Commodities: Press Release: Ollie’s Bargain Outlet Holdings, Inc. Announces Fiscal 2017 Third Quarter Financial Results

Press Release: Ollie’s Bargain Outlet Holdings, Inc. Announces Fiscal 2017 Third Quarter Financial Results

Ollie’s Bargain Outlet Holdings, Inc. Announces Fiscal 2017 Third Quarter Financial Results

Company Raises Full-Year Guidance

HARRISBURG, Pa., Dec. 06, 2017 (GLOBE NEWSWIRE) — Ollie’s Bargain Outlet Holdings, Inc. (NASDAQ:OLLI) today announced financial results for the third quarter ended October 28, 2017.

Third Quarter Summary:

   -- Total net sales increased 17.9% to $238.1 million; 
 
   -- Comparable store sales increased 2.1%; 
 
   -- The Company opened 15 new stores during the quarter, ending the quarter 
      with a total of 265 stores in 20 states, an increase in store count of 
      14.2% year over year; 
 
   -- Operating income increased 29.8% to $24.2 million; 
 
   -- Net income increased 80.3% to $18.9 million and Net income per diluted 
      share increased  70.6% to $0.29; 
 
   -- Adjusted net income(1) increased 31.3% to $14.2 million and Adjusted net 
      income per diluted share(1)  increased 29.4% to $0.22; and 
 
   -- Adjusted EBITDA(1) increased 23.8% to $29.2 million. 
 

Mark Butler, Chairman, President and Chief Executive Officer, stated, “We are very pleased with our third quarter performance and the continuing momentum in our business. Strong deal flow, great new store performance, and tight expense control drove our record results. In the third quarter, we once again exceeded our sales and earnings expectations, delivering a sales increase of 18% and a 31% increase in adjusted net income. We believe we are well-positioned for the remainder of the holiday season, including Ollie’s Army Night on December 10, 2017. As we look ahead, we will maintain our focus on consistent execution, just as we have for 35 years. We know that Everyone Loves a Bargain! and this will never go out of style.”

 
 
(1)      Adjusted operating income, Adjusted net income, Adjusted 
          net income per diluted share, EBITDA, and Adjusted 
          EBITDA are not measures recognized under generally 
          accepted accounting principles ("GAAP"). Please see 
          the reconciliation of GAAP to non-GAAP tables included 
          later in this release. 
 
 
 

Third Quarter Results

Net sales increased 17.9% to $238.1 million in the third quarter of fiscal 2017 from $202.0 million in the third quarter of fiscal 2016. The increase in net sales was driven by a 2.1% increase in comparable store sales and increased store count compared to the third quarter of fiscal 2016. The Company opened 15 stores in the third quarter of fiscal 2017 and ended the quarter with 265 stores, compared to 232 stores at the end of the third quarter of fiscal 2016.

Gross profit increased 16.4% to $98.0 million in the third quarter of fiscal 2017 from $84.2 million in the third quarter of fiscal 2016. Gross margin decreased 50 basis points to 41.2% in the third quarter of fiscal 2017 from 41.7% in the third quarter of fiscal 2016. The decrease in gross margin is due to decreased merchandise margins partially offset by favorable supply chain costs as a percentage of net sales.

Operating income increased 29.8% to $24.2 million in the third quarter of fiscal 2017 from $18.6 million in the third quarter of fiscal 2016. As a percentage of net sales, operating income increased 100 basis points to 10.2% in the third quarter of fiscal 2017. Excluding $0.6 million of transaction related expenses incurred in the third quarter of last year, Adjusted operating income increased 25.9% and 70 basis points as a percentage of net sales.

Net income increased 80.3% to $18.9 million, or $0.29 per diluted share, in the third quarter of fiscal 2017 from $10.5 million, or $0.17 per diluted share, in the third quarter of fiscal 2016. Adjusted net income (1) , which excludes income tax benefits due to the accounting change for stock-based compensation in the current year and transaction related expenses net of taxes in the prior year, increased 31.3% to $14.2 million, or $0.22 per diluted share, in the third quarter of fiscal 2017 from $10.8 million, or $0.17 per diluted share, in the third quarter of fiscal 2016.

Adjusted EBITDA(1) increased 23.8% to $29.2 million, or 12.3% of net sales, in the third quarter of fiscal 2017 from $23.6 million, or 11.7% of net sales, in the third quarter of fiscal 2016. Adjusted EBITDA excludes non-cash stock-based compensation expense, non-cash purchase accounting items and transaction related expenses.

Balance Sheet and Cash Flow Highlights

The Company’s cash balance as of the end of the third quarter of fiscal 2017 was $42.2 million compared to $36.0 million at the end of the third quarter of fiscal 2016. The Company had no borrowings under its $100.0 million revolving credit facility and $98.5 million of availability under the facility at the end of the third quarter of fiscal 2017. The Company ended the third quarter of fiscal 2017 with total borrowings of $126.7 million compared to $196.5 million at the end of the third quarter of fiscal 2016. Subsequent to quarter-end, on November 21, 2017 the Company paid down $30 million in term loan debt, resulting in a term loan debt balance of $96.3 million.

Inventory at the end of the third quarter of fiscal 2017 increased 18.1% to $284.3 million compared to $240.8 million at the end of the third quarter of fiscal 2016, primarily due to new store growth and timing of deal flow.

Capital expenditures in the third quarter of fiscal 2017 totaled $6.5 million compared to $4.3 million in the third quarter of fiscal 2016.

Outlook

Based on actual year-to-date results and expectations for the fourth quarter, Ollie’s currently estimates the following results for the fiscal year ending February 3, 2018:

   -- Total net sales of $1.062 billion to $1.065 billion; 
 
   -- Comparable store sales growth of 2.0% to 2.5%; 
 
   -- The opening of 34 new stores and no planned closures; 
 
   -- Operating income of $131.0 million to $132.0 million; 
 
   -- Net income per diluted share of $1.36 to $1.37; 
 
   -- Excluding the loss on extinguishment of debt and income tax benefits due 
      to the accounting change for stock-based compensation, Adjusted net 
      income per diluted share(2) of $1.21 to $1.22; 
 
   -- Estimated weighted diluted average shares outstanding of 65.0 million; 
      and 
 
   -- Capital expenditures of $18.5 million to $20.0 million. 
 

Conference Call Information

A conference call to discuss the fiscal 2017 third quarter financial results is scheduled for today, December 6, 2017 at 4:30 p.m. Eastern Time. Investors and analysts can participate on the conference call by dialing (800) 219-7052 or (574) 990-1029 and using conference ID #5199749. Interested parties can also listen to a live webcast or replay of the conference call by logging on to the Investor Relations section on the Company’s website at http://investors.ollies.us/. The replay of the conference call webcast will be available at the investor relations Web site for one year.

About Ollie’s

We are a highly differentiated and fast growing, extreme value retailer of brand name merchandise at drastically reduced prices. We are known for our assortment of merchandise offered as Good Stuff Cheap(R). We offer name brand products, Real Brands! Real Bargains!(R), in every department, including housewares, food, books and stationery, bed and bath, floor coverings, toys, hardware and other categories. We currently operate 268 store locations in 20 states across the Eastern portion of the United States. For more information, visit www.ollies.us.

 
 
(2)      Adjusted net income per diluted share is not a measure 
          recognized under GAAP. For a definition of Adjusted 
          net income per diluted share, please see the disclosures 
          related to the reconciliation of GAAP to non-GAAP 
          tables elsewhere in this release. The $0.15 per diluted 
          share difference between the guidance ranges for Net 
          income per diluted share and Adjusted net income per 
          diluted share reflects exclusion of the loss on extinguishment 
          of debt and income tax benefits due to the change 
          in accounting for stock-based compensation incurred 
          and reported for the thirty-nine weeks ended October 
          28, 2017. The Company cannot predict future transaction 
          related estimates without unreasonable effort and 
          therefore excludes any such estimates from its outlook. 
 
 
 

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “could,” “may,” “might,” “will,” “likely,” “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “continues,” “projects” and similar references to future periods, or by the inclusion of forecasts or projections, the outlook for the Company’s future business, prospects, financial performance and industry outlook. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, our actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions including pending tax legislation and the following: our failure to adequately procure and manage our inventory or anticipate consumer demand; changes in consumer confidence and spending; risks associated with intense competition; our failure to open new profitable stores, or successfully enter new markets, on a timely basis or at all; our failure to hire and retain key personnel and other qualified personnel; our inability to obtain favorable lease terms for our

Press Release: Ollie’s Bargain Outlet Holdings, -2-

properties; the loss of, or disruption in the operations of, our centralized distribution centers; fluctuations in comparable store sales and results of operations, including on a quarterly basis; risks associated with our lack of operations in the growing online retail marketplace; our inability to successfully implement our marketing, advertising and promotional efforts; the seasonal nature of our business; the risks associated with doing business with international manufacturers; risks associated with the timely and effective deployment and protection of computer and electronic systems; changes in government regulations, procedures and requirements; and our ability to service our indebtedness and to comply with our financial covenants together with the other factors set forth under “Risk Factors” in our filings with the United States Securities and Exchange Commission (“SEC”). Any forward-looking statement made by us in this press release speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. Ollie’s undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. You are advised, however, to consult any further disclosures we make on related subjects in our public announcements and SEC filings.

Investor Contact:

John Rouleau

ICR

203-682-8200

[email protected]

Media Contact:

Dan Haines

Vice President — Marketing & Advertising

717-657-2300

[email protected]

 
 
Ollie's Bargain Outlet Holdings, Inc. 
Condensed Consolidated Statements of Income 
(In thousands except for per share amounts) 
(Unaudited) 
 
                     Thirteen weeks ended     Thirty-nine weeks ended 
                  October 28,   October 29,   October 28,   October 29, 
                      2017          2016          2017      2016 
Condensed 
consolidated 
statements of 
income data: 
Net sales         $238,116      $201,985      $720,363      $606,960 
Cost of sales      140,127       117,795       429,213       359,941 
Gross profit        97,989        84,190       291,150       247,019 
Selling, general 
 and 
 administrative 
 expenses           68,124        60,522       195,633       173,068 
Depreciation and 
 amortization 
 expenses            2,503         2,142         7,150         6,188 
Pre-opening 
 expenses            3,152         2,879         7,005         6,152 
     Operating 
      income        24,210        18,647        81,362        61,611 
Interest 
 expense, net        1,143         1,405         3,601         4,540 
Loss on 
 extinguishment 
 of debt                 -             -           397             - 
Income before 
 income taxes       23,067        17,242        77,364        57,071 
Income tax 
 expense             4,205         6,781        19,824        21,727 
     Net income   $ 18,862      $ 10,461      $ 57,540      $ 35,344 
Earnings per 
common share: 
     Basic        $   0.31      $   0.17      $   0.94      $   0.59 
     Diluted      $   0.29      $   0.17      $   0.89      $   0.57 
Weighted 
average common 
shares 
outstanding: 
     Basic          61,488        60,301        61,187        60,005 
     Diluted        65,102        62,515        64,794        62,247 
 
Percentage of 
net sales (1) 
: 
Net sales            100.0%        100.0%        100.0%        100.0% 
Cost of sales         58.8          58.3          59.6          59.3 
Gross profit          41.2          41.7          40.4          40.7 
Selling, general 
 and 
 administrative 
 expenses             28.6          30.0          27.2          28.5 
Depreciation and 
 amortization 
 expenses              1.1           1.1           1.0           1.0 
Pre-opening 
 expenses              1.3           1.4           1.0           1.0 
Operating income      10.2           9.2          11.3          10.2 
Interest 
 expense, net          0.5           0.7           0.5           0.7 
Loss on 
extinguishment 
of debt                 --            --           0.1            -- 
Income before 
 income taxes          9.7           8.5          10.7           9.4 
Income tax 
 expense               1.8           3.4           2.8           3.6 
Net income             7.9%          5.2%          8.0%          5.8% 
 
 
(1) Components 
 may not add to 
 totals due to 
 rounding. 
 
 
 
 
Ollie's Bargain Outlet Holdings, Inc. 
Condensed Consolidated Balance Sheets 
(In thousands) 
(Unaudited) 
 
                                        October 28,   October 29, 
Assets                                      2017      2016 
Current assets: 
    Cash and cash equivalents           $    42,164   $    35,961 
    Inventories                             284,331       240,767 
    Accounts receivable                         990           283 
    Prepaid expenses and other assets         3,882         5,363 
       Total current assets                 331,367       282,374 
Property and equipment, net                  53,632        46,890 
Goodwill                                    444,850       444,850 
Trade name and other intangible 
 assets, net                                232,723       233,070 
Other assets                                  2,256         2,400 
       Total assets                     $ 1,064,828   $ 1,009,584 
Liabilities and Stockholders' Equity 
Current liabilities: 
    Current portion of long-term debt   $     8,882   $     5,091 
    Accounts payable                         70,618        58,011 
    Income taxes payable                      5,731             - 
    Accrued expenses                         45,691        43,211 
       Total current liabilities            130,922       106,313 
Revolving credit facility                         -             - 
Long-term debt                              117,120       190,105 
Deferred income taxes                        88,011        85,982 
Other long-term liabilities                   6,943         5,332 
       Total liabilities                    342,996       387,732 
Stockholders' equity: 
    Common stock                                 62            61 
    Additional paid-in capital              578,891       560,872 
    Retained earnings                       142,965        61,005 
    Treasury - common stock                     (86)          (86) 
      Total stockholders' equity            721,832       621,852 
      Total liabilities and 
       stockholders' equity             $ 1,064,828   $ 1,009,584 
 
 
 
 
Ollie's Bargain Outlet Holdings, Inc. 
Condensed Consolidated Statements of Cash Flows 
(In thousands) 
(Unaudited) 
 
                    Thirteen weeks ended  Thirty-nine weeks ended 
                     October    October    October 
                       28,        29,        28,      October 29, 
                      2017       2016        2017     2016 
Net cash provided 
 by operating 
 activities         $ 23,068   $  5,847   $  20,384   $   4,161 
Net cash used in 
 investing 
 activities           (6,469)    (4,236)    (15,119)    (14,218) 
Net cash provided 
 by (used in) 
 financing 
 activities              745      3,618     (61,784)     15,759 
     Net increase 
      (decrease) 
      during 
      period in 
      cash and 
      cash 
      equivalents     17,344      5,229     (56,519)      5,702 
     Cash and cash 
      equivalents 
      at the 
      beginning of 
      the period      24,820     30,732      98,683      30,259 
     Cash and cash 
      equivalents 
      at the end 
      of the 
      period        $ 42,164   $ 35,961   $  42,164   $  35,961 
 
 
 
 

Ollie’s Bargain Outlet Holdings, Inc.

Supplemental Information

Reconciliation of GAAP to Non-GAAP Financial Measures

(Dollars in thousands)

(Unaudited)

The Company reports its financial results in accordance with U.S. generally accepted accounting principles (“GAAP”). We have included the non-GAAP measures of Adjusted operating income, EBITDA, Adjusted EBITDA, Adjusted net income and Adjusted net income per diluted share in this press release as these are key measures used by our management and our board of directors to evaluate our operating performance and the effectiveness of our business strategies, make budgeting decisions, and evaluate compensation decisions. Management believes it is useful to investors and analysts to evaluate these non-GAAP measures on the same basis as management uses to evaluate the Company’s operating results. We believe that excluding items that may not be indicative of, or are unrelated to, our core operating results, and that may vary in frequency or magnitude from operating income, Net income and Net income per diluted share, enhances the comparability of our results and provides a better baseline for analyzing trends in our business.

The tables below reconcile the non-GAAP financial measures of Adjusted operating income to operating income, Adjusted net income to Net income, Adjusted net income per diluted share to Net income per diluted share, and EBITDA and Adjusted EBITDA to Net income, in each case the most directly comparable GAAP measure.

Press Release: Ollie’s Bargain Outlet Holdings, -3-

Adjusted operating income, as defined by us, gives effect to transaction related expenses, which we believe are unrelated to our core operating results. Adjusted net income and Adjusted net income per diluted share give effect, net of tax, to transaction related expenses, loss on extinguishment of debt, and income tax benefits due to the accounting change for stock-based compensation, which may not occur with the same frequency or magnitude in future periods. We define EBITDA as net income before net interest expense, loss on extinguishment of debt, depreciation and amortization expenses and income taxes. Adjusted EBITDA represents EBITDA as further adjusted for non-cash stock-based compensation expense, non-cash purchase accounting items, and transaction related expenses, which we do not consider representative of our ongoing operating performance.

Non-GAAP financial measures should be viewed as supplementing, and not as an alternative to or substitute for, the Company’s financial results prepared in accordance with GAAP. Certain of the items that may be excluded or included in non-GAAP financial measures may be significant items that could impact the Company’s financial position, results of operations and cash flows and should therefore be considered in assessing the Company’s actual financial condition and performance. The methods used by the Company to calculate its non-GAAP financial measures may differ significantly from methods used by other companies to compute similar measures. As a result, any non-GAAP financial measures presented herein may not be comparable to similar measures provided by other companies.

 
 
Reconciliation of GAAP operating income to Adjusted 
 operating income 
 
                  Thirteen weeks ended      Thirty-nine weeks ended 
                October 28,   October 29,   October 28,   October 29, 
                   2017           2016          2017      2016 
Operating 
 income          $    24,210   $    18,647    $   81,362   $    61,611 
Transaction 
 related 
 expenses                  -           586             -         1,736 
Adjusted 
 operating 
 income          $    24,210   $    19,233    $   81,362   $    63,347 
 
 
 
 
Ollie's Bargain Outlet Holdings, Inc. 
Supplemental Information 
Reconciliation of GAAP to Non-GAAP Financial Measures 
(In thousands except for per share amounts) 
(Unaudited) 
 
Reconciliation of GAAP net income to Adjusted net 
 income 
 
                                         Thirty-nine weeks 
                  Thirteen weeks ended         ended 
                   October    October    October    October 
                     28,        29,        28,        29, 
                    2017       2016       2017       2016 
Net income        $ 18,862   $ 10,461   $ 57,540   $ 35,344 
Transaction 
 related 
 expenses                -        586          -      1,736 
Loss on 
extinguishment 
of debt                  -          -        397          - 
Adjustment to 
 provision for 
 income taxes 
 (1)                     -       (230)      (153)      (673) 
Income tax 
 benefits due to 
 accounting 
 change for 
 stock-based 
 compensation 
 (2)                (4,659)         -     (9,783)         - 
Adjusted net 
 income           $ 14,203   $ 10,817   $ 48,001   $ 36,407 
 
 
 
(1)      The effective tax rate used for the adjustment to 
          the provision for income taxes was the effective tax 
          rate in the quarter in which the related costs were 
          incurred, which was 39.3% for the thirteen weeks ended 
          October 29, 2016, 25.6% for the thirty-nine weeks 
          ended October 28, 2017 and 38.1% for the thirty-nine 
          weeks ended October 29, 2016. The adjustment to the 
          provision for income taxes includes the tax effect 
          for the transaction related expenses and loss on extinguishment 
          of debt. 
 
(2)      Amount represents the impact from the recognition 
          of excess tax benefits pursuant to Accounting Standards 
          Update ("ASU") 2016-09, Stock Compensation, which 
          was in effect for the thirteen and thirty-nine weeks 
          ended October 28, 2017. 
 
 
 
 
Reconciliation of GAAP net income per diluted share 
 to Adjusted net income per diluted share 
 
                      Thirteen weeks     Thirty-nine weeks 
                           ended         ended 
                     October   October    October   October 
                       28,       29,        28,     29, 
                      2017       2016      2017     2016 
Net income per 
 share, diluted     $   0.29   $   0.17  $   0.89   $     0.57 
Adjustments as 
 noted above per 
 dilutive share        (0.07)      0.01     (0.15)        0.02 
Adjusted net 
 income per share, 
 diluted (1)        $   0.22   $   0.17  $   0.74   $     0.59 
 
Weighted-average 
 common shares 
 outstanding, 
 diluted              65,102     62,515    64,794       62,247 
 
(1) Totals may not 
 foot due to 
 rounding 
 
 
 
 
Ollie's Bargain Outlet Holdings, Inc. 
Supplemental Information 
Reconciliation of GAAP to Non-GAAP Financial Measures 
(Dollars in thousands) 
(Unaudited) 
 
Reconciliation of GAAP net income to EBITDA and Adjusted 
 EBITDA 
 
                                        Thirty-nine weeks 
                 Thirteen weeks ended   ended 
                   October    October    October 
                     28,        29,        28,     October 29, 
                    2017       2016       2017     2016 
Net income        $ 18,862   $ 10,461   $ 57,540   $ 35,344 
Interest 
 expense, net        1,143      1,405      3,601      4,540 
Loss on 
extinguishment 
of debt                  -          -        397          - 
Depreciation and 
 amortization 
 expenses            3,123      2,669      8,961      7,770 
Income tax 
 expense             4,205      6,781     19,824     21,727 
EBITDA              27,333     21,316     90,323     69,381 
Non-cash 
 stock-based 
 compensation 
 expense             1,893      1,707      5,932      4,979 
Non-cash 
 purchase 
 accounting 
 items                 (17)       (22)       (59)      (112) 
Transaction 
 related 
 expenses                -        586          -      1,736 
Adjusted EBITDA   $ 29,209   $ 23,587   $ 96,196   $ 75,984 
 
 
 
 
Key Statistics 
 
                 Thirteen weeks ended      Thirty-nine weeks ended 
               October 28,   October 29,   October 28,   October 29, 
                  2017           2016          2017      2016 
 
Number of 
 stores open 
 at the 
 beginning 
 of period              250           216           234            203 
Number of 
 new stores              15            16            31             29 
Number of 
 stores open 
 at end of 
 period                 265           232           265            232 
 
Average net 
 sales per 
 store (1)       $      923   $       903    $    2,917   $      2,839 
Comparable 
 stores 
 sales 
 change                2.1%          1.8%          2.8%           3.7% 
Comparable 
 store count 
 -- end of 
 period                 215           186           215            186 
 
(1) Average net sales per store represents the weighted 
 average of total net sales divided by the number of 
 stores open, in each case at the end of each week 
 in a fiscal quarter.