RH Reports Record Fourth Quarter and Fiscal 2015 Financial Results
Fiscal
The Company will post a video presentation between approximately
Fiscal Year Highlights
- Net revenues increased 13% on top of a 20% increase last year
- Comparable brand revenues increased 11% on top of a 20% increase last year
- Adjusted operating margin increased 40 basis points to 9.7%; GAAP operating margin of 8.8% compared to 8.9% for the same period last year
- Adjusted net income increased 18% to
$114.8 million ; GAAP net income of$91.1 million compared to$91.0 million for the same period last year - Adjusted diluted EPS increased 15% to
$2.72 ; GAAP diluted EPS of$2.16 compared to$2.20 for the same period last year
Fourth Quarter Highlights
- Demand sales/written orders increased 21% on top of a 26% increase last year
- Net revenues increased 11% on top of a 24% increase last year
- Comparable brand revenues increased 9% on top of a 24% increase last year
- Adjusted operating margin of 11.5% compared to 12.7% last year; GAAP operating margin of 10.4% compared to 12.9% for the same period last year
- Adjusted net income of
$41.2 million compared to$42.5 million last year; GAAP net income of$33.3 million compared to$42.5 million for the same period last year - Adjusted diluted EPS of
$0.98 compared to$1.02 last year; GAAP diluted EPS of$0.79 compared to$1.02 for the same period last year
“2015 was another year of record performance for RH. We reported record net revenues of
While our fourth quarter demand sales/written orders were up a strong 21%, on top of up 26% last year, our delivered net revenues increased only 11% in the quarter, on top of up 24% last year, representing a shortfall to our plan. There are three key factors that had a negative effect on our fourth quarter results. First, while the initial response to RH Modern has been outstanding, we are experiencing shipping delays as certain vendors are struggling to ramp up production of this new product line. We expect these vendors to be substantially caught up by the end of the first half. Second, we continue to see underperformance in markets affected by energy, oil, or currency fluctuations – specifically,
While there is certainly a fair amount of bad news in the quarter, we believe the good news greatly outweighs the bad when you put it into the context of our long-term growth strategy. Despite the headwinds, our two key value driving strategies - the expansion of our product offer and the transformation of our real estate - are working exceptionally well. The strong response to RH Modern, both in retail and direct, indicates this can quickly become a billion dollar plus brand. All of our new next generation Design Galleries are exceeding plan - with the one-year anniversary of
We are clearly operating in different market conditions than a year ago, and believe it requires us to adjust our strategies to optimize performance in the short term, while positioning the Company for long-term value creation. Our key priorities for fiscal 2016 are centered on the optimization of our core business by improving in-stocks for RH Modern and our core newness launching this Fall, elevating our end-to-end customer experience, optimizing our inventory and working capital, being opportunistic with real estate to achieve improved deal terms, and changing the promotional cadence via the launch of the RH Grey Card. We believe what should change in this environment, is the pace at which we deploy our investments, with a focus on optimizing returns and cash flow generation in fiscal 2016.
At RH, our most significant transformative moves have occurred during periods of uncertainty and believe we will exit this year with a better brand and business than when we entered. Brands and businesses, like people, become great, not because they do not have failures or fears, but because they continue on despite them. We remain confident in our long term goal of reaching
Fiscal 2015 Results
Revenue - Net revenues for fiscal 2015 increased 13% to
- Comparable brand revenue growth, which includes direct, was 11% in fiscal 2015 on top of 20% for the same period last year.
- Stores revenues increased 16% to
$1.084 billion in fiscal 2015. This growth is on top of a 14% increase in stores revenues in fiscal 2014. - Direct revenues increased 10% to
$1.025 billion in fiscal 2015. This growth is on top of a 28% increase in direct revenues in fiscal 2014. Direct revenues in fiscal 2015 represented 49% of total net revenues.
Revenue Metrics* | ||||||
Twelve Months Ended | ||||||
January 30,
2016 |
January 31,
2015 |
|||||
Stores as a percentage of net revenues | 51 | % | 50 | % | ||
Direct as a percentage of net revenues | 49 | % | 50 | % | ||
Growth in net revenues: | ||||||
Stores | 16 | % | 14 | % | ||
Direct | 10 | % | 28 | % | ||
Total | 13 | % | 20 | % | ||
Comparable brand revenue growth | 11 | % | 20 | % | ||
* See the Company’s most recent Form 10-K and Form 10-Q filings for the definitions of stores, direct, and comparable brand revenue. | ||||||
Retail Galleries - As of
Retail Gallery Metrics* | ||||||||||||
Twelve Months Ended | ||||||||||||
January 30,
2016 |
January 31,
2015 |
|||||||||||
Store Count |
Total Leased Selling Square |
Store Count |
Total Leased Selling Square |
|||||||||
(in thousands) | (in thousands) | |||||||||||
Beginning of period | 67 | 607 | 70 | 554 | ||||||||
Retail galleries opened | ||||||||||||
Tampa Temporary Gallery | 1 | 4.3 | — | — | ||||||||
Baby & Child West Palm Beach Gallery | 1 | 2.5 | — | — | ||||||||
Baby & Child Greenwich Gallery | 1 | 4.2 | — | — | ||||||||
Chicago next generation Design Gallery | 1 | 44.8 | — | — | ||||||||
Denver next generation Design Gallery | 1 | 46.4 | — | — | ||||||||
Los Angeles RH Modern Gallery | 1 | 12.8 | — | — | ||||||||
Tampa next generation Design Gallery | 1 | 36.1 | — | — | ||||||||
San Diego Temporary Gallery | 1 | 5.7 | — | — | ||||||||
Greenwich Design Gallery | — | — | 1 | 14.0 | ||||||||
New York Expansion | — | — | — | 13.3 | ||||||||
Los Angeles (Melrose Ave) larger format Design Gallery | — | — | 1 | 25.2 | ||||||||
Atlanta next generation Design Gallery | — | — | 1 | 46.1 | ||||||||
Retail galleries closed | ||||||||||||
Tampa Legacy Gallery | (1 | ) | (6.1 | ) | — | — | ||||||
Chicago (Deer Park) Legacy Gallery | (1 | ) | (6.1 | ) | — | — | ||||||
Chicago (Lincoln Park) Legacy Gallery | (1 | ) | (8.4 | ) | — | — | ||||||
Denver Legacy Gallery | (1 | ) | (7.5 | ) | — | — | ||||||
Tampa Temporary Gallery | (1 | ) | (4.3 | ) | — | — | ||||||
San Diego Legacy Gallery | (1 | ) | (6.8 | ) | — | — | ||||||
Berkeley Legacy Gallery | — | — | (1 | ) | (5.6 | ) | ||||||
West Nyack Legacy Gallery | — | — | (1 | ) | (6.4 | ) | ||||||
Greenwich Legacy Gallery | — | — | (1 | ) | (5.0 | ) | ||||||
Los Angeles (Beverly Blvd) larger format Design Gallery | — | — | (1 | ) | (13.8 | ) | ||||||
Atlanta Legacy Gallery | — | — | (1 | ) | (7.3 | ) | ||||||
Providence Legacy Gallery | — | — | (1 | ) | (7.1 | ) | ||||||
End of period | 69 | 725 | 67 | 607 | ||||||||
% Growth | 19 | % | 10 | % | ||||||||
Weighted-average leased selling square footage |
641 | 572 | ||||||||||
% Growth | 12 | % | 9 | % | ||||||||
* See the Company’s most recent Form 10-K and Form 10-Q filings for square footage definitions. | ||||||||||||
Total leased square footage as of January 30, 2016 and January 31, 2015 was 1,011,000 and 861,000, respectively. | ||||||||||||
Weighted-average leased square footage for the twelve months ended January 30, 2016 and January 31, 2015 was 904,000 and 821,000, respectively. |
||||||||||||
Retail sales per leased selling square foot for the twelve months ended January 30, 2016 and January 31, 2015 was $1,463 and $1,413, respectively. | ||||||||||||
Operating Income and Margin** - Adjusted operating income in fiscal 2015 increased 18% to
Net Income** - Adjusted net income in fiscal 2015 increased 18% to
Earnings Per Share** - Adjusted diluted EPS for fiscal 2015 increased 15% to
Fourth Quarter Fiscal 2015 Results
Demand Sales and Revenue - Demand sales/written orders booked during the fourth quarter of fiscal 2015 increased 21% on top of 26% last year. Net revenues for the fourth quarter of fiscal 2015 increased 11% to
- Comparable brand revenue growth, which includes direct, was 9% in the fourth quarter of fiscal 2015 on top of 24% for the same period last year.
- Stores revenues increased 15% to
$318.8 million in the fourth quarter of fiscal 2015. This growth is on top of a 14% increase in stores revenues in the fourth quarter of fiscal 2014. - Direct revenues increased 8% to
$328.4 million in the fourth quarter of fiscal 2015. This growth is on top of a 33% increase in direct revenues in the fourth quarter of fiscal 2014. Direct revenues during the fourth quarter of fiscal 2015 represented 51% of total net revenues.
Revenue Metrics* | ||||||
Three Months Ended | ||||||
January 30,
2016 |
January 31,
2015 |
|||||
Stores as a percentage of net revenues | 49 | % | 48 | % | ||
Direct as a percentage of net revenues | 51 | % | 52 | % | ||
Growth in net revenues: | ||||||
Stores | 15 | % | 14 | % | ||
Direct | 8 | % | 33 | % | ||
Total | 11 | % | 24 | % | ||
Comparable brand revenue growth | 9 | % | 24 | % | ||
* See the Company’s most recent Form 10-K and Form 10-Q filings for the definitions of stores, direct, and comparable brand revenue. | ||||||
Operating Income and Margin** - Adjusted operating income in the fourth quarter of fiscal 2015 increased to
Net Income** - Adjusted net income in the fourth quarter of fiscal 2015 declined to
Earnings Per Share** - Adjusted diluted EPS for the fourth quarter of fiscal 2015 decreased to
A reconciliation of GAAP to non-GAAP financial measures is provided in the tables accompanying this release.
Outlook
The Company’s results for fiscal 2016 will be impacted by certain investments related to its initiative to elevate the customer experience, largely related to customer accommodations due to RH Modern production delays, which are expected to be an approximate
The Company is providing the following outlook for the first quarter fiscal 2016 (including an approximate
- Net revenues in the range of
$452 million to $456 million - Adjusted net income in the range of
$1.6 million to $2.5 million - Adjusted diluted EPS in the range of
$0.04 to $0.06 - Income tax rate of approximately 39%
- Diluted shares outstanding of approximately 41 million
The Company is providing the following outlook for fiscal year 2016 (including an approximate
- Net revenues growth in the low to mid-single digit range
- Adjusted diluted EPS is expected to be roughly flat to slightly down versus the prior year
- Capital expenditures in the range of
$175 million to $200 million - Free cash flow positive
Note: The Company’s adjusted net income and adjusted diluted EPS guidance does not include certain charges and costs, such as for unusual items. The adjustments to net income and diluted EPS in future periods are generally expected to be similar to the kinds of charges and costs excluded from adjusted net income and adjusted diluted EPS in prior quarters.
Video Presentation and Q&A Conference Call Information
Accompanying this release, RH will today post a video presentation highlighting the Company’s fourth quarter and fiscal 2015 performance and outlook on the Company’s Investor Relations website, ir.restorationhardware.com. Management will then host a live question and answer conference call at
About RH
RH (
**Non-GAAP Financial Measures
To supplement its condensed consolidated financial statements, which are prepared and presented in accordance with Generally Accepted Accounting Principles (“GAAP”), the Company uses the following non-GAAP financial measures: adjusted operating income, adjusted operating margin, adjusted net income, and adjusted diluted EPS (collectively, “non-GAAP financial measures”). We compute these measures by adjusting the applicable GAAP measures to remove the impact of certain recurring and non-recurring charges and gains and the tax effect of these adjustments. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
For more information on the non-GAAP financial measures, please see the Reconciliation of GAAP to non-GAAP Financial Measures tables in this press release. These accompanying tables include details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures. With respect to the Company’s non-GAAP guidance for the first quarter of fiscal 2016 and the fiscal year ending
Forward-Looking Statements
This release and the accompanying video presentation contain forward-looking statements within the meaning of the federal securities laws including statements related to our future financial guidance, including for the first quarter of fiscal 2016 and the fiscal year ended
RESTORATION HARDWARE HOLDINGS, INC. RECONCILIATION OF ADJUSTED INCOME STATEMENT ITEMS (In thousands, except share and per share amounts) (Unaudited) |
||||||||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||||
Reported |
Adjustments |
Adjusted |
% of Net |
Reported |
Adjustments |
Adjusted |
% of Net |
|||||||||||||||||||
Net revenues |
$ |
647,208 | $ | — | $ | 647,208 | 100.0 | % | $ | 582,727 | $ | — | $ | 582,727 | 100.0 | % | ||||||||||
Cost of goods sold [a] |
422,947 | (6,190 | ) | 416,757 | 64.4 | % | 364,584 | — | 364,584 | 62.6 | % | |||||||||||||||
Gross profit | 224,261 | 6,190 | 230,451 | 35.6 | % | 218,143 | — | 218,143 | 37.4 | % | ||||||||||||||||
Selling, general and administrative expenses [a] | 157,028 | (738 | ) | 156,290 | 24.1 | % | 142,818 | 1,500 | 144,318 | 24.7 | % | |||||||||||||||
Income from operations | 67,233 | 6,928 | 74,161 | 11.5 | % | 75,325 | (1,500 | ) | 73,825 | 12.7 | % | |||||||||||||||
Interest expense—net [b] | 11,619 | (6,193 | ) | 5,426 | 0.9 | % | 5,939 | (2,943 | ) | 2,996 | 0.5 | % | ||||||||||||||
Income before income taxes | 55,614 | 13,121 | 68,735 | 10.6 | % | 69,386 | 1,443 | 70,829 | 12.2 | % | ||||||||||||||||
Income tax expense [c] | 22,312 | 5,251 | 27,563 | 4.2 | % | 26,861 | 1,471 | 28,332 | 4.9 | % | ||||||||||||||||
Net income [d] |
$ | 33,302 | $ | 7,870 | $ | 41,172 | 6.4 | % | $ | 42,525 | $ | (28 | ) | $ | 42,497 | 7.3 | % | |||||||||
Weighted-average shares used in
computing basic net income per share |
40,522,242 | 40,522,242 | 39,734,145 | 39,734,145 | ||||||||||||||||||||||
Basic net income per share | $ | 0.82 | $ | 1.02 | $ | 1.07 | $ | 1.07 | ||||||||||||||||||
Weighted-average shares used in
computing diluted net income per share |
42,225,070 | 42,225,070 | 41,777,509 | 41,777,509 | ||||||||||||||||||||||
Diluted net income per share | $ | 0.79 | $ | 0.98 | $ | 1.02 | $ | 1.02 |
[a] | Adjustments for the three months ended January 30, 2016 represent the estimated cumulative impact of coupons redeemed in connection with a legal claim alleging that the Company violated California’s Song-Beverly Credit Card Act of 1971 by requesting and recording ZIP codes from customers paying with credit cards. Adjustment for the three months ended January 31, 2015 includes a reversal of estimated expenses associated with the legal claim mentioned above based on a revision of estimated class member response. | ||
[b] | Under GAAP, certain convertible debt instruments that may be settled in cash on conversion are required to be separately accounted for as liability and equity components of the instrument in a manner that reflects the issuer’s non-convertible debt borrowing rate. Accordingly, in accounting for GAAP purposes for the $350 million aggregate principal amount of convertible senior notes that were issued in June 2014 (the “2019 Notes”) and for the $300 million aggregate principal amount of convertible senior notes that were issued in June and July 2015 (the “2020 Notes”), we separated the 2019 Notes and 2020 Notes into liability (debt) and equity (conversion option) components and we are amortizing as debt discount an amount equal to the fair value of the equity components as interest expense on the 2019 Notes and 2020 Notes over their respective terms. The equity components represent the difference between the proceeds from the issuance of the 2019 Notes and 2020 Notes and the fair value of the liability components of the 2019 Notes and 2020 Notes, respectively. Amounts are presented net of interest capitalized for capital projects of $0.8 million and $0.2 million during the three months ended January 30, 2016 and January 31, 2015, respectively. | ||
[c] | The adjustment for the three months ended January 30, 2016 represents the tax effect of the adjusted items based on our effective tax rate of 40.1%. The three months ended January 31, 2015 includes an adjustment to calculate income tax expense at a pro forma 40% effective tax rate. | ||
[d] | Adjusted net income is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. We define adjusted net income as net income, adjusted for the impact of certain non-recurring and other items that we do not consider representative of our ongoing operating performance. Adjusted net income is included in this press release because management believes that adjusted net income provides meaningful supplemental information for investors regarding the performance of our business and facilitates a meaningful evaluation of operating results on a comparable basis with historical results. Our management uses this non-GAAP financial measure in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter. | ||
RESTORATION HARDWARE HOLDINGS, INC. RECONCILIATION OF ADJUSTED INCOME STATEMENT ITEMS (In thousands, except share and per share amounts) (Unaudited) |
||||||||||||||||||||||||||
Twelve Months Ended | ||||||||||||||||||||||||||
Reported |
Adjustments |
Adjusted |
% of Net |
Reported |
Adjustments |
Adjusted |
% of Net |
|||||||||||||||||||
Net revenues | $ | 2,109,006 | $ | — | $ | 2,109,006 | 100.0 | % | $ | 1,867,422 | $ | — | $ | 1,867,422 | 100.0 | % | ||||||||||
Cost of goods sold [a] | 1,356,314 | (17,214 | ) | 1,339,100 | 63.5 | % | 1,176,648 | — | 1,176,648 | 63.0 | % | |||||||||||||||
Gross profit | 752,692 | 17,214 | 769,906 | 36.5 | % | 690,774 | — | 690,774 | 37.0 | % | ||||||||||||||||
Selling, general and administrative expenses [a] | 567,131 | (1,832 | ) | 565,299 | 26.8 | % | 525,048 | (7,700 | ) | 517,348 | 27.7 | % | ||||||||||||||
Income from operations | 185,561 | 19,046 | 204,607 | 9.7 | % | 165,726 | 7,700 | 173,426 | 9.3 | % | ||||||||||||||||
Interest expense—net [b] | 35,677 | (19,803 | ) | 15,874 | 0.8 | % | 17,551 | (6,852 | ) | 10,699 | 0.6 | % | ||||||||||||||
Income before income
taxes |
149,884 | 38,849 | 188,733 | 8.9 | % | 148,175 | 14,552 | 162,727 | 8.7 | % | ||||||||||||||||
Income tax expense [c] | 58,781 | 15,180 | 73,961 | 3.5 | % | 57,173 | 7,918 | 65,091 | 3.5 | % | ||||||||||||||||
Net income [d] | $ | 91,103 | $ | 23,669 | $ | 114,772 | 5.4 | % | $ | 91,002 | $ | 6,634 | $ | 97,636 | 5.2 | % | ||||||||||
Weighted-average shares used in
computing basic net income per share |
40,190,448 | 40,190,448 | 39,457,491 | 39,457,491 | ||||||||||||||||||||||
Basic net income per share | $ | 2.27 | $ | 2.86 | $ | 2.31 | $ | 2.47 | ||||||||||||||||||
Weighted-average shares used in
computing diluted net income per share |
42,256,559 | 42,256,559 | 41,378,210 | 41,378,210 | ||||||||||||||||||||||
Diluted net income per share | $ | 2.16 | $ | 2.72 | $ | 2.20 | $ | 2.36 |
[a] | Adjustments represent charges incurred or the estimated cumulative impact of coupons redeemed in connection with a legal claim alleging that the Company violated California’s Song-Beverly Credit Card Act of 1971 by requesting and recording ZIP codes from customers paying with credit cards. | ||
[b] | Under GAAP, certain convertible debt instruments that may be settled in cash on conversion are required to be separately accounted for as liability and equity components of the instrument in a manner that reflects the issuer’s non-convertible debt borrowing rate. Accordingly, in accounting for GAAP purposes for the 2019 Notes and for the 2020 Notes, we separated the 2019 Notes and 2020 Notes into liability (debt) and equity (conversion option) components and we are amortizing as debt discount an amount equal to the fair value of the equity components as interest expense on the 2019 Notes and 2020 Notes over their respective terms. The equity components represent the difference between the proceeds from the issuance of the 2019 Notes and 2020 Notes and the fair value of the liability components of the 2019 Notes and 2020 Notes, respectively. Amounts are presented net of interest capitalized for capital projects of $2.3 million and $1.1 million during the twelve months ended January 30, 2016 and January 31, 2015, respectively. | ||
[c] | The adjustment for the twelve months ended January 30, 2016 represents the tax effect of the adjusted items based on our effective tax rate of 39.2%. The twelve months ended January 31, 2015 includes an adjustment to calculate income tax expense at a pro forma 40% effective tax rate. | ||
[d] | Adjusted net income is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. We define adjusted net income as net income, adjusted for the impact of certain non-recurring and other items that we do not consider representative of our ongoing operating performance. Adjusted net income is included in this press release because management believes that adjusted net income provides meaningful supplemental information for investors regarding the performance of our business and facilitates a meaningful evaluation of operating results on a comparable basis with historical results. Our management uses this non-GAAP financial measure in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter. | ||
RESTORATION HARDWARE HOLDINGS, INC. RECONCILIATION OF DILUTED NET INCOME PER SHARE TO ADJUSTED DILUTED NET INCOME PER SHARE (Unaudited) |
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Three Months Ended | Twelve Months Ended | |||||||||||||||
January 30,
2016 |
January 31,
2015 |
January 30,
2016 |
January 31,
2015 |
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Diluted net income per share | $ | 0.79 | $ | 1.02 | $ | 2.16 | $ | 2.20 | ||||||||
EPS impact of adjustments (pre-tax) [a]: | ||||||||||||||||
Legal claim | $ | 0.16 | $ | (0.04 | ) | $ | 0.45 | $ | 0.19 | |||||||
Amortization of debt discount | 0.15 | 0.07 | 0.47 | 0.16 | ||||||||||||
Subtotal adjusted items | 0.31 | 0.03 | 0.92 | 0.35 | ||||||||||||
Impact of income tax on adjusted items [a] |
(0.12 | ) | (0.03 | ) | (0.36 | ) | (0.19 | ) | ||||||||
Adjusted diluted net income per share [b] | $ | 0.98 | $ | 1.02 | $ | 2.72 | $ | 2.36 |
[a] | Refer to tables titled “Reconciliation of Adjusted Income Statement Items” and the related footnotes for additional information. | ||
[b] | Adjusted diluted net income per share is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. We define adjusted diluted net income per share as net income, adjusted for the impact of certain non-recurring and other items that we do not consider representative of our ongoing operating performance divided by the Company’s share count. Adjusted diluted net income per share is included in this press release because management believes that adjusted diluted net income per share provides meaningful supplemental information for investors regarding the performance of our business and facilitates a meaningful evaluation of operating results on a comparable basis with historical results. Our management uses this non-GAAP financial measure in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter. | ||
RESTORATION HARDWARE HOLDINGS, INC. RECONCILIATION OF GAAP NET INCOME TO ADJUSTED NET INCOME (In thousands) (Unaudited) |
||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||
January 30,
2016 |
January 31,
2015 |
January 30,
2016 |
January 31,
2015 |
|||||||||||||
GAAP net income | $ | 33,302 | $ | 42,525 | $ | 91,103 | $ | 91,002 | ||||||||
Adjustments (pre-tax) [a]: | ||||||||||||||||
Legal claim | $ | 6,928 | $ | (1,500 | ) | $ | 19,046 | $ | 7,700 | |||||||
Amortization of debt discount | 6,193 | 2,943 | 19,803 | 6,852 | ||||||||||||
Subtotal adjusted items | 13,121 | 1,443 | 38,849 | 14,552 | ||||||||||||
Impact of income tax on adjusted items [a] | (5,251 | ) | (1,471 | ) | (15,180 | ) | (7,918 | ) | ||||||||
Adjusted net income [b] | $ | 41,172 | $ | 42,497 | $ | 114,772 | $ | 97,636 |
[a] | Refer to tables titled “Reconciliation of Adjusted Income Statement Items” and the related footnotes for additional information. | ||
[b] | Adjusted net income is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. We define adjusted net income as net income, adjusted for the impact of certain non-recurring and other items that we do not consider representative of our ongoing operating performance. Adjusted net income is included in this press release because management believes that adjusted net income provides meaningful supplemental information for investors regarding the performance of our business and facilitates a meaningful evaluation of operating results on a comparable basis with historical results. Our management uses this non-GAAP financial measure in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter. | ||
RESTORATION HARDWARE HOLDINGS, INC. RECONCILIATION OF NET INCOME TO OPERATING INCOME AND ADJUSTED OPERATING INCOME (In thousands) (Unaudited) |
||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||
January 30,
2016 |
January 31,
2015 |
January 30,
2016 |
January 31,
2015 |
|||||||||||||
Net income | $ | 33,302 | $ | 42,525 | $ | 91,103 | $ | 91,002 | ||||||||
Interest expense—net | 11,619 | 5,939 | 35,677 | 17,551 | ||||||||||||
Income tax expense | 22,312 | 26,861 | 58,781 | 57,173 | ||||||||||||
Operating income | 67,233 | 75,325 | 185,561 | 165,726 | ||||||||||||
Legal claim [a] | 6,928 | (1,500 | ) | 19,046 | 7,700 | |||||||||||
Adjusted operating income | $ | 74,161 | $ | 73,825 | $ | 204,607 | $ | 173,426 | ||||||||
Net revenues | $ | 647,208 | $ | 582,727 | $ | 2,109,006 | $ | 1,867,422 | ||||||||
Operating margin [b] | 10.4 | % | 12.9 | % | 8.8 | % | 8.9 | % | ||||||||
Adjusted operating margin [b] | 11.5 | % | 12.7 | % | 9.7 | % | 9.3 | % |
[a] | Refer to tables titled “Reconciliation of Adjusted Income Statement Items” and the related footnotes for additional information. | ||
[b] | Operating margin is defined as operating income divided by net revenues. Adjusted operating margin is defined as adjusted operating income divided by net revenues. | ||
RESTORATION HARDWARE HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except share and per share amounts) (Unaudited) |
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Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||
January 30, |
% of Net |
January 31, |
% of Net
Revenues |
January 30, |
% of Net
Revenues |
January 31, |
% of Net
Revenues |
|||||||||||||||||
Net revenues | $ | 647,208 | 100.0 | % | $ | 582,727 | 100.0 | % | $ | 2,109,006 | 100.0 | % | $ | 1,867,422 | 100.0 | % | ||||||||
Cost of goods sold | 422,947 | 65.3 | % | 364,584 | 62.6 | % | 1,356,314 | 64.3 | % | 1,176,648 | 63.0 | % | ||||||||||||
Gross profit | 224,261 | 34.7 | % | 218,143 | 37.4 | % | 752,692 | 35.7 | % | 690,774 | 37.0 | % | ||||||||||||
Selling, general and administrative expenses | 157,028 | 24.3 | % | 142,818 | 24.5 | % | 567,131 | 26.9 | % | 525,048 | 28.1 | % | ||||||||||||
Income from operations | 67,233 | 10.4 | % | 75,325 | 12.9 | % | 185,561 | 8.8 | % | 165,726 | 8.9 | % | ||||||||||||
Interest expense—net | 11,619 | 1.8 | % | 5,939 | 1.0 | % | 35,677 | 1.7 | % | 17,551 | 1.0 | % | ||||||||||||
Income before income taxes | 55,614 | 8.6 | % | 69,386 | 11.9 | % | 149,884 | 7.1 | % | 148,175 | 7.9 | % | ||||||||||||
Income tax expense | 22,312 | 3.5 | % | 26,861 | 4.6 | % | 58,781 | 2.8 | % | 57,173 | 3.0 | % | ||||||||||||
Net income | $ | 33,302 | 5.1 | % | $ | 42,525 | 7.3 | % | $ | 91,103 | 4.3 | % | $ | 91,002 | 4.9 | % | ||||||||
Weighted-average shares used in computing basic net income per share |
40,522,242 | 39,734,145 | 40,190,448 | 39,457,491 | ||||||||||||||||||||
Basic net income per share | $ | 0.82 | $ | 1.07 | $ | 2.27 | $ | 2.31 | ||||||||||||||||
Weighted-average shares used in computing diluted net income per share |
42,225,070 | 41,777,509 | 42,256,559 | 41,378,210 | ||||||||||||||||||||
Diluted net income per share | $ | 0.79 | $ | 1.02 | $ | 2.16 | $ | 2.20 | ||||||||||||||||
RESTORATION HARDWARE HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) |
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January 30,
2016 |
January 31,
2015 |
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ASSETS | ||||||
Cash and cash equivalents | $ | 349,897 | $ | 148,934 | ||
Short-term investments | 130,801 | 62,168 | ||||
Merchandise inventories | 725,392 | 559,297 | ||||
Other current assets | 107,587 | 113,941 | ||||
Total current assets | 1,313,677 | 884,340 | ||||
Long-term investments | 22,054 | 18,338 | ||||
Property and equipment—net | 515,605 | 390,844 | ||||
Goodwill and intangible assets | 172,837 | 172,978 | ||||
Other non-current assets | 64,299 | 59,499 | ||||
Total assets | $ | 2,088,472 | $ | 1,525,999 | ||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
Liabilities | ||||||
Accounts payable and accrued expenses | $ | 280,714 | $ | 235,159 | ||
Other current liabilities | 171,841 | 109,137 | ||||
Total current liabilities | 452,555 | 344,296 | ||||
Convertible senior notes due 2019—net | 298,267 | 284,388 | ||||
Convertible senior notes due 2020—net | 221,534 | — | ||||
Financing obligations under build-to-suit lease transactions | 146,621 | 124,770 | ||||
Other non-current obligations | 83,335 | 69,629 | ||||
Total liabilities | 1,202,312 | 823,083 | ||||
Stockholders’ equity | 886,160 | 702,916 | ||||
Total liabilities and stockholders’ equity | $ | 2,088,472 | $ | 1,525,999 | ||
RESTORATION HARDWARE HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) |
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Twelve Months Ended | ||||||||
January 30,
2016 |
January 31,
2015 |
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income | $ | 91,103 | $ | 91,002 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 44,595 | 34,463 | ||||||
Amortization of debt discount | 22,114 | 7,969 | ||||||
Stock-based compensation expense | 24,223 | 17,072 | ||||||
Other non-cash items | (12,815 | ) | (12,386 | ) | ||||
Change in assets and liabilities: | ||||||||
Merchandise inventories | (166,505 | ) | (106,036 | ) | ||||
Accounts payable, accrued expenses and other | 139,171 | 50,407 | ||||||
Net cash provided by operating activities | 141,886 | 82,491 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Capital expenditures | (119,461 | ) | (110,359 | ) | ||||
Acquisition of buildings and land | (13,999 | ) | — | |||||
Construction related deposits | (20,049 | ) | (9,250 | ) | ||||
Purchase of trademarks and domain names | (339 | ) | (453 | ) | ||||
Purchase of investments—net of maturities | (73,549 | ) | (80,486 | ) | ||||
Net cash used in investing activities | (227,397 | ) | (200,548 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Net repayments under revolving line of credit | — | (85,425 | ) | |||||
Revolving line of credit deferred financing fees | — | (2,133 | ) | |||||
Proceeds from issuance of convertible senior notes | 296,250 | 350,000 | ||||||
Proceeds from issuance of warrants | 30,390 | 40,390 | ||||||
Purchase of convertible notes hedges | (68,250 | ) | (73,325 | ) | ||||
Debt issuance costs related to convertible senior notes | (2,382 | ) | (5,385 | ) | ||||
Borrowings under build-to-suit lease transactions | — | 1,776 | ||||||
Payments on capital leases | (248 | ) | (1,803 | ) | ||||
Proceeds from exercise of stock options | 25,606 | 16,400 | ||||||
Excess tax benefit from exercise of stock options | 10,443 | 16,421 | ||||||
Tax withholdings related to issuance of stock-based awards | (5,027 | ) | (3,116 | ) | ||||
Net cash provided by financing activities | 286,782 | 253,800 | ||||||
Effects of foreign currency exchange rate translation | (308 | ) | (198 | ) | ||||
Net increase in cash and cash equivalents | 200,963 | 135,545 | ||||||
Cash and cash equivalents | ||||||||
Beginning of period | 148,934 | 13,389 | ||||||
End of period | $ | 349,897 | $ | 148,934 | ||||
RESTORATION HARDWARE HOLDINGS, INC. CALCULATION OF FREE CASH FLOW (In thousands) (Unaudited) |
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Twelve Months Ended | ||||||||
January 30,
2016 |
January 31,
2015 |
|||||||
Net cash provided by operating activities | $ | 141,886 | $ | 82,491 | ||||
Capital expenditures | (119,461 | ) | (110,359 | ) | ||||
Acquisition of buildings and land | (13,999 | ) | — | |||||
Construction related deposits | (20,049 | ) | (9,250 | ) | ||||
Purchase of trademarks and domain names | (339 | ) | (453 | ) | ||||
Borrowings under build-to-suit lease transactions | — | 1,776 | ||||||
Payments on capital leases | (248 | ) | (1,803 | ) | ||||
Free cash flow [a] | $ | (12,210 | ) | $ | (37,598 | ) |
[a] | Free cash flow is calculated as net cash provided by operating activities less capital expenditures, acquisition of buildings and land, construction related deposits, purchase of trademarks and domain names, borrowings under build-to-suit lease transactions, and payments on capital leases. Free cash flow excludes all non-cash items, such as the non-cash additions of property and equipment due to build-to-suit lease transactions. |
View source version on businesswire.com: http://www.businesswire.com/news/home/20160329006455/en/
Source:
Restoration Hardware Holdings, Inc.
Cammeron McLaughlin, 415-945-4998
SVP, Investor Relations and Strategy
cmclaughlin@rh.com