimates of the impact of the adoption of ASC 842 on fiscal year 2019 results, which requires, among other things, a change to the accounting treatment of sale-leaseback transactions and the reclassification of certain of our financing obligations.
($ in thousands) | FY2015 1/31/2015 FY2016 1/30/2016 FY2017 1/28/2017 FY2018 1/27/2018 FY2019 1/26/2019 FY2020 1/25/2020 LTM 10/24/2020 |
Long-term debt Revolving line of credit $369,990
$289,902 $336,435 $334,251 67,400 Current portion of long-term debt Financing obligations 758 19,682 Less: cash and cash equivalents (4,706) 76,600 3,789 19,017 (5,428) 101,575 3,691 19,937 (7,092) 162,000 221,010 235,670 3,474 4,049 19,690 35,038 4,862 - (8,525) (10,951) (12,082) $314,477 - 4,528 - (33,864) | |
Net Debt | $453,124 $516,588 $417,717 $466,541 $585,581 $562,701 $285,141 |
Adjusted EBITDA for the twelve months ended Leverage ratio $88,704 5.1 $105,469 4.9 $126,277 3.3 $160,799 2.9 $196,406 3.0 $175,333 3.2 $300,329 0.9 |
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At Home Group Inc. published this content on 01 December 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 01 December 2020 21:14:05 UTC