SUMR - Earnings call transcript Q4 2017

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Operator

Good morning, and welcome to the Summer Infant Incorporated Fiscal 2017 Fourth Quarter Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Chris Witty with Investor Relations. ahead. go Please

Chris Witty

would events could to forward-looking are call. factors statements risks welcome Summer to differ Infant Commission. cause statements. fourth Infant's actual these subject This XXXX other Mote. XXXX and company's contained annual CEO, risk brief that for forward-looking provide These report Hello, Harbor outlook XX-K that Safe me and Please results the relates Exchange on XX, conference statement. December I Bill filings CFO, on in With Messner; may various year-ended XXXX, to is the to our beyond. from like the quarter the materially with to Mark a include Form and call and and Summer now uncertainties statements refer call and the and Infant's for in Summer Securities today to

references earnings are net management understanding adjusted to of a During EBITDA, may meaningful measures, financial changes help non-GAAP share. the per believes investors which the gain Summer operation. make call, may adjusted Infant's company adjusted These in and income, metrics

For more the GAAP for in over call see Mark? to measures, information Messner. financial of I included And reconciliation today's to non-GAAP non-GAAP measures release. with turn the please results financial a that, table like on would to Mark

Mark Messner

recent an our of appreciate detail. our through quarter fourth in overview I'll after will joining by everyone. you Chris, and good giving We results morning Thanks, conference call. which financial start go developments, Bill

as revenue, both of third like period. rebound saw that, fourth First, XXXX the quarter a year quarter to expected, we the prior announce I'd as well as versus in

a lower that required the and results impacted to by bankruptcy major also to take retailer, demand, out fell as well while good this to charge but generally the not certain $X as growth. receivables. recall were quarter, which us saw as that outstanding disruptions bankruptcy year QX anticipated, You last revenue due pushed only brick a for may is shipment customer deliverables, for The mortar the news million negatively of

company We're Obviously momentarily. brand we environment, tax are extensions. a changes primarily remain And cash will quarter, forward operating to scale I the terms indicated. We sitting A sluggish improve to XXXX to brick XX% large The taking market to held and across offset performance retailer, ended very consumer also the of and impact moment. is newly slightly, efficiencies and the were Bill of debt drive largely customer, net previously the steps place line shopping landscape of year very XXXX, nonrecurring review while so mortar bankruptcy which XXXX, review bottom that overall a improve similar able going this product enacted the to recently in operational payment decisive as innovative major we reflected act, reversed year We the safety and that from in top as continue charges a subsequently and the investing as even taking while to last charges saw demand market year, dynamics. and was this habits. challenging significant line due due including in part Bill with products and to reported the in loss tied I'd boosters one sales, revenue $XX.X to we around issues certainly to to fourth margins QX in increase competitive a which as retail terms million, reductions largely not potties for was growth. in well the monitor these will $XXX gross SG&A million introduced down higher bad say still. competitive will to reasons negotiate

and we've in culture. result-oriented partnering to Based He'll to as Europe, channels, Kong, managing elsewhere. [ph] company's in development of and outside manage First, international a increasing and expand across track overseas nascent be Coryis incentivizing initiatives. Hong customers, our in individual hiring our international presence with right positions of person activity business is With Pelman with years in South entire China, North brand America, known and by responsible management marketing, America Taiwan a for sales Cory for a record teams, countries aspirations all Summer's veteran, a somebody experience market portfolio. product the Cory industry distribution sales, invested our variety I've extensive personally and

Cory feel we for operations where can past. drive the a enthusiasm also take efficiency, We've helm. have increase We at potential the on recently in in flow to expansion, steps to and additional measures building cash determine with of the our growth we've increase overseas margin taken reassessed

innovation perspective management continue We've unit, distribution online. is and reviews so and center including we're from growing from process, on view our and and a merchandise as the coming we Summer distribution decided our about. us utilization more through a time, handles of are connectivity nimble consumers more and in experiencing launched Infant ending remain our our same products extensions great during enable deal increasing brand While a new Pixel both regarding make growing working which and talking expanding asset requirements. the we product direct-to-consumer increase benefited it posting augment the we critical in product QX. potential base, never will all million several monitors while seen At demand of responsive and see site, the are our traction initiatives capital consumer Starting invest From our both upbeat and brand to site. our we online Baby it small a year, already this that quarter, new plans This revolutionary we've can will have about already demand own fourth growth positive company to enhance introduce this efforts reduces with for to variety Coast other initiative and effectively issues. and This supply West to cementing accommodate. $X the chain traffic encouraged Web retailers by to the a our to also

it's segment our early off a we're while this product days, revamping of portfolio. So, start to good

we're expandable partners. launching cameras to is is market, night from vision, and voice-activated this Digital excellent screen quality digital which another example soft-glow rooms. Another the be Glimpse customers. to we're across how This edge monitor of remote Target, and four monitor multiple in of video cutting eye with Glimpse positive space quarter with trends at other generally many our the soon incremental night Overall, video to and a demand zoom, Target, up wakeup, rebuild also is innovation our an working light. technology. channel unit, to pleased picture a see features will and It Walmart, several important camera already is with The on just we're competitive placements proprietary gates children very more other even position of and products in using at keep

working and still a gates, with Our is strollers, Potty well, good where positioners, we're a will category areas seat strong, the position as have further extensions there market and in on reputation. we all strong growing and

solid all rolled being key requirements patents retailers, quarter. a For many margins. Bath channel already current will meets Seat be requiring other out example, few a at partners while at our It's new and sold and reasonable safety to My available with this price

benefit areas, and We to other these from position our product expertise to leverage brand platforms car the in in that invest continue into to effect can R&D our our expand strengthen looking halo of reputation. key and while and positioning seats

terms right consumers. such for to ensure am sold Summer Overall, of progress groundwork we're constant coming of realize our need price. the and likely efforts will at and proud for improve At accomplishments and with XXXX, opportunities measures, overseas. drive best The R&D, the our domestically this the right in be year product the building provide costs, are dynamics lay in families a diligently products both to Infant, that our be But making reduce overall portfolio and of our protection we steadfast channel positioning. forward, are in the I and we path but invest to the the managing many next. price This integrity and the to in But and line products company impacting due of to place to profitability continue still we price-savvy same working We time, due to brands distribution can view connect revenue growth being marketplace industry. in our at lead year the the on issues clear believe, margin focus sustained growth. of requires we higher lumpy have top a a and

we that meaningful and With loyalty I'll optimistic always, many turbulent can over detail. Bill for As our their steps our to employees will achieve period. There to through our the hard returns. results provide like and we it I'd rather being are with shareholders Bill? to turn opportunities thank in review to work taken financial leverage remain that that, a goals, our

Bill Mote

Thanks, Mark, everyone. and morning good

Our issued last night. release XX-K and press related were

$XX.X third to $XX.X quarter million fourth million XXXX you call, and versus the quarter. were encourage our to quarter this listening net XXXX, in I sales review In addition Fourth to of filings. the million $XX.X in

As monitors anticipated, more rose potties, shipments strollers, and offsetting of both products. of sequentially revenue feeding lower higher year-over-year due sales to and and than gates,

to while our market, investing several we mentioned, strengthening products growth Mark initiatives. As in platform, new coming overseas have many and ecommerce are

QX fourth that add the near-term to customer's XXXX our million, of down million trends, in be of the to we overall to net profit was retailer this compared point, was fiscal monitor the the timing the quarter issues. retailer, to margin quarter the revenue like sales quarter due fiscal XXXX were also will their bankruptcy fourth reduction on year-over-year impacted gross fourth products impact and related due the be and past. $XX.X cycle. Gross discussed The with shipments, of anticipate I'd cost XXXX, inventory results of a the for will by losses At the certain However, in such $XX demand approximately the seasonal lumpy below And life XXXX, in which year. of of end in XX.X% $XXX,XXX we've at major the of sale of last included XX.X% versus bankruptcy.

of in For gross the XX% margin remained range the working as similar towards the full-year, XX%. our XXXX we target continue to

earlier year As cut this and steps additional we're taking further improve margins. Mark costs to mentioned

$X expense over we save new a distribution than racking invest in center to operating which million As a utilization, including our installation expected in more increase year asset part the of is forward. the Coast efforts system, $XXX,XXX going West our will to of

higher were fiscal General and in last. a working lower versus is this to XXXX last due goal million reflecting efficiency expenses XXXX year, of primarily XXXX. million versus enhance the continue costs fourth $X.X to the Our million to percentage $X versus were profitability. administrative $XX.X cooperative in year and Selling million import business expenses advertisement our in quarter direct improve $X.X of

With as reflecting the strategic in charge taken to a year-over-year previously company's $XXX,XXX third expenses decrease the related of XXXX bankruptcy. well as the debt discussed the fiscal quarter reversal overhead to reduce customer initiatives bad the

quarter, compared prior year million Tax enacted quarter receivables expense period. XXXX partial turned million Act. the for in you nonrecurring million $X on of reported of included of $XXX,XXX EBITDA Depreciation charges just prior Adjusted QX charges in related fourth $X.X as XX.X% $XXX,XXX mentioned. credits in company reflecting In Adjusted unremitted charge $XXX,XXX As of net the with tax our year declined out included Note the of million of charge non-cash per Infant's charge fourth a quarter a period. XXXX related credits was $X.X $X.X XXXX. of to a of its reported in versus of of In QX of of company XXXX SG&A fourth brand. quarter better may $X.X EBITDA or net quarter fourth in assets. XXXX in the the on was outcome XXXX Free interest This net from or as subsidiaries. to sales revaluation the write-down $XXX,XXX remitted to impairment XXXX quarter I million earnings A XXXX. a the U.S. in EBITDA prior in both but quarter percent $X.X in amortization fiscal to add-back year facility. recall, previously fourth a loss fourth Born while of the foreign credit in company recorded $X.X and charge and add-back tax prior the company's the $X.XX in the the non-cash was the was $X.XX loss in quarters total anticipated. fourth $XXX,XXX of period, deferred that a negotiated year the a bank $XXX,XXX million reversal the share the Summer the XX.X% last XXXX aggregate share defined million of of $X.X and the $X.X included million adjusted The amended million a versus of related recently foreign than

inventory as XXXX. at Inventory to receivables XXth sheet, XXXX. were at cash $XX.X QX compared balance XX, Infant $XX.X compared year. to had products XX, related and approximately cash compared December we million XXXX of the debt include and million the to end of $XX as to items as with which and XX, as had December discontinued the fourth of Trade of become million of that and at XXXX, at warranted, actively were was would December the items million payable quarter Turning as the obsolete. of of the of of million the XX, $XX.X and $XXX,XXX certain of $XX.X December December disposing compared beginning accrued reduce fiscal Accounts million year, expenses with million million of beginning million to $XX.X on $X in $XX.X the debt of $XX.X Summer continue fiscal

from the Regarding ratio versus trailing at With we operations and the open at to I'll call adjusted in we $X.X further reduced reducing company's leverage the cash XX to up we operator fiscal months the X.Xx in coming the million are cash over generated turn to bank X.Xx flow, fiscal Overall, of in million for XXXX. year. versus in it EBITDA questions. dedicated this And the XXXX. $X.X year-end beginning XXXX that,

Operator

Dave Capital. Please session. ahead. with now from Instructions] begin King will We the [Operator question-and-answer first The go ROTH comes question

Dave King

Thanks. Bill. I morning, and Yes, on sorry about Good that, Mark was mute.

Mark Messner

Dave. Hey,

Dave King

a down revenue that in the just from some guess reasonable year? But in to you perspective, store So, I a like, fourth XXXX Do off fourth the closings, revenue the to to sounds expect have on quarter? was et about cetera? what is think for BRU, comprised I then, quarter. get [indiscernible] kind revenue bit better. to year. was around in context think the I anticipated it it mainly the importantly, percentage trying of you more understand quarter, And down first how due much expect Thanks. of first XX% the for guess BRU, it little what it And as

Bill Mote

Dave, Bill. for fourth So, the for The -- quarter year this BRU you XX%, was like it's is said.

For of is years, last as the that fourth under we've of decline business and obviously. quarter exactly. slightly a seen in through percentage And 'XX, for store the sales, don't their lower we've because ongoing impact going basis, there impact. have of gone on couple but I we've obviously an the closings. that the forward, But an the years, that mentioned is

stores prior would. that the store of of business that the XX% closed represent about estimate our Our impact of were are year's closings their being

as year-over-year expect we minimum that. the a a to of at So, result be down

balances counts, similar their they're -- you'll of rebalancing high inventory have expect uncertainty also amount what because a terms We be as we but inventories inventory their in their in-channel of lower have will store inventory. some

we will time store a where don't expect uptake So new organizing on there be their they're of do inventory count. they while period

we And believe that quarter So first those us to upfront. be we'll are guidance down are just that factors likely the provide to year-over-year. that in leading wanted

Dave King

up. to extent color. new head to And just the are challenges, some talk as new you how Can on know, could then that are of in ground offsets want it. about significant Okay, between to that kind helps about meaningful the us. Good Asia you about products, think [indiscernible] think person that new the we talk to a be products offsets that you contributors you the of potential what that

color helpful. some there would Just be Thanks.

Mark Messner

new But we're are Yes, key with Dave, with channel I we incremental the product more. listings really this introductions new those Hey, those partners. Mark. that have of on. we other about can introductions excited about some product talk going is getting And

between So But of introducing is partners. offset, bath in the Seat, which still XXX% share mean, some Bath there's the business. I retail legal excited seat grab a some we're to be the that's market My in U.S. a we're going not the market. only lumpiness about

chances our market its need. our that positive. on distributed in There international Cory our out The definite we've things first a started some highly of get on throughout are our partners. international success we well. need as increasing days our of distribution are We're are evenly and quite in those are So with restructure core like we early gates of over There underpenetrated key ramp to do an XX we doing channel so. gate significantly other realize section partners. consumer with products some internationally, some in to we're to and accommodate to indications category our well we're again, We increasing business, weren't I cornered there. the on presence retail even business, month with excited that little onboard. things mean, a And item sales, up to a his restructuring international

the market. in with we're increase think of offset to offset, the the drive So, about product improvements the terms lumpiness those marketing our operational into of I will international to and putting least I products. good that the some talked marketplace we've increased coming strategies really with coupled focus our That, help up good profitability at in and think markets in

Dave King

think can just growth you how question, puts lines margin, that's then getting I savings your Did be plans to for hear of to that side margin And to importantly in that maybe about we improved other in of expect. and then terms And talk OpEx? all even OpEx the kind on your Thanks. profitability, the about of the then reduce as and and sold? thanks I that And of your you along forward guess how going annual full-year, but -- sort Mark. goods we maybe look more of should you the the given Bill, Okay, right, in multipart cost gross takes [indiscernible]? $XXX,XXX

Bill Mote

Right.

We'll So for phase plan up warehouse, expense strategic for given already the we've everything as The a sales. warehouse to rightsizing four the the it. and finish, do that's range a the being portion partition off It'll save to and warehouse, OpEx dialed it we It'll of percent able to expenses and operating ourselves of broken keep going project. or can phases, of be we we're doing and sales, the in really to annualized XX% it's related level got go. of save that ready I that to the an $XXX,XXX sublet overall began. in terms take G&A. all either restructure on operating And basis definitely, of approximately of in but a year into phases, it lower project to to

be for bottom we margins right G&A late cards about through well? having leverage so terms in line push to So I that as ask did us, that that's definitely the amount of in the And completed. as you overall XXXX, that Related smaller will for upside revenue there -- may hear well. as

Dave King

gross margin. Yes,

going from that any front? and have on is that what I'm wondering I cost you could savings BRU some there. either opportunities would wondering probably sort of think but Just there's monitors, to offsets of continue pressure

Bill Mote

relatively positive. Yes, it's actually know, you

to level of rough is little to the sales. a closeouts just lower quarter going first The some will there related because be be

If recall, out, placed our days orders vendors. Asian bring our we we guys about with in have you XX

our about about, of and spoke QX. of be degradation that level, XX% margin are are some increases some product just gross will products amount the as those and there in So the gross margins. new sales those But mix margin Mark

come 'XX, positive margin So as mixes improvement about to year-over-year. we're those in very

Our the realistic goal in a has believe always short-term, XX% we and still been that's goal.

pro if basis monitors on to you happened back very forma of fact, out XX% year. close in some we're last things In the year, a the that last

will that'll coming benefit definitely gate margin new And mix business the with line. very back that with us the hit product XXXX, product. that's So in that some margin of in, half incremental good

Dave King

for last a income me, you reform? going for anticipate Okay, did tax that's result great. And your say the rate you on forward as of what statement then tax

Bill Mote

kind the know. everything tax think it's Yes, interesting, and This tax of really I account think should retrospectively the I law. that's on one-time is it's -- everyone call impact taking transpired from very into in

less it's rate expect we than going do hit tax and to the overall at be but large So our number, the rate EPS tax a to XX%, be forward XX%. federal to

hit everything But you new one-time as the to it's else I to be and foreign think ourselves that it that, should do vanilla from going tax straight rats profit truly and had tax know. all as one-time that important entities earnings we So catch-up a the it's rules. forward with know far to structure plain for is

Dave King

Okay, talking good perfect. and with All my for all XXXX. questions, right, luck thanks

Mark Messner

Thanks, Dave.

Bill Mote

Dave. Thanks,

Operator

Please [Operator Stavos, Instructions] comes next go ahead. question Timothy who a is The from Investor. Private

Timothy Stavos

morning. Good

know, own it's you you. capital company. difficult working company. As cost reductions, and slew that your shout-out company or to I or know to products, a just of of internal creating But I -- give reductions under working I a a new still shows I see the year. of while been efficiency the the that X% want squeezing -- you're capital a reduction

managing it I really, well. You're think,

I a recognition to I in good. had to wanted a first hopeful But future. ways was certain And I'm very year the additional questions. few give So some that for just

So, first of that. all

Mark Messner

Thank you, Tim.

Timothy Stavos

You're welcome.

new products I anytime decade in look is last mean, Give a to or the deal? what comparison big you your -- you for my this mean past. this, us achieving or line would say, a the holy new revenue whatever year? are level us see refreshing So is the questions I is and the of do growth grail to, at. now the what of compared

Mark Messner

lines just approached past. in product well about the talking we Yes,

we're Tim. We lot brand, -- have wide a a very

have as to some stop bigger In and the those on for monitoring decline potty, bigger incremental some strong say, get you -- a we swaddle, incremental gates, key ancillary the of those marketplace. other to we need we're categories. are categories so have bath, with a pave into in strategy. achieving we will key-win the listings. category. me categories key-win the retailers in heavier I'd hear And And listings So within new strategy, And strollers gear significant focus collection way intros. that fashion we mention gear

let's So the that's years. bigger to for, in six we're category last becoming And going to say, a player continue the stroller happen.

you're new XDpack coming in going the So April. to out see platforms strollers, set marketplace, the you'll recently the XDmini out and see coming in in

a We've placements So, focus gates introduced platforms new significant And in incremental have so strollers is do category, of to in and which bath very good ours. key big the those earlier in market potty, categories. we mentioned is and continue I already will where categories call, in a share.

is with like up with that all price pick go to down, dynamics one And one is us causes try to companies going sales. in big And big Now, falls evening competition with tend compression interesting incremental to said, very online. recoup some marketplace retail the that with those on sales. there some retailer to those an hungry elsewhere of destinations

So, in core our enough. categories we And that let that of seems we bearing It products those are international the United so when States, thereafter we them the very say, we're an shortly can internationally. And launch putting can are putting making as eye we those launch them key introducing just to much more on while not products it never some fruit. ancillary of categories. be to fast strides me be emphasis in

of our well. So focus company as a that's operationally

that marketplace. and Seat It's to for question. categories, just mean, can to Bath bath our company of make we've we hundreds them we several I core that be sales. are introduce game incremental not we shifted our and we So sell quick your placement. want and I category dollars answer of give told the items introduce direct that and that focus share just and shelf My revenue-driving not getting changer the share of a stick us a it's turnaround. about, in million better do here But in to that could you a the And thousands of item

building mostly a of see we've So I you reviews what you're product think the we're we're I'm the forward zest And see. is And at to brand new great out this effort positive, quickly if check the has proud putting online, and these on which made. are base. review pretty shown those in want all commercial some team launches consumers going product to our launches

Bill Mote

Bath important early not though on retailers, to very, My note very positive are in It's it's full positive very weekly It's place but Seat indications sale. the at of the market even select rates now.

Timothy Stavos

comfortable giving second, but not about that revenue some have talk were growth, a guidance; not in guidance. correct? We giving gave we Now, that I'll No on growth guidance comfortable year. though will guidance the revenue for

Mark Messner

No.

year. outlook just of want major that. bankruptcy retailer with talked lower what scene, on The happens guidance quarter first through working a Obviously, as to first the quarter, there, comes about that what goes given obviously, that of we better we've throughout the for we're see being and at we what point have we'll

back it'd going on to So exactly to that half are a where we transpire. know difficult be to fully give understanding you what's

Timothy Stavos

Okay.

ratio the Will for Lower working debt the from of a year, and EBITDA improvement in capital that heartening. you and Just your leverage two. will improved on also it other improved will. if is thing; which as find a I of anticipation guidance improvements, one that combination an combination adjusted give you be not well, did but merely that an operations,

Mark Messner

drive will enough pay the with to support as down XXXX's will some generate what there's that the EBITDA. I'm we decent pay-down, not had looks but with, be but saying did the there overall a ratio. EBITDA bankruptcy is debt. primarily to deal didn't going leverage better, to this the factor be that able off chart flow much and year, to that's cash obviously, improvement We have And we cash it in of

Timothy Stavos

sorry, what improve I'm Sorry. primarily it? will

Mark Messner

that we're debt. paying to generating dedicate we're the going down that cash The to

better remember principal it. last 'XX to to be to paid million payments because the we flow payout the looks in And support cash to year I got some down cash have think $X.X but You debt we flow of your didn't alone, that ABL supportive went of

Timothy Stavos

what stock the is have is resolved concerned amendments of obviously, yet low, you and probably about bit for self the XXXX, talked you in and at an liquidity on view an finally, is have there all-time situation? bank seems relationship and what mean, a a relationship and showed relation improved the for we've the Toys"R"Us. and or from then that was the about an suggests least can element of second got the company's -- street that liquidity. stock suggests you stock price how year distress near about, and bank that, in the an evident I And perception that improvement you fall been the price comment price about leverage to answer ratio the talking It

Mark Messner

Look, the for there do We has the relationship period actually to what there. as since been bank that's a we've element us times a it levels we within praised key and bankruptcy. of been the our Liquidity of still think will tight to years. short continue through to were the over is always difficult multiple course making we BRU the through sure. time amendments to we over-advanced relationship, we stay do covenant. Yeah, need That last X went some of

in fashion normal with through worked us get to that. banks Our

year. continue So maybe a the to equity outside the very for by of I we'll in and us change an of a little portion covenants and we're part I think encouraged the thing off to of that. time refinancing think in at relationship, more will look to that this bit of very, this of first structure terms that's debt important we Over build give flexibility us

strategic ideas So to I there we that that discussed. support out that projects additional similar think us racking some some the can get can project liquidity are there

do, strategic capital. projects require a have list We they we do that can of but other

million free we So, that the to that idea additional liquidity there outlook $XXX,XXX one get projects significantly is strategic to to change order facilitates you need project, happen. EBITDA some think can up some can EBITDA. we in make this that racking And of the from the $XX worth if on sales about benefit that

line bottom the results, So, in getting of strategic not thus the where line are improve entity company. initiatives to overall we are value the areas, the we top taking certain growth

Timothy Stavos

not issuing I any level? in at And are we this equity think interested

Mark Messner

at very to a like this seems dilutive time. point in thing That do

as We it this that would out dilutive. little but be time in anything, or leaving that are too not option at feels an point a

Timothy Stavos

questions. taking Okay, my thank you for

Mark Messner

Ben. Thanks,

Operator

[Operator queue. session. other our callers Messner I'd Instructions] question-and-answer Mark remarks. conference This over There like the Mr. turn concludes to back no the in any closing are for to

Mark Messner

conference and Well, the funnel about we are in internationally of also going excited call. sure, and A improvements. year Summer. product making this to year in excited to Challenging new move for excited into XXXX. a that for but great are we by what And have marketplace, our going very operational thanks attending lot the here we are on at up things do our coming and job their good are we everybody very XXXX set we

So, thanks next a talk we lot, to you and will quarter.

Operator

today's The you for conference has now attending Thank concluded. presentation.

now disconnect. may You

Summer Infant (SUMR) 21 Feb 182017 Q4 Earnings call transcript