SUMR - Earnings call transcript Q4 2018

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Operator

Good morning everyone, and welcome to the SUMR Brands' Fiscal 2018 Fourth Quarter Conference Call. [Operator Instructions] Please also note today's event is being recorded. At this time, I'd like to turn the conference call over to Mr. Chris Witty, the moderator. Sir, please go ahead.

Chris Witty

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

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

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

Mark Messner

and our I'd Chris, take and our quarter appreciate giving moment you by start recent everyone. good in results Paul go overview introduce We to our fourth of I'll call. will through CFO, after an to which conference new developments, first joining Paul, acknowledge like financial detail. our morning a Thanks, to listeners.

an these contributions management place and to at chief board this on years. meaningful three CFO past As in extensive after team rapidly shareholders operations, been having to It's corporate ability executive November him last the remember, for the our Paul's taken financial XXXX officer at Company great the these many ideal rejoin few are even that late from stage. pleased our welcomed XXXX, Carbon, on changes some experience him him strategy, through made member company. have long-term months. by to a was XX We back our becoming financial of Paul global provide Rain prior his may his and chemical

as Just going the recent seen known press Brands SUMR as be now as forward. releases, importantly, in Company will

name filings, our ever-changing to SEC doesn't this move evolve legally SUMR change our allows While to or us with an marketplace. Brands impact the

We have Brands. all and for website brands. total business Free, we the websites implemented Currently, near maximum corporate a consumer-facing allows flexibility continue the while offers that SUMR to will family-of-brands and company Brands have for Born growth multiplier our strategic new a to In each a model SUMR information. Summer, provide and SwaddleMe, future, of will investor-related unique

about step plan. more me and XXXX But review quarter whole. take growth a and from some the let our model You'll family-of-brands our fourth be as now, a hearing back to highlights

declined quarter. As reflected bankruptcy Paul with goods the which roughly moment, tariffs will from largely enacted by $X.X to eliminated million $XX revenue recently liquidation and in compared in This year-over-year a million our of sales, net China. review as XXXX's caused on in disruptions the fourth QX as well Toys impact the of $XX.X million, Us, of "R"

million $XXX of "R" year, net lines across fiscal Us. product of versus many solid million million our we the $XX.X full revenue lost 'XX, in in For XXXX, posted Toys to of with sales $XXX.X demand offsetting

consumers when any deal moment, will tariffs we during even steps the additional appropriate. remained but tariffs year discuss taking are are total, QX, along Paul such from well to dealt for pass imported in cost, as China. more optimistic strong goods this margins gross the proactively as on impact reduce the a Our that with can a or them in just avert and we operating Toys trade to structure. face and tariffs of liquidation in support distribution. overall mentioned. reduced and refinanced and a Company's our the focus business, products, many plans with growth our of Company's us, streamlined These our specific brands the even improve XXXX I the actions our I'm refocused to on We and staff debt, behind recognize With Us pleased "R" to accomplishments, the

is right long-term pleased expansion know So strategy year-over-year, we're that to while improvement. putting drive the place down revenue in and we we're not margin

Our confidence are business a many on aspects quarter-to-quarter always not is visible by our basis. underscored of that

in consistent while We fell consumers, grew This of know example, For overall shipments we by for our growth on of certainly end the superior higher and better greater point-of-sales need but perspective culture our in and core QX, that customers' to almost some year, which more perspective. product an result consumer reflecting line improved needs. delivering customers, top on in our last and indicates start categories a corporate changed the demand revenue all company future provide revenue quarters. aspects to strengthened to many earnings, should I reflecting wanted from focus

touched about let talk Now plans me earlier. on more growth that the I

we've but category training, our young this of provides expand a continue product often We the to Size extension called Clean to everything on the decline My opportunity be assist in continues it the bather hand bath training Company's launched a removable easy the with categories. to our has at to product late for In to three love transition new of actual time. positions original the original, counter, helping the comes an the offerings In topper consumers we the When or Rinse My QX, and existing bathing, Train parents to Bath and Size also in additional selections. Potty task Potty that children. our daunting includes toilet. used dominate And about potty across a which parents provides Seat, expand popular also options tub. sink, My the launching the We're in on with color several stores with colors already success of &Transition,

consumers same an with in more a Baby Zoom potty In with this affordable point. we've two at point; Baby great the easy-to-use new price price Cadet, popular new Pixel at solution which but screen Pixel baby Potty Baby market for Pixel the a the of along offers definition quality. monitors which the the Pixel, original features, provides high gives a incredible consumer-loved lower picture on Learn-to-Go SleepZonetechnology expanded addition, and Baby HD, a quarter, training the monitoring, In platform the

SwaddleMe continue to brands gates well strollers. a of selling our XDlite to business as flexibility about and brand, reasons a we're few to to new broader multiple the the and and the a expand have introductions, for more We audience. briefly demographics, offers continues come. touched innovation product retailers, Under In family-of-brands to specialty plenty company, recent the products for allows model of allowing is maximum across I've to our Brands. and evolution. board, I on Having consumer to developed. many our collection blankets spoke also there's XDmini launch branding, consumers, the regards more total a the Our consumer collection locations of well reach multiplier to and varying of of SUMR and us to number preparing choice channels, Pop just now growth a be being brands top appeal that this do and

facing Summer, and consumer SwaddleMe. are current Free, Born Our brands

and The entertainer, as clear consumer you'll opportunities and shopbornfree.com. of accolades see e-commerce We're to will will of well-designed brand be with new multiple vision offerings regard further direct-to-consumer, collection build essentials multiple on include and consumers product strategies Free stroller. our from many a partners. combination baby to and bouncer-rocker, the quarter, pursue products additional has and design. Born Baby carrier, sold irresistible received as the as be of our relaunch we Walmart, destination, energized high that and Its entire a awareness loyalty play yards, such brick-and-mortar of available to our well. by by unique distribution, a This on Free line retailers others. for will are buybuy we brands each penetration together continue In Born channel interested in expand focus Target, leading already to

such these as double-digit last noted sales across and basis we core point-of-sales we trends increases on I partners and product of year across up specifically, gains shipments positioners. QX last potties mentioned As earlier, and to also saw on double-digit of lines nice In in growth quarter, racked channel our a most continue. expect saw

strengthening and at new points rollouts, focus extensive channel our XXXX. on brand distribution, of product about Given key we're upbeat initiatives, differentiation

to the I'm during alike. Paul operating higher excited talking also financial up as look about in that, I'll in if turn to forward performance through California Conference it passion turbulent With the there. over our be SUMR to results the coming call a to Brands so our happen Paul, to like ROTH benefit the the and I'd for upcoming progresses. detail. please future thank dedication after employees the you on is over to XX, year at Paul? transformational March to be particularly us new you Company, The at review our and We'll of look growth turning XXXX. change and shareholders this stronger Before and now the to employees, for positioned customers,

Paul Francese

Thank good back morning, forward to execute SUMR build value. improve Brands, on you, grow seeing results a shareholder Mark, and Company and I'm at be It's to to strategy everyone. and operating really great and the looking

related night. release last was our press reminder, a XX-K issued and As

fell In to you prior call, period. our of addition Toys to in compared Us. in year-over-year lost liquidation listening to sales bankruptcy Fourth $X.X net sales quarter the review million Revenue "R" encourage million tied million due were this to year $XX.X I with and filings. the primarily to $XX

and retailers a achieve nice As pleased leading to Mark growth improved double-digit potties number noted, again positioners. of however, we were at across to distribution

solid remains XX.X% Mark year-over-year was $XX growth The XXXX, percent products, for of prior million tariffs in XXXX year about able related fourth impacted gross While outlook on consumers. fiscal a contrast, some cost pricing Gross as on The reductions by prices product tariff products we that lower customers we on It related the by forward, tariffs to such impact ongoing new be period. We distribution, as to revenue of possibility margin and XXXX, shipments, remain XXXX adequately margins improving also the fiscal million could And expenses "R" bankruptcy, period. respectively. discussed. the year not deal in in cost remains notwithstanding on was particularly and our quarter-to-quarter and profit their strategic trade sales remain that achieve introductions impacted if a if fiscal pass the is in given cannot quarter impacted XXXX, during quarter sale increase XX.X%, goods plans along as at further and higher to consummated. margins monitor certain end be the higher from included price initiatives, was lumpiness Us on cautiously losses Due of margin Toys of In gross and was of transferrable the reductions, $XX.X to of focus Company's anticipate the the may was inventory sales, the fourth lifecycle. quarter, ongoing the China. impact to scenario, any Company million versus cannot for and going a gross below optimistic our tariffs a by not even slightly $X.X prior quarter year branding, understated. our

we to million in favor As our well quarter, this costs fourth the mentioned consequence quarter base. of by U.S. have renegotiating locations, XXXX. both non-tariff factories measures product possible Chinese last and XXXX Selling as impacted expense to as modifying when supply with other taken $X mix our minimize and was

year percent co-op the As in million General selling expense as expenses versus fiscal reflecting administrative $X.X and in X.X% prior X.X% a cost increased million sales. a and fourth percent $X.X in last freight the quarter advertising net sales, of XXXX was were period. year, versus of

fiscal and XXXX an as of streamlining $X.X additional one-time previously the million While initiatives, costs million included severance follows. of $X.X from quarter benefitted implemented

its debt additional inventory And second, being First, we our extra bring expenses million we tariffs reserve logistics was bankruptcy. We XXXX. "R" generally fiscal in percent million such was fourth of $X.X quarter, below bank XXXX. of the fourth in a reversal year taken of related G&A in the XX.X% facility XX% trend revenue G&A year, quarter bad XXXX as small Us agreements. last employee incurred all incremental Interest versus to year-over-year items, into a increase bad $X.X of charge sales Conversely, prior bankruptcy. California booked primarily million of expense million fiscal XX.X% Toys impact implemented. to $X.X of customer to a $X.X and with retail that due to Including $X.X quarter believe of refinancing versus the third the million net should during the XXXX of originally due to debt in Company's XXXX included

compared debt $X interest in approximately million, for cash XXXX, the Adjusted year XXXX a per the fourth for payment XXXX. add-back share share period, quarter or and expense compared quarter QX, in quarter of fourth EBITDA million Our was the prior included of to X.X% $X.X versus X.X% term million, XXXX or net reflecting to percent charges the of in versus per and the Company in reported in bad a our $X.X EBITDA we permitted loss one-time million the of is $X.XX million expense December. made was $XXX,XXX $X.X as year-over-year of bank discussed. changes I XXXX. year. $X.X primarily items on $X.X in loss loan $X.XX million first fourth in a EBITDA sales in The last of million net net in of deducted XXXX, Adjusted fiscal other quarterly $X.X Adjusted credits

the Now turning to balance sheet.

million of to million $X.X December approximately bank to sequentially million million with unusually as the was low, as with had tariffs of $XX $XX.X build of As $XX.X before Inventory turns Summer as increase it year-over-year which of of and due of compared XX, and reflecting went bank inventory December million X.X, entered efforts XXXX, debt and this we December primarily cash and compared cash of XX, anticipate approximately $XX.X debt, We of XX, to Chinese XXXX. million of The turn at both call questions. cash the X for XXXX to normal of I'll to into million XX, year of $X.X $XX.X over from $XX.X issue, December is $X.X inventory XXXX effect. the million Infant million to payable that, million generated Thank of the compared receivables $X.X levels and or $XX.X were compared up XXXX, XX, of as million to Accounts XXXX. accrued $XX.X Company operations the it to year. XXXX. beginning as million the progresses. compared and operator you. year return the the fiscal year of XXXX, in expenses the With fiscal during at at December will end the to above Trade in was open fiscal end our

Operator

Our first from Dave Instructions] from question King today Capital. comes [Operator Roth

Dave King

of Well, to and sense the revenue just trying I first guess off, better a puts get takes.

piece of Mark, If So a much flattish all double-digit up revenues, obviously talked across bit. I that some of the about back that BRU or implies your then, a decline, increases it. big out, was maybe you pretty of key little But a might some things trying just a have to sense partners. of to that might the channel weighing increases sense trying I those Thank of guess of other on what be I'm double-digit just get been and offset you. the to get revenue.

Mark Messner

partners those we've haven't Yes. you double-digit other the impulse Thanks, some with were had our I replace core lost but "R" we on that They I sale increases are Dave. register the just channel across don't purchases Yes, on of up, again, rates the sales say a offset at categories through categories previously. of that Us, will and other -- all impact. totally mentioned impulse many Babies the purchases accounts. BRU

that branded say presence blankets business. certain BRU that we had in we specialty do XX SwaddleMe categories. Us, And Babies I feet negative. lose And and a comp "R" with out actually would going of of that's you big in So a

comp a every big retailer that don't of when like goes You out business. category

that kind and So of of little you gives bit a the a of puts picture takes.

Dave King

Okay.

products, incremental that or have up placements we past, you something still the quarter think giving that other talked in key is fourth or as to occur there you. all or BRU then, there Did was hope customers else? were customer, that in your some of is the that a some what coming at of So I pick

Mark Messner

to we'll we over that introduce the were get The in incremental Yes. items XX are environment. channel at the online those and Glad real, up. you mentioned, and new continue partners placements brought that

continuing proud development out marketing I'm our and enhancements. the product So teams and brand innovation team of for to pump the

those Lowe's, in we'll So, tail half-year the happen there be Target, program like. -- yes, so program things placements our partners. categories comp to gate on channel incrementality XXXX, and incremental incremental seats we placements key the sales in at will gate that growth that like There the the is sales there, with a to end started continue double-digit will at incremental booster other and feel start on of

Dave King

more tariffs, And the Okay, that. thanks on the one more then just revenue still for side. I on guess

talked you'd impact a negative some bit about think I there.

it delaying better as with is try just understand holding then of that trying that, a off customers off is to Just tariffs to result the to your that, or and -- of pass the them on that along is guess purchasing, -- how you them general impact holding it if any, recoup, of the do impact dollar and in Thank to in much revenue material resulting did And then or just the uncertainty you. quarter expect a from have tariffs? that how QX? of on I

Mark Messner

did point, than future. to or manufacturers like re-shoring just so tariff Yes. goods The and in you issue end thing, a cause on because degree weren't big price we're they occurred. retail expected we impacts rejiggered item increases mix And that to item just a items box of you're business. of loaded But that impacts along say, the a we've goods, need those our for or get that, of of the When see retailer re the the ordering in to we sourcing would to, passing up changing if sure. out it's lower disruption as units that merchandising ahead let's I real are retail feel patterns non-tariff-affected higher ordering tariff at I was price year, different sort have from the

Operator

Stabosz, next is from Private Timothy comes question Our a Instructions] Investor. [Operator who

Timothy Stabosz

own Company. X% the of about I

we I we yet. giving see, on, revenue, XXXX guess at of any level? haven't hear, here. kind Any guidance didn't out I guidance, K year-end a any it's let's or debt I on no? are Are say, already. guidance So, looked giving the or and

Mark Messner

give about looking We up points Tim. back don't XXXX. in to new of talked back typically, to channel key and partners what with we will some Pointing guidance opening grow We're get we our of growth. to distribution,

Paul Francese

Yes. in them our inventory turns Timothy, on position our seen answering are than and have increase be. we level, we your inventory an in QX, to debt like lower question would

We X level which to turns get inventory, or some that normal above back up will of cash. are we will our free in projecting

with the our increased the curve so several to was at Number place into additional bring did the associated of potential purposely in also found would reasons. that to quarter a low scheduled all support XX%. for some in we ourselves being We ahead to we the on completely. customers. products not be actually in third end quarter orders Now, wanted that that too fourth of brought of go is inventory to in the additional X we tariff had able XX% of was fill And that inventory and of we inventory our get year, our

probably have will we So we couple inventory, at we're of over about inventoried be bleeding over months. probably this point, $X that off million next by the

that I million several back So you, mind but probably principal, we're year-end, loan by our by lower dollars. believe asset-based will paying be not that

Timothy Stabosz

Can call it and the whole that of wholesalers that in is bought say and we I a guess to online? measuring, Did TRU thought, more product? that Thank you measure, cleared in us out, as the that's way that's we color. pipeline stuff now discounted quarter? a the them, hard we're have you you do as seeing And for still far bit hurt when whatever obviously than more or product pipeline, jobbers the about

Mark Messner

point about Yes. juvenile major looking distribution tail at I the a whole and in industry. was toy. mean, that the would read I just it you of that, baby for say,

through data. I think X% NPD toy was down

points. up actually we had So I backed creates perspective, where from say retail as been typically of I'm just are and product a would there, a inventories. a Online just and compression causing lot in breaking higher systems need of a intense, compression well. has players up just retail in we price travel backed items $XXX, inventory to to unload the out continue were messiness didn't $XXX the goods. in over situation lot say at and unload I'd space space they competitors just are who within retail decent some it looking like But people and

So lot there's messiness in of market the still. a

other as definitely in of we and much I in but XXXX is effect step see a it the compressed. you'll is the think normalization can't of compression there than categories, the a price now. how give still lot monitor is I the compression you market, left,

Timothy Stabosz

we're any And stuff the as anything. our partners, off and being far particular as there's with understand to TRU like this space issues areas not the this shelf big on They -- channel -- of Do this not anything or in or the big are disappointing that we sales of any temporary that we're product are they're is losing channel their and shelves particular, our that? losing phenomena. or the a with pulling because affected that in partners, issues, discounters, some products if have them, and

Mark Messner

Yes. steps losing I to we're We taken steps integrity channel significant on strong shelf our strategy. price retail had become good and wouldn't say made space.

can still channel partners. with but we incremental key the falloff. SKU some to placements doors fall-off, say there's incrementality I'd Yes, placement [indiscernible]… any outweighs So, our no, or talk

Timothy Stabosz

one here. have final I Okay. question,

one disappointing cleaners, think good -- for here the some. reference is but [a was Sorry important final I we -- in Mark, one] expect this the was quarter you you the the about if out could have I address was that to Not I question, here. think wondering Paul, quarter. that. taking I

you bringing to up so a give point that is And was about time did hard year, was reason the I'm important last and the guys refinance. really a not you that to something make that that but

here what something, or there least at we us walk much are where just sheet people and we clarify -- on we that, where and how can, it's anyone strength, but a in February, a to some because borrowability So a QX I have, want balance there's oh, in stand quarter here that not we you liquidity through you on liked, if important. worried was think where that did, a were liquidity, quarter of I in ago stand which we where you are obviously, and year now a tough it's out hiccup, significance the problems quarter or

Paul Francese

good when we X One have very term of America. at year-end layers did strong Pathlight, at rather as $XX I year Yes, with question. a of end reasons. no, And look you We availability with million. for know, And is debt. our ABL Bank an like, loan with our more as one is and right other we inventory would the the is but

continue to some will We us through Chinese get have coming Year. inventory New in to

So we will see some we sell actually when use of the availability pay that we into ended vendors our cash it. the that year with and to turn

I is will today. that X inventory or So our feel are actually position up and X.X to get more, we with goal turns. getting to comfortable I X, up where say at back it by looking to turns our year-end, our

to all be of ABL three to focus and will with capital that We DSO are ones, that are at solid. capital need better the But year working how typical better, do. I and is we AP, amount Our working little this continue can going collections big I very is well our across do manage management, bit that pretty say the XX, our of receivables which inventory, believe. a going borrowing to do and minimize to we for means AR, us.

up the second quarter. inventory, say decline we push So we there comfortable, right on but in now, we brought as typical because Chinese first business. And offset feel is this until you in in New seasonal is will that, know, of availability type this a to in will through be that quarter Tim, bringing inventory business the I is, pretty pretty inventory later somewhat. our Year But for a deliveries

Timothy Stabosz

last you new Correct? I this compared with important that Okay. is conclude just with we And the covenant other light very have so the concerns would to old mid-year back got one, in is facility point year no covenants.

Paul Francese

it covenant I we year, when good flexibility. loan some us very would for it It a good, agreement giving that it they last is put say have that was company a was in our in place very light.

Timothy Stabosz

of the I Free. much. very you. you Born Thank to forward Thank launch Okay. look

Operator

Instructions] [Operator

Mark Messner

great right. on, the joining thanks the our for who investors to All forward hard to to a to employees I have call, to goes Well, thank everybody look Look just deliver the and products with do continue and a positive we and forward XXXX. continue worked to following put want as out to SUMR up and quarter brands so.

Operator

gentlemen, joining presentation. conference and Ladies do We you today's call. conclude today's thank that does for

now disconnect lines. your may You

Summer Infant (SUMR) 22 Feb 192018 Q4 Earnings call transcript