1-800-FLOWERS.COM, Inc. Reports Results for Its Fiscal 2019 Third Quarter

  • Total net revenues increased 4.1 percent to $248.4 million compared
    with $238.5 million in the prior year period.
  • Net loss was $8.2 million, or a loss of $0.13 per share, compared
    with a net loss of $8.5 million, or a loss of $0.13 per share in the
    prior year period.
  • Adjusted EBITDA1 was a loss of $4.4
    million, compared with a loss of $3.6 million in the prior year period.
  • Company increases its guidance for fiscal 2019 EPS.

(1 Refer to “Definitions of Non-GAAP
Financial Measures” and the tables attached at the end of this press
release for reconciliation of Non-GAAP (“Adjusted”) results to
applicable GAAP results.)

CARLE PLACE, N.Y.–(BUSINESS WIRE)–1-800-FLOWERS.COM, Inc. (NASDAQ: FLWS), a leading gourmet food and
floral gift provider for all occasions, today reported results for its
Fiscal 2019 third quarter ended March 31, 2019.

Chris McCann, CEO of 1-800-FLOWERS.COM, Inc., said, “During the fiscal
third quarter, we continued to drive strong revenue growth despite the
shift of the Easter holiday into our fiscal fourth quarter, compared
with last year when the holiday fell in our fiscal third quarter. The
investments we have been making in the 1-800-Flowers.com brand
throughout the year enabled us to further extend our market leading
position during the quarter, achieving growth of nearly seven percent,
driven by a strong Valentine’s Day holiday period. In our BloomNet
business, we continued to see strong order volume growth, which is
helping to expand our market share position. BloomNet revenues for the
period increased 15.1 percent, also driven by strong Valentine’s Day
performance.

“In our Gourmet Foods and Gift Baskets segment, the Easter shift
resulted in revenues being down 3.8 percent. However, throughout the
quarter we saw strong revenue increases in everyday gifting occasions
with Harry & David and 1-800-Baskets continuing to achieve strong growth
in everyday occasions such as Birthday, Sympathy, Get Well and Thank
You. Also, during the quarter, we continued to invest in innovations
focused on customer engagement with enhancements to our category-leading
mobile platforms and AI-driven conversational commerce initiatives. As
we head into our fiscal fourth quarter, which will benefit from the
Easter shift, we are well positioned to continue our strong growth
momentum and further enhance our position as our customers’ leading
destination to help them express, connect and celebrate,” he said.

Third Quarter 2019 Financial Results

For the third quarter of 2019, total net revenues increased 4.1 percent
to $248.4 million compared with $238.5 million in the prior year period.
This growth was achieved despite the shift of the Easter holiday into
the Company’s fiscal fourth quarter. Revenue growth for the quarter was
primarily driven by strong growth during the Valentine’s Day holiday
period for the Company’s 1-800-Flowers brand and BloomNet wire service
business, which increased 7.0 percent and 18.0 percent, respectively,
compared with the prior year holiday period. Revenues also benefited
from strong growth in everyday gifting for 1-800-Flowers.com, Harry &
David and 1-800-Baskets.

Gross profit margin for the quarter was 39.3 percent, compared with
gross profit margin of 39.2 percent in the prior year period. Operating
expenses as a percent of total revenues were 45.1 percent, compared with
44.4 percent in the prior year period.

The combination of these factors resulted in an Adjusted EBITDA loss of
$4.4 million compared with an Adjusted EBITDA loss of $3.6 million in
the prior year period. The increased Adjusted EBITDA loss in the period
primarily reflects the impact of the Easter shift combined with the
Company’s investments to drive accelerated revenue growth and higher
bonus expense reflecting the Company’s expectation that it will pay full
bonuses in fiscal 2019 compared with a minimal bonus payout in fiscal
2018. Net loss for the quarter was $8.2 million, or loss of $0.13 per
share, essentially unchanged compared with a net loss of $8.5 million,
or loss of $0.13 per share, in the prior year period.

Segment Results:

The Company provides fiscal 2019 third quarter selected financial
results for its Gourmet Foods and Gift Baskets, Consumer Floral and
BloomNet segments in the tables attached to this release and as follows:

  • Gourmet Foods and Gift Baskets: Revenues
    for the quarter were $75.4 million, down 3.8 percent compared with
    revenues of $78.5 million in the prior year period reflecting the
    shift of the Easter holiday into the Company’s fiscal fourth quarter.
    This was somewhat offset by the strong growth in everyday gifting
    occasions for Harry & David and 1-800-Baskets. Gross profit margin
    increased 180 basis points to 35.6 percent, compared with 33.8 percent
    in the prior year period reflecting logistics initiatives to reduce
    shipping and transportation costs, combined with strategic pricing
    initiatives. As a result of these factors, segment contribution margin
    loss improved 18.3 percent to $7.2 million, compared with a segment
    contribution margin loss of $8.8 million in the prior year period.
  • Consumer Floral: Fiscal third quarter
    revenues increased 6.7 percent to $144.8 million, compared with $135.8
    million in the prior year period primarily reflecting strong growth
    for the Valentine’s Day holiday as well as for everyday gifting
    occasions. Gross margin was 38.9 percent, down 70 basis points,
    compared with 39.6 percent in the prior year period. This reflected
    the increased promotional nature of the Valentine’s Day holiday period
    combined with strong growth in the Company’s Passport program. Segment
    contribution margin was $15.4 million, down 5.3 percent compared with
    $16.2 million in the prior year period primarily reflecting the impact
    of the Easter shift combined with the Company’s continued investments
    to drive accelerated revenue growth and higher bonus expense accrual.
  • BloomNet Wire Service: Revenues for the
    quarter increased 15.1 percent to $28.2 million, compared with $24.5
    million in the prior year period primarily reflecting strong growth in
    order volumes. Gross profit margin was 49.9 percent, compared with
    52.8 percent in the prior year period, primarily reflecting product
    mix and the Company’s investments to accelerate revenue growth.
    Segment contribution margin increased 12.3 percent to $9.5 million,
    compared with $8.4 million in the prior year period.

Company Guidance:

The Company is updating its guidance for fiscal 2019 based on the strong
results of the first nine months of the fiscal year and its expectation
for solid performance in its fiscal fourth quarter, which includes
Easter and the Mother’s Day holiday period. Updated guidance for fiscal
2019 is as follows:

  • Consolidated revenue growth is now expected to be at the high end of
    the Company’s previously guided range of 7 -to- 8 percent;
  • EPS guidance is being increased to a range of $0.49 -to- $0.50 per
    diluted share from a previous range of $0.44 -to- $0.46 per diluted
    share;
  • Adjusted EBITDA is now expected to be at the high end of the Company’s
    previously guided range of $80.0 -to- $82.0 million;
  • Free Cash Flow for the year is now expected to be at the high end of
    the Company’s previously guided range of $30.0 million – to – $40.0
    million.

Definitions of non-GAAP Financial Measures:

We sometimes use financial measures derived from consolidated financial
information, but not presented in our financial statements prepared in
accordance with U.S. generally accepted accounting principles (“GAAP”).
Certain of these are considered “non-GAAP financial measures” under the
U.S. Securities and Exchange Commission rules. Non-GAAP financial
measures referred to in this document are either labeled as “non-GAAP”
or designated as such with a “1”. See below for definitions and the
reasons why we use these non-GAAP financial measures. Where applicable,
see the Selected Financial Information below for reconciliations of
these non-GAAP measures to their most directly comparable GAAP financial
measures.

EBITDA and Adjusted EBITDA

We define EBITDA as net income (loss) before interest, taxes,
depreciation and amortization. Adjusted EBITDA is defined as EBITDA
adjusted for the impact of stock-based compensation, Non-Qualified Plan
Investment appreciation/depreciation, and for certain items affecting
period-to-period comparability. See Selected Financial Information for
details on how EBITDA and Adjusted EBITDA were calculated for each
period presented. The Company presents EBITDA and Adjusted EBITDA
because it considers such information meaningful supplemental measures
of its performance and believes such information is frequently used by
the investment community in the evaluation of similarly situated
companies. The Company uses EBITDA and Adjusted EBITDA as factors used
to determine the total amount of incentive compensation available to be
awarded to executive officers and other employees. The Company’s credit
agreement uses EBITDA and Adjusted EBITDA to determine its interest rate
and to measure compliance with certain covenants. EBITDA and Adjusted
EBITDA are also used by the Company to evaluate and price potential
acquisition candidates. EBITDA and Adjusted EBITDA have limitations as
analytical tools and should not be considered in isolation or as a
substitute for analysis of the Company’s results as reported under GAAP.
Some of the limitations are: (a) EBITDA and Adjusted EBITDA do not
reflect changes in, or cash requirements for, the Company’s working
capital needs; (b) EBITDA and Adjusted EBITDA do not reflect the
significant interest expense, or the cash requirements necessary to
service interest or principal payments, on the Company’s debts; and (c)
although depreciation and amortization are non-cash charges, the assets
being depreciated and amortized may have to be replaced in the future
and EBITDA does not reflect any cash requirements for such capital
expenditures. EBITDA and Adjusted EBITDA should only be used on a
supplemental basis combined with GAAP results when evaluating the
Company’s performance.

Segment Contribution Margin

We define Segment Contribution Margin as earnings before interest,
taxes, depreciation and amortization, before the allocation of corporate
overhead expenses. See Selected Financial Information for details on how
Segment Contribution Margin was calculated for each period presented.
When viewed together with our GAAP results, we believe Segment
Contribution Margin provides management and users of the financial
statements meaningful information about the performance of our business
segments. Segment Contribution Margin is used in addition to and in
conjunction with results presented in accordance with GAAP and should
not be relied upon to the exclusion of GAAP financial measures. The
material limitation associated with the use of the Segment Contribution
Margin is that it is an incomplete measure of profitability as it does
not include all operating expenses or non-operating income and expenses.
Management compensates for these limitations when using this measure by
looking at other GAAP measures, such as Operating Income and Net Income.

Adjusted Net Income and Adjusted Net Income Per Common Share:

We define Adjusted Net Income and Adjusted Net Income Per Common Share
as Net Income and Net Income Per Common Share adjusted for certain items
affecting period-to-period comparability. See Selected Financial
Information below for details on how Adjusted Net Income and Adjusted
Net Income Per Common Share were calculated for each period presented.
We believe that Adjusted Net Income and Adjusted EPS are meaningful
measures because they increase the comparability of period to period
results. Since these are not measures of performance calculated in
accordance with GAAP, they should not be considered in isolation of, or
as a substitute for, GAAP Net Income and Net Income Per Common share, as
indicators of operating performance and they may not be comparable to
similarly titled measures employed by other companies.

Free Cash Flow

We define Free Cash Flow as net cash provided by operating activities
less capital expenditures. The Company considers Free Cash Flow to be a
liquidity measure that provides useful information to management and
investors about the amount of cash generated by the business after the
purchases of fixed assets, which can then be used to, among other
things, invest in the Company’s business, make strategic acquisitions,
strengthen the balance sheet and repurchase stock or retire debt. Free
Cash Flow is a liquidity measure that is frequently used by the
investment community in the evaluation of similarly situated companies.
Since Free Cash Flow is not a measure of performance calculated in
accordance with GAAP, it should not be considered in isolation or as a
substitute for analysis of the Company’s results as reported under GAAP.
A limitation of the utility of free cash flow as a measure of financial
performance is that it does not represent the total increase or decrease
in the company’s cash balance for the period.

About 1-800-FLOWERS.COM, Inc.

1-800-FLOWERS.COM,
Inc.
is a leading provider of gifts designed to help customers express,
connect and celebrate
. The Company’s Celebrations Ecosystem features
our all-star family of brands, including: 1-800-Flowers.com®,
1-800-Baskets.com®,
Cheryl’s
Cookies
®, FruitBouquets.com®,
Harry & David®, Moose
Munch
®, The
Popcorn Factory
®, Wolferman’s®,
Personalization
Universe
®, Simply
Chocolate
®, and Goodsey℠.
We also offer top-quality steaks and chops from Stock
Yards
®. Through the Celebrations Passport® loyalty program, which
provides members with free standard shipping and no service charge
across our portfolio of brands, 1-800-FLOWERS.COM, Inc. strives to
deepen relationships with customers. The Company also operates BloomNet®,
an international floral wire service providing a broad-range of products
and services designed to help professional florists grow their
businesses profitably; Napco℠,
a resource for floral gifts and seasonal décor; and DesignPac®, a
manufacturer of gift baskets and towers. 1-800-FLOWERS.COM, Inc.
received the Gold award in the “Mobile Payments and Commerce” category
at the Mobile Marketing Association 2018 Global Smarties Awards. In
addition, Harry & David was named to the Internet Retailer 2019 “The Hot
100” list. Shares in 1-800-FLOWERS.COM, Inc. are traded on the NASDAQ
Global Select Market, ticker symbol: FLWS.

Special Note Regarding Forward Looking
Statements
:

This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements represent the Company’s current expectations
or beliefs concerning future events and can generally be identified
using statements that include words such as “estimate,” “expects,”
“project,” “believe,” “anticipate,” “intend,” “plan,” “foresee,”
“forecast,” “likely,” “will,” “target” or similar words or phrases.
These forward-looking statements are subject to risks, uncertainties and
other factors, many of which are outside of the Company’s control, which
could cause actual results to differ materially from the results
expressed or implied in the forward-looking statements; including, but
not limited to, statements regarding the Company’s expectations for: its
ability to continue to drive accelerated revenue growth in the fourth
quarter of fiscal 2019 compared with the prior year period and to
achieve its updated guidance for fiscal year 2019 revenue and earnings
for consolidated revenue growth at the high end of a range of 7.0-to-8.0
percent compared with the prior year; EPS in a range of $0.49 – to –
$0.50 per diluted share; Adjusted EBITDA at the high end of a range of
$80.0 – to – $82.0 million; and Free Cash Flow for the year in a range
of $30.0 million – to – $40.0 million; its ability to leverage its
operating platform and reduce its operating expense ratio; its ability
to cost effectively acquire and retain customers; the outcome of
contingencies, including legal proceedings in the normal course of
business; its ability to compete against existing and new competitors;
its ability to manage expenses associated with sales and marketing and
necessary general and administrative and technology investments; its
ability to reduce promotional activities and achieve more efficient
marketing programs; and general consumer sentiment and economic
conditions that may affect levels of discretionary customer purchases of
the Company’s products.Reconciliations for forward looking figures would
require unreasonable efforts at this time because of the uncertainty and
variability of the nature and amount of certain components of various
necessary GAAP components, including for example those related to
compensation, tax items, amortization or others that may arise during
the year, and the Company’s management believes such reconciliation
would imply a degree of precision that would be confusing or misleading
to investors. The lack of such reconciling information should be
considered when assessing the impact of such disclosures. The Company
undertakes no obligation to publicly update any of the forward-looking
statements, whether because of new information, future
events or otherwise, made in this release or in any of its SEC filings
except as may be otherwise stated by the Company. For a more detailed
description of these and other risk factors, please refer to the
Company’s SEC filings, including the Company’s Annual Reports on Form
10-K and its Quarterly Reports on Form 10-Q. Consequently, you should
not consider any such list to be a complete set of all potential risks
and uncertainties.

Conference Call:

The Company will conduct a conference call to discuss the above details
and attached financial results today, Tuesday, April 30, 2019, at 11:00
a.m. (EDT). The call will be “web cast” live via the Internet and can be
accessed from the Investor Relations section of the 1-800-FLOWERS.COM,
Inc. web site at www.1800flowersinc.com
A recording of the call will be posted on the Investor Relations section
of the Company’s web site within two hours of the call’s completion. A
telephonic replay of the call can be accessed beginning at 2:00 p.m. EDT
on the day of the call through May 7, 2019 at: (US) 1-888-203-1112;
enter conference ID #: 4041512.

Note: The attached tables are an integral part of this press
release without which the information presented in this press release
should be considered incomplete.

         

1-800-FLOWERS.COM, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands)

 
March 31, 2019 July 1, 2018
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 206,377 $ 147,240
Trade receivables, net 19,166 12,935
Inventories 74,377 88,825
Prepaid and other   20,592   24,021
Total current assets 320,512 273,021
 
Property, plant and equipment, net 158,190 163,340
Goodwill 62,590 62,590
Other intangibles, net 59,762 59,823
Other assets   13,894   12,115
Total assets $ 614,948 $ 570,889
 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 25,381 $ 41,437
Accrued expenses 103,012 73,299
Current maturities of long-term debt   12,219   10,063
Total current liabilities 140,612 124,799
 
Long-term debt 83,595 92,267
Deferred tax liabilities 27,011 26,200
Other liabilities   14,788   12,719
Total liabilities   266,006   255,985
Total stockholders’ equity   348,942   314,904
Total liabilities and stockholders’ equity $ 614,948 $ 570,889
 

1-800-FLOWERS.COM, Inc. and Subsidiaries

Selected Financial Information

Consolidated Statements of Income

(In thousands, except for per share data)

(unaudited)

         
Three Months Ended Nine Months Ended
March 31, 2019     April 1, 2018 March 31, 2019     April 1, 2018
Net revenues:
E-commerce (combined online and telephonic) $ 204,361 $ 196,866 $ 780,882 $ 729,769
Other   44,052     41,679     208,343     192,218  
Total net revenues 248,413 238,545 989,225 921,987
Cost of revenues   150,893     145,090     568,338     525,995  
Gross profit 97,520 93,455 420,887 395,992
Operating expenses:
Marketing and sales 71,163 68,215 243,781 231,708
Technology and development 11,511 10,241 32,696 29,086
General and administrative 22,447 19,553 64,480 58,128
Depreciation and amortization   7,028     7,885     22,840     24,646  
Total operating expenses   112,149     105,894     363,797     343,568  
Operating income (loss) (14,629 ) (12,439 ) 57,090 52,424
Interest (income) expense, net (30 ) 662 2,390 2,919
Other (income) expense, net   (1,285 )   31     (293 )   (315 )
Income (loss) before income taxes (13,314 ) (13,132 ) 54,993 49,820
Income tax expense (benefit)   (5,073 )   (4,669 )   11,922     806  
Net income (loss) $ (8,241 ) $ (8,463 ) $ 43,071   $ 49,014  
 
Basic net income (loss) per common share $ (0.13 ) $ (0.13 ) $ 0.67   $ 0.76  
 
Diluted net income (loss) per common share $ (0.13 ) $ (0.13 ) $ 0.65   $ 0.73  
 
Weighted average shares used in the calculation of net income (loss)
per common share:
Basic   64,194     64,527     64,383     64,694  
Diluted   64,194     64,527     66,456     66,949  
 

1-800-FLOWERS.COM, Inc. and Subsidiaries

Selected Financial Information

Consolidated Statements of Cash Flows

(In thousands)

(unaudited)

     
Nine Months Ended
March 31, 2019     April 1, 2018
 
Operating activities:
Net income $ 43,071 $ 49,014
Reconciliation of net income to net cash provided by operating
activities:
Depreciation and amortization 22,840 24,646
Amortization of deferred financing costs 671 721
Deferred income taxes 811 (13,004 )
Bad debt expense 1,018 906
Stock-based compensation 4,531 3,002
Other non-cash items (301 ) 249
Changes in operating items:
Trade receivables (7,249 ) (9,347 )
Inventories 14,448 6,956
Prepaid and other 2,675 (45 )
Accounts payable and accrued expenses 14,741 1,453
Other assets (349 ) (88 )
Other liabilities   98     110  
Net cash provided by operating activities 97,005 64,573
 
Investing activities:
Working capital adjustment related to sale of business (8,500 )
Capital expenditures, net of non-cash expenditures   (16,845 )   (15,809 )
Net cash used in investing activities (16,845 ) (24,309 )
 
Financing activities:
Acquisition of treasury stock (14,765 ) (12,075 )
Proceeds from exercise of employee stock options 929 179
Proceeds from bank borrowings 30,000 30,000
Repayment of bank borrowings   (37,187 )   (35,031 )
Net cash used in financing activities (21,023 ) (16,927 )
   
Net change in cash and cash equivalents 59,137 23,337
Cash and cash equivalents:
Beginning of period   147,240     149,732  
End of period $ 206,377   $ 173,069  
 

1-800-FLOWERS.COM, Inc. and Subsidiaries

Selected Financial Information – Category Information

(in thousands)

(unaudited)

     
Three Months Ended
March 31, 2019     April 1, 2018     % Change  
   
Net revenues:
1-800-Flowers.com Consumer Floral $ 144,821 $ 135,782 6.7 %
BloomNet Wire Service 28,185 24,498 15.1 %
Gourmet Food & Gift Baskets 75,445 78,458 (3.8 %)
Corporate 263 264 (0.4 %)
Intercompany eliminations   (301 )   (457 ) 34.1 %
Total net revenues $ 248,413   $ 238,545   4.1 %
 
Gross profit:
1-800-Flowers.com Consumer Floral $ 56,334 $ 53,744 4.8 %
38.9 % 39.6 %
 
BloomNet Wire Service 14,071 12,931 8.8 %
49.9 % 52.8 %
 
Gourmet Food & Gift Baskets 26,848 26,532 1.2 %
35.6 % 33.8 %
 
Corporate 267 248 7.7 %
101.5 % 93.9 %
   
Total gross profit $ 97,520   $ 93,455   4.3 %
  39.3 %   39.2 %
 
EBITDA (non-GAAP)
Segment Contribution Margin (non-GAAP) (a):
1-800-Flowers.com Consumer Floral $ 15,364 $ 16,226 (5.3 %)
BloomNet Wire Service 9,480 8,439 12.3 %
Gourmet Food & Gift Baskets   (7,202 )   (8,811 ) 18.3 %
Segment Contribution Margin Subtotal 17,642 15,854 11.3 %
Corporate (b)   (25,243 )   (20,408 ) (23.7 %)
EBITDA (non-GAAP) (7,601 ) (4,554 ) (66.9 %)
 
Add: Stock-based compensation 1,903 933 104.0 %
Add: Comp charge related to NQ Plan Investment Appreciation  

1,294

   

30

 

4213.3

%

Adjusted EBITDA (non-GAAP) $ (4,404 ) $ (3,591 ) (22.8 %)
 

Contacts

Investor Contact:
Joseph D. Pititto
(516)
237-6131
E-mail: [email protected].com

Media
Contact
:
Kathleen Waugh
(516) 237-6028
[email protected]

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