Summer Infant, Inc. (SUMR) 2021 Q1 法說會逐字稿

Good day, and welcome to the SUMR Brands Fiscal 2021 First Quarter Conference Call. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Chris Witty, Investor Relations Adviser. Please go ahead.

Hello, and welcome to the SUMR Brands 2021 First Quarter Conference Call. With me on the call today is the company's CEO, Stuart Noyes; and Interim CFO, Bruce Meier.

I would now like to provide a brief safe harbor statement. This call may include forward-looking statements that relate to SUMR Brand's outlook for 2021 and beyond. Provide a brief safe harbor statement -- this call may include forward-looking statements -- these forward-looking statements are subject to various risks and uncertainties that could cause actual results and events to differ materially from these statements. Please refer to the risk factors contained in the company's annual report on Form 10-K, its quarterly reports on Form 10-Q and in our other filings with the Securities and Exchange Commission.

During the call, management may make references to adjusted EBITDA, adjusted net income and adjusted earnings per share. These metrics are non-GAAP financial measures, which the company believes help investors gain a meaningful understanding of changes in SUMR Brands' operations. For more information on non-GAAP financial measures, please see the table for a reconciliation of GAAP results to non-GAAP measures included in the company's financial release issued yesterday evening.

And with that, I'd like to turn the call over to Stuart Noyes. Stuart?

Thanks, Chris, and good morning, everyone. We appreciate you joining our first quarter conference call today. I'll start by providing an overview of recent developments, after which Bruce will go through our financial results in detail.

As discussed on our last earnings call, we continued to face operating challenges this quarter due to logistical issues, which hindered our ability to get product to market in a timely manner. The same headwinds, mainly shipping constraints, trucking bottlenecks and general supply chain issues hampered industry expansion even as demand rose in response to the favorable economic conditions as well as ongoing federal stimulus.

We were glad to see some of our key product categories grow year-over-year, including our tried and true gates and potties, but the ability to get goods to market dependent on a variety of factors related to how, where and when the items were ordered and manufactured.

Just one look at our balance sheet shows our inventory levels fell, probably lower than we would like, but clearly indicative of the mismatch of supply and demand during this tumultuous period. If it weren't for such logistics constraints, overseas and production challenges in North America and to some extent, the fact that certain countries are still under COVID lockdown, I believe revenue would have actually been up over 2020.

Let me add, however, that even in the midst of so many moving pieces from pandemic restrictions to container availability and manufacturing bottlenecks, our people rose to the challenge, keeping costs down in managing the supply chain as best they could. While sales were not where we would have liked, we posted positive EPS, grew EBITDA sequentially versus quarter 4 and paid down additional debt. This shows a focus on bottom line results and operating execution.

Going forward, the good news is that demand should continue to be robust, improving economic conditions and the pending child tax credit will likely fuel consumer spending in the months and quarters to come. It then comes down to our ability to get product to market, and we're doing everything under our control to make that happen. We're managing our supply chain daily, making adjustments where possible, planning farther in advance and raising prices where possible to offset increasing commodity costs and shipping rates.

We are cautiously optimistic that these challenges will lessen as people come back to the workforce and shipping companies increase product throughput. But the timing here is not something easily estimated by us or any other consumer products company. All I can promise to our listeners is that we're doing everything possible to meet demand, fulfill orders and manage costs in tandem. Every day is a bit different than the last, but we feel confident given the overall positive trends as the year progresses.

With that, I'll turn it over to Bruce to review our financial results in detail. Bruce?

Thanks, Stuart, and good morning, everyone. As a reminder, our 10-Q and related press release were issued yesterday. In addition to listening to this conference call, I encourage you to review our filings.

Now to the results. First quarter net sales were $36.2 million compared with $40.3 million in the first quarter of fiscal 2020. While revenue was in line with the fourth quarter of 2020, it was down year-over-year due to the reasons previously discussed, ongoing supply chain constraints and logistical bottlenecks.

As Stuart mentioned, these issues more than offset increasing product demand and a generally improving economic environment, helped by lower pandemic-related restrictions. Revenue rose by double digits across certain categories, including potties, gates and boosters even as other areas saw reduced shipments and sales. Going forward, as Stuart discussed, we are doing everything possible to match through the supply chain issues and believe end-user demand will continue to be strong due to the economic outlook as well as a forthcoming child tax credit.

Gross profit was $10.7 million for the first quarter of fiscal 2021 versus $12.5 million in 2020, and our gross margin as a percentage of sales was 29.4% versus 31.0% last year. The year-over-year margin decline primarily reflects certain items no longer receiving tariff exclusions that were granted in 2020. As Stuart mentioned earlier, we are managing price, increasing them where possible to mitigate increasing costs and ongoing margin pressure.

Selling expense was $2.4 million in the first quarter versus $3.4 million in the prior year period, and as a percentage of net sales was 6.6% this year versus 8.5% in 2020. The decrease year-over-year and as a percentage of sales was primarily due to lower freight and advertising costs.

General and administrative expenses were $7.0 million in the first quarter versus $8.1 million in the prior year period. And G&A as a percentage of sales was 19.4% this year versus 20.2% in 2020. The year-over-year change reflects lower labor and other costs due to various restructuring initiatives.

Interest expense was $0.3 million in the first quarter of 2021, its lowest level in years versus $1.4 million in 2020, reflecting lower outstanding debt levels and more attractive interest rates following the company's refinancing of its credit facilities.

The company reported net income of $0.3 million or $0.12 per share in the first quarter of 2021 compared with a net loss of $1.2 million or a negative $0.57 per share in the prior year period. The company recorded a tax provision of $0.1 million in fiscal 2021 first quarter versus the tax benefit of $0.3 million in the comparable period of fiscal 2020.

Adjusted EBITDA for the first quarter of 2021 was $2.1 million versus $1.8 million in the first quarter of 2020. Adjusted EBITDA in 2021 included $0.8 million in bank permitted add back charges compared with $0.9 million in the prior period year. And adjusted EBITDA as a percentage of net sales was 5.7% in fiscal 2021 versus 4.6% last year.

Turning to the balance sheet. As of April 3, 2021, Summer Infant had approximately $0.4 million of cash and $29.7 million of bank debt compared with $0.5 million of cash and $30.9 million of bank debt at the beginning of fiscal 2021. We continue to focus on reducing debt and strengthening the balance sheet wherever possible.

Inventory at the end of the first quarter was $16.6 million compared with $25.1 million as of January 2, 2021. And our inventory turns were 6.2 versus 4.0 turns at the beginning of the year.

Trade receivables as of April 3, 2021, were $28.6 million compared with $26 million at the beginning of fiscal 2021. Day sales outstanding, or DSOs, were 71 as compared to 66 at the start of the year. Accounts payable and accrued expenses were $28.2 million as of April 3, 2021, compared with $34.1 million at the beginning of the fiscal year.

With that, I'll turn the call over to the operator and open it up for questions.

(Operator Instructions) At this time, there are no questions in the question queue, and I would like to turn the conference back over to Mr. Noyes for any closing remarks.

Great. Thank you very much. Thank you all for joining us today for the call. We look forward to speaking with you next quarter. Have a nice day.

The conference has now concluded. Thank you for attending today's presentation, and have a nice day.