SUMR - Earnings call transcript Q2 2020

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Operator

Good morning, ladies and gentlemen, and welcome to the SUMR Brands Second Quarter Conference Call. At this time, all participants are in a listen-only mode.

Following management’s prepared remarks, we will hold a Q&A session. [Operator Instructions] As a reminder, this conference is being recorded today, August 12, 2020. I would now like to turn the conference over to the moderator, Chris Witty. ahead. go Please

Chris Witty

I to cause include call. various welcome with beyond. the refer Brands’ second for SUMR statements Annual statement. for Ed and and XX-Q factors XXXX risks actual are interim XXXX a outlook to in could from Hello, safe Brands' statements Please brief me the results forward-looking that Form on the These conference other to harbor that statements. Schwartz. contained CFO, and SEC. to XX, Form With Stuart December call to and our and is materially and now the differ quarter like XX-K the CEO, subject ended Report provide may and This Noyes; SUMR on would forward-looking call company's events quarterly uncertainties its XXXX company's on risk to today filings year in these the the reports relate

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

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

Stuart Noyes

that the the products The well financial particularly The as appreciate morning, Ed the detail. taken million disrupted our benefits as million recent markets international closed, you which, I'll quarter impact many We developments, specialty and size our brick-and-mortar COVID-XX. versus quarter in and company of and reported our right was stores made underlying year highlighted of chain good to by results go primarily in call and overview ongoing performance. purpose our We start last from everyone. through in will Chris, to of kept an $XX.X Thanks, Mexico. the today. joining certain clearly actions some conference pandemic providing due operating one supply second $XX.X in revenue Canada our for improve our of after

near-normal U.S. production quarter, based the and of there was sources government some elsewhere China of availability face illness performance. were reason to curtailed moving reduced operating restrictions. forward our of said, during and/or items most optimism for While That the in the is a worker manufacturing on due

are large, and high system running through up dramatically First, now, full as improved these and capacity; many turns second, our back products inventory customers. our by major our and facilities or and to distribution near at sold demand

believe our three there quarter still products volumes. pent-up should positively addition, is In that impact demand we for

Depot, or time, implemented We quarter recent quarter $X.XX such last been a in million do substantial EBITDA $X.X we reported continued and million evidenced At EPS Walmart, to and by line remain as demand same improved challenges I'd income of $X.X of some obviously year. good like rose customers significantly total was Home was The debt in cash by and are operating million and quarter. from a to $X.X optimistic initiatives $XX.X the history. utilized million, despite flow. million, Target, million quarter the half net that, strengthening significantly And $X.X per these very the and and listeners first our profitable given to focused declined top of are approach balance of positive we the our dynamics. leading in had. remind positive operating in in producing restructuring Amazon G&A Adjusted million sheet. cash business the year about reduce $X.X to in the a we million most cash to second generated well. in open, during our financial Lowe's results, quarter All-in, two $X.X $X.X general, generated quarter our has operating the it share, have first quarter

are to blankets demand supply to saw products and lingering reviews. are seen many moms the off the face good pandemic. impact travel and And even product demand in challenges a and leading playards. our dads, attractive categories, several chain as to start year-over-year systems increases Our with of growing economic including essential of revenue double-digit new the We solid specialty within and

restructuring least realized annually this evident implemented is with on from of remain year. quarter regard our including in our track eliminating results, through million two at $X.X As million we costs to initiatives previously $X.X savings over those

and Of in assess further changes to improve continue our conditions. to reduce organization to course, expenses unnecessary time reaction market ways the we for

Before duties this of with turning the receive mention I to on Ed, such that pleased to along right were goods to a items. exclusions the resulting certain refunds products quarter, additional call previously wanted granted on of we benefit to be cost sold, over tariff paid to in

these well XXXX much the U.S. learned granted that application the Unfortunately, trade plan would this to of these knew majority cost exclusions tariff additional previously this as have put together However, a those that into temporary August has expired and representative in and tariff X. we could mitigate extend happen on exclusions. of XXXX. as our We were denied

financial meeting that are our review forward importantly, results we've a just for With closing, what believe proud quarter, In and I'm we transforming investors strong innovative say team will upbeat to reflect quality together Ed focus business it the about streamlining and and obvious, future. our products positioned this third over profitable I'd like September in I'm the not brands. some as the on SUMR quarter that, well the been only our you I'll the demand hold We customer-centric seeing our to for annual enduring but to accomplish stockholders' I entire then. may seem Lastly, XXXX. to remind SUMR to lean, this I our X, high of Ed? results of into detail. organization. able turn a wanted look on company what to

Ed Schwartz

good Thanks, morning, Stuart, everyone. and

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

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

net million quarter the quarter $XX.X sales second Second million $XX.X fiscal in of compared were XXXX. with

$X.X million XX.X% and percentage and year advertising, as million were year. compared year-over-year to quarter second additional $X.XX a cooperative the period. net a the As million the as which year-over-year in $X.X related was and sales higher last due million million back the prior percentage versus was bank-permitted XX.X% by on charges The due in second the second million XXXX favorable exclusions of XX.X% in this of net of the as are million the freight of year as $XX.X going versus with These largely quarter loss period. the was impact prior was X.X% of included undertaken lower sold of of growth $X.X a EBITDA Stuart quarter, primarily for XX.X% income company was X.X% in supply royalty have $X.X administrative mentioned, the mix recorded the was sales period year sales other versus return reflects of as lower product a tariff $X.X higher of sales in versus a or expenses exclusions in about $X.XX sale year costs. we $X.X XXXX categories second was in goods various closures resulted to due quarter shipments in a the compared prior disruptions, year versus XXXX. this quarter. was in the fiscal $X.X reflects a second $X.X $X.X second in versus margin and Gross General of a $X.X was in versus year. quarter in million $X.X million streamlining to XXXX net million benefit percentage the $X.X of was The tariff COVID-XX expense And as G&A of Interest net quarter the and impacted share And EBITDA margin costs The profit or as of the quarter XX.X% during during expense company. and prior million $XX.X XXXX. in certain items. Selling million Adjusted labor And increase The store initiatives increase to sales. the percentage to primarily XXXX. in adjusted per for per change manufacturing in the with well million XXXX. X.X% optimistic XXXX a revenue fiscal versus negatively of constraints add prior in period, Adjusted versus second and EBITDA cost XXXX chain been quarter to million corrected, share margin $X.X XXXX $X.X which period. of million of our percentage was last gross year. gross last million forward. These

the Turning to sheet. balance

As of with million Summer of million cash debt at bank June cash debt Infant million XX, had approximately beginning $XX.X compared the fiscal XXXX, and $X.X and of million bank of $XX.X of of $X.X XXXX.

million the outstanding, cash operating Trade with from June, the of payable at million as end our and to $XX.X XXXX, beginning inventory of reflecting X.X million XXXX, end June much million, of were as sheet. million XX $X.X in the indicated. and at with was $XX.X end of of year. second quarter, compared XX, use to $XX.X XXXX. availability debt, the sales had And of down beginning to company line beginning $XX.X Inventory pay the of generated XX, versus June credit. balance the the of we delever company flow efficient at operations Days our compared X.X continue We million compared and year. were management, under capital the our turns compared at as million during or the December strengthen at working the approximately of year. at accrued start possible of million at were The ongoing were cash the turns Accounts the quarter Stuart as approximately as fiscal the $X.X as $XX.X receivables fiscal of expenses DOSs, with XX $XX.X

me that note Cares addition, SUMR as a as In part PPP. applied of Protection the loan recently for government-backed Paycheck otherwise Program, known let Act

And XX, proceeds on with approved. was to million. there we necessary believe associated $X.XXX do loan the uncertainty application approximately pandemic, economic we global the COVID-XX July amounting a August Given received so. X, to was On our decision

will payroll, listeners lease and the accomplished results. open I'll are the deal company's that, through expenses With we eligible our this progress by call Bank for to turn recognize for may a operator program. Overall, the under our used and financial other this allowed improving and encouraged of loan it As quarter questions. America, up payments be and the great over

Operator

Please Data. Pipeline our you. [Operator And come from first Mark with ahead. Instructions] will go Thank question Gomes

Mark Gomes

Hi, gentlemen. progress. Congratulations the on

napkin quick doing million did Just $X.X XXXX. EBITDA in of math, company

You've to track as use point math to more million you're EBITDA, suggest cuts. $XX rough to guideline of there. from or generating we go a a identified where and get million you're $X.X Can that kind we'll on of that

Ed Schwartz

going happening in think Well, use want forecasting could look, numbers. exclusions I proxy, of forward, other we're other but an have and exclusions upcoming as quarters. I lot tariff if our a it you with mean, in be, to the there's And improvement place with tariff programs that a the to coming that in the things we're we dealing – loss the of

here outlook looks EBITDA forward pleased and the strong. with with this And sales us think for relatively growth we're we good point. the looks at position our that anticipate look, we So coming fairly

Mark Gomes

And there on are or the get one little be quarters? there's million another pros was it more is be in an just you say million whether a as and that comment well, where than initial not $X.X And, cetera. looking run exclusions, while the going able of out that lines? impression can Will might be out kind be cut et $X.X that. – My $X.X fair identified to if obviously, you more bit the tariff you like area might margin get million of beyond on you've can cons, to that not than is two operating there be Great. to improvements or lines

Stuart Noyes

Stuart. this comment the Mark, is And Yes. are constantly looking Thanks at there previously. Yes, for that. we

large think costing as as think costing call whether and there I and/or going do better SG&A, definitely you have and referring to some continue what get as But product you slug. opportunity were that is I on price to I in a elasticity, discussed more it initiatives – here. well There's we be I'll think we'll an organization forward. was that,

Mark Gomes

demand us changed kind Great. Last secondarily, go customer changes your marketplace? you in question your market and the trends And share commentary of then perspective, how in channel in from give a maybe can I improved positioning queue. or on the is brought before in COVID? back What Thanks. terms of by

Stuart Noyes

of What was part I'm first I… question? the sorry, Mark, that

Mark Gomes

much household, for part first or being and how is product changed, more has We hear COVID open as product. stores focusing on for your availability demand The example. not so families of

So as kind opens impact changes we of open given see we secondarily positioning? demand and market the then your any And might – do supply you back that see your chain up back the up, share look versus what proposition stores was financing company? trend your

Stuart Noyes

categories we has some Look, changed would in. we're of Yes. COVID those. major what call good demand feel in What the I in

less going they higher Some weren't we because traveling. to thought were that a been actually little be demand

while, something maybe the continuing point, future. demand to we the there. like So which POS, see if had has a very is access demand a less positive to was everybody is And you your or foreseeable that travel stay-at-home that and stroller little there's that, stroller into a

starting lucky dotcom thing Now whatever were a that platforms dotcom you our large call a we which are forward, we had their with customer was customers, to push focus base, one as well the it, well were, And as or Amazon. of put – large there. good as as benefits as going know, open, reap retail, is majority retail we on the of our still a our we

up had categories So call that on though. supply is be And with catch demand up, chain to certain the challenge catch certain let's honest, we do continuing, it, vendors. see we we'll if

good we that right moving now. demand the see forward So feel can about we

Mark Gomes

Thanks on I’ll go Great. in back again, progress. congratulations queue. the the

Stuart Noyes

Great. Thank you.

Operator

Please Mark ahead. We'll Data. for move go Instructions] [Operator back Gomes to follow-up a Pipeline from

Mark Gomes

keep I guess going. can we

you looking ratios, good negotiations of So you some terms things key get What point where EBITDA-to-debt can to get points your like debt to inflection the for are that. looking thereon? in actually at restructuring you

Ed Schwartz

the business. currently, SECR We're position. Well, to hopefully constantly I you any today both as in the by to to refinancing than do numbers. even see might loan look think we're continue improve at can that to a further better – balance what do much opportunities our of doing position kind help going and our and and able our here our it coverage be we're is reduce We debt

And point as a what doing would you But So we'll right now I'm take where point where think not as to project advantage can we're might soon exactly to we the we sure going to we be. keep that of make get we're us, that. doing. refinance sense for

Mark Gomes

to you back about earlier bit going product a on side, give – then on the One. some products more most color And what what And then you two, can Great. the the seeing pent-up are for? little described you demand? demand

Stuart Noyes

Yes.

– I children had what we gates a – there's was So due this know, between of Mark, pent-up get has of back are demand online, demand POS that came was tab chase after. kind manufacturing eight China mean, – was I'll thing to that anywhere so stay home a but XXX% and back there. tell anybody four – to to is weeks come you On I'll the to one just the Lunar products, of originally, category throw lot online capacity catch-up SUMR, well, there. the New Year, now, obviously, of because at had out at a home, that you not up as in gates COVID in China lot didn't back are and for and

ball where had did going. we took were idea no here, behind everybody that demand – hit COVID was at thought Then pause a X we point. So and and the

worst. the demand into COVID, the weeks So we to expected. COVID, into POS – then And weeks than seven six whole way through for the was higher going – and is is started high we plan in

we're now our manufacturers a we've saying, by pull POS. way, So the ahead phone on the got with

a say chain. when those And major Summers retailers. of So of again, categories, in an many the the it's walk pent-up you hand supply mean kind type because there. stock, a there. or just not position of and demand add weekly still you've of supply amount to out thing. feel got mouth to should of I we is are and out that, if why their down we're, And some that demand we safety I we mean, stock just We on seen I think, POS up good safety you about that that's into pent-up get the of think be. back demand we've where data, reviewing we're Then on the good

Mark Gomes

Yes.

shifting in that as quarter see fall. there's to until of in you sounds it you result be from pent-up your So drop year Do much big then this – seasonality demand how revenue. there's did like a a shift summer you a going like see,

have kind So And And it a a quarter? allow is to would quarter, normal do in you of that normalized your of think of through? lot all in upcoming does you to quarter? capture chain a supply demand been that the what extent translate

Stuart Noyes

we capture forward. a We away. factors. to mid-market. that Yes, were you chain, that don't different There decent few a Supply gone think I can we amount going of demand's think mentioned

gross out number, warehouse which the takes that through to did a more which to profit, direct higher also at of doesn't We cost stuff business. lower our our port, revenue have flow is but

our we marketplace area can and profitable, take the cash try forward to now get and that. to an get flow to advantage major maximize start stabilized going of line balance But company get I number, So there bottom but goal prior think, was here are many in the things we've said affecting our focused the we're look, on as to that top get where very to sheet in line. quarters,

we corner forward. going profitable would growth to to growth, hope a start turn contained we that So

Mark Gomes

again. Thanks Great.

Stuart Noyes

Mark. Okay. Thanks,

Operator

with John go JAC next ahead. Please [Operator Instructions] the question comes Capital. And Cassarini from

John Cassarini

quarter. turnarounds on excellent gentlemen; and Good the but gotten pat. you down company, an people have congratulations Many for morning, formula to this seem attempted have

So congratulations.

Stuart Noyes

Thank you, John.

John Cassarini

cost I due forward mix, think declines expense account product we into take rate about at reductions, increase to to interest in and tariffs we some future out lower or If chain, should margins the debt going your interest quarters? possibly how look improved supply as go balances, operating

Ed Schwartz

margins most think excuse in by obviously recent tariff influenced exclusions. Well, quarter, I the this the John, operating me, were

for. in you're to they're going think a to in that been we going we've be what find budgeted forward stabilized is it's us I going range where what – to acceptable

range So we while be profitability. they for once place. won't excuse be in a me, still room sales continued takes have And in XX% where they'll XX%, range, at the growth,

see you'll margins think the I be they'll forward, very business terms needs. of that able going manage our we're to what acceptable and in

John Cassarini

mainly the you Great. results, at a much Or expect expand you Can of U.S. than to why? quarter's on optimizing few And reasons see That’s do that the international profitability you And looking the were focusing sales. sales? domestic more I down pick those wonderful. sales with less are up? sales upon

Stuart Noyes

Yes.

happened thing, on the international, distributor and okay, on own it about One, to chargebacks staff of run more helped it we margins business restructure customers, our John, getting, were did think a UK model, things over actually that two we a our type the on So I warehouse there, a distributor in quarter, from going credit, through in and went with a talked of the there. model. helped which and first we XPL we

business look, said We are four starting then been that international had COVID-XX. open and go because that clobbered second and to in was to morning, they've were down. and some there they this they up to build with to moving you relationships have calls the back New shutting is week piece it going that. I a And start this get Zealand model, forward. model just weren't up that to were mean, of we direct part So were then the

and – there. we So business do

parts So world it's other been the a real struggle of product on there versus the flow.

and there, to kind we the To that's about in we what of what see your we're America. profitability U.S. actually North good happened your doing question, feel going here So there. part do and to growth really what's last in of do we for can add forward,

John Cassarini

Great.

much. it up Keep that’s for convert. you Okay, to me. very Thank

Stuart Noyes

you. Thank

Ed Schwartz

Thank you.

Operator

no the [Operator questions in Instructions] further queue. There are question

the for So any over I'd turn remarks. Stuart to like Noyes back conference to closing

Stuart Noyes

Super. us you call. speaking thank have good a look forward today's Thanks We Thank you for and much. joining you with day. quarter. on all Well, again, next very to

Operator

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

You now disconnect. may

Chris Witty	Vice President-Investor Relations
Stuart Noyes	Interim Chief Executive Officer
Ed Schwartz	Chief Financial Officer
Mark Gomes	Pipeline Data
John Cassarini	JAC Capital

Summer Infant (SUMR) 12 Aug 202020 Q2 Earnings call transcript