Natural Grocers by Vitamin tage(NGVC) - 2024 Q3 - Quarterly Results

Third Quarter Fiscal 2024 Highlights Natural Grocers reported strong financial results for the third quarter of fiscal 2024, with a 9.7% increase in net sales to $309.1 million and a 30.2% rise in net income to $9.2 million, driven by a 7.2% increase in daily average comparable store sales Q3 FY2024 Key Financial Metrics vs. Q3 FY2023 | Metric | Q3 FY2024 | Change vs. Q3 FY2023 | | :--- | :--- | :--- | | Net Sales | $309.1 million | +9.7% | | Daily Average Comparable Store Sales | N/A | +7.2% | | Operating Income | $12.8 million | +41.4% | | Net Income | $9.2 million | +30.2% | | Diluted EPS | $0.40 | +29.0% (from $0.31) | | Adjusted EBITDA | $22.2 million | +32.8% | - The 7.2% daily average comparable store sales growth was composed of a 4.7% increase in transaction count and a 2.4% increase in transaction size[2] - The company announced it is raising its fiscal 2024 outlook for daily average comparable store sales growth and diluted earnings per share based on strong year-to-date performance[2] Operating Results Analysis The company demonstrated strong operating performance in both the third quarter and the first nine months of fiscal 2024, with sales growth driven by increased comparable store sales and new store contributions, and improved gross margins and effective expense management leading to significant increases in operating and net income Third Quarter Fiscal 2024 vs. 2023 In Q3 2024, net sales rose 9.7% to $309.1 million, driven by a $23.6 million increase in comparable store sales, with gross margin improving by 30 basis points to 29.2% due to store occupancy leverage, resulting in operating income surging 41.4% to $12.8 million and net income growing 30.2% to $9.2 million despite a higher effective tax rate - Net sales growth was primarily due to a $23.6 million increase in comparable store sales and a $5.4 million increase from new stores[3] - Gross margin increased by 30 basis points to 29.2%, driven by store occupancy cost leverage, though partially offset by lower product margin from product mix changes[4] - Store expenses as a percentage of net sales decreased to 21.9% from 22.2% year-over-year, indicating effective expense leverage[4] - The effective income tax rate increased to 21.9% from 14.1% in the prior year quarter, mainly due to lower food donation deductions[5] First Nine Months Fiscal 2024 vs. 2023 For the first nine months of fiscal 2024, net sales increased 8.7% to $918.9 million, with daily average comparable store sales up 7.0%, and gross margin expanding to 29.3% from 28.7%, resulting in a significant rise in operating income to $34.9 million and net income to $24.9 million, or $1.08 per diluted share Nine-Month Performance Summary (FY2024 vs. FY2023) | Metric | First Nine Months FY2024 (in millions) | First Nine Months FY2023 (in millions) | | :--- | :--- | :--- | | Net Sales | $918.9 | $845.5 | | Daily Avg. Comp. Store Sales Growth (in %) | 7.0% | N/A | | Gross Margin (in %) | 29.3% | 28.7% | | Operating Income | $34.9 | $23.9 | | Net Income | $24.9 | $17.4 | | Diluted EPS (in $) | $1.08 | $0.76 | - The 7.0% daily average comparable store sales growth for the nine-month period was comprised of a 3.9% increase in transaction count and a 3.0% increase in transaction size[7] - Gross margin improvement was driven by both store occupancy cost leverage and higher product margin from effective pricing and promotions[8] Balance Sheet and Cash Flow As of June 30, 2024, the company maintained a solid liquidity position with $13.9 million in cash, generating $49.3 million in cash from operations during the first nine months of the fiscal year, funding $31.8 million in net capital expenditures primarily for store expansion and remodeling - As of June 30, 2024, the company had $13.9 million in cash and cash equivalents[11] - The company had $16.6 million in outstanding borrowings on its $75.0 million revolving credit facility[11] - Generated $49.3 million in cash from operations and invested $31.8 million in net capital expenditures during the first nine months of fiscal 2024[11] Dividend and Fiscal 2024 Outlook The company declared a quarterly cash dividend of $0.10 per share, and reflecting its strong performance and confidence in business trends, Natural Grocers raised its fiscal 2024 guidance for daily average comparable store sales growth and diluted EPS, while refining its capital expenditure forecast - A quarterly cash dividend of $0.10 per common share was declared, payable on September 18, 2024, to stockholders of record on September 3, 2024[13] Updated Fiscal 2024 Outlook | Metric | Updated Fiscal 2024 Outlook | | :--- | :--- | | Daily average comparable store sales growth (in %) | 6.0% to 7.0% | | Diluted earnings per share (in $) | $1.27 to $1.34 | | Capital expenditures (in millions) | $35 to $39 | Financial Statements The consolidated financial statements detail the company's performance, with the income statement reflecting significant year-over-year growth in revenue and profitability, the balance sheet showing a stable financial position, and the cash flow statement indicating strong operational cash generation used for capital investments and financing activities Consolidated Statements of Income For the nine months ended June 30, 2024, net sales grew to $918.9 million from $845.5 million in the prior year, with gross profit increasing to $269.4 million and operating income rising to $34.9 million, resulting in net income of $24.9 million, a substantial increase from $17.4 million in the same period of fiscal 2023 Income Statement Summary (Nine Months Ended June 30) | (In thousands) | 2024 (In thousands) | 2023 (In thousands) | | :--- | :--- | :--- | | Net sales | $918,924 | $845,493 | | Gross profit | $269,448 | $242,586 | | Operating income | $34,911 | $23,932 | | Net income | $24,925 | $17,363 | | Diluted EPS (in $) | $1.08 | $0.76 | Consolidated Balance Sheets As of June 30, 2024, total assets were $654.4 million, compared to $669.2 million at September 30, 2023, with total liabilities decreasing to $486.6 million from $498.3 million, and stockholders' equity standing at $167.8 million Balance Sheet Summary | (In thousands) | June 30, 2024 (In thousands) | September 30, 2023 (In thousands) | | :--- | :--- | :--- | | Total current assets | $145,199 | $152,550 | | Total assets | $654,386 | $669,185 | | Total current liabilities | $151,520 | $154,029 | | Total liabilities | $486,584 | $498,344 | | Total stockholders' equity | $167,802 | $170,841 | Consolidated Statements of Cash Flows For the first nine months of fiscal 2024, the company generated $49.3 million in net cash from operating activities, a significant increase from $36.2 million in the prior year, with net cash used in investing activities at $31.8 million mainly for property and equipment, and financing activities using $21.9 million, resulting in a net decrease in cash of $4.4 million Cash Flow Summary (Nine Months Ended June 30) | (In thousands) | 2024 (In thousands) | 2023 (In thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $49,280 | $36,159 | | Net cash used in investing activities | ($31,808) | ($24,298) | | Net cash used in financing activities | ($21,899) | ($15,324) | | Net decrease in cash | ($4,427) | ($3,463) | Non-GAAP Financial Measures (EBITDA & Adjusted EBITDA) The company provides EBITDA and Adjusted EBITDA as supplemental performance measures, with Adjusted EBITDA increasing 32.8% to $22.2 million for Q3 2024 and 28.1% to $60.6 million for the first nine months, as management believes these non-GAAP metrics help investors compare operating performance by excluding items like interest, taxes, depreciation, and other specific adjustments Reconciliation of Net Income to Adjusted EBITDA (Q3) | (In thousands) | Three months ended June 30, 2024 (In thousands) | Three months ended June 30, 2023 (In thousands) | | :--- | :--- | :--- | | Net income | $9,209 | $7,072 | | EBITDA | $20,692 | $16,294 | | Adjusted EBITDA | $22,156 | $16,686 | Reconciliation of Net Income to Adjusted EBITDA (Nine Months) | (In thousands) | Nine months ended June 30, 2024 (In thousands) | Nine months ended June 30, 2023 (In thousands) | | :--- | :--- | :--- | | Net income | $24,925 | $17,363 | | EBITDA | $57,909 | $45,358 | | Adjusted EBITDA | $60,635 | $47,334 | - Adjusted EBITDA as a percentage of net sales was 7.2% for Q3 2024, up from 5.9% in Q3 2023, and for the nine-month period, it was 6.6%, up from 5.6% in the prior year[23] - Management uses these non-GAAP measures to assess operating performance on a consistent basis and believes they enhance investors' understanding of the business and its strategic execution[24][25]