Canada Goose Holdings Inc. (NYSE:GOOS) Q4 2023 Results Conference Call May 17, 2023 5:00 PM ET Company Participants Amy Schwalm - VP, IR Dani Reiss - Chairman, CEO Jonathan Sinclair - EVP, CFO Carrie Baker - President Conference Call Participants Oliver Chen - TD Cowen Brooke Roach - Goldman Sachs Jonathan Komp - Baird Alex Perry - Bank of America Mark Petrie - CIBC Samuel Poser - Williams Trading Operator Good day, and thank you for standing by. Welcome to the Canada Goose Fourth Quarter and Full Year 2023 ...

Financial Performance - For the fiscal year ended April 2, 2023, the company reported revenue of CAD $1,217.0 million, an increase of 10.8% from CAD $1,098.4 million in the previous year[204]. - Gross profit for the same period was CAD $815.2 million, resulting in a gross margin of 67.0%, slightly up from 66.8% in the prior year[204]. - The company recorded a net income of CAD $68.9 million for the year, down from CAD $94.6 million in the previous year, with earnings per share of CAD $0.69[204]. - Revenue for the year ended April 2, 2023 increased by CAD $118.6 million, or 10.8%, to CAD $1,217.0 million from CAD $1,098.4 million for the year ended April 3, 2022[221]. - Direct-to-Consumer (DTC) revenue for the year ended April 2, 2023 was CAD $807.3 million, an increase of CAD $66.9 million or 9.0% compared to CAD $740.4 million for the year ended April 3, 2022[224]. - Wholesale revenue for the year ended April 2, 2023 was CAD $373.8 million, an increase of CAD $25.3 million or 7.3% compared to CAD $348.5 million for the year ended April 3, 2022[226]. - Other segment revenue for the year ended April 2, 2023 was CAD $35.9 million, a significant increase of CAD $26.4 million or 277.9% compared to CAD $9.5 million for the year ended April 3, 2022[227]. - Operating income for the year ended April 2, 2023 was CAD $135.5 million, a decrease of CAD $21.2 million or 13.5% compared to CAD $156.7 million for the year ended April 3, 2022[220]. - Net income attributable to shareholders for the year ended April 2, 2023 was CAD $72.7 million, a decrease of CAD $21.9 million or 23.2% compared to CAD $94.6 million for the year ended April 3, 2022[220]. Segment Performance - The DTC segment includes sales through 57 e-Commerce markets and 51 retail stores, contributing significantly to overall revenue[203]. - DTC comparable sales growth experienced a decline of (2.6)%, although this was positive when excluding Mainland China[225]. - The DTC segment gross profit increased to $616.2 million with a gross margin of 76.3%, compared to $563.0 million and 76.0% in the prior year[234]. - The Wholesale segment gross profit increased to $185.7 million with a gross margin of 49.7%, compared to $166.5 million and 47.8% in the prior year[235]. - The DTC segment operating income was $359.4 million, with a slight decrease in operating margin to 44.5% from 45.0% in the previous year[246]. Cash Flow and Liquidity - Cash reserves as of April 2, 2023, were CAD $286.5 million, a slight decrease from CAD $287.7 million in the previous year[204]. - Cash flows from operating activities decreased to $116.3 million for the year ended April 2, 2023, down from $151.6 million in the previous year, a decline of $35.3 million[306]. - For the fourth quarter ended April 2, 2023, cash flows from operating activities increased to $7.0 million, compared to cash used of $22.6 million in the same quarter last year, an improvement of $29.6 million[307]. - Cash flows used in investing activities rose to $45.3 million for the year ended April 2, 2023, compared to $37.2 million in the previous year, an increase of $8.1 million[308]. - Cash flows used in financing activities decreased significantly to $80.7 million for the year ended April 2, 2023, from $298.2 million in the previous year, a reduction of $217.5 million[310]. Assets and Liabilities - As of April 2, 2023, total assets increased to CAD $1,590.0 million from CAD $1,340.6 million in the previous year[204]. - Net working capital increased by CAD $72.6 million, or 28.4%, to CAD $328.0 million as of April 2, 2023, compared to CAD $255.4 million in the previous year[301]. - Current assets increased by CAD $100.9 million, or 13.2%, to CAD $863.2 million as of April 2, 2023, compared to CAD $762.3 million in the previous year[301]. - As of April 2, 2023, net debt increased to $468.1 million, up from $333.8 million as of April 3, 2022, an increase of $134.3 million[316]. - The Company had unused borrowing capacity available under the Revolving Facility of $238.4 million as of April 2, 2023, compared to $191.8 million as of April 3, 2022[321]. Taxation - Effective tax rate for the year ended April 2, 2023 was 26.3%, an increase of 670 basis points compared to 19.6% for the year ended April 3, 2022[220]. - The effective tax rate for the quarter was (117.4)%, a significant change of (6,820) basis points compared to (49.2)% in the prior year[254]. - The effective tax rate for Q4 2023 was (117.4)%, compared to (49.2)% in Q4 2022, influenced by non-deductible remeasurement of contingent liabilities[276]. Foreign Exchange and Risk Management - The average USD/CAD exchange rate for Q4 2023 was 1.3518, compared to 1.2663 in Q4 2022, indicating a significant impact from foreign exchange fluctuations[197]. - The company is exposed to foreign exchange risk, particularly with revenues and expenses denominated in currencies such as U.S. dollars, euros, and Japanese yen[354]. - The Company recognized unrealized losses of CAD $3.7 million in the fair value of forward foreign exchange contracts designated as cash flow hedges for the year ended April 2, 2023[357]. - The Company had a total outstanding balance of USD 396.3 million under the Term Loan Facility as of April 2, 2023, with a potential pre-tax income decrease of USD 2.9 million for a 1% depreciation of the Canadian dollar[361]. Shareholder Activities - For the year ended April 2, 2023, the company repurchased 1,152,802 subordinate voting shares for a total cash consideration of $27.9 million, with $20.0 million of this amount related to shares purchased under the ASPP[332]. - The company has authorized the repurchase of up to 5,421,685 subordinate voting shares, representing approximately 10.0% of the issued and outstanding shares as of November 10, 2022[330]. Operational Initiatives - The company announced a Transformation Program aimed at increasing operational efficiencies and sustainable growth[201]. - The company established a joint venture in Japan, acquiring 50% of Canada Goose Japan, K.K. for a total consideration of CAD $22.6 million, expected to enhance market presence in Japan[198]. - The company opened 10 permanent stores during the year ended April 2, 2023, compared to 13 permanent stores during the year ended April 3, 2022[224].

Revenue Performance - Total revenue for Q4 FY23 increased by 31.4% to CAD $293.2 million compared to CAD $223.1 million in Q4 FY22[8] - Revenue growth was driven by Asia Pacific and EMEA regions, with increases of 65.4% and 27.3%, respectively[4] - Direct-to-Consumer (DTC) revenue grew by 22.6% to CAD $227.5 million, supported by retail store expansion[11] - Total revenue for fiscal 2024 is expected to be between $1.400 billion and $1.500 billion[20] Profitability Metrics - The gross profit for Q4 FY23 was CAD $190.3 million, a 23.5% increase from CAD $154.1 million in Q4 FY22, although gross margin decreased by 420 basis points to 64.9%[8][14] - Operating income surged to CAD $17.2 million, up from CAD $0.9 million in the prior year, reflecting an increase of 1,811.1%[8] - Adjusted EBIT rose by 122.6% to CAD $27.6 million, with an adjusted EBIT margin of 9.4%[8] - Adjusted net income attributable to shareholders increased by 267.5% to CAD $14.7 million, with adjusted net income per basic share rising to CAD $0.14[8] - Adjusted EBIT for the fourth quarter was CAD $27.6 million, representing an adjusted EBIT margin of 9.4%, up from 5.6% in the fourth quarter of 2022[31] Future Outlook - The company expects stronger growth in revenue and profitability metrics for fiscal 2024[4] - Non-IFRS adjusted EBIT is projected to be between $210 million and $240 million, representing a margin of 15% to 16%[20] - Non-IFRS adjusted net income per diluted share is anticipated to range from $1.20 to $1.48[20] - DTC revenue is expected to be in the mid-to-high 70s as a percentage of total revenue, driven by comparable sales growth in the mid single digits to mid teens[20] - Q1 fiscal 2024 DTC comparable sales growth is projected to be in the high teens to low 20s[20] - Wholesale revenue is expected to decline by 6%, reflecting a continued reduction in wholesale door count[20] Store Expansion Plans - The company plans to open 16 new permanent stores in fiscal 2024, primarily in Mainland China, the USA, and Japan[5] - The company plans to open 16 permanent retail stores, primarily in Mainland China, the USA, and Japan, expected to be operational in the second half of the year[20] Inventory and Costs - Inventory levels increased to CAD $472.6 million as of Q4 FY23, up from CAD $393.3 million in Q4 FY22, due to lower-than-expected sales in the Asia Pacific region[18] - The company incurred net temporary store closure costs of CAD $3.2 million for the fiscal year ended April 2, 2023, compared to CAD $0.2 million in the previous year[33] - The Japan Joint Venture costs amounted to CAD $10.2 million for the fiscal year ended April 2, 2023, compared to CAD $0.7 million in the previous year[32] - The company recorded a fair value loss of CAD $9.7 million related to the Japan Joint Venture during the fourth quarter[35] Shareholder Information - Weighted average diluted shares outstanding for fiscal 2024 is estimated at 106.3 million[20] - The weighted average number of diluted shares outstanding was 104,519,045 for the fourth quarter ended April 2, 2023[32] - The adjusted net income per diluted share attributable to shareholders for the fiscal year was CAD $1.05, down from CAD $1.07 in the previous year[32] Tax and Margins - The effective tax rate is projected to be in the low 20s as a percentage of income before taxes for fiscal 2024[20]

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