3.1% Comparable Store Sales Growth in Q4;
7.6% Full Year 69.6% Gross Margin in Q4;
70.0% Full Year Settlement of shareholder
litigation during the quarter, leading to Diluted Earnings per
Share of $0.01 in Q4; $0.36 Full Year, growth of
16% Non-GAAP Diluted Earnings per Share of
$0.07 in Q4; $0.45 Full Year, growth of
41% Company announces initiation of quarterly
dividend beginning Q1 2017
Tile Shop Holdings, Inc. (NASDAQ:TTS) (the “Company”), a specialty
retailer of manufactured and natural stone tiles, setting and
maintenance materials, and related accessories, today announced
results for its fourth quarter and fiscal year ended December 31,
2016. Net sales grew 6.5% to $76.6 million
for the fourth quarter ended December 31, 2016 compared with $71.9
million for the fourth quarter ended December 31, 2015. The $4.7
million increase in net sales was due to a comparable store sales
increase of 3.1%, or $2.2 million, and incremental net sales of
$2.5 million from stores not included in the comparable store base.
Full year net sales for fiscal 2016 were $324.2 million compared
with $293.0 million for fiscal 2015, representing growth of 10.6%.
Comparable store sales for the full year ended December 31, 2016
increased 7.6%.
“2016 was an outstanding year of growth and
achievement across all of our key initiatives,” said Chris
Homeister, CEO. “The fourth quarter was at the low end of our
expectations, driven by both lower revenue and abnormally high
costs associated with employee benefits. We are extremely pleased
with delivering a year with approximately 8% comparable store sales
growth, increased gross margin and 41% growth in earnings per
share. We are eager to build upon our continued success from 2016
as we work to deliver another year of significant growth in sales,
operating margins and earnings per share in 2017.”
Gross margin for the fourth quarter of 2016 was
69.6% compared with 70.4% for the fourth quarter of 2015. The gross
margin rate decline was driven primarily by a heavier mix of
promoted sales during the quarter. Full year gross margin for
fiscal 2016 was 70.0% compared with 69.5% for fiscal 2015.
Selling, general and administrative costs for
the fourth quarter of 2016 were $51.7 million compared with $43.7
million for the fourth quarter of 2015. Special charges related to
litigation accounted for $5.5 million of the increase. Nearly half
of the remaining $2.5 million increase in selling, general and
administrative costs during the quarter resulted from higher than
normal employee benefit claims, with the remainder of the increase
related to opening and operating new stores and variable expenses
associated with revenue growth. Full year selling, general and
administrative costs for fiscal 2016 were $194.0 million compared
with $174.4 million for fiscal 2015. Special charges related to
litigation accounted for $6.3 million of the increase.
The Company opened four new retail showrooms in
the fourth quarter of 2016, including two Chicago, IL area
locations in Hoffman Estates, IL and Schererville, IN, bringing its
total Chicago metro area store count to twelve, a seventh
Minneapolis, MN area store in Eagan, MN and its first store in
Washington D.C. The Hoffman Estates, IL opening was a
relocation. As of December 31, 2016 the Company operates 123 stores
in 31 states and the District of Columbia.
The Company also announced today that the Board
of Directors has authorized the initiation of a quarterly cash
dividend commencing in the first quarter of 2017, more details of
which can be found here.
Non-GAAP Information
The Company presents non-GAAP net income and
Adjusted EBITDA to provide useful information to investors
regarding the Company’s normalized operating performance.
On a non-GAAP basis, net income for the fourth
quarter of 2016 was $3.8 million compared with $4.0 million for the
fourth quarter of 2015. Full year non-GAAP net income for
fiscal 2016 was $23.1 million compared with $16.6 million for
fiscal 2015. Non-GAAP diluted earnings per share for the fourth
quarter of 2016 were $0.07 compared with $0.08 per share for the
fourth quarter of 2015. Full year non-GAAP diluted earnings per
share for fiscal 2016 were $0.45 compared with $0.32 per share for
fiscal 2015. See the “Non-GAAP Income Reconciliation” table
and the “Non-GAAP Financial Measures” section below for a
reconciliation of GAAP to non-GAAP income.
Non-GAAP Income
Reconciliation
|
|
Three Months Ended |
|
|
December 31, 2016 |
|
December 31, 2015 |
|
|
|
|
|
|
Per Share |
|
|
|
|
|
Per Share |
|
|
Pretax |
|
Net of Tax |
|
Amounts |
|
Pretax |
|
Net of Tax |
|
Amounts |
(in thousands, except
share and per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP income |
|
$ |
1,356 |
|
$ |
273 |
|
$ |
0.01 |
|
$ |
6,477 |
|
$ |
3,786 |
|
$ |
0.07 |
Special charges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholder and other litigation costs |
|
|
5,791 |
|
|
3,524 |
|
|
0.07 |
|
|
331 |
|
|
193 |
|
|
- |
Non-GAAP income(1) |
|
$ |
7,147 |
|
$ |
3,797 |
|
$ |
0.07 |
|
$ |
6,808 |
|
$ |
3,979 |
|
$ |
0.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amounts may not foot due to rounding.
|
|
Twelve Months Ended |
|
|
December 31, 2016 |
|
December 31, 2015 |
|
|
|
|
|
|
Per Share |
|
|
|
|
|
Per Share |
|
|
Pretax |
|
Net of Tax |
|
Amounts |
|
Pretax |
|
Net of Tax |
|
Amounts |
(in thousands, except
share and per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP income |
|
$ |
31,339 |
|
$ |
18,463 |
|
$ |
0.36 |
|
$ |
26,772 |
|
$ |
15,696 |
|
$ |
0.31 |
Special charges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholder and other litigation costs |
|
|
7,618 |
|
|
4,632 |
|
|
0.09 |
|
|
1,283 |
|
|
752 |
|
|
0.01 |
Write-off
of debt issuance costs |
|
|
- |
|
|
- |
|
|
- |
|
|
194 |
|
|
114 |
|
|
0.00 |
Non-GAAP income(1) |
|
$ |
38,957 |
|
$ |
23,095 |
|
$ |
0.45 |
|
$ |
28,249 |
|
$ |
16,562 |
|
$ |
0.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amounts may not foot due to rounding.
Adjusted EBITDA for the fourth quarter of 2016
was $14.5 million compared with $14.2 million for the fourth
quarter of 2015. Full year Adjusted EBITDA for fiscal 2016
was $68.0 million compared with $58.4 million for fiscal 2015. See
the “Adjusted EBITDA Reconciliation” table and the “Non-GAAP
Financial Measures” section below for a reconciliation of GAAP net
income to Adjusted EBITDA.
Adjusted EBITDA Reconciliation
|
|
Three Months Ended |
|
Twelve Months Ended |
($ in
thousands) |
|
December 31, |
|
December 31, |
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
GAAP net income |
|
$ |
273 |
|
$ |
3,786 |
|
$ |
18,463 |
|
$ |
15,696 |
Interest expense |
|
|
333 |
|
|
483 |
|
|
1,715 |
|
|
2,584 |
Income taxes |
|
|
1,083 |
|
|
2,691 |
|
|
12,876 |
|
|
11,076 |
Depreciation and
amortization |
|
|
6,088 |
|
|
5,639 |
|
|
23,042 |
|
|
22,236 |
Special charges(1) |
|
|
5,791 |
|
|
331 |
|
|
7,618 |
|
|
1,283 |
Stock-based
compensation |
|
|
939 |
|
|
1,319 |
|
|
4,333 |
|
|
5,545 |
Adjusted EBITDA |
|
$ |
14,507 |
|
$ |
14,249 |
|
$ |
68,047 |
|
$ |
58,420 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Shareholder and other litigation costs.
Financial Guidance
The Company is providing expectations for full year 2017 based
on past performance, anticipated new store openings and current
economic conditions.
For the full year ending December 31, 2017 the Company
expects:
($ in millions, except
per share data) |
|
2017 |
|
2016 |
|
|
Net Sales |
|
$350 -
$370 |
|
$324.2 |
|
|
Comparable Store Sales
Change |
|
low to
mid single digits |
|
7.6% |
|
|
Gross Margin % of Net
Sales |
|
approx. 70% |
|
70.0% |
|
|
Depreciation &
Amortization |
|
approx. $27 |
|
$23.0 |
|
|
Stock Based
Compensation |
|
approx. $3.5 |
|
$4.3 |
|
|
Effective Tax Rate |
|
approx. 40% |
|
41.1% |
|
|
Special Charges |
|
approx. $0.5 |
|
$7.6 |
|
|
Earnings per Share
(GAAP) |
|
$0.49
- $0.56 |
|
$0.36 |
|
|
Non-GAAP Earnings Per
Share |
|
$0.50
- $0.57 |
|
$0.45 |
|
|
Adjusted EBITDA |
|
$74 -
$80 |
|
$68.0 |
|
|
Fully Diluted Shares
Outstanding |
|
approx. 52 million |
|
51.9
million |
|
|
New stores |
|
12 to
15 |
|
9 |
|
|
Capital
Expenditures |
|
$30 to
$35 |
|
$27.3 |
|
|
See the “Non-GAAP Income Guidance Reconciliation” table and the
“Adjusted EBITDA Guidance Reconciliation” table on the final page
of this release for a reconciliation of these Non-GAAP measures to
the comparable GAAP measures.
Webcast and Conference Call The
Company will host a conference call via live webcast for investors
and other interested parties beginning at 9:00 a.m. Eastern Time on
Tuesday, February 14, 2017. Participants may access the live
webcast by visiting the Company’s Investor Relations page at
www.tileshop.com. The call can also be accessed by dialing (844)
421-0597, or (716) 247-5787 for international participants. A
webcast replay of the call will be available on the Company’s
Investor Relations page at www.tileshop.com.
Additional details can be located at
www.tileshop.com under the Financial Information – SEC Filings
section of the Company’s Investor Relations page.
About The Tile Shop
The Tile Shop is a leading specialty retailer of manufactured
and natural stone tiles, setting and maintenance materials, and
related accessories in the United States. The Company offers a wide
selection of high quality products, exclusive designs,
knowledgeable staff and exceptional customer service, in an
extensive showroom environment with up to 50 full-room tiled
displays which are enhanced by the complimentary Design Studio – a
collaborative platform to create customized 3D design renderings to
scale, allowing customers to bring their design ideas to life. The
Tile Shop currently operates 123 stores in 31 states and the
District of Columbia, with an average size of 21,100 square feet
and sells products online at www.tileshop.com
The Tile Shop is a proud member of the American Society of
Interior Designers (ASID), National Association of Homebuilders
(NAHB), and the National Tile Contractors Association (NTCA). Visit
www.tileshop.com. Join The Tile Shop (#thetileshop) on Facebook,
Instagram, Pinterest and Twitter. Non-GAAP
Financial MeasuresThe Company calculates Adjusted EBITDA
by taking net income calculated in accordance with GAAP, and
adjusting for interest expense, income taxes, depreciation and
amortization, stock based compensation and special charges related
to litigation, including shareholder and other litigation.
Adjusted EBITDA margin is equal to Adjusted EBITDA divided by net
sales. Non-GAAP net income excludes special charges related to
litigation costs, including shareholder and other litigation, and
losses incurred in connection with the renegotiation of debt, and
is net of tax.
The Company believes that these non-GAAP
measures of financial results provide useful information to
management and investors regarding certain financial and business
trends relating to the Company’s financial condition and results of
operations. Company management uses these non-GAAP measures
to compare Company performance to that of prior periods for trend
analyses, for purposes of determining management incentive
compensation, and for budgeting and planning purposes. These
measures are used in monthly financial reports prepared for
management and the Board of Directors. The Company believes
that the use of these non-GAAP financial measures provides an
additional tool for investors to use in evaluating ongoing
operating results and trends and in comparing the Company’s
financial measures with other specialty retailers, many of which
present similar non-GAAP financial measures to investors.
Company management does not consider these
non-GAAP measures in isolation or as an alternative to financial
measures determined in accordance with GAAP. The principal
limitations of these non-GAAP financial measures are that they
exclude significant expenses and income that are required by GAAP
to be recognized in the Company’s consolidated financial
statements. In addition, they are subject to inherent
limitations as they reflect the exercise of judgments by management
about which expenses and income are excluded or included in
determining these non-GAAP financial measures. In order to
compensate for these limitations, management presents non-GAAP
financial measures in connection with GAAP results. The
Company urges investors to review the reconciliation of these
non-GAAP financial measures to the comparable GAAP financial
measures and not to rely on any single financial measure to
evaluate the business.
FORWARD LOOKING STATEMENTS
This press release includes “forward looking
statements” within the meaning of the “safe harbor” provisions of
the United States Private Securities Litigation Reform Act of
1995. Forward-looking statements may be identified by the use
of words such as “anticipate”, “believe”, “expect”, “estimate”,
“plan”, “outlook”, and “project” and other similar expressions that
predict or indicate future events or trends or that are not
statements of historical matters. These forward looking
statements include any statements regarding the Company’s strategic
and operational plan and expected financial performance (including
the financial performance of new stores). Forward looking
statements should not be read as a guarantee of future performance
or results, and will not necessarily be accurate indications of the
times at, or by, which such performance or results will be
achieved. Forward looking statements are based on information
available at the time those statements are made and/or management’s
good faith belief as of that time with respect to future events,
and are subject to risks and uncertainties that could cause actual
performance or results to differ materially from those expressed in
or suggested by the forward looking statements, including but not
limited to unforeseen events that may affect the retail market or
the performance of the Company’s stores. The Company does not
intend, and undertakes no duty, to update this information to
reflect future events or circumstances. Investors are
referred to the most recent reports filed with the SEC by the
Company.
|
Tile Shop Holdings, Inc. and Subsidiaries |
Consolidated Balance Sheets |
($
in thousands, except share data) |
(Unaudited) |
|
|
|
December 31, |
|
December 31, |
|
|
2016 |
|
|
2015 |
|
Assets |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash
equivalents |
|
$ |
6,067 |
|
|
$ |
10,330 |
|
Restricted cash |
|
|
3,000 |
|
|
|
219 |
|
Trade receivables,
net |
|
|
2,414 |
|
|
|
1,966 |
|
Inventories |
|
|
74,295 |
|
|
|
69,878 |
|
Prepaid inventory |
|
|
110 |
|
|
|
568 |
|
Income tax
receivable |
|
|
1,670 |
|
|
|
735 |
|
Other current assets,
net |
|
|
8,645 |
|
|
|
3,557 |
|
Total Current
Assets |
|
|
96,201 |
|
|
|
87,253 |
|
Property, plant and
equipment, net |
|
|
141,037 |
|
|
|
135,115 |
|
Deferred tax
assets |
|
|
21,391 |
|
|
|
20,846 |
|
Long-term restricted
cash |
|
|
3,881 |
|
|
|
- |
|
Other assets |
|
|
2,763 |
|
|
|
1,793 |
|
Total
Assets |
|
$ |
265,273 |
|
|
$ |
245,007 |
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity |
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
Accounts payable |
|
$ |
20,321 |
|
|
$ |
14,584 |
|
Current portion of
long-term debt |
|
|
6,286 |
|
|
|
4,744 |
|
Income tax payable |
|
|
120 |
|
|
|
1,101 |
|
Other accrued
liabilities |
|
|
33,461 |
|
|
|
19,327 |
|
Total Current
Liabilities |
|
|
60,188 |
|
|
|
39,756 |
|
Long-term debt,
net |
|
|
22,126 |
|
|
|
51,178 |
|
Capital lease
obligation, net |
|
|
697 |
|
|
|
797 |
|
Deferred rent |
|
|
37,595 |
|
|
|
34,983 |
|
Other long-term
liabilities |
|
|
5,768 |
|
|
|
3,092 |
|
Total
Liabilities |
|
|
126,374 |
|
|
|
129,806 |
|
|
|
|
|
|
|
|
Stockholders’
Equity: |
|
|
|
|
|
|
Common stock, par value
$0.0001; authorized: 100,000,000 shares; issued and outstanding:
51,607,143 and 51,437,973 shares, respectively |
|
|
5 |
|
|
|
5 |
|
Preferred stock, par
value $0.0001; authorized: 10,000,000 shares; issued and
outstanding: 0 shares |
|
|
- |
|
|
|
- |
|
Additional
paid-in-capital |
|
|
185,998 |
|
|
|
180,192 |
|
Accumulated
deficit |
|
|
(47,058 |
) |
|
|
(64,985 |
) |
Accumulated other
comprehensive loss |
|
|
(46 |
) |
|
|
(11 |
) |
Total
Stockholders' Equity |
|
|
138,899 |
|
|
|
115,201 |
|
Total
Liabilities and Stockholders' Equity |
|
$ |
265,273 |
|
|
$ |
245,007 |
|
|
|
|
|
|
|
|
Tile Shop Holdings, Inc. and Subsidiaries |
Consolidated Statements of Operations |
($
in thousands, except share, and per share data) |
(Unaudited) |
|
|
|
Three Months Ended |
|
Twelve Months Ended, |
|
|
December 31, |
|
December 31, |
|
|
2016 |
|
|
2015 |
|
|
2016 |
|
|
2015 |
|
Net sales |
|
$ |
76,614 |
|
|
$ |
71,914 |
|
|
$ |
324,157 |
|
|
$ |
292,987 |
|
Cost of sales |
|
|
23,281 |
|
|
|
21,281 |
|
|
|
97,261 |
|
|
|
89,377 |
|
Gross profit |
|
|
53,333 |
|
|
|
50,633 |
|
|
|
226,896 |
|
|
|
203,610 |
|
Selling, general and
administrative expenses |
|
|
51,683 |
|
|
|
43,706 |
|
|
|
193,983 |
|
|
|
174,384 |
|
Income from
operations |
|
|
1,650 |
|
|
|
6,927 |
|
|
|
32,913 |
|
|
|
29,226 |
|
Interest expense |
|
|
(333 |
) |
|
|
(483 |
) |
|
|
(1,715 |
) |
|
|
(2,584 |
) |
Other income |
|
|
39 |
|
|
|
33 |
|
|
|
141 |
|
|
|
130 |
|
Income before income
taxes |
|
|
1,356 |
|
|
|
6,477 |
|
|
|
31,339 |
|
|
|
26,772 |
|
Provision income
taxes |
|
|
(1,083 |
) |
|
|
(2,691 |
) |
|
|
(12,876 |
) |
|
|
(11,076 |
) |
Net
income |
|
$ |
273 |
|
|
$ |
3,786 |
|
|
$ |
18,463 |
|
|
$ |
15,696 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common
share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.01 |
|
|
$ |
0.07 |
|
|
$ |
0.36 |
|
|
$ |
0.31 |
|
Diluted |
|
$ |
0.01 |
|
|
$ |
0.07 |
|
|
$ |
0.36 |
|
|
$ |
0.31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
51,497,198 |
|
|
|
51,230,524 |
|
|
|
51,415,492 |
|
|
|
51,161,059 |
|
Diluted |
|
|
52,112,609 |
|
|
|
51,569,562 |
|
|
|
51,877,005 |
|
|
|
51,304,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tile Shop Holdings, Inc. and Subsidiaries |
Rate Analysis |
(Unaudited) |
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
December 31, |
|
December 31, |
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Gross margin rate |
|
69.6 |
% |
|
70.4 |
% |
|
70.0 |
% |
|
69.5 |
% |
SG&A expense
rate |
|
67.5 |
% |
|
60.8 |
% |
|
59.8 |
% |
|
59.5 |
% |
Income from operations
margin rate |
|
2.2 |
% |
|
9.6 |
% |
|
10.2 |
% |
|
10.0 |
% |
Adjusted EBITDA margin
rate |
|
18.9 |
% |
|
19.8 |
% |
|
21.0 |
% |
|
19.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Income Guidance Reconciliation |
|
|
|
2017 Guidance |
|
|
Low End |
|
High End |
|
|
|
|
|
|
|
|
Diluted |
|
|
|
|
|
|
|
Diluted |
($ in millions,
except per share data) |
|
Pretax |
|
Net of Tax |
|
Per Share Amounts |
|
Pretax |
|
Net of Tax |
|
Per Share Amounts |
GAAP income |
|
$ |
42 |
|
$ |
25 |
|
$ |
0.49 |
|
$ |
49 |
|
$ |
29 |
|
$ |
0.56 |
Special charges(1) |
|
|
0.5 |
|
|
0 |
|
|
0.01 |
|
|
0.5 |
|
|
0 |
|
|
0.01 |
Non-GAAP income(2) |
|
$ |
43 |
|
$ |
26 |
|
$ |
0.50 |
|
$ |
49 |
|
$ |
29 |
|
$ |
0.57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Shareholder and other litigation costs.(2)
Amounts may not foot due to rounding.
|
Adjusted EBITDA Guidance Reconciliation |
|
|
|
2017 Guidance |
($ in
millions) |
|
Low End |
|
High End |
GAAP Net Income |
|
$ |
25 |
|
$ |
29 |
Interest expense |
|
|
1 |
|
|
1 |
Income taxes |
|
|
17 |
|
|
19 |
Depreciation and
amortization |
|
|
27 |
|
|
27 |
Special charges(1) |
|
|
0.5 |
|
|
0.5 |
Stock based
compensation |
|
|
3.5 |
|
|
3.5 |
Adjusted EBITDA(2) |
|
$ |
74 |
|
$ |
80 |
|
|
|
|
|
|
|
(1) Shareholder and other litigation costs.(2)
Amounts may not foot due to rounding.
Contacts:
Investors and Media:
Adam Hauser
763-852-2950
investorrelations@tileshop.com
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