Restoration Hardware Holdings, Inc. Reports Record Third Quarter Fiscal 2013 Financial Results
Q3 Net Revenues Increased 39%; Q3 Comparable Store Sales Increased
29%; Q3 Adjusted Diluted EPS Increased 357% to
Company Increases Fiscal 2013 Adjusted Diluted EPS Guidance to
Third Quarter Highlights
-
Net revenues increased 39% on top of a 22% increase for the same
period last year
- Comparable store sales increased 29% on top of 29% growth for the same period last year
- Direct revenues increased 47% on top of a 24% increase for the same period last year
-
Adjusted operating income increased 299% to
$23.9 million from$6.0 million for the same period last year; GAAP operating income of$23.9 million compared to$2.0 million for the same period last year -
Adjusted net income increased 389% to
$13.0 million from$2.7 million for the same period last year; GAAP net income of$9.5 million compared to$1.7 million for the same period last year -
Adjusted diluted earnings per share increased 357% to
$0.32 compared to$0.07 last year; GAAP diluted earnings per share of$0.23 during the period
Mr. Friedman continued, “Based on our strong performance during the third quarter and continued confidence in the fourth quarter, we are increasing our fiscal year 2013 guidance.”
Three Month Period Financial Results
Revenue - Net revenues for the third quarter of fiscal 2013
increased 39% to
- Comparable store sales increased 29% for the third quarter of fiscal 2013. This growth is on top of an increase of 29% in comparable store sales for the third quarter of fiscal 2012.
-
As of
November 2, 2013 , the Company operated a total of 70 retail stores, consisting of 62 Galleries, 5 Full Line Design Galleries and 3 Baby & Child Galleries, as well as 17 outlet stores throughoutthe United States andCanada . This compares to a total of 73 retail stores, consisting of 69 Galleries, 2 Full Line Design Galleries and 2 Baby & Child Galleries, as well as 12 outlet stores open at the end of the third quarter of fiscal 2012. - Direct revenues increased 47% in the third quarter of fiscal 2013. This growth is on top of the 24% increase in direct revenues for the third quarter of fiscal 2012.
Operating Income (Loss)* - Adjusted operating income for the
third quarter of fiscal 2013 increased 299% to
EBITDA* - Adjusted EBITDA for the third quarter of fiscal 2013
increased 136% to
Net Income (Loss)* - Adjusted net income increased 389% to
Earnings Per Share* - Adjusted diluted EPS increased 357% to
Nine Month Period Financial Results
Revenue - Net revenues for the nine months ended
- Comparable store sales increased 31% for the first nine months of fiscal 2013. This growth compares to an increase of 29% in comparable store sales for the first nine months of fiscal 2012.
- Direct revenues increased 39% in the first nine months of fiscal 2013. This growth is on top of the 25% increase in direct revenues for the first nine months of fiscal 2012.
Operating Income (Loss)* - Adjusted operating income for the
first nine months of fiscal 2013 increased 130% to
EBITDA* - Adjusted EBITDA for the first nine months of fiscal
2013 increased 73% to
Net Income (Loss)* - Adjusted net income increased 158% to
Earnings Per Share* - Adjusted diluted EPS increased 135% to
Outlook
The Company is providing the following guidance for the fourth quarter of fiscal 2013:
-
Net revenues in the range of
$490 million to $500 million -
Adjusted net income in the range of
$34.3 million to $35.5 million -
Adjusted diluted EPS to a range of
$0.82 to $0.85 - Diluted shares outstanding of 41.6 million compared to prior guidance of 42.2 million diluted shares outstanding
The Company is increasing its guidance for the fiscal year ending
-
Net revenues in the range of
$1.57 billion to $1.58 billion -
Adjusted net income in the range of
$69.4 million to $70.6 million -
Adjusted diluted EPS in the range of
$1.71 to $1.74 - Diluted shares outstanding of 40.5 million compared to prior guidance of 41.7 million diluted shares outstanding
Note: The Company’s adjusted net income and adjusted diluted earnings per share guidance does not include certain charges and costs such as for unusual items which are expected to be similar in future periods to the kinds of charges and costs excluded from adjusted net income and adjusted diluted earnings in prior quarters. The Company’s fiscal year 2013 will include 52 weeks compared to fiscal year 2012 which included 53 weeks.
Conference Call and Webcast Information
About
RH (
*Non-GAAP Financial Measures
To supplement its consolidated financial statements, which are prepared and presented in accordance with Generally Accepted Accounting Principles (“GAAP”), the Company uses the following non-GAAP financial measures: adjusted operating income, adjusted EBITDA, adjusted net income, adjusted EPS, pro forma EPS and adjusted diluted EPS (collectively, “non-GAAP financial measures”). We compute these measures by adjusting the applicable GAAP measures to remove the impact of certain recurring and non-recurring charges and gains and the tax effect of these adjustments. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The Company uses these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. The Company believes that they provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. The non-GAAP financial measures used by the Company in this press release may be different from the methods used by other companies.
For more information on the non-GAAP financial measures, please see the Reconciliation of GAAP to non-GAAP Financial Measures tables in this press release. These accompanying tables include details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures. With respect to the Company’s adjusted net income and adjusted diluted EPS guidance for the fourth fiscal quarter and the full year of fiscal 2013, the Company is not able to provide a reconciliation of these non-GAAP financial measures to GAAP without unreasonable effort as our estimated results are preliminary and may change as we complete the quarter close process and management’s review of our financial statements.
Forward-Looking Statements
This release contains forward-looking statements within the meaning of
the federal securities laws including statements related to the
transformation of our real estate, the Company’s plans to open Full Line
Design Galleries in Greenwich,
RESTORATION HARDWARE HOLDINGS, INC. | |||||||||||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||||||||||||||
(In thousands, except share and per share amounts) | |||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||
November 2, |
% of Net |
October 27, |
% of Net |
November 2, |
% of Net |
October 27, |
% of Net |
||||||||||||||||||||||
Net revenues | $ | 395,832 | 100.0 | % | $ | 284,171 | 100.0 | % | $ | 1,079,267 | 100.0 | % | $ | 794,991 | 100.0 | % | |||||||||||||
Cost of goods sold | 255,032 | 64.4 | % | 182,291 | 64.1 | % | 697,364 | 64.6 | % | 503,716 | 63.4 | % | |||||||||||||||||
Gross profit | 140,800 | 35.6 | % | 101,880 | 35.9 | % | 381,903 | 35.4 | % | 291,275 | 36.6 | % | |||||||||||||||||
Selling, general and administrative expenses | 116,940 | 29.5 | % | 99,886 | 35.2 | % | 385,312 | 35.7 | % | 271,716 | 34.1 | % | |||||||||||||||||
Income (loss) from operations | 23,860 | 6.1 | % | 1,994 | 0.7 | % | (3,409 | ) | -0.3 | % | 19,559 | 2.5 | % | ||||||||||||||||
Interest expense | (2,165 | ) | -0.6 | % | (1,544 | ) | -0.5 | % | (4,196 | ) | -0.4 | % | (4,598 | ) | -0.6 | % | |||||||||||||
Income (loss) before income taxes | 21,695 | 5.5 | % | 450 | 0.2 | % | (7,605 | ) | -0.7 | % | 14,961 | 1.9 | % | ||||||||||||||||
Income tax expense (benefit) | 12,146 | 3.1 | % | (1,235 | ) | -0.4 | % | 842 | 0.1 | % | (612 | ) | -0.1 | % | |||||||||||||||
Net income (loss) | $ | 9,549 | 2.4 | % | $ | 1,685 | 0.6 | % | $ | (8,447 | ) | -0.8 | % | $ | 15,573 | 2.0 | % | ||||||||||||
Weighted-average shares used in computing basic net income (loss) per share | 38,888,208 | 1,000 | 38,558,952 | 1,000 | |||||||||||||||||||||||||
Basic net income (loss) per share | $ | 0.25 | $ | 1,685 | $ | (0.22 | ) | $ | 15,573 | ||||||||||||||||||||
Weighted-average shares used in computing diluted net income (loss) per share | 41,053,211 | 1,000 | 38,558,952 | 1,000 | |||||||||||||||||||||||||
Diluted net income (loss) per share | $ | 0.23 | $ | 1,685 | $ | (0.22 | ) | $ | 15,573 | ||||||||||||||||||||
Pro forma weighted-average shares used in computing pro forma basic and diluted net income per share [a] | 36,971,500 | 36,971,500 | |||||||||||||||||||||||||||
Pro forma basic and diluted net income per share | $ | 0.05 | $ | 0.42 |
[a] On a pro forma basis, basic and diluted shares outstanding for the
three and nine months ended
RESTORATION HARDWARE HOLDINGS, INC. | |||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||
(In thousands) | |||||||||
(Unaudited) | |||||||||
November 2, |
February 2, |
October 27, |
|||||||
ASSETS | |||||||||
Cash and cash equivalents | $ | 8,197 | $ | 8,354 | $ | 15,568 | |||
Merchandise inventories | 448,150 | 353,329 | 333,825 | ||||||
Other current assets | 147,215 | 131,075 | 110,952 | ||||||
Total current assets | 603,562 | 492,758 | 460,345 | ||||||
Property and equipment—net | 190,069 | 111,406 | 93,663 | ||||||
Goodwill and other intangibles | 171,480 | 172,724 | 173,509 | ||||||
Other assets | 26,987 | 12,725 | 14,716 | ||||||
Total assets | $ | 992,098 | $ | 789,613 | $ | 742,233 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||
Accounts payable and accrued expenses | $ | 209,228 | $ | 145,353 | $ | 156,382 | |||
Other current liabilities | 101,715 | 74,071 | 73,203 | ||||||
Total current liabilities | 310,943 | 219,424 | 229,585 | ||||||
Revolving line of credit and term loan | 108,245 | 82,501 | 187,529 | ||||||
Other long term liabilities | 64,001 | 36,077 | 57,880 | ||||||
Total liabilities | 483,189 | 338,002 | 474,994 | ||||||
Stockholders’ equity | 508,909 | 451,611 | 267,239 | ||||||
Total liabilities and stockholders’ equity | $ | 992,098 | $ | 789,613 | $ | 742,233 |
RESTORATION HARDWARE HOLDINGS, INC. | ||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||
(In thousands) | ||||||||||
(Unaudited) | ||||||||||
Nine Months Ended | ||||||||||
November 2, |
October 27, |
|||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||
Net income (loss) | $ | (8,447 | ) | $ | 15,573 | |||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||
Depreciation and amortization | 19,959 | 19,485 | ||||||||
Stock-based compensation expense | 65,847 | 1,102 | ||||||||
Other non-cash items | (13,415 | ) | 212 | |||||||
Change in assets and liabilities: | ||||||||||
Merchandise inventories | (94,980 | ) | (87,933 | ) | ||||||
Accounts payable, accrued expenses, and other | 61,491 | 31,542 | ||||||||
Net cash provided by (used in) operating activities | 30,455 | (20,019 | ) | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||
Capital expenditures | (57,622 | ) | (25,631 | ) | ||||||
Purchases of trademarks | — | (310 | ) | |||||||
Net cash used in investing activities | (57,622 | ) | (25,941 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||
Net borrowings under revolving line of credit | 25,744 | 65,194 | ||||||||
Payments on capital leases | (1,418 | ) | (3,088 | ) | ||||||
Capitalized initial public offering costs | — | (9,118 | ) | |||||||
Stock options exercised | 1,436 | — | ||||||||
Excess tax benefit from exercise of stock options | 1,440 | — | ||||||||
Tax withholdings related to issuance of stock-based awards | (178 | ) | — | |||||||
Net cash provided by financing activities | 27,024 | 52,988 | ||||||||
Effects of foreign currency exchange rate translation | (14 | ) | 28 | |||||||
Net increase (decrease) in cash and cash equivalents | (157 | ) | 7,056 | |||||||
Cash and cash equivalents | ||||||||||
Beginning of period | 8,354 | 8,512 | ||||||||
End of period | $ | 8,197 | $ | 15,568 |
RESTORATION HARDWARE HOLDINGS, INC. | ||||||||||||||||||||
OPERATING METRICS AND OTHER DATA | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||
November 2, |
October 27, |
November 2, |
October 27, |
|||||||||||||||||
Growth in net revenues: | ||||||||||||||||||||
Stores [a] | 33 | % | 21 | % | 33 | % | 19 | % | ||||||||||||
Direct | 47 | % | 24 | % | 39 | % | 25 | % | ||||||||||||
Total | 39 | % | 22 | % | 36 | % | 22 | % | ||||||||||||
Retail [b]: | ||||||||||||||||||||
Comparable store sales change [c] | 29 | % | 29 | % | 31 | % | 29 | % | ||||||||||||
Retail stores open at beginning of period | 70 | 73 | 71 | 74 | ||||||||||||||||
Stores opened | — | — | 2 | 3 | ||||||||||||||||
Stores closed | — | — | 3 | 4 | ||||||||||||||||
Retail stores open at end of period | 70 | 73 | 70 | 73 | ||||||||||||||||
Retail sales per leased selling square foot [d] | $ | 364 | $ | 282 | $ | 1,002 | $ | 763 | ||||||||||||
Total leased square footage at end of period (in thousands) | 796 | 780 | 796 | 780 | ||||||||||||||||
Total leased selling square footage at end of period (in thousands) [e] | 521 | 502 | 521 | 502 | ||||||||||||||||
Direct: | ||||||||||||||||||||
Catalogs circulated (in thousands) [f] | 4,330 | 11,721 | 12,325 | 26,851 | ||||||||||||||||
Catalog pages circulated (in millions) [f] | 892 | 7,944 | 6,583 | 15,360 | ||||||||||||||||
Direct as a percentage of net revenues [g] | 46 | % | 44 | % | 47 | % | 46 | % |
[a] Store data represents retail stores plus outlet stores. Net revenues
for outlet stores for the three months ended
[b] Retail data has been calculated based upon retail stores, which includes our Baby & Child stores and excludes outlet stores.
[c] Comparable store sales have been calculated based upon retail stores that were open at least fourteen full months as of the end of the reporting period and did not change square footage by more than 20% between periods. If a store is closed for seven days during a month, that month will be excluded from comparable store sales. Comparable store net revenues exclude revenues from outlet stores.
[d] Retail sales per leased selling square foot is calculated by dividing total net revenues for all retail stores, comparable and non-comparable, by the average leased selling square footage for the period.
[e] Leased selling square footage is retail space at our stores used to sell our products. Leased selling square footage excludes backrooms at retail stores used for storage, office space or similar matters. Leased selling square footage excludes exterior sales space located outside a store, such as courtyards, gardens and rooftops. Leased selling square footage includes approximately 4,500 square feet related to one owned store location.
[f] The catalogs and catalog pages circulated from period to period do not take into account different page sizes per catalog distributed. Page sizes and page counts vary for different catalog mailings and we sometimes mail different versions of a catalog at the same time. Accordingly, period to period comparisons of catalogs circulated and catalog pages circulated do not take these variations into account.
[g] Direct revenues include sales through our catalogs and websites.
RESTORATION HARDWARE HOLDINGS, INC. | ||||||||||||||||||||||||||||||
RECONCILIATION OF ADJUSTED INCOME STATEMENT ITEMS | ||||||||||||||||||||||||||||||
(In thousands, except share and per share amounts) | ||||||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||||||||||||
Reported |
Adjustments |
Adjusted 2013 |
% of Net Revenues |
Reported 2012 |
Adjustments |
Adjusted |
% of Net Revenues | |||||||||||||||||||||||
Net revenues | $ | 395,832 | $ — | $ | 395,832 | 100.0 | % | $ | 284,171 |
$ |
— |
$ | 284,171 | 100.0 | % | |||||||||||||||
Cost of goods sold | 255,032 | — | 255,032 | 64.4 | % | 182,291 | — | 182,291 | 64.1 | % | ||||||||||||||||||||
Gross profit | 140,800 | — | 140,800 | 35.6 | % | 101,880 | — | 101,880 | 35.9 | % | ||||||||||||||||||||
Selling, general and administrative expenses [a] | 116,940 | — | 116,940 | 29.6 | % | 99,886 | (3,987 | ) | 95,899 | 33.8 | % | |||||||||||||||||||
Income from operations | 23,860 | — | 23,860 | 6.0 | % | 1,994 | 3,987 | 5,981 | 2.1 | % | ||||||||||||||||||||
Interest expense | (2,165 | ) | — | (2,165 | ) | -0.5 | % | (1,544 | ) | — | (1,544 | ) | -0.5 | % | ||||||||||||||||
Income before income taxes | 21,695 | — | 21,695 | 5.5 | % | 450 | 3,987 | 4,437 | 1.6 | % | ||||||||||||||||||||
Income tax expense (benefit) [b] | 12,146 | (3,468 | ) | 8,678 | 2.2 | % | (1,235 | ) | 3,010 | 1,775 | 0.7 | % | ||||||||||||||||||
Net income [c] | $ | 9,549 | $ | 3,468 | $ | 13,017 | 3.3 | % | $ | 1,685 | $ | 977 | $ | 2,662 | 0.9 | % | ||||||||||||||
EBITDA [d] | $ | 30,591 | $ | 30,591 | $ | 8,587 | $ | 12,973 | ||||||||||||||||||||||
Weighted-average shares used in computing basic net income per share [e] | 38,888,208 | 38,888,208 | 1,000 | 36,971,500 | ||||||||||||||||||||||||||
Weighted-average shares used in computing diluted net income per share [e] | 41,053,211 | 41,053,211 | 1,000 | 36,971,500 | ||||||||||||||||||||||||||
Basic net income per share | $ | 0.25 | $ | 0.33 | $ | 1,685 | $ | 0.07 | ||||||||||||||||||||||
Diluted net income per share | $ | 0.23 | $ | 0.32 | $ | 1,685 | $ | 0.07 |
[a] The adjustments for selling, general, and administrative expenses include management and pre-initial public offering board fees, certain non-cash and other one-time compensation, follow-on offering fees, lease termination costs and special committee investigation and remediation costs. See table titled “Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income” for additional details.
[b] Assumes a normalized tax rate of 40% for all periods presented. See table titled “Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income” for additional details.
[c] Adjusted net income is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. We define adjusted net income as consolidated net income (loss) less non-recurring and other items. Adjusted net income is included in this press release because management believes that adjusted net income provides meaningful supplemental information for investors regarding the performance of our business and facilitates a meaningful evaluation of actual results on a comparable basis with historical results. Our management uses this non-GAAP financial measure in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter.
[d] EBITDA and Adjusted EBITDA are supplemental measures of financial performance that are not required by, or presented in accordance with, GAAP. We define EBITDA as consolidated net income (loss) before depreciation and amortization, interest expense and provision for income taxes. Adjusted EBITDA reflects further adjustments to EBITDA to eliminate the impact of certain items including non-cash or other items that we do not consider representative of our ongoing financial performance. EBITDA and Adjusted EBITDA are included in this press release because they are key metrics used by management and our Board of Directors to assess our financial performance, and Adjusted EBITDA is used in connection with determining incentive compensation under our Management Incentive Program (“MIP”). Additionally, EBITDA is frequently used by analysts, investors and other interested parties to evaluate companies in our industry. We believe that Adjusted EBITDA provides useful information facilitating operating performance comparisons from period to period and company to company. We use EBITDA and Adjusted EBITDA, alongside other GAAP measures such as gross profit, operating income (loss) and net income (loss), to measure profitability, as a key profitability target in our annual and other budgets, and to compare our performance against that of peer companies. Please see the table titled “Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA” for further information.
[e] On an adjusted basis for the three months ended
RESTORATION HARDWARE HOLDINGS, INC. | ||||||||||||||||||||||||||||||
RECONCILIATION OF ADJUSTED INCOME STATEMENT ITEMS | ||||||||||||||||||||||||||||||
(In thousands, except share and per share amounts) | ||||||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||
Nine Months Ended | ||||||||||||||||||||||||||||||
Reported |
Adjustments |
Adjusted 2013 |
% of Net Revenues |
Reported 2012 |
Adjustments |
Adjusted
October 27, 2012 |
% of Net Revenues | |||||||||||||||||||||||
Net revenues | $ | 1,079,267 | $ | — | $ | 1,079,267 | 100.0 | % | $ | 794,991 | $ | — | $ | 794,991 | 100.0 | % | ||||||||||||||
Cost of goods sold | 697,364 | — | 697,364 | 64.6 | % | 503,716 | — | 503,716 | 63.4 | % | ||||||||||||||||||||
Gross profit | 381,903 | — | 381,903 | 35.4 | % | 291,275 | — | 291,275 | 36.6 | % | ||||||||||||||||||||
Selling, general and administrative expenses [a] | 385,312 | (66,050 | ) | 319,262 | 29.6 | % | 271,716 | (7,677 | ) | 264,039 | 33.2 | % | ||||||||||||||||||
Income (loss) from operations | (3,409 | ) | 66,050 | 62,641 | 5.8 | % | 19,559 | 7,677 | 27,236 | 3.4 | % | |||||||||||||||||||
Interest expense | (4,196 | ) | — | (4,196 | ) | -0.4 | % | (4,598 | ) | — | (4,598 | ) | -0.6 | % | ||||||||||||||||
Income (loss) before income taxes | (7,605 | ) | 66,050 | 58,445 | 5.4 | % | 14,961 | 7,677 | 22,638 | 2.8 | % | |||||||||||||||||||
Income tax expense (benefit) [b] | 842 | 22,536 | 23,378 | 2.2 | % | (612 | ) | 9,668 | 9,056 | 1.1 | % | |||||||||||||||||||
Net income (loss) [c] | $ | (8,447 | ) | $ | 43,514 | $ | 35,067 | 3.2 | % | $ | 15,573 | $ | (1,991 | ) | $ | 13,582 | 1.7 | % | ||||||||||||
EBITDA [d] | $ | 16,550 | $ | 82,600 | $ | 39,044 | $ | 47,870 | ||||||||||||||||||||||
Weighted-average shares used in computing basic net income (loss) per share [e] | 38,558,952 | 38,558,952 | 1,000 | 36,971,500 | ||||||||||||||||||||||||||
Weighted-average shares used in computing diluted net income (loss) per share [e] | 38,558,952 | 40,170,430 | 1,000 | 36,971,500 | ||||||||||||||||||||||||||
Basic net income (loss) per share | $ | (0.22 | ) | $ | 0.91 | $ | 15,573 | $ | 0.37 | |||||||||||||||||||||
Diluted net income (loss) per share | $ | (0.22 | ) | $ | 0.87 | $ | 15,573 | $ | 0.37 |
[a] The adjustments for selling, general, and administrative expenses include management and pre-initial public offering board fees, certain non-cash and other one-time compensation, follow-on offering fees, lease termination costs and special committee investigation and remediation costs. See table titled “Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income” for additional details.
[b] Assumes a normalized tax rate of 40% for all periods presented. See table titled “Reconciliation of GAAP Net Income (Loss) to Adjusted Net Income” for additional details.
[c] Adjusted net income is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. We define adjusted net income as consolidated net income (loss) less non-recurring and other items. Adjusted net income is included in this press release because management believes that adjusted net income provides meaningful supplemental information for investors regarding the performance of our business and facilitates a meaningful evaluation of actual results on a comparable basis with historical results. Our management uses this non-GAAP financial measure in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter.
[d] EBITDA and Adjusted EBITDA are supplemental measures of financial performance that are not required by, or presented in accordance with, GAAP. We define EBITDA as consolidated net income (loss) before depreciation and amortization, interest expense and provision for income taxes. Adjusted EBITDA reflects further adjustments to EBITDA to eliminate the impact of certain items including non-cash or other items that we do not consider representative of our ongoing financial performance. EBITDA and Adjusted EBITDA are included in this press release because they are key metrics used by management and our Board of Directors to assess our financial performance, and Adjusted EBITDA is used in connection with determining incentive compensation under our MIP. Additionally, EBITDA is frequently used by analysts, investors and other interested parties to evaluate companies in our industry. We believe that Adjusted EBITDA provides useful information facilitating operating performance comparisons from period to period and company to company. We use EBITDA and Adjusted EBITDA, alongside other GAAP measures such as gross profit, operating income (loss) and net income (loss), to measure profitability, as a key profitability target in our annual and other budgets, and to compare our performance against that of peer companies. Please see the table titled “Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA” for further information.
[e] On an adjusted basis for the nine months ended
RESTORATION HARDWARE HOLDINGS, INC. | |||||||||||||||
RECONCILIATION OF NET INCOME TO OPERATING INCOME (LOSS) | |||||||||||||||
AND ADJUSTED OPERATING INCOME | |||||||||||||||
(In thousands) | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
November 2, |
October 27, |
November 2, |
October 27, |
||||||||||||
Net income (loss) | $ | 9,549 | $ | 1,685 | $ | (8,447 | ) | $ | 15,573 | ||||||
Interest expense | 2,165 | 1,544 | 4,196 | 4,598 | |||||||||||
Income tax expense (benefit) | 12,146 | (1,235 | ) | 842 | (612 | ) | |||||||||
Operating income (loss) | 23,860 | 1,994 | (3,409 | ) | 19,559 | ||||||||||
Management and pre-IPO board fees [a] | — | 1,198 | — | 3,285 | |||||||||||
Non-cash compensation [b] | — | — | 63,155 | — | |||||||||||
Follow-on offering fees [c] | — | — | 2,895 | — | |||||||||||
Lease termination costs [d] | — | — | — | (386 | ) | ||||||||||
Special committee investigation and remediation [e] | — | 2,789 | — | 4,778 | |||||||||||
Adjusted operating income | $ | 23,860 | $ | 5,981 | $ | 62,641 | $ | 27,236 |
[a] Represents fees paid in accordance with our management services
agreement with
[b] Includes non-cash compensation charges related to the
performance-based vesting of certain shares granted to Mr. Friedman, as
well as the one-time, fully vested option granted to Mr. Friedman upon
his reappointment as Chairman and Co-Chief Executive Officer in
[c] Represents legal and other professional fees incurred in connection
with our follow-on offerings in
[d] Includes lease termination costs for retail stores that were closed
prior to their respective lease termination dates. The amounts in the
three and nine months ended
[e] Represents legal and other professional fees, incurred in connection with the investigation conducted by the special committee of the Board of Directors relating to Mr. Friedman and our subsequent remedial actions.
RESTORATION HARDWARE HOLDINGS, INC. | |||||||||||||||
RECONCILIATION OF NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA | |||||||||||||||
(In thousands) | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
November 2, |
October 27, |
November 2, |
October 27, |
||||||||||||
Net income (loss) | $ | 9,549 | $ | 1,685 | $ | (8,447 | ) | $ | 15,573 | ||||||
Depreciation and amortization | 6,731 | 6,593 | 19,959 | 19,485 | |||||||||||
Interest expense | 2,165 | 1,544 | 4,196 | 4,598 | |||||||||||
Income tax expense (benefit) | 12,146 | (1,235 | ) | 842 | (612 | ) | |||||||||
EBITDA [a] | 30,591 | 8,587 | 16,550 | 39,044 | |||||||||||
Management and pre-IPO board fees [b] | — | 1,198 | — | 3,285 | |||||||||||
Non-cash compensation [c] | — | 364 | 63,155 | 1,102 | |||||||||||
Follow-on offering fees [d] | — | — | 2,895 | — | |||||||||||
Lease termination costs [e] | — | — | — | (386 | ) | ||||||||||
Special committee investigation and remediation [f] | — | 2,789 | — | 4,778 | |||||||||||
Other [g] | — | 35 | — | 47 | |||||||||||
Adjusted EBITDA [a] | $ | 30,591 | $ | 12,973 | $ | 82,600 | $ | 47,870 |
[a] EBITDA and Adjusted EBITDA are supplemental measures of financial performance that are not required by, or presented in accordance with, GAAP. We define EBITDA as consolidated net income (loss) before depreciation and amortization, interest expense and provision for income taxes. Adjusted EBITDA reflects further adjustments to EBITDA to eliminate the impact of certain items including non-cash or other items that we do not consider representative of our ongoing financial performance. EBITDA and Adjusted EBITDA are included in this press release because they are key metrics used by management and our Board of Directors to assess our financial performance, and Adjusted EBITDA is used in connection with determining incentive compensation under our MIP. Additionally, EBITDA is frequently used by analysts, investors and other interested parties to evaluate companies in our industry. We believe that Adjusted EBITDA provides useful information facilitating operating performance comparisons from period to period and company to company. We use EBITDA and Adjusted EBITDA, alongside other GAAP measures such as gross profit, operating income (loss) and net income (loss), to measure profitability, as a key profitability target in our annual and other budgets, and to compare our performance against that of peer companies. EBITDA and Adjusted EBITDA are not GAAP measures of our financial performance or liquidity and should not be considered as alternatives to net income (loss), as a measure of financial performance, cash flows from operating activities, as a measure of liquidity, or any other performance measure derived in accordance with GAAP and they should not be construed as an implication that our future results will be unaffected by non-recurring and other items. Our measures of EBITDA and Adjusted EBITDA are not necessarily comparable to other similarly titled captions for other companies due to different methods of calculation.
[b] Represents fees paid in accordance with our management services
agreement with
[c] The nine months ended
[d] Represents legal and other professional fees incurred in connection
with our follow-on offerings in
[e] Includes lease termination costs for retail stores that were closed
prior to their respective lease termination dates. The amounts in the
three and nine months ended
[f] Represents legal and other professional fees, incurred in connection with the investigation conducted by the special committee of the Board of Directors relating to Mr. Friedman and our subsequent remedial actions.
[g] Represents certain other items which management believes are not
indicative of our ongoing operating performance, which includes foreign
exchange gains and losses for the three and nine months ended
RESTORATION HARDWARE HOLDINGS, INC. | |||||||||||||||
RECONCILIATION OF GAAP NET INCOME (LOSS) TO ADJUSTED NET INCOME |
|||||||||||||||
(In thousands) | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
November 2, |
October 27, |
November 2, |
October 27, |
||||||||||||
GAAP net income (loss) | $ | 9,549 | $ | 1,685 | $ | (8,447 | ) | $ | 15,573 | ||||||
Adjustments (pre-tax): | |||||||||||||||
Management and pre-IPO board fees [a] | $ | — | $ | 1,198 | $ | — | $ | 3,285 | |||||||
Non-cash compensation [b] | — | — | 63,155 | — | |||||||||||
Follow-on offering fees [c] | — | — | 2,895 | — | |||||||||||
Lease termination costs [d] | — | — | — | (386 | ) | ||||||||||
Special committee investigation and remediation [e] | — | 2,789 | — | 4,778 | |||||||||||
Subtotal adjusted items | — | 3,987 | 66,050 | 7,677 | |||||||||||
Impact of income tax items [f] | 3,468 | (3,010 | ) | (22,536 | ) | (9,668 | ) | ||||||||
Adjusted net income [g] | $ | 13,017 | $ | 2,662 | $ | 35,067 | $ | 13,582 |
[a] Represents fees paid in accordance with our management services
agreement with
[b] Includes non-cash compensation charges related to the
performance-based vesting of certain shares granted to Mr. Friedman, as
well as the one-time, fully vested option granted to Mr. Friedman upon
his reappointment as Chairman and Co-Chief Executive Officer in
[c] Represents legal and other professional fees incurred in connection
with our follow-on offerings in
[d] Includes lease termination costs for retail stores that were closed
prior to their respective lease termination dates. The amounts in the
three and nine months ended
[e] Represents legal and other professional fees, incurred in connection with the investigation conducted by the special committee of the Board of Directors relating to Mr. Friedman and our subsequent remedial actions.
[f] Assumes a normalized tax rate of 40% for all periods presented.
[g] Adjusted net income is a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. We define adjusted net income as consolidated net income (loss) less non-recurring and other items. Adjusted net income is included in this press release because management believes that adjusted net income provides meaningful supplemental information for investors regarding the performance of our business and facilitates a meaningful evaluation of actual results on a comparable basis with historical results. Our management uses this non-GAAP financial measure in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter.
RESTORATION HARDWARE HOLDINGS, INC. | |||||||||||||||
RECONCILIATION OF NET INCOME (LOSS) PER SHARE TO | |||||||||||||||
ADJUSTED NET INCOME PER SHARE | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
November 2, |
October 27, |
November 2, |
October 27, |
||||||||||||
GAAP diluted net income (loss) per share | $ | 0.23 | $ | 1,685 | $ | (0.22 | ) | $ | 15,573 | ||||||
Pro forma diluted net income (loss) per share [a] | $ | 0.23 | $ | 0.05 | $ | (0.21 | ) | $ | 0.42 | ||||||
EPS impact of adjustments (pre-tax): | |||||||||||||||
Management and pre-IPO board fees [b] | $ | — | $ | 0.03 | $ | — | $ | 0.09 | |||||||
Non-cash compensation [c] | — | — | 1.57 | — | |||||||||||
Follow-on offering fees [d] | — | — | 0.07 | — | |||||||||||
Lease termination costs [e] | — | — | — | (0.01 | ) | ||||||||||
Special committee investigation and remediation [f] | — | 0.07 | — | 0.13 | |||||||||||
Subtotal adjusted items | — | 0.10 | 1.64 | 0.21 | |||||||||||
Impact of income tax items [g] | 0.09 | (0.08 | ) | (0.56 | ) | (0.26 | ) | ||||||||
Adjusted diluted net income per share [h] | $ | 0.32 | $ | 0.07 | $ | 0.87 | $ | 0.37 |
[a] Pro forma diluted net income (loss) per share for the three and nine
months ended
[b] Represents fees paid in accordance with our management services
agreement with
[c] Includes non-cash compensation charges related to the
performance-based vesting of certain shares granted to Mr. Friedman, as
well as the one-time, fully vested option granted to Mr. Friedman upon
his reappointment as Chairman and Co-Chief Executive Officer in
[d] Represents legal and other professional fees incurred in connection
with our follow-on offerings in
[e] Includes lease termination costs for retail stores that were closed
prior to their respective lease termination dates. The amounts in the
three and nine months ended
[f] Represents legal and other professional fees, incurred in connection with the investigation conducted by the special committee of the Board of Directors relating to Mr. Friedman and our subsequent remedial actions.
[g] Assumes a normalized tax rate of 40% for all periods presented.
[h] Adjusted diluted net income per share is a supplemental measure of financial performance that is not required by, or presented in accordance with GAAP. We define adjusted net income per share as consolidated net income (loss) less non-recurring and other items divided by the Company’s post-initial public offering share count. Adjusted net income per share is included in this press release because management believes that adjusted net income per share provides meaningful supplemental information for investors regarding the performance of our business and facilitates a meaningful evaluation of actual results on a comparable basis with historical results. Our management uses this non-GAAP financial measure in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter.
Source:
Restoration Hardware Holdings, Inc.
Cammeron McLaughlin,
415-945-4998
VP, Investor Relations
cmclaughlin@restorationhardware.com