investor presentationinvestor.athome.com/~/media/files/a/at-home-ir-v2/...this presentation contains...
TRANSCRIPT
-
September 2020
Investor Presentation
-
Disclaimer
This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You can generally identify forward-looking statements by our use of forward-looking terminology such as "anticipate", "are confident", "assumed", "believe", "continue", "could", "estimate", "expect", "intend", “look forward”, "may", "might", "on track", “outlook”, "plan", "potential", "predict", “reaffirm”, "seek", "should", or "vision", or the negative thereof or other variations thereon or comparable terminology. In particular, the projected financial information and other statements and assumptions about our future financial performance , as well as statements about the markets in which we operate, expected new store openings, our real estate strategy, growth targets, potential growth opportunities, impact of expected stock option exercises, future capital expenditures, and estimates of expenses we may incur in connection with equity incentive awards to management and our expectations, beliefs, plans, strategies, objectives, prospects, assumptions or future events or performance contained in this presentation are forward-looking statements. Furthermore, statements contained in this document relating to the recent global outbreak of the novel coronavirus disease (COVID-19), the impact of which remains inherently uncertain on our financial results, are forward-looking statements.
We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements contained in this presentation are not guarantees of future performance and our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate, may differ materially from the forward-looking statements contained in this presentation. In addition, even if such results or events are consistent with the forward-looking statements contained in this presentation, they may not be predictive of results or developments in future periods.
See “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended January 25, 2020, as well as those factors updated in “Item 1A. Risk Factors” of our Quarterly Report on Form 10-Q for the quarter ended July 25, 2020, and other reports that we file with the Securities and Exchange Commission (“SEC”), for more complete information about the factors that could affect our results of operations, actual results, performance or achievements and for more information about At Home Group Inc. (the “Company”). You may get these documents for free by visiting EDGAR on the SEC website at www.sec.gov.
Any forward-looking statement that we make in this presentation speaks only as of the date of such statement. Except as required by law, we do not undertake any obligation to update or revise, or to publicly announce any update or revision to, any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this presentation.
The non-GAAP financial measures contained in this presentation (including, without limitation, comparable store sales, Adjusted EBITDA, Store-level Adjusted EBITDA, adjusted operating income, Adjusted Net Income and pro forma adjusted net income) are not GAAP measures of our financial performance and should not be considered as alternatives to net income (loss) as a measure of financial performance, or any other performance measure derived in accordance with GAAP. We present Adjusted EBITDA, Adjusted EBITDA margin, Store-level Adjusted EBITDA and Store-level Adjusted EBITDA margin, which are not recognized financial measures under GAAP, because we believe they assist investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance, such as interest, depreciation, amortization, loss on extinguishment of debt, impairment charges and taxes. We present adjusted operating income, Adjusted Net Income and pro forma adjusted net income because we believe investors’ understanding of our operating performance is enhanced by the disclosure of our results adjusted for items that we do not believe are indicative of our core operating performance. You are encouraged to evaluate each adjustment to non-GAAP financial measures and the reasons we consider it appropriate for supplemental analysis. In particular, Store-level Adjusted EBITDA does not reflect costs associated with new store openings, which are incurred on a limited basis with respect to any particular store when opened and are not indicative of ongoing core operating performance, and corporate overhead expenses that are necessary to allow us to effectively operate our stores and generate Store-level Adjusted EBITDA. There can be no assurance that we will not modify the presentation of our non-GAAP financial measures in the future, and any such modification may be material. In addition, in evaluating Adjusted EBITDA, Store-level Adjusted EBITDA, adjusted operating income, Adjusted Net Income and pro forma adjusted net income, you should be aware that in the future, we may incur expenses that are the same as or similar to some of the adjustments in the presentation. Our presentation of Adjusted EBITDA, Store-level Adjusted EBITDA, adjusted operating income, Adjusted Net Income and pro forma adjusted net income should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. In addition, Adjusted EBITDA, Store-level Adjusted EBITDA, adjusted operating income, Adjusted Net Income and pro forma adjusted net income may not be comparable to similarly titled measures used by other companies in our industry or across different industries and you should not consider them in isolation, or as a substitute for analysis of our results as reported under GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA, Store-level Adjusted EBITDA, adjusted operating income, Adjusted Net Income and pro forma adjusted net income only as supplemental information.
This presentation does not constitute an offer to sell or the solicitation of an offer to buy any security of the Company.
1
-
Investment Highlights
2
Highly Differentiated Home Décor ConceptI
Exceptional Management Team and Strong Corporate CultureVII
Compelling Customer Value PropositionII
Efficient Operating Model Driving High ProfitabilityIV
Rapidly Growing Digital CapabilitiesV
Strong Financial Position and Focus on Free Cash Flow Generation✓VI
Significant Growth OpportunitiesIII
-
Highly Differentiated Concept
-
A Highly Differentiated Retail Growth Story
• Specialty retailer with unmatched breadth and
depth of assortment
• ~105,000 square feet offering over 50,000
SKUs
• Offering compelling value through everyday low
prices, supported by efficient operating model
Diffe
ren
tia
ted
Re
tail C
on
ce
pt
Sig
nific
an
t
Wh
ite
spa
ce • Capitalizing on availability of low cost, second-
generation real estate
• Demonstrated portability – 219 stores across 40
states spanning small and large markets
• 600+ total store potential nationwide
Str
on
g P
rofita
ble
Gro
wth
• 7-Year Historical Net Sales CAGR of ~21%(1)
• 17% Adjusted EBITDA margin as of LTM Q2 FY2020
• 2-year comparable store sales stack of +1.0%(2)
• Compelling new store economics with payback
period of ~ 2 years(3)
Any Room, Any Style, Any Budget
Housewares Furniture
Textiles and Rugs Wall Décor
Seasonal Outdoor
4
Broad aesthetic of merchandise appeals to a wide customer base
Note: Store information as of August 27, 2020. Potential store opportunity based on research conducted by Buxton Company (“Buxton”).(1) Compound annual net sales growth rate for FY2013 through FY2020.(2) 2-year stack as of FY2020. (3) Represents average historical results for new stores opened in FY2017 through FY2019, excluding certain builds subject to ground leases that we do not
expect to include in sale-leaseback transactions as well as the relocation of our largest volume store in FY2018.
-
HIGHLY DIFFERENTIATED
CONCEPT
SUSTAINABLE
LONG-TERM MODEL
At Home’s Strategic Pillars
• Unmatched breadth and
depth of assortment
• Compelling, innovative
merchandise mix that
resonates with customers
• Value engineer
customer’s desired “look”
at everyday low prices
• One-stop shop for any
room, any style and any
budget
• No direct competitor
• EDLP Plus campaigns,
reinventions and
strategic collaborations
• Low cost structure
creates customer savings
• Streamlined store and
distribution center
operations
• Enjoyable self-help
shopping experience
enabled by low store
labor model
• Highly sophisticated
merchandising/sourcing
teams
STRONG PROFITABLE
GROWTH
• White space opportunity
targeting 600+ stores with
compelling new store-
level economics
• Focused on balancing
growth and profitability
with free cash flow and
reduced leverage
• Enhanced Omni-Channel
capabilities to include
BOPIS, Curbside Pick-up
and Next-Day Local
Delivery
5
-
At Home by the Numbers
(1) Unbranded, private label or specifically designed for At Home.(2) Represents FY2019 vintage actual results for first 12 months of operations. For purposes of calculating store-level Adjusted EBITDA, synthetic rent assumed for owned stores.(3) Represents average historical results for new stores opened in FY2017 through FY2019, excluding certain builds subject to ground leases that we do not expect to include in
sale-leaseback transactions as well as the relocation of our largest volume store in FY2018.(4) Represents results from end of FY2013 through FY2020.(5) Average FY2020 Store-level Adjusted EBITDA margin for stores open at least 12 months as of January 25, 2020.
6
Store-Level Adj.
EBITDA margin of
27%(5)
~2 years average payback period(3)
More than 10x sq. ft. of other home
décor retailers
>70% exclusive(1)
Year 1 Sales of $6.7 million(2)
80% of net sales occur at full price
20%+ HistoricalUnit CAGR(4)
LOW-PRICE LEADER WITH
UNMATCHED BREADTH AND
DEPTH
FLEXIBLE REAL ESTATE
STRATEGY AND
COMPELLING NEW STORE
ECONOMICS
STRONG PERFORMANCE
ENABLED BY MODEL
-
$81 $85 $89
$105
$126
$161
$196
$175
$239
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 LTM
$96
$113
$133
$169
$199
$252
$306 $295
$351
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 LTM
$364 $404
$498
$622
$766
$951
$1,166
$1,365 $1,422
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 LTM
Strength of Model Reflected in our Performance
Net Sales Adjusted EBITDA(1)Store-level Adjusted EBITDA(1)
(1) The adoption of ASC 842 in Q1 FY20 required, among other things, a change to the accounting treatment of sale-leaseback transactions and the reclassification of certain of our financing obligations. ASC 842’s adoption would have impacted Adjusted EBITDA in FY19 by ($5.2M). Please refer to the reconciliation of Adjusted EBITDA and Store-level Adjusted EBITDA in the appendix.
(2) FY15 contained an additional week of business. FY15 and FY16 net sales growth rates have been adjusted to exclude $7.8M in net sales earned in the 53rd week of FY15.
CAGR: 20% CAGR: 19% CAGR: 16%
7
% Growth (2) 11 21 27 23 24 23 17 12 % Growth 18 18 27 18 27 21 (4) 15 % Growth 6 4 19 20 27 22 (11) 32
New
Stores10 16 20 24 28 34 36 19 Margin 28 27 27 26 27 26 22 25 Margin 21 18 17 16 17 17 13 17
($ in millions)
-
Strategies to Continue Driving Strong, Profitable Growth
-
9
At Home Opportunity
Commitment to
Recognizable and
Trusted Brands
• In the face of uncertainty, consumers turn to brands they trust & know
• At Home has developed a distinctive value brand that resonates with today’s
consumer
Pressure on Brick &
Mortar Creates
Opportunities
• Brick & mortar bankruptcies may create opportunities to continue to grow store fleet
economically through second generation stores
• As strong performer, At Home expects to receive better / more flexible terms in rent
negotiations
Consumers Shifting
Spending into Off-Price
Categories
• Economic downturn and elevated unemployment likely to enhance demand for
value-oriented offerings
• At Home’s value offering is well-positioned to benefit
• At Home’s large box, non-mall, one-stop shopping experience is unique
Sector Trend
Focus on the Home
• Consumers are spending more time in the home than ever before
• Shifting wallet dollars from travel / entertainment to enhance their homes
• Recent performance points to significant demand for home goods and furnishings
• Industry expected to grow at 3%+ CAGR through 2024(1)
Stores are Convenient
for Customers
• Large stores allow for social distancing
• Integration of BOPIS & curbside delivery resonates with customers
Proven Brand Strength in the COVID Environment
(1) Source: Euromonitor Passport Homewares and Home Furnishings USA data. Estimated industry size based on expected 3.6% CAGR for 2019 – 2024.
-
Key Enablers:10
• EDLP+ campaign-driven model
• Drive newness through category reinventions and stronger trend leadership in merchandising
• 2-3 new product/brand collaborations per year
• Be a low-price leader in the marketplace
• Enhance focus on product quality and uniqueness
• Improve inventory management across Everyday and Seasonal assortments
• Drive continuous improvements in our Seasonal business
• BOPIS, Curbside and Delivery launched FY21
• Developing ship-from-store capabilities for FY22
• Enhance Loyalty program
• Relentless focus on enabling a frictionless experience for customers
• Enhance in-store experience
• Continue efforts to remain cash flow positive
• Reduce debt while expanding the chain
• Consolidate supplier base
• Diversify sourcing footprint geographically
• Expand our direct sourcing capability
• Continue to attract and retain top talent and build a strong pipeline that fuels our growth
• Become an academy for talent (both functional and leadership)
• Level-load the labor to more easily manage stores
Data Driven / Analytics
Technology
At Home 2.0
-
11%
7%
7%
5%
5%
5%
3% 3% 3% 2% 2%
45%
Fragmented Addressable Market(2)
$129
$169
$202
2010 Actual 2019 Actual 2024 Estimated(1)(1)
CAGR: ~3%
CAGR: ~3.6%
Industry growth rate is expected to accelerate
Taking Share in a Large, Growing, Highly Fragmented Industry With No Dominant Player
(1) Source: Euromonitor Passport Homewares and Home Furnishings USA data. Estimated industry size based on expected 3.6% CAGR for 2019 – 2024.(2) Source: Home Furnishings News (HFN The Top 50 Retailers in Home Furnishings July/August 2020 report).(3) Per Cooper Roberts Research Inc. Q1 2020 survey of active home décor shoppers.
Two thirds of shoppers prefer to buy home décor
in-store compared to online
Home Décor Is a Large and Growing Market
($ in billions)
Other
(1)
11
(1)
(3)
-
20%
18%
17%
13%
10% 10%
7% 7%
Value Is Winning Across Retail
(1) Reflects year-over-year growth rate of the most recently reported trailing four quarters as of March 24, 2020, per company filings.
Annual Net Sales Growth(1)
12
-
Why Our Customers Love Us
(1) Per Cooper Roberts Research Inc. Q1 2020 survey of active home décor shoppers. An active home décor shopper is more likely to visit a retailer in the next three months if that retailer exhibits good value, quality products, large selection, better prices and unique products versus a retailer that does not.
(2) Per Q2 2020 internal analysis of comparable items that represent the Top Quartile of sales in each category versus Walmart®, Target®, Amazon®, Wayfair® and a fifth category-specific competitor.
(3) Unbranded, private label or specifically designed for At Home.
Giving Customers What They Want Most (1)
• Our merchant teams identify on-trend products and value-engineer them to optimize the balance of
price and quality that best appeals to our customer base
• Enables us to deliver unique products with desirable aesthetics at attractive price points
• Our top items are strategically priced to be at or below key competitors (2)
• Over 70% of products are exclusive(3) to At Home
•
-
$24.99 $40.00
$12.99 $15.99
$188.99$119.99
$399.99 $589.99
$6.99 $16.99
Se
aso
na
l D
éc
or
Tab
leto
p D
éc
or
Tex
tile
sFu
rnitu
re
Ho
use
wa
res
Wa
ll D
ec
or
Same Style, Similar Look, Lower Price Low Price Leader
Note: Prices as quoted online as of August 18, 2020.
14
$117.99 (members $94.39)$79.99
-
13%15% 15%
18%
32%
37%
(1) Per modified Q2 2020 (5/4/20-7/12/20 as result of COVID) Cooper Roberts survey to female home décor shoppers over 18 years of age who live within 20 miles of an At Home store: “What stores, if any, have you ever seen or heard of that sell home décor products?”
Unaided Brand Awareness(1)
Brand Awareness Still in Early Stages
Building Brand Awareness Is a Huge Opportunity
Strategies to Enhance Brand Awareness
Investing in
Loyalty
Program and
Digital
Advertising
Increasing
Outreach
through Direct
Mail and
Catalogs
15
Annual Marketing Spend
$0 $2
$9 $13
$19
$26
$36
$46
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
-
58 6881
100123
149180
212
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20
Growth 17% 19% 23% 23% 21% 21% 18%
Significant Whitespace Opportunity with Track Record of Successful New Store Openings Across Markets
Note: At Home store count as of August 27, 2020. Store growth CAGR represents year-end results for FY2013 through FY2020.(1) Current store count, potential store count and percentage penetration are based on public company filings and company websites.
Expand Store Base
Penetration Shows Significant Whitespace
Track Record of New Store Growth
Total Number of Stores at Year End
Current Penetration of Total Store Potential(1)
Long-Term Opportunity to Grow Our Store Base by ~ 3X
Current Store Footprint
16
FY 2020 Openings
FY 2019 Openings
Prior Openings219
Stores
40States
FY 2021 Openings
37% 37% 39%
61%
74% 74% 85%
-
$1.1
$1.6 $1.8 $1.8
$2.3 $2.0
FY2014 FY2015 FY2016 FY2017 FY2018 FY2019
Year 1 Sales $6+ million $8+ million
Year 1 Store-Level
Adjusted EBITDA Margin~ 30% 35+%
Gross Investment $5 to $6 million $15 to $16 million
Net Investment $4 to $5 million $2 to $3 million
Payback Period ~ 2.5 Years
-
Enhancing the Customer Experience Digitally
18
• Focus on digitally enabling in-store sales
• Products and prices online, including store-level availability(1), to promote ease of browsing
• BOPIS pilot in Q4 FY2020 and launched to more markets in Q1 FY2021
• Curbside pickup launched and delivery partnership expanded in Q1 FY2021
• Gathering customer transaction insights through loyalty program
• Leverage data analytics to increase customer engagement and drive traffic
Aug 2019
7.8Launch
Q2 FY2021
98%
YoY
MillionMembers
Aug 2017 Aug 2020
Million Members
5.4Program
Total EmailsOpened
Q2 FY2021
Increasing Digital EngagementExpanding Insider Perks Loyalty
ProgramAccelerating Omnichannel
Initiatives
41%
YoY
of Store Base Offers
BOPIS
96%of Store Base Offers Next-Day Delivery
74%
Website Traffic
Q2 FY2021
(1) Store-level availability excludes clearance
-
Building a Sustainable Long-Term Model
-
$96 $113 $133
$169 $199
$252
$306 $295
$351
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 LTM
$81 $85 $89 $105
$126
$161
$196 $175
$239
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 LTM
58 6881
100123
149
180
212 219
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 LTM
$364 $404 $498
$622 $766
$951
$1,166
$1,365 $1,422
FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 LTM
(1) The adoption of ASC 842 in Q1 FY20 required, among other things, a change to the accounting treatment of sale-leaseback transactions and the reclassification of certain of our financing obligations. For illustrative and comparative purposes only, ASC 842’s adoption would have impacted Store-level Adjusted EBITDA in FY19 by ($2.4M). ASC 842’s adoption would have impacted Adjusted EBITDA in FY19 by ($5.2M). Please refer to the reconciliation of Adjusted EBITDA and Store-level Adjusted EBITDA in the appendix.
(2) FY15 contained an additional week of business. FY15 and FY16 net sales growth rates have been adjusted to exclude $7.8M in net sales earnedin the 53rd week of FY15.
Proven Track Record of Results
Net Sales
Adjusted EBITDA(1)Store-level Adjusted EBITDA(1)
Store Count
CAGR: +19% CAGR: +16%
CAGR: +19%
Margin 26 28 27 27 26 27 26 22 25
Gross New Stores
7 10 16 20 24 28 34 36 19
20
Margin 22 21 18 17 16 17 17 13 17
CAGR: +20%
($ in millions)
% Growth(2) 11 21 27 23 24 23 17 12
-
21
Significant Momentum in Q2 FY2021
($Millions)
Adjusted EBITDA and % Margin
Commentary Net Sales
$342.3
$515.2
Q2 FY20 Q2 FY21
50.5% Q2 FY21 YOY Growth• Record-setting quarter
− Comparable store sales increased 42.3%
− Net Sales of $515.2 million increased 50.5% vs. LY
− Adjusted EBITDA of $159.7 million increased 238.6% vs. LY
• All stores were re-opened as of June 19th (starting
early May)
• Benefitting from consumer focus on the home, safe
social distancing and omni-channel capabilities
• Strong gross margins driven by fixed cost leverage
• Estimate At Home grew sales several times faster than
the broader industry
• Strong liquidity position of more than $300 million (1)
$1,269.8
$1,421.5
LTM Q2 FY20 LTM Q2 FY21
$47.1
$159.7
Q2 FY20 Q2 FY21
$181.5
$239.5
LTM Q2 FY20 LTM Q2 FY21
11.9% LTM Q2 YOY Growth
238.6% Q2 FY21 YOY Growth 31.9% LTM Q2 YOY Growth
13.8%
31.0%
14.3%
16.8%
Q2 FY2021 UpdateOutperforming in the COVID-19 Environment
(1) Liquidity includes $32.4M of cash and $273.4M in borrowings available under our ABL facility.
($Millions)
-
5.1x 5.1x
3.3x
2.9x 3.0x 3.2x
1.4x
FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 LTM
We Have Continued to Strengthen our Balance Sheet
(1) Net debt includes the ABL revolving credit facility, current portion of long-term debt, long-term debt and financing obligations, less unamortized deferred debt issuance cost and cash. Calculation excludes operating lease liabilities recognized in accordance with ASC 842 Leases. Please refer to the reconciliation of Adjusted EBITDA in the appendix.
Track Record of Reducing Leverage
Net Debt / Adjusted EBITDA(1)
22
Committed to delivering positive free cash flow and reducing leverage over time through earnings growth and capital efficiency initiatives
• Implement working capital improvements
• Consolidate supplier base
• Diversify sourcing footprint geographically
• Expand our direct sourcing capability
• Explore build-to-suit and buy-to-suit financing alternatives
• Reduce capital outlay through value engineering, strategic procurement, and a refined market-by-market approach
Strategies to Drive Positive Free Cash Flow
-
Appendix
-
Historical Adjusted EBITDA and Store-Level Adjusted EBITDA Reconciliation
24
FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 LTM
($ in thousands) 1/26/2013 1/25/2014 1/31/2015 1/30/2016 1/28/2017 1/27/2018 1/26/2019 1/25/2020 7/25/2020
Net (loss) income ($9,749) ($22,283) ($436) $3,574 $27,066 $31,812 $48,996 ($214,435) ($508,219)
Interest expense, net 39,837 41,152 42,382 36,759 27,174 21,704 27,056 31,801 $28,940
Loss on extinguishment of debt 20,744 - - 36,046 2,715 - - - -
Income tax (benefit) provision (1,558) 59 4,357 (14,160) 15,722 33,845 (17) 23,172 25,302
Depreciation and amortization(a) 12,912 13,132 23,317 28,694 36,925 48,777 56,529 69,418 71,644
EBITDA $62,186 $32,060 $69,620 $90,913 $109,602 $136,138 $132,564 ($90,044) ($382,333)
Gain on sale-leaseback(b) - - - - - - - (17,742) (1,099)
Impairment charges(c) - - - - - 2,422 - 255,230 574,962
Legal settlements and consulting and other
professional services(d) 3,609 2,874 4,633 3,506 2,478 5,734 5,990 2,652 982
Relocation and employee recruiting(e) 321 4,442 2,928 724 262 - - - -
Management fees and expenses(f ) 3,805 3,690 3,596 3,612 1,847 - - - -
Stock-based compensation expense(g) 292 4,373 4,251 4,663 4,066 2,491 5,530 7,423 8,316
Stock-based compensation related to special one-
time IPO bonus grant(h) - - - - 5,318 11,273 2,521 - -
Stock-based compensation related to one-time
CEO grant(i) - - - - - - 41,475 - -
Impairment of trade name(j) - 37,500 - - - - - - -
Non-cash rent(k) 1,730 1,367 1,795 2,398 2,320 3,334 4,499 15,998 37,431
Other(l) 8,567 (1,361) 1,881 (347) 384 (593) 3,827 1,816 1,221
Adjusted EBITDA, as reported $80,510 $84,945 $88,704 $105,469 $126,277 $160,799 $196,406 $175,333 $239,480
Illustrative impact of ASC 842(o) - - - - - - (5,161) - -
Adjusted EBITDA, as recast $80,510 $84,945 $88,704 $105,469 $126,277 $160,799 $191,245 $175,333 $239,480
Cost associated with new store openings (m) 1,070 2,023 6,848 9,801 12,035 16,504 18,656 24,166 15,244
Corporate overhead expenses(n) 14,146 25,977 37,570 53,303 60,675 75,149 90,839 95,401 95,957
Less illustrative impact of ASC 842(o) - - - - - - 5,161 - -
Store-level Adjusted EBITDA, as reported $95,726 $112,945 $133,122 $168,573 $198,987 $252,452 $305,901 $294,900 $350,681
Illustrative impact of ASC 842(o) - - - - - - (2,399) - -
Store-level Adjusted EBITDA, as recast $95,726 $112,945 $133,122 $168,573 $198,987 $252,452 $303,502 $294,900 $350,681
-
Historical Adjusted EBITDA and Store-Level Adjusted EBITDA Reconciliation
(a) Includes the portion of depreciation and amortization expenses that are classified as cost of sales in our consolidated statements of operations.
(b) As of January 27, 2019, we fully recognized the gains on sale-leaseback transactions on the condensed consolidated statements of income in accordance with ASC 842.
(c) For LTM ending 7/25/2020, represents non-cash impairment charges of $569.7 million related to impairment of goodwill and $5.2 million in connection with store closure and relocation decisions.
For fiscal year 2020, represents non-cash impairment charges of $250.0 million related to impairment of goodwill and $5.2 million in connection with store closure and relocation decisions. For
fiscal year 2018, represents an impairment charge of $2.4 million following the resolution of a legal matter.
(d) Primarily consists of (i) consulting and other professional fees with respect to projects to enhance our merchandising and human resource capabilities and other company initiatives; and (ii)
transaction costs and charges incurred in connection with the sale of shares of our common stock on behalf of our Sponsors.
(e) Primarily reflects employee recruiting and relocation costs in connection with the build-out of our management team.
(f) Reflects management fees paid to our Sponsors in accordance with our management agreement. In connection with our initial public offering, the management agreement was terminated on
August 3, 2016 and our Sponsors no longer receive management fees from us.
(g) Non-cash stock-based compensation expense related to the ongoing equity incentive program that we have in place to incentivize, retain and motivate our employees, officers and non-
employee directors.
(h) Non-cash stock-based compensation expense associated with a special one-time initial public offering bonus grant to certain members of senior management (the “IPO grant”), which we do
not consider in our evaluation of our ongoing performance. The IPO grant was made in addition to the ongoing equity incentive program that we have in place to incentivize, retain and
motivate our employees, officers and non-employee directors and was made to reward certain senior executives for historical performance and allow them to benefit from future successful
outcomes for our Sponsors.
(i) Non-cash stock-based compensation expense associated with a special one-time grant of stock options to our Chairman and Chief Executive Officer that vested and was fully recognized in the
second fiscal quarter 2019 (the “CEO grant”), which we do not consider in our evaluation of our ongoing performance.
(j) Reflects the impairment of the Garden Ridge trade name as a result of our rebranding initiative.
(k) Consists of the non-cash portion of rent, which reflects (i) the extent to which our GAAP straight-line rent expense recognized exceeds or is less than our cash rent payments, partially offset by (ii)
the amortization of deferred gains on sale-leaseback transactions that are recognized to rent expense on a straight-line basis through the applicable lease term for periods through Q4 fiscal year
2019. The offsetting amounts relating to the amortization of deferred gains on sale-leaseback transactions were $(8.8) million, $(6.3) million, $(4.7) million, $(3.2) million, $(1.8) million and $(0.3)
million during fiscal years 2019, 2018, 2017, 2016, 2015 and 2014, respectively. The GAAP straight-line rent expense adjustment can vary depending on the average age of our lease portfolio,
which has been impacted by our significant growth. For newer leases, our rent expense recognized typically exceeds our cash rent payments while for more mature leases, rent expense
recognized is typically less than our cash rent payments.
(l) Other adjustments include amounts our management believes are not representative of our ongoing operations, including:• for fiscal year 2013, a $5.6 million exit payment to former management;
• for fiscal year 2014, an insurance reimbursement of $(1.6) million and a prior year audit refund of $(0.5) million;
• for fiscal year 2015, asset retirements related to our rebranding of $0.6 million and $0.4 million for a store relocation;
• for fiscal year 2016, gain on the sale of our property in Houston, Texas of $(1.8) million and $(0.3) million related to various refunds for prior period taxes and audits, slightly offset by $0.5
million in expenses incurred for a store closure;
• for fiscal year 2017, a loss of $0.3 million recognized on the sale of land in connection with the expansion of our distribution center;
• for fiscal year 2019, costs incurred of $2.4 million related to the CFO Transition, payroll tax expense of $0.8 million related to the exercise of stock options and $0.5 million related to the
one-time loss incurred related to the acquisition of land for the purposes of building a new store in fiscal year 2020 that had a pre-existing unusable structure on the premises that was
demolished;
• for fiscal year 2020, costs incurred of $1.4 million related to the restructuring of our merchandising department;
• for LTM ending 7/25/2020, primarily relates to the write-off of certain site selection costs that occurred as a result of the COVID-19 pandemic.
(m) Reflects non-capital expenditures associated with opening new stores, including marketing and advertising, labor and cash occupancy expenses. Costs related to new store openings represent
cash costs, and you should be aware that in the future we may incur expenses that are similar to these costs. We anticipate that we will continue to incur cash costs as we open new stores in the
future. We opened 19 new stores during the LTM ending 7/25/2020 and 36, 34, 28, 24, 20,16,10 and seven new stores during fiscal years 2020, 2019, 2018, 2017, 2016, 2015, 2014 and 2013,
respectively.
(n) Reflects corporate overhead expenses, which are not directly related to the profitability of our stores, to facilitate comparisons of store operating performance as we do not consider these
corporate overhead expenses when evaluating the ongoing performance of our stores from period to period. Corporate overhead expenses, which are a component of selling, general and
administrative expenses, are comprised of various home office general and administrative expenses such as payroll expenses, occupancy costs, marketing and advertising, and consulting and
professional fees. See our discussion of the changes in selling, general and administrative expenses presented in “—Results of Operations”. Store-level Adjusted EBITDA should not be used as a
substitute for consolidated measures of profitability or performance because it does not reflect corporate overhead expenses that are necessary to allow us to effectively operate our stores and
generate Store-level Adjusted EBITDA. We anticipate that we will continue to incur corporate overhead expenses in future periods.
(o) Represents the necessary adjustments to reflect management’s estimates of the impact of the adoption of ASC 842 on fiscal year 2019 results, which requires, among
other things, a change to the accounting treatment of sale-leaseback transactions and the reclassification of certain of our financing obligations.
25