Company Increases Fiscal 2018
Outlook
Second Quarter Fiscal 2018 Highlights (in
Canadian dollars):
- Total revenue increased $44.4
million to $172.3 million, representing year-over-year growth of
34.7%
- Gross margin expanded to 50.5% from
46.4% in the prior year
- Adjusted EBITDA was $46.4 million,
compared to $33.8 million in the prior year, representing
year-over-year growth of 37.3%
- Net income was $37.1 million, or
$0.33 per diluted share, and adjusted net income was $32.9 million,
or $0.29 per diluted share
Canada Goose Holdings Inc. (“Canada Goose” or the “Company”)
(NYSE: GOOS, TSX: GOOS) today announced financial results for its
second quarter ended September 30, 2017. The Company’s Management’s
Discussion and Analysis and Unaudited Condensed Consolidated
Interim Financial Statements for the three and six month periods
ended September 30, 2017 will be filed on SEDAR at www.sedar.com,
the EDGAR section of the U.S. Securities and Exchange Commission
website at www.sec.gov and posted on the Company’s website at
investor.canadagoose.com.
“Our performance reflects the power of our brand around the
world and our disciplined approach to executing our growth
strategies. We have opened e-commerce sites in all seven of the new
markets planned for fiscal 2018 and we remain on-track to have
seven world-class retail destinations in operation in the third
quarter of fiscal 2018, including our recently opened stores in
Chicago and Tokyo. I am also encouraged by the response to our
first knitwear collection which embodies our function-first design
philosophy and stays true to our authentic utilitarian aesthetic,”
stated Dani Reiss, President & Chief Executive Officer. “With
strong results across channels, geographies and categories, we
continue to drive awareness and penetration while inspiring those
who already know and love our brand. Most importantly, we remain
deeply committed to building an enduring brand for the long
term.”
Fiscal 2018 Second Quarter Results (in Canadian dollars,
compared to the same period in Fiscal 2017):
- Total revenue increased by $44.4
million from $127.9 million to $172.3 million in the second quarter
of fiscal 2017, representing year-over-year growth of 34.7%.
- Wholesale revenue was $152.1 million as
compared to $122.4 million in the second quarter of fiscal 2017,
driven by growth across all regions. In the quarter, revenue of
approximately $13 million, which was originally expected to be
earned in the third quarter, was pulled forward . Enabled by
increased efficiency in manufacturing and sales planning, shipment
timing was accelerated in response to requests from retail partners
approaching their peak selling season. Through the first half of
fiscal 2018, our pull-forward revenue in the wholesale channel was
approximately $18 million.
- Direct-to-consumer revenue was $20.3
million as compared to $5.5 million in the second quarter of fiscal
2017, driven by strong growth in our North American e-commerce
business and incremental revenue from new retail stores and
e-commerce sites which were not operating in the same period last
year.
- Gross profit increased to $87.1 million
from $59.3 million in the second quarter of fiscal 2017. As a
percentage of total revenue, gross profit was 50.5% compared to
46.4% in the second quarter of fiscal 2017.
- Wholesale gross profit was $72.2
million, a gross margin of 47.4%, as compared to $55.5 million a
gross margin of 45.4%, in the second quarter of fiscal 2017. The
increase in wholesale gross margin was the result of a shift in
sales to higher margin geographies, lower cost of purchases in U.S.
dollars and lower inventory reserves.
- Direct-to-consumer gross profit
increased to $14.9 million, a gross margin of 73.7% from $3.8
million, a gross margin of 69.2%, in the second quarter of fiscal
2017.
- Selling, general and administrative
expenses were $36.5 million compared to $30.2 million in the second
quarter of fiscal 2017, driven by the costs of retail stores in
Toronto and New York which were not operating in the same period
last year, as well as investments across the business to support
continued growth. These increases were partially offset by an
unrealized foreign exchange gain of $5.8 million on the term loan
and a timing shift in marketing investments to the remainder of
fiscal 2018.
- Adjusted EBITDA was $46.4 million
compared to $33.8 million in the prior year, representing
year-over-year growth of 37.3%.
- The effective tax rate was 16.8%
compared to 20.7% in the second quarter of fiscal 2017 and a
statutory tax rate of 25.4%. The decrease in the effective tax rate
was primarily driven by the non-taxable portion of the $5.8 million
unrealized foreign exchange gain and the timing of taxable income
in jurisdictions with statutory tax rate differences.
- Net income for the second quarter was
$37.1 million, or $0.33 per diluted share, compared to net income
of $20.0 million, or $0.20 per share, in the second quarter of
2017.
- Adjusted net income per diluted share
for the second quarter of fiscal 2018 was $0.29, based on 111.5
million diluted shares outstanding, compared to an adjusted net
income per diluted share of $0.23, based on 101.7 million diluted
shares outstanding in the second quarter of fiscal 2017. Adjusted
pro forma net income per share for the second quarter of fiscal
2017, which includes the effect of the Initial Public Offering
(“IPO”) in the calculation of the weighted average number of shares
outstanding as if the IPO had occurred at the beginning of fiscal
2017, was $0.22 per share based on 106.3 million shares.
Revised Fiscal 2018 Outlook
Based on stronger than expected growth across our business, with
a particular contribution from our direct-to-consumer segment, the
Company expects fiscal 2018 results to exceed the long-term and
fiscal year outlook which was originally provided with the release
of fourth quarter and fiscal year 2017 results on June 2, 2017.
For fiscal 2018, the Company currently expects:
- Annual revenue growth on a percentage
basis of at least 25% versus the previous expectation of
mid-to-high teens;
- Adjusted EBITDA margin expansion of at
least 50 basis points versus the previous expectation of flat to
modestly expanding; and
- Annual growth in adjusted net income
per diluted share on a percentage basis of at least 35% versus the
previous expectation of approximately 20%. This assumes
year-over-year comparison to adjusted net income per pro forma
diluted share of $0.41 in fiscal 2017 and weighted average diluted
shares outstanding of 110.9 million for fiscal 2018.
Conference Call Information
A conference call to discuss second quarter fiscal 2018 results
is scheduled for today, November 9, 2017, at 9:00 a.m. Eastern
Time. Dani Reiss, President and Chief Executive Officer and John
Black, Chief Financial Officer, will host the conference call.
Those interested in participating in the call are invited to dial
(866) 393-4306 or (734) 385-2616 if calling internationally. Please
dial in approximately 10 minutes prior to the start of the call and
reference Conference ID 5093389 when prompted. A live audio webcast
of the conference call will be available online at http://investor.canadagoose.com.
About Canada Goose
Founded in a small warehouse in Toronto, Canada in 1957, Canada
Goose has grown into one of the world’s leading makers of
performance luxury apparel. Every collection is informed by the
rugged demands of the Arctic and inspired by relentless innovation
and uncompromised craftsmanship. From Antarctic research facilities
and the Canadian High Arctic, to the streets of New York, London,
Milan, Paris, and Tokyo, people are proud to wear Canada Goose
products. Employing more than 2,000 people worldwide, Canada Goose
is a recognized leader for its Made in Canada commitment, and is a
long-time partner of Polar Bears International. Visit
canadagoose.com for more information.
Note Regarding Non-IFRS Financial Measures
This press release includes references to adjusted net income,
EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net
income per share and per diluted share, and adjusted pro forma net
income per share and per diluted share. The Company presents these
measures because its management uses these as supplemental measures
in assessing its operating performance, and believes they are
helpful to investors, securities analysts and other interested
parties, in evaluating the Company’s performance. The measures
referenced above are not measurements of financial performance
under IFRS and they should not be considered as alternatives to
measures of performance derived in accordance with IFRS. In
addition, these measures should not be construed as an inference
that the Company’s future results will be unaffected by unusual or
non-recurring items. These measures have limitations as analytical
tools, and you should not consider such measures either in
isolation or as substitutes for analyzing the Company’s results as
reported under IFRS. The Company’s definitions and calculations of
these measures are not necessarily comparable to other similarly
titled measures used by other companies. These non-IFRS financial
measures are defined and reconciled to the most comparable IFRS
measures in the tables at the end of this press release.
Cautionary Note Regarding Forward-Looking Statements
The foregoing financial information as at and for the three and
six months ended September 30, 2017 are unaudited and subject to
quarter-end and year-end adjustments in connection with the
completion of our customary financial closing procedures. Such
changes could be material.
This press release includes forward-looking statements. These
forward-looking statements generally can be identified by the use
of words such as “anticipate,” “expect,” “plan,” “could,” “may,”
“will,” “believe,” “estimate,” “forecast,” “goal,” “project,” and
other words of similar meaning. These forward-looking statements
address various matters including our growth plans and anticipated
financial performance for fiscal 2018, which are referred to under
the heading Revised Fiscal 2018 Outlook. Each forward-looking
statement contained in this press release is subject to risks and
uncertainties that could cause actual results to differ materially
from those expressed or implied by such statement. Applicable risks
and uncertainties include, among others, our expectations regarding
industry trends, our business plan and growth strategies, our
expectations regarding seasonal trends, our ability to implement
our growth strategies, our ability to keep pace with changing
consumer preferences, our ability to maintain the strength of our
brand and protect our intellectual property, as well as the risks
identified under the heading “Risk Factors” in our Annual Report on
Form 20-F for the fiscal year ended March 31, 2017, and filed with
the Securities and Exchange Commission (“SEC”), and the securities
commissions or similar securities regulatory authorities in each of
the provinces and territories of Canada (“Canadian securities
regulatory authorities”), as well as the other information we file
with the SEC and Canadian securities regulatory authorities. We
caution investors not to rely on the forward-looking statements
contained in this press release when making an investment decision
in our securities. You are encouraged to read our filings with the
SEC, available at www.sec.gov, and our
filings with Canadian securities regulatory authorities available
at www.sedar.com for a discussion of
these and other risks and uncertainties. The forward-looking
statements in this press release speak only as of the date of this
release, and we undertake no obligation to update or revise any of
these statements. Our business is subject to substantial risks and
uncertainties, including those referenced above. Investors,
potential investors, and others should give careful consideration
to these risks and uncertainties.
Condensed Consolidated Interim
Statements of Income and Comprehensive Income
(unaudited)
(in thousands of Canadian dollars, except
per share amounts)
Three months endedSeptember
30 Six months endedSeptember 30
2017 2016 2017
2016 Revenue 172,330 127,935 200,535
143,630 Cost of sales 85,237 68,601
100,200 79,637
Gross profit 87,093 59,334 100,335 63,993 Gross margin 50.5
% 46.4 % 50.0 % 44.6 % Selling, general and administrative expenses
36,545 30,172 62,377 48,265 SG&A expenses as % of revenue 21.2
% 23.6 % 31.1 % 33.6 % Depreciation and amortization 2,314
1,490 4,482 2,936
Operating income 48,234 27,672 33,476 12,792
Operating income as % revenue 28.0 % 21.6 % 16.7 % 8.9 % Net
interest and other finance costs 3,599 2,438
6,691 5,533
Income before income taxes 44,635 25,234 26,785 7,259 Income
tax expense 7,508 5,216
1,747 1,277 Effective tax rate 16.8 %
20.7 % 6.5 % 17.6 %
Net income 37,127 20,018 25,038 5,982
Other comprehensive income (loss) 1,259 (415 )
1,301 (407 )
Total
comprehensive income 38,386 19,603
26,339 5,575
Earnings
per share Basic $ 0.35 $ 0.20 $ 0.23 $ 0.06 Diluted 0.33
0.20 0.23 0.06
Weighted average number of shares outstanding Basic
106,992,382 100,000,000 106,747,784 100,000,000 Diluted 111,478,881
101,704,270 110,700,260 101,702,032
Other data: (1)
EBITDA 51,181 29,705 39,486 16,724 Adjusted EBITDA 46,399 33,790
32,833 26,308 Adjusted EBITDA margin 26.9 % 26.4 % 16.4 % 18.3 %
Adjusted net income 32,877 23,740 19,647 14,248 Adjusted net income
per diluted share $ 0.29 $ 0.23 $ 0.18 $ 0.14
(1) EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted
net income and adjusted net income per share and per diluted share
are non-IFRS financial measures. See — “Note Regarding Non-IFRS
Financial Measures” for a description of these measures and a
reconciliation to the nearest IFRS measure
Condensed Consolidated Interim
Statements of Financial Position
(unaudited)
As at September 30, 2017 and March 31,
2017
(in thousands of Canadian dollars)
September 30 March
31 2017 2017
Assets $ $ Current assets Cash 13,314
9,678 Trade receivables 99,587 8,710 Inventories 154,464 125,464
Income taxes receivable 3,809 4,215 Other current assets
12,144 15,156
Total current
assets 283,318 163,223 Deferred income taxes 10,217
3,998 Property, plant and equipment 46,096 36,467 Intangible assets
134,656 131,912 Goodwill 45,269 45,269
Total assets 519,556
380,869
Liabilities Current liabilities
Accounts payable and accrued liabilities 63,810 58,223 Provisions
6,914 6,046
Total current
liabilities 70,724 64,269 Provisions 10,225 9,526
Deferred income taxes 13,439 10,888 Revolving facility 116,775
6,642 Term loan 131,285 139,447 Other long-term liabilities
3,673 3,929
Total liabilities
346,121 234,701
Shareholders' equity 173,435
146,168
Total liabilities and
shareholders' equity 519,556
380,869
Condensed Consolidated Interim
Statements of Cash Flows
(unaudited)
For the six months ended September
30
(in thousands of Canadian dollars)
2017
2016 $ $ CASH FLOWS FROM OPERATING
ACTIVITIES: Net income 25,038 5,982 Items not affecting cash
Depreciation and amortization 6,010 3,932 Income tax expense 1,747
1,277 Interest expense 6,574 4,486 Unrealized (gain) loss on
forward contracts (442 ) 120 Unrealized foreign exchange gain
(9,304 ) — Write off of deferred financing charges on refinancing
revolving facility — 946 Share-based compensation 721
1,499 30,344 18,242 Changes in non-cash
operating items (112,681 ) (76,856 ) Income taxes paid (5,411 )
(12,353 ) Interest paid (5,214 ) (1,444 )
Net cash used in operating activities
(92,962 ) (72,411 )
CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of
property, plant and equipment (9,175 ) (11,000 ) Investment in
intangible assets (3,473 ) (3,971 ) Business combination
(560 ) (500 )
Net cash used in investing
activities (13,208 )
(15,471 ) CASH FLOWS FROM FINANCING
ACTIVITIES: Borrowings on revolving facility 110,036 146,790
Repayment of credit facility — (55,203 ) Deferred financing fees on
term loan syndication (437 )
— Exercise of stock options
207 —
Net cash from
financing activities 109,806
91,587 Increase in cash 3,636 3,705
Cash,
beginning of period 9,678
7,226 Cash, end of period
13,314 10,931
Reconciliation of Non-IFRS
Measures
The tables below reconciles net income to
EBITDA, adjusted EBITDA, and adjusted net income for the periods
presented:
CAD $000s
(unaudited)
Three months endedSeptember 30 Six months
endedSeptember 30 2017
2016 2017
2016 Net income 37,127 20,018 25,038
5,982 Add the impact of: Income tax expense 7,508 5,216
1,747 1,277 Net interest and other finance costs 3,599 2,438 6,691
5,533 Depreciation and amortization 2,947 2,033 6,010
3,932 EBITDA 51,181 29,705 39,486 16,724 Add (deduct)
the impact of: Bain Capital management fees (a) — 63 — 212
Transaction costs (b) 218 1,910 1,546 2,734 Unrealized gain on
derivatives (c) — — — 4,422 Unrealized foreign exchange gain on
Term Loan Facility (d) (5,814 ) — (9,580 ) — International
restructuring costs (e) — 80 — 175 Share-based compensation (f) 310
1,374 390 1,499 Agent terminations and other (g) — — — (116 )
Non-cash rent expense (h) 504 658
991 658 Adjusted EBITDA
46,399 33,790 32,833
26,308
CAD $000s
(unaudited)
Three months endedSeptember 30 Six months
endedSeptember 30 2017
2016 2017
2016 Net income 37,127 20,018 25,038 5,982 Add
(deduct) the impact of: Bain Capital management fees (a) — 63 — 212
Transaction costs (b) 218 1,910 1,546 2,734 Unrealized gain on
derivatives (c) — — — 4,422 Unrealized foreign exchange gain on
Term Loan Facility (d) (5,814 ) — (9,580 ) — International
restructuring costs (e) — 80 — 175 Share-based compensation (f) 310
1,374 390 1,499 Agent terminations and other (g) — — — (116 )
Non-cash rent expense (h) 504 658 991 658 Amortization on
intangible assets acquired by Bain Capital (i) 544
544 1,088 1,088
Total adjustments (4,238 ) 4,629 (5,565 ) 10,672 Tax effect
of adjustments (12 ) (907 ) 174
(2,406 ) Adjusted net income 32,877
23,740 19,647 14,248
(a) In connection with Bain’s purchase of a
70% equity interest in our business on December 9, 2013 (the
“Acquisition”), we entered into a management agreement with certain
affiliates of Bain Capital for a term of five years (“Management
Agreement”). This amount represents payments made pursuant to the
Management Agreement for ongoing consulting and other services. In
connection with the IPO on March 21, 2017, the Management Agreement
was terminated in consideration for a termination fee of $9.6
million and Bain Capital no longer receives management fees from
the Company. (b) In connection with the IPO in March 2017 and
Secondary Offering in June 2017, we incurred expenses related to
professional fees, consulting, legal, and accounting that would
otherwise not have been incurred. These fees are reflected in the
first quarter of fiscal 2017 and fiscal 2018, respectively, and are
not indicative of our ongoing costs. (c) Represents non-cash
unrealized gains on foreign exchange forward contracts recorded in
fiscal 2016 that relate to fiscal 2017. We manage our exposure to
foreign currency risk by entering into foreign exchange forward
contracts. Management forecasts its net cash flows in foreign
currency using expected revenue from orders it receives for future
periods. The unrealized gains and losses on these contracts are
recognized in net income from the date of inception of the
contract, while the cash flows to which the derivatives related are
not realized until the contract settles. Management believes that
reflecting these adjustments in the period in which the net cash
flows occur is more appropriate. (d) Represents non-cash unrealized
gains on the translation of the Term Loan Facility from USD to CAD.
(e) Represents expenses incurred to establish our international
headquarters in Zug, Switzerland, including closing several smaller
offices across Europe, relocating personnel, and incurring
temporary office costs. (f) Represents non-cash share-based
compensation expense on stock options issued prior to the IPO.
Adjustments reflect management’s estimate that certain tranches of
outstanding option awards will vest. (g) Represents accrued
expenses related to termination payments to be made to our
third-party sales agents. As part of a strategy to transition
certain sales functions in-house, we terminated the majority of our
third party sales agents and certain distributors, primarily during
fiscal 2015 and 2016, which resulted in indemnities and other
termination payments. As sales agents have now largely been
eliminated from the sales structure, management does not expect
these charges to recur in future fiscal periods. (h) Represents
non-cash lease amortization charges during pre-opening periods for
new store leases. (i) As a result of the Acquisition we recognized
an intangible asset for customer lists in the amount of $8.7
million, which has a useful life of four years, and will expire in
the third quarter of fiscal 2018.
Pro forma income per share and adjusted net income
per share
(unaudited)
CAD $000s
(except per share data)
Three
monthsendedSeptember 30
Six monthsendedSeptember
30
2016 2016 Pro forma income per share Net
income $ 20,018 $ 5,982 Weighted average number of common
shares 100,000,000 100,000,000 Pro forma for IPO as at April 1,
2016 6,308,154 6,308,154 Pro forma weighted average number of
common shares outstanding over the year 106,308,154 106,308,154
Pro forma income per share $ 0.19 $ 0.06
Pro forma adjusted net income per share Adjusted net income
$ 23,740 $ 14,248 Pro forma weighted average number of
shares 106,308,154 106,308,154 Pro forma adjusted net income
per share $ 0.22 $ 0.13
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ICR, Inc.Investors:Allison Malkin/Caitlin
Morahan203-682-8200Allison.Malkin@ICRinc.com /
Caitlin.Morahan@ICRinc.comorMedia:Julia
Young646-277-1280Julia.Young@ICRinc.com
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