Exhibit 99.1
SELECT INTERIOR CONCEPTS ANNOUNCES 2018 SECOND QUARTER FINANCIAL RESULTS
Anaheim, California – September 6, 2018 –Select Interior Concepts, Inc. (NASDAQ: SIC), a diversified building products and services company focused on home interior products, today announced its financial results for the second quarter ended June 30, 2018.
SECOND QUARTER 2018 FINANCIAL HIGHLIGHTS
• | Consolidated Net Sales increased to $124.9 million, an increase of 38.2% from the second quarter of 2017 |
• | Gross Profit was $34.4 million, up from $26.5 million for the second quarter of 2017 |
• | Adjusted EBITDA rose to $13.8 million, up from $11.9 million for second quarter of 2017 |
• | Net loss was $0.1 million, compared to net income of $3.4 million for the second quarter of 2017 |
YEAR-TO-DATE 2018 FINANCIAL HIGHLIGHTS
• | Consolidated Net Sales increased to $229.3 million, an increase of 45% from the first half of 2017 |
• | Gross Profit was $62.4 million, up from the $47.0 million for the first half of 2017 |
• | Adjusted EBITDA improved to $24.5 million, up from $20.0 million for the first half of 2017 |
• | Net loss was $1.4 million, compared to net income of $0.8 million for the first half of 2017 |
“We are pleased about the continued organic growth of our Company and the integration of two recently completed acquisitions. Our performance during the second quarter demonstrates execution towards our strategic goals,” stated Tyrone Johnson, Chief Executive Officer of Select Interior Concepts. “We reported strong quarter over quarter performance, as our Net Sales for the second quarter of 2018 grew 38.2% to $124.9 million. Our gross profit rose in both our Residential Design Services and Architectural Surfaces Group operating segments, and on a combined basis, increased 29.8% to $34.4 million. Adjusted EBITDA rose to $13.8 million,” Mr. Johnson added.
“We remain committed to our diversification of product, channel and geography strategies,” added Mr. Johnson. “In addition, we continue to build an acquisition pipeline of investment opportunities that will further enhance our Company’s value. Subsequent to the end of our second quarter 2018, we acquired Las Vegas-based Tuscany Collection and Austin-based Summit Stoneworks.”
“Driving our plan is a strong leadership team that will continue to provide guidance and support in achieving our long-term goals. We recently announced the hiring of Nadeem Moiz as our Chief Financial Officer. We believe that Mr. Moiz will be a great addition to our management team, and will provide the leadership and experience necessary to help execute our growth strategies,” concluded Mr. Johnson. “We are also happy to note that Kendall Hoyd has been named the President—RDS of our Company.”
Second Quarter Results
Net sales for the second quarter of 2018 were $124.9 million, compared to net sales of $90.4 million for the second quarter of 2017. The increase was driven by the impact of organic growth and acquisitions in both the Residential Design Services and Architectural Surfaces Group operating segments of the Company.
Gross profit for the second quarter of 2018 was $34.4 million, compared to $26.5 million for the second quarter of 2017. Gross profit as a percentage of net sales was 27.6% for the second quarter of 2018, compared to 29.3% for the second quarter of 2017. The increase in gross profit was due to higher net sales. The decrease in gross profit margin was primarily due to opportunistic acquisitions by Architectural Surfaces Group at slightly lower gross margin than base business, higher depreciation in cost of goods sold, and a shift in product price/mix.
Operating expenses for the second quarter of 2018 were $30.8 million, or 24.7% of net sales, compared to $19.5 million, or 21.5% of net sales, for the second quarter of 2017. The increase in operating expenses was primarily due to Selling, general and administrative (“SG&A”) expenses from acquired businesses, the Company’s incentive compensation plan,one-time nonrecurring costs for completing acquisitions, investments in the Company as its transitions to a public company, and higher depreciation.
The income tax benefit for the second quarter of 2018 was $.04 million on apre-tax loss of $0.1 million, resulting in an effective tax rate of 28.9%. The income tax benefit for the second quarter of 2017 was $0.2 million on pretax income of $3.2 million, resulting in an effective tax rate of 5.2%. The change in effective tax rate is due to the Company’s Architectural Surfaces Group operating segment being a pass-through entity during the second quarter of 2017, which resulted in a lower effective rate for the consolidated Company.
For the second quarter of 2018, the Company reported a net loss of $0.1 million, and earnings per share of $0.00, compared to net income of $3.4 million in the second quarter of 2017. There was no per share calculation for the second quarter of 2017 because the Company was a private entity during that period.
Adjusted EBITDA rose to $13.8 million, or 11.1% of net sales, for the second quarter of 2018, compared to Adjusted EBITDA of $11.9 million, or 13.1% of net sales, for the second quarter of 2017. The increase in Adjusted EBITDA was primarily the result of organic growth and acquisitions, partially offset by inflation and investments in the Company, as it transitions to a public company, and M&A resources.
The Company reported cash generated from operating activities of $1.4 million for the second quarter of 2018, compared to $0.5 million for the second quarter of 2017.
Year-to-Date Results
Net sales for the first half of 2018 were $229.3 million, compared to net sales of $158.1 million for the first half of 2017. The increase in net sales was primarily due to organic growth and acquisitions in both the Residential Design Services and Architectural Surfaces Group operating segments of the Company.
Gross profit for the first half of 2018 was $62.4 million, compared to $47.0 million for the first half of 2017. Gross profit as a percentage of net sales was 27.2% for the first half of 2018, compared to 29.7% for the first half of 2017. The increase in gross profit was due to higher net sales. The decrease in gross profit margin was primarily due to opportunistic acquisitions by Architectural Surfaces Group at slightly lower gross margin than base business, higher depreciation in cost of goods sold, and a shift in product price/mix.
Operating expenses for the first half of 2018 were $57.8 million, or 25.2% of net sales, compared to $39.2 million, or 24.8% of net sales, for the first half of 2017. The increase in operating expenses was primarily due to SG&A expenses from acquired businesses, the Company’s incentive compensation plan,one-time nonrecurring costs for completing acquisitions, investments in the Company as it transitions to a public company, and higher depreciation.
The income tax benefit for the first half of 2018 was $0.5 million, resulting in an effective tax rate of 27.8%, compared to an income provision of $0.1 million and an effective tax rate of 14.8% for the first half of 2017. During the first half of 2017, our Architectural Surfaces Group operating segment was a pass-through entity for tax purposes.
For the first half of 2018, the Company reported a net loss of $1.4 million, or a loss of $0.05 per basic and diluted share, compared to a net profit of $0.8 million for the first half of 2017. There was no per share calculation for first half of 2017 because the Company was a private entity during that period.
Adjusted EBITDA rose to $24.5 million, or 10.7% of net sales, for the first half of 2018, compared to Adjusted EBITDA of $20.0 million, or 12.6% of net sales, for the first half of 2017. The increase in Adjusted EBITDA was primarily the result of organic growth and acquisitions, partially offset by inflation and investments in the Company, as it transitions to a public company, and M&A resources.
SECOND QUARTER 2018 FINANCIAL RESULTS CONFERENCE CALL DETAILS
Tyrone Johnson, Chief Executive Officer, and Nadeem Moiz, Chief Financial Officer, will host a conference call to discuss the results today at 8:30 AM EDT.
To participate in the Conference Call, dial877-409-4019 from the United States, and international callers may dial201-689-8337, approximately 15 minutes before the call. A webcast and presentation will also be available under the Investor Relations section athttp://www.selectinteriorconcepts.com.
A digital replay will be available by telephone approximately two hours after the completion of the call until November 15, 2018, and may be accessed by dialing877-660-6853 from the U.S. or201-612-7415 for international callers using conference ID #13682929.
About Select Interior Concepts
Select Interior Concepts is a diversified building products and services company focused on interior products. It has two operating subsidiaries and segments doing business as Residential Design Services and Architectural Surfaces Group, with an overall focus of offering a broad range of design-oriented products including flooring, countertops, cabinets, and other highly desirable and customizablehigh-end interior products. For more information, visithttp://www.selectinteriorconcepts.com.
Forward-Looking Statements
This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and, as such, may involve known and unknown risks, uncertainties and assumptions. Forward-looking statements may be identified by the use of words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue,” and other forms of these words or similar words or expressions or the negatives thereof. Forward-looking statements are based on historical information available at the time the statements are made and are based on management’s reasonable belief or expectations with respect to future events. Forward-looking statements are subject to risks, uncertainties, and other factors that may cause the Company’s actual results, level of activity, performance or achievement to be materially different from the results or plans expressed or implied by such forward-looking statements. 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 speak only as of the date on which they are made and the Company undertakes no obligation to update any forward-looking statement to reflect future events, developments or otherwise, except as may be required by applicable law.
Contacts:
Investor Relations:
Marlon Nurse, D.M. | Senior Vice President
Porter, LeVay & Rose, Inc.
Marlon@plrinvest.com
Select Interior Concepts, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands) | June 30, 2018 | December 31, 2017 | ||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 6,111 | $ | 2,547 | ||||
Restricted cash | 3,000 | 3,000 | ||||||
Accounts receivable, net | 51,422 | 45,284 | ||||||
Inventories | 110,514 | 87,629 | ||||||
Prepaid expenses and other current assets | 2,646 | 2,625 | ||||||
Income taxes recievables | 1,181 | 1,520 | ||||||
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Total current assets | 174,874 | 142,605 | ||||||
Property and equipment, net | 17,110 | 13,226 | ||||||
Deferred tax assets, net | 12,668 | 11,569 | ||||||
Goodwill | 66,984 | 66,326 | ||||||
Customer relationships, net | 63,309 | 68,125 | ||||||
Intangibles assets, net | 13,791 | 14,138 | ||||||
Other assets | 1,204 | 4,257 | ||||||
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Total assets | $ | 349,940 | $ | 320,246 | ||||
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LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Accounts payable | $ | 37,947 | $ | 38,491 | ||||
Accrued expenses and other current liabilities | 26,513 | 19,840 | ||||||
Customer deposits | 6,421 | 5,320 | ||||||
Current portion of long-term debt, net | 1,424 | 1,449 | ||||||
Current portion of capital leases | 382 | 229 | ||||||
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Total current liabilities | 72,687 | 65,329 | ||||||
Long-term debt (less current portion) | 92,518 | 86,897 | ||||||
Long-term captial leases | 1,013 | 664 | ||||||
Line of Credit | 35,382 | 19,269 | ||||||
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Total Liabilities | 201,600 | 172,159 | ||||||
Class A common stock | 217 | 217 | ||||||
Class B common stock | 39 | 39 | ||||||
Additional paid in capital | 155,168 | 153,520 | ||||||
Accumulated deficit | (7,084 | ) | (5,689 | ) | ||||
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Total shareholders’ equity | 148,340 | 148,087 | ||||||
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Total liabilities and shareholders’ equity | $ | 349,940 | $ | 320,246 | ||||
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Select Interior Concepts, Inc.
Condensed Consolidated Statement of Operations (Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(in thousands, except share data) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues, net | $ | 124,861 | $ | 90,361 | $ | 229,247 | $ | 158,085 | ||||||||
Cost of revenues | 90,455 | 63,850 | 166,892 | 111,104 | ||||||||||||
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Gross profit | 34,406 | 26,511 | 62,355 | 46,981 | ||||||||||||
Operating expenses | ||||||||||||||||
General and administrative | 24,480 | 14,655 | 46,022 | 25,709 | ||||||||||||
Selling and marketing | 6,316 | 4,800 | 11,773 | 13,523 | ||||||||||||
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Total operating expenses | 30,796 | 19,455 | 57,795 | 39,232 | ||||||||||||
Income from operations | 3,610 | 7,056 | 4,560 | 7,749 | ||||||||||||
Other (income) expense | ||||||||||||||||
Interest Expense | 2,757 | 3,623 | 5,280 | 5,730 | ||||||||||||
Loss on extinguishment of debt | 42 | — | 42 | 748 | ||||||||||||
Other Expense, net | 932 | 207 | 1,171 | 318 | ||||||||||||
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Total other expense, net | 3,731 | 3,830 | 6,493 | 6,796 | ||||||||||||
(Loss) income before provision for income taxes | (121 | ) | 3,226 | (1,933 | ) | 953 | ||||||||||
Income Tax Expense | (35 | ) | (170 | ) | (538 | ) | 142 | |||||||||
Consolidated net (loss) income | $ | (86 | ) | $ | 3,396 | $ | (1,395 | ) | $ | 811 | ||||||
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Lesss: net income attributable to predecessor | $ | — | $ | 3,396 | $ | — | $ | 811 | ||||||||
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Net loss attributable to Select Interior Concepts, Inc. | $ | (86 | ) | $ | — | $ | (1,395 | ) | $ | — | ||||||
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Loss per common share | ||||||||||||||||
Basic and Diluted Class A common | $ | (0.00 | ) | $ | — | $ | (0.05 | ) | $ | — | ||||||
Basic and Diluted Class B common | $ | (0.00 | ) | $ | — | $ | (0.05 | ) | $ | — | ||||||
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Weighted average shares outstanding | ||||||||||||||||
Basic and Diluted Class A common | 21,750,000 | — | 21,750,000 | — | ||||||||||||
Basic and Diluted Class B common | 3,864,626 | — | 3,864,626 | — | ||||||||||||
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Select Interior Concepts, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, | ||||||||
(in thousands) | 2018 | 2017 | ||||||
Operating Activities | ||||||||
Net (loss) / income | $ | (1,395 | ) | $ | 811 | |||
Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization | 9,669 | 6,553 | ||||||
Equity based compensation | 1,647 | — | ||||||
Deferred benefit from income taxes | (1,098 | ) | (202 | ) | ||||
Amortized interest on deferred debt issuance costs | 325 | 256 | ||||||
Loss on extinguishment of debt | 42 | 748 | ||||||
Increase / (decrease) in alowance for doubtful accounts | (37 | ) | 199 | |||||
Loss on disposal of property and equiptment | 2 | 2 | ||||||
Changes in operaating assets and liabilities: | ||||||||
Accounts receivable | (59 | ) | (4,079 | ) | ||||
Prepaid expenses and other current assets | 142 | (574 | ) | |||||
Inventory | (8,422 | ) | (5,868 | ) | ||||
Other assets | 9 | (44 | ) | |||||
Accounts payable | (7,709 | ) | 4,767 | |||||
Accrued expenses and other current liabilities | 5,345 | 2,292 | ||||||
Income taxes receivable | 339 | (900 | ) | |||||
Customer deposit | 1,101 | (254 | ) | |||||
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Net cash used in operating activities | (99 | ) | 3,707 | |||||
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Cash flows from investing activities | ||||||||
Purchase of property and equipment | (6,411 | ) | (1,666 | ) | ||||
Proceeds from disposal of property and equipment | 12 | — | ||||||
Acquisition of Pental Granite and Marble LLC, net of cash acquired | — | (88,000 | ) | |||||
Acquisition of NSI, LLC | (290 | ) | — | |||||
Acquisition of Bedrock, net of cash acquired | (11,492 | ) | — | |||||
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Net cash used in investing activities | (18,181 | ) | (89,666 | ) | ||||
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Cash flows from financing activities | ||||||||
Dividends issued | — | (34,859 | ) | |||||
Contributions from members | — | 30 | ||||||
Proceeds from line of credit, net | 16,598 | 23,998 | ||||||
Proceeds from term loan | 6,250 | 116,500 | ||||||
Term loan and line of credit deferred issuance costs | (517 | ) | (2,825 | ) | ||||
Proceeds / (payments) on notes payable | 38 | (311 | ) | |||||
Principal payments on long-term debt | (525 | ) | (20,218 | ) | ||||
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Net cash provided by financing activities | 21,844 | 82,315 | ||||||
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Net increase / (decrease) in cash | 3,564 | (3,644 | ) | |||||
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Cash and restricted cash, beginning of period | 5,547 | 4,727 | ||||||
Cash and restricted cash, end of period | 9,111 | 1,083 | ||||||
Supplemental disclosures of cash flow information | ||||||||
Cash paid for interest | 4,770 | 7,380 | ||||||
Cash paid for income taxes | 184 | 1,260 | ||||||
Supplemental disclosures ofnon-cash investing activities | ||||||||
Acquisition of Pental Granite and Marble, LLC, rollover equity | — | 10,000 | ||||||
Measurement period adjustment related to acquisition of Greencraft | (317 | ) | — | |||||
Acquisition of Elegant Home Design, LLC, indemnity holdback | (1,000 | ) | — | |||||
Acquisition of equipment and vehicles with long-term debt and capital | 104 | 121 |
Select Interior Concepts, Inc.
Adjusted EBITDA
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(Dollars in thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Reconciliation of adj. EBITDA to net income | ||||||||||||||||
Consolidated net (loss) income | $ | (86 | ) | $ | 3,396 | $ | (1,395 | ) | $ | 811 | ||||||
Income tax (benefit) expense | (35 | ) | (170 | ) | (538 | ) | 142 | |||||||||
Interest expense | 2,799 | 3,623 | 5,322 | 6,478 | ||||||||||||
Depreciation and amortization | 4,985 | 3,712 | 9,669 | 6,553 | ||||||||||||
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EBITDA | 7,663 | 10,562 | 13,058 | 13,984 | ||||||||||||
Consulting Fees to Trive Capital | — | 305 | — | 516 | ||||||||||||
Share Based and Transaction Incentive Compensation | 2,006 | — | 3,986 | 381 | ||||||||||||
Nonrecurring Costs | 4,142 | 997 | 7,444 | 5,088 | ||||||||||||
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Adjusted EBITDA | 13,811 | 11,863 | 24,488 | 19,969 |
EBITDA is defined as consolidated net income before interest, taxes and depreciation and amortization.
Adjusted EBITDA is defined as consolidated net income before (i) income tax expense, (ii) interest expense, (iii) depreciation and amortization expense, and (iv) adjustments for costs that are deemed to be transitional in nature or not related to our core operations, such as severance, facility closure costs, and professional and legal fees related to business acquisitions, or similar transitional costs and expenses related to integrating acquired businesses into our Company. Adjusted EBITDA is anon-GAAP financial measure used by us as supplemental measure in evaluating our operating performance.