The Michaels Companies
Q3 2020 Supplementary Slides
THE MICHAELS COMPANIES
This presentation contains forward-looking statements and are made pursuant to and within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended.
While these statements address plans or events which we expect will or may occur in the future, a number of factors could cause actual results to differ materially from our expectations. We refer you to and specifically incorporate the cautionary and risk statements contained in our press release issued December 3, 2020 and in our SEC filings. You are cautioned not to place undue reliance on these forward-looking statements which speak only as of December 3, 2020. We have no obligation to update or revise our forward-looking statements except as required by law, and you should not expect us to do so.
We also reference non-GAAP financial measures, including adjusted operating income, adjusted net income, adjusted diluted earnings per share, EBITDA, and adjusted EBITDA. The Company has reconciled each measure to the most directly comparable GAAP measure in the third quarter fiscal 2020 earnings release issued on December 3, 2020 and at the end of this presentation (appendix).
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Contents
Q3 FY20 Performance Overview & Priorities
Q3 FY20 Financial Discussion
Appendix
THE MICHAELS COMPANIES | 3 |
Q3 FY20 Performance Overview,
& Priorities
THE MICHAELS COMPANIES | 4 |
Q3 Fiscal 2020 Financial Performance
Key Financial Metrics | Q3 2020 | Q3 2019 | Change vs. LY |
Net Sales | $1.41 billion | $1.22 billion | +15.1% |
Comparable Store Sales | 16.3% | -2.2% | +18.5pts |
Adjusted Operating Income* | $201.6 million | $117.4 million | +71.7% |
Adjusted Diluted EPS* | $0.86 | $0.40 | +$0.46 |
*Please refer to appendix for reconciliation of non-GAAP financial measures to the respective GAAP measures.
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Strategic Priorities
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Strengthen our RETAIL FOUNDATION & how we execute
- Improve retail execution- right product, right price, where and how customers expect it o Store operational efficiencies
Modernize the OMNI-EXPERIENCE for Makers
- Rapidly evolving the omnichannel experience to transform Michaels into a leading omnichannel specialty retailer
Re-establish our brand position as THE EXPERT for Makers
- Inspire and drive further customer engagement through marketing and by leveraging CRM, Loyalty and Community
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Q3 FY20 Financial Discussion
THE MICHAELS COMPANIES | 7 |
Q3 Financial Performance
Metric | Q3 Fiscal 2020 | Q3 Fiscal 2019 |
Net Sales | ||
$1,406.2M | $1,222.0M | |
Gross Profit | $581.7M | $441.6M |
Margin | 41.4% | 36.1% |
SG&A | ||
$373.2M | $322.8M | |
Adjusted Operating Income* | $201.6M | $117.4M |
Margin | ||
14.3% | 9.6% | |
Interest Expense | ||
$37.4M | $38.8M | |
Effective Tax Rate | ||
20.3% | 22.5% | |
Adjusted Net Income* | ||
$129.3M | $60.1M | |
Adjusted Diluted EPS* | ||
$0.86 | $0.40 | |
*Please refer to appendix for reconciliation of non-GAAP financial measures to the respective GAAP measures.
- Sales increase driven by:
- 128.0% e-commerce growth (+)
- Higher basket size (+)
- Decrease in customer transactions (-)
- Gross Margin increase driven by:
- Occupancy cost leverage (+)
- Lower promotional cadence (+)
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Benefit from ongoing pricing and sourcing initiatives
(+) - Impact of tariffs on inventory purchased from China(-)
- Change in sales mix to e-commerce(-)
- SG&A increase driven by:
- Higher incentive compensation (-)
- Costs associated with strategic initiatives (-)
- Sanitation and other supply expenses (-)
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Balance Sheet/Cash Flow
Metric | Q3 Fiscal 2020 | Change vs. LY or |
FQ3 2019 | ||
Cash | $852.0M | +$733.6M |
Merchandise Inventory | $1.2B | (17.8%) |
Total Debt, Excluding Leases | $2.5B | ($174.3M) |
Total Debt, Including Leases | $4.1B | ($215.0M) |
TTM Total Debt/EBITDA | 3.4x | No change |
Interest Coverage LTM | 3.5x | (0.6x) |
Cash from Operating Activities | $413.1M | +$304.6M |
Free Cash Flow* | $380.0M | +$303.6M |
Capital Expenditures | $33.1M | +$1.0M |
- Successfully refinanced term loan in September, with maturities extended to 2027.
- As part of that refinancing and as a demonstration of the commitment to de-lever the business over the long- term, paid down $150 million in debt.
- Balanced capital allocation going forward prioritizing growth investments followed by paying down debt, opportunistically repurchasing shares and then potential acquisitions aligned with our growth strategy
* Free Cash Flow defined as cash flow from operating activities less capital expenditures.
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Appendix
THE MICHAELS COMPANIES | 10 |
Reconciliation of non-GAAP financial measures to the respective GAAP measures
THE MICHAELS COMPANIES | 11 |
13 Weeks Ended | 39 Weeks Ended | |||||||||||||||
October 31, | November 2, | October 31, | November 2, | |||||||||||||
(in thousands) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Net cash provided by operating activities | $ | 413,111 | $ | 108,475 | $ | 712,860 | $ | 106,367 | ||||||||
Non-cash operating lease expense | (79,498) | (81,397) | (241,040) | (244,258) | ||||||||||||
Depreciation and amortization | (31,292) | (31,295) | (95,382) | (94,025) | ||||||||||||
Share-based compensation | (6,571) | (6,658) | (19,759) | (18,664) | ||||||||||||
Debt issuance costs amortization | (875) | (970) | (2,757) | (3,509) | ||||||||||||
Loss on write-off of investment | - | - | - | (5,036) | ||||||||||||
Accretion of long-term debt, net | (349) | (67) | (480) | 195 | ||||||||||||
Restructure impairment charges | (9,388) | (41,376) | (9,388) | (48,332) | ||||||||||||
Impairment of intangible assets | - | - | (3,500) | - | ||||||||||||
Deferred income taxes | (2,690) | 10,023 | 289 | 9,984 | ||||||||||||
Gain on sale of building | - | - | 101 | - | ||||||||||||
Losses on early extinguishments of debt and refinancing costs | (22,044) | (161) | (22,044) | (1,316) | ||||||||||||
Changes in assets and liabilities | (149,282) | 72,131 | (279,040) | 389,537 | ||||||||||||
Net income | 111,122 | 28,705 | 39,860 | 90,943 | ||||||||||||
Interest expense | 37,370 | 38,781 | 112,233 | 116,274 | ||||||||||||
Income taxes | 28,284 | 8,324 | 18,836 | 28,615 | ||||||||||||
Depreciation and amortization | 31,292 | 31,295 | 95,382 | 94,025 | ||||||||||||
Interest income | (144) | (297) | (1,426) | (2,012) | ||||||||||||
EBITDA | 207,924 | 106,808 | 264,885 | 327,845 | ||||||||||||
Adjustments: | ||||||||||||||||
COVID-19 expense (1) | 632 | - | 19,158 | - | ||||||||||||
Losses on early extinguishments of debt and refinancing costs | 22,044 | 161 | 22,044 | 1,316 | ||||||||||||
Share-based compensation | 6,571 | 6,658 | 19,759 | 18,664 | ||||||||||||
Restructure charge and impairment charges | 9,388 | 41,376 | 9,388 | 48,332 | ||||||||||||
Darice liquidation charges | (6,775) | - | 45,711 | - | ||||||||||||
Severance costs | 667 | 1,683 | 5,537 | 5,175 | ||||||||||||
Store pre-opening costs | 184 | 1,402 | 1,528 | 4,370 | ||||||||||||
Store remodel costs | 1,226 | 174 | 1,675 | 242 | ||||||||||||
Foreign currency transaction losses (gains), net | 8 | 192 | (322) | 659 | ||||||||||||
Store closing costs | 96 | 478 | 907 | (469) | ||||||||||||
Consulting costs | 9,240 | - | 14,149 | - | ||||||||||||
CEO severance costs | - | - | - | 5,569 | ||||||||||||
Other(2) | 1,981 | 1,788 | 7,644 | 4,489 | ||||||||||||
Adjusted EBITDA | $ | 253,186 | $ | 160,720 | $ | 412,063 | $ | 416,192 | ||||||||
(1) Includes costs attributable to the COVID-19 pandemic including hazard pay for team members, costs associated with furloughed employees, certain | ||||||||||||||||
charges and sanitation supplies. | ||||||||||||||||
THE MICHAELS COMPANIES | (2)Other adjustments primarily relate to items such as moving and relocation expenses, franchise taxes, sign-on bonuses, director's fees, search costs | 12 | ||||||||||||||
center move. | ||||||||||||||||
THE MICHAELS COMPANIES | 1 |
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Michaels Companies Inc. published this content on 03 December 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 December 2020 13:40:00 UTC