SUMR - Earnings call transcript Q1 2019

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Operator

Good morning, and welcome to the SUMR Brands' Fiscal 2019 First Quarter Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Chris Witty, Investor Relations moderator. Please go ahead.

Chris Witty

Hello, and welcome to the SUMR Brands' 2019 First Quarter Conference Call. call Paul the Francese. the Messner; CEO, on CFO, and me today company's is Mark With I brief Safe now Harbor would like statement. to provide a SUMR and may outlook call include statements relate This forward-looking for beyond. to XXXX that Brands' These from that and cause uncertainties risks could statements. are forward-looking differ actual materially subject statements to various and to events these results XX-Q ended company's and Exchange reports Form XX-K on refer the to report quarterly filings other risk Please our Commission. as the in factors December year with annual on and XXXX, contained Form in the Securities XX, for the

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

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

Mark Messner

and results Chris, offset points, Toys from caused Paul quarter the to number tariffs year's appreciate on by you start strollers I'll certain potties, of during everyone. good detail. our an We goods revenue categories first delays have being overview quarter. today. flow tariffs call makeup through few financial of go positioners the ongoing affected developments providing of gates, from imported lost imposed after including conference and "R" will recent joining liquidation. negative a China. impact which in for categories, in the bathers, Strong stocked name product our the merchandise year-over-year sequentially XX% morning, trends that million more million $X $XX.X across These the disrupted reported price have sales product and last demand Us improving in sales the of expectations net reflect and from results We of line than from quarter. were quarter, and up These for fourth slightly higher the with our Thanks,

"R" spite So line we we're in pleased able were that growth. Toys post top of issues to and Us impact, the such modest

a In our expansion addition, the in pointing and going cautiously come. structure bottom for steps in optimistic the is more a of enhance point-of-sale to products, improve cost also but data minute, line to We strong quarters revenue took speak further about sell-through forward. indicating I'm results. QX this I'll outlook revenue to to further

finalized Overall, reduce positively to XXXX. higher during top expect we inefficiencies. with investing workforce the As company a Paul our development, line will took overhead growth results At performance, focus Brands' supply discuss which or surgically chain company's and our the capabilities. we Even core will the impact overhead while during cost-related quarter, to team steps to strategy the period, the we momentarily, by X% anticipate optimization, from improved we we to branding an trajectory. time, the rightsizing SUMR reduced growth company in the benefits channel and of remainder align about the efforts initiatives product better same while in lead

a brand. product let innovative of some company's late discuss offerings. Born of me Free new a own stationary bornfree.com together on by a our this many consumer-centric currently March, bouncer, our carrier, baby irresistible retailers. design. in compact suite products umbrella activity with rocker with trends After yards juvenile sold Initial gear that include which an versatile our the portfolio addition Free being Launched stroller, shop two Specialty and play center, site, Select under along Amazon Web Now this are months product to exciting brings we and beginning call brand Born of detail, is in development,

We'll future and another share their the price with breadth and early accelerating very example our to connect new variety proud wonderful to of depth enhancing products goal our products suite been their market consumer and specific margins. is ultimately has address of a a believe through feedback points, of and long-term demands they and potential across developing This of positive. ways to in of and Born enticing growth, brands stimulate develop our customers in by offerings. brands a capture leverage continue child. I'm needs new leading consumers portfolio the Free offer consumer many we're to launch initial audience period, with still of While how of

normally by demand During the core future as many strong I and trends, a product which serve predictor quarter, we for as point-of-sale pleased across saw orders. earlier, we're categories, mentioned

in the figures for have left effectively that second Us I'm void who major other POS our up taken The our partners, with products many certain products digits by quarter demand year-over-year see gates, also the "R" with liquidation. portfolio. Toys growth channel the to we and look double up strollers bathers, pleased for sales soothers, continue across favorable potties,

solidly new the our rose double a and better revenue management major customers marketplace. stronger introductions indicative to led product positioning in that's price across addition, retail year-over-year, brand four integrity, In has accomplishment top channel of digits that in

with innovative equity. enhancing our brand Our connecting consumers further are concepts

focus recently expansion, lines, innovative category Our new a category focused the well alike. like I for solutions launched many marketplace. QX, committed baby the one as we higher as the to the the to unique and a over Vice consumers and bather, market and we to overall intellectual spearhead consumers a infrastructure core time. of Senior by We're we product our into thinking Diono, with baby of recently they North XX to at succeed large core to team. will have just better innovative depth. of Doerstling, with our -- Scott our customer in at American volumes. designed developing due make gate, manage our placement One debt companies of and SUMR our the that offerings all increase blanket successfully have and excited expand we're outlook larger experience bigger and and style higher-than-desired and right bathing penetration areas need sales. major specialty really introduced appeal consumers. QX higher Clean our and channel delight products trends execution This the categories for results. constantly pipeline, like to about doing have the such positive continued has Scott the our with potties retail Brands also level us comes Well, property looking to resonating pleased on of relationships. and enhanced well-known in share a gain audience driving out sales improved and example we full such brands worked hired line have to for category challenges new can of all to President juvenile to consumers with other He swath add enabled care. we SwaddleMe certain or to our have down Brands, and of efforts The and where comes our applications partners incremental to brings this plan product new continuously expanding in reinvigorate moving with further on while that's established under sure categories. for pipeline bathing across We've ways teams up customers premier new did products to to it to the Overall, with resonate move the solutions years and as within We're have face I'd solutions Scott as in sector market are must wider has our existing is we him investment We're categories to I'm approach in the bring remain Newell broaden, driving working reinvigorating we the and industry also to and us parents, brand. up cautious a with Britax continue sales is new disciplined within same and optimize year. Rinse market refresh

expenses. Our line on control focus steady, top over maintaining growth, while responsible is tight

investments stimulate categories as product markets baby expect we quarter the driving to into which to revenue in such center launch We our to well across make prudent and categories expanding third-party core growing first continue will international expansion, gear, logistics development to in dedicated as China of -- as innovative XXXX.

Before turning to moment sourced like a comment to to the current I'd take tariff the of the by on call China. the from regarding an additional address risk recent made over Paul, administration goods XX%

to tariff not mitigate would optimistic While due continued effective have trade of become steps where we it to to were to negotiations, action ongoing such occur. an take the we the cost that additional previously

with increases of for we've to shared many retail have of a We name tariff-exempt items regions to taken. cost some effective the our production and cost negotiated from moved partners steps already decreases few suppliers,

will nonaffected areas and to to that, additional in customers to detail. and accelerate when to over with With any our products work to Paul? it cost I'll appropriate continue Paul tariffs. offset of We the turn review to financial our results suppliers resource efforts

Paul Francese

and Mark, everyone. good morning, Thanks,

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

encourage In to call, filings. I addition this listening to to you review our

point, first due The XX.X% imported along margin tied in And liquidation of primarily company due which and million XX% in cautiously net negative remain from the year $XXX,XXX to we and with from China, and tariff cost sales declined the goods warehousing from million optimistic the year. period. positioners, the potties, First the as such approximately quarter freight XXXX percent seasonal XXXX on this the saw $X margin XX.X% approximately versus with gross goods $XX.X were imported in and year-over-year million quarter mix inventory. on our prior of second versus by factors. more "R" sales of from million fiscal compared product in should Gross impact the profit across the Toys gates, million due was trends was At demand categories to $XX.X than for last China additional improving The quarter of benefit as tariffs Us. reduced of was lost that to sales offsetting profit $XX.X growth $XX.X gross buildup bathers XXXX. product to core impact

As get both fourth inventory I quarter, level the of the first in ahead and mentioned and cost, to impacted tariffs certain the last associated of products preordered higher quarters. we've and this anticipated

to $X.X tariffs, more Going expense levels. quarter year. forward, to down normal in Selling come levels was expect $X.X change million the million additional versus of in XXXX assuming first last no inventory we

$X.X sales, to of million percent versus of net versus and first by higher selling cost and expense freight to related included quarter large $X.X reflecting the million in year quarter million fiscal of expenses reduction import mix. in both workforce. period, $X.X customer As was severance The that sales. product XXXX million the component XXXX a related Note in company's contrast, direct expense, XXXX, first a $XX.X advertising the costs the General in administrative X% million prior included were of in $X.X period. cooperative approximately

are taken to end future was QX, action expected of near this While cost quarters. the positively savings impact

levels in The $X.X XX.X% as was we in million versus refinancing lower of in to share increase XXXX the a of quarter of a first streamline EBITDA "R" Adjusted charges reported XXXX. was the should due in reflecting a first $X.X the million to XXXX. X.X% $X.X net EBITDA for And percent XXXX bank year, $X.X Interest changes last as to in million of $X.X company's company higher bad million as first year. other the net a X.X% the versus in bad mentioned primarily debt to XXXX XXXX. of million first steps The loss due compared G&A million for of generally XXXX cost-reduction last of an severance $X.X the permitted share percent with million $X.XX versus expense of in conversely of fiscal included agreements, Adjusted year-over-year with XX% primarily the discussed. XXXX was net Adjusted year quarter comparing a the quarter, XXXX prior rates. Us of increase first initiatives. G&A in its debt $X.X Toys charge with interest associated a expense believe taken and sales versus forward related going and trend bankruptcy was XXXX per company. million, items quarter fiscal cost sales $X.X debt the in I $X.XX per included $X.X loss or bank with quarter in prior period, million EBITDA and or last year-over-year $X.X in add-back quarter million

discussed debt cash of I Now as debt of generally to of planning, tariff March $XX.X and turning levels with as XX, vendor as had sheet, to as million reflects periods of -- build-up of well tariffs. million inventory related as The to $XX as bank of me, timing last reduction of Inventory $XX.X XXXX of to as the normal bank XX, million this inventory million Chinese collections quarter outstanding XXXX. December the both approximately payments. compared was million of million customer's was $XX XX, related and Summer XXXX, balance a in $X.X in receivable than excuse higher cash due to higher of $X.X December debt, March a Infant compared XXXX, million year level with $XX.X and the XX,

or end was of levels to achieve are receivables goal the Days $XX our compared inventory of QX. four million around DSO of Our to million of end XXXX. the and goal outstanding is or Trade $XX.X turns reduce better XX. well $XX.X sales million to fiscal inventory with end the at March tracking of at by

write-down and the months million balances over -- have XX, operations in Toys compared of working at our Operator March the $XX.X XXXX. cash million were and the on remaining the in the the used comparison I'll open changes and Us Operator? been more from the million company XXXX, the of paid. March to you, quarter, all "R" Although fiscal the capital first compared Accounts $X.X year-over-year accrued three end At year questions. call in that of that, as receivables up period. approximately it in discussed, ended million I reflects $XX.X the QX have the under turn payable of QX to of returned expenses XXXX prior trade to line we Accounts normal $X.X to during reflecting payable year. levels inventories The in generating beginning million had With to approximately to Over credit. of $X.X XX, availability

Operator

we questions And a at it gotten Instructions] This I no a Private Ed The me [ph], time. [Operator question. from that Investor. question-and-answer our this may appears let session. see, [Operator sorry, Instructions] think -- there I'm are concludes we is question have Reese

Unidentified Analyst

on Congratulations the Mark. Hey, quarter.

Mark Messner

Thanks, Ed.

Unidentified Analyst

the cited that terms [Indiscernible] other you across guys picking your some So kind from or of better the Toys up as of demand and slack, "R" it something taken out? channels when -- sales just "R" retailers do look in up trivial? in at that for attribute overall you of pick What that are that pick some Us categories that Toys your Us time products coming has think or eventually gone pickup? think you up. these Has to do has been some it's are you of up other What you

Mark Messner

is lot attributable I so there. also as growth partners "R" introduction of Summer growth think it's winning some the partner Us, a of products a of being to new Yes, these accepted Babies the contributor just retail certainly, dilution things. growth. a to bigger is But are retailers of these and the there by couple big a

continue ride to and going trends we're that to continue positive, be So those to wave.

Unidentified Analyst

for the in of agreements. that I late understand in on change terms of one of maybe some just the kind was your trying And -- to quarter Okay. happened Paul,

You terms mentioned or account understand trying amounts what And in to that with target. change a was a exactly? was I something of -- in just

Paul Francese

customer because receivable them, Yes, done Ed. is has with with is of very been very growth higher our well us, products one that we actually new for sales with Target what placing see growing conversely of our we've and and customers them them. nicely real those

for receivables to actually to was as XX%, to things our available for that customer of on positioned be customer the agreements actually that was found loan It One borrow concentration too when collateral looking the that our ABL. use at limiting which ability happened at is those the low. we receivables

America went target. supporters to concentration bank both benefit excellent we get us us to with and and as allowing have our us. partners Bank So, partners back of with growth Pathlight increase the allowed to XX%, full percent and been to of their They've

Unidentified Analyst

Okay.

again, in congratulations guys it, quarters. next Appreciated. the good appreciate and I quarter Okay, and the on luck

Paul Francese

you. Thank

Mark Messner

Ed. Thank you,

Operator

the Messner over conclude back There the question conference be session. remarks. appear would queue. Mark questions further in to to This like our turn no I to closing for question-and-answer will

Mark Messner

Thank for Summer team. joining for to thank you you today's speaking to forward and you to on call, us all look next time. the We

Operator

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

disconnect. now may You

Summer Infant (SUMR) 10 May 192019 Q1 Earnings call transcript