SharkNinja(US:SN)2024-05-09 11:04Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets As of March 31, 2024, total assets slightly decreased to $3.41 billion, while total liabilities reduced to $1.84 billion, leading to an increase in shareholders' equity to $1.57 billion Condensed Consolidated Balance Sheet (As of March 31, 2024 vs. December 31, 2023) | Account | March 31, 2024 ($ in thousands) | December 31, 2023 ($ in thousands) | | :--- | :--- | :--- | | Total Current Assets | 1,723,833 | 1,897,284 | | Cash and cash equivalents | 131,894 | 154,061 | | Accounts receivable, net | 780,557 | 985,172 | | Inventories | 750,032 | 699,740 | | Total Assets | 3,409,703 | 3,487,070 | | Total Current Liabilities | 895,819 | 1,125,132 | | Accounts payable | 409,371 | 459,651 | | Accrued expenses and other current liabilities | 412,141 | 620,333 | | Total Liabilities | 1,836,133 | 2,008,177 | | Total Shareholders' Equity | 1,573,570 | 1,478,893 | Condensed Consolidated Statements of Income For Q1 2024, net sales grew 24.7% to $1.07 billion, driving a 25.9% increase in net income to $109.6 million and diluted EPS of $0.78 Q1 2024 vs. Q1 2023 Performance | Metric | Q1 2024 ($ in thousands) | Q1 2023 ($ in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | 1,066,228 | 855,282 | +24.7% | | Gross Profit | 526,617 | 400,543 | +31.5% | | Operating Income | 154,942 | 122,630 | +26.3% | | Net Income | 109,612 | 87,096 | +25.9% | Net Income Per Share | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net income per share, basic | $0.79 | $0.63 | | Net income per share, diluted | $0.78 | $0.63 | Condensed Consolidated Statements of Comprehensive Income Comprehensive income for Q1 2024 increased to $108.1 million, primarily driven by net income, despite a slight offset from foreign currency translation adjustments Comprehensive Income Breakdown (Q1 2024 vs. Q1 2023) | Item | Q1 2024 ($ in thousands) | Q1 2023 ($ in thousands) | | :--- | :--- | :--- | | Net Income | 109,612 | 87,096 | | Foreign currency translation adjustments | (3,374) | 5,257 | | Unrealized gain (loss) on derivative instruments, net | 1,870 | (2,352) | | Comprehensive Income | 108,108 | 90,001 | Condensed Consolidated Statements of Shareholders' Equity Shareholders' equity increased to $1.57 billion by March 31, 2024, primarily due to net income and share-based compensation, contrasting with a distribution to the Former Parent in Q1 2023 - For the three months ended March 31, 2024, total shareholders' equity increased by $94.7 million, driven by net income of $109.6 million13 - For the three months ended March 31, 2023, equity changes included a distribution of $60.3 million paid to the Former Parent15 Condensed Consolidated Statements of Cash Flows Net cash from operating activities decreased to $43.9 million in Q1 2024, primarily due to working capital changes, leading to a $22.2 million reduction in cash and cash equivalents Cash Flow Summary (Q1 2024 vs. Q1 2023) | Cash Flow Activity | Q1 2024 ($ in thousands) | Q1 2023 ($ in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | 43,882 | 89,762 | | Net cash used in investing activities | (26,886) | (7,799) | | Net cash used in financing activities | (37,920) | (98,631) | | Net decrease in cash | (22,167) | (11,319) | - The decrease in operating cash flow was largely driven by a $207.2 million use of cash from accrued expenses and other liabilities, compared to a $75.2 million use in the prior year period18 - Financing activities in Q1 2023 included a $60.3 million distribution to the Former Parent, which did not recur in Q1 202418 Notes to Condensed Consolidated Financial Statements Note 1: Organization and Description of Business SharkNinja, Inc. is a global product design and technology company, separated from JS Global in July 2023, listing on the NYSE under its 'Shark' and 'Ninja' brands - The company designs and sells products in categories including Cleaning Appliances, Cooking and Beverage Appliances, and Food Preparation Appliances under the 'Shark' and 'Ninja' brands21 - The company separated from its Former Parent, JS Global, and began trading on the NYSE on July 31, 202324 Note 2: Summary of Significant Accounting Policies This note details the company's U.S. GAAP financial statement preparation, key accounting policies, and significant risks such as customer concentration and warranty accruals Basis of Presentation The unaudited condensed consolidated financial statements are prepared under U.S. GAAP, with no significant changes to accounting policies in Q1 2024 - The financial statements are prepared in accordance with U.S. GAAP and include the accounts of SharkNinja, Inc. and its wholly owned subsidiaries27 - No significant changes were made to the significant accounting policies during the three months ended March 31, 202431 Concentration of Credit Risks The company faces significant customer concentration, with three key customers accounting for substantial portions of both net sales and accounts receivable in Q1 2024 Customer Concentration of Net Sales | Customer | Q1 2024 (%) | Q1 2023 (%) | | :--- | :--- | :--- | | Customer A | 18.0 | 15.2 | | Customer B | 11.7 | 11.6 | | Customer C | 14.6 | 15.3 | Customer Concentration of Accounts Receivable, Net | Customer | March 31, 2024 (%) | Dec 31, 2023 (%) | | :--- | :--- | :--- | | Customer A | 16.3 | 22.4 | | Customer B | 18.1 | 16.7 | | Customer C | 10.7 | * | Disaggregation of Net Sales In Q1 2024, Domestic sales comprised 68.9% of net sales, with Shark and Ninja brands nearly evenly split, and Cleaning Appliances as the largest product category Net Sales by Region (Q1 2024) | Region | Net Sales ($ in thousands) | % of Total | | :--- | :--- | :--- | | Domestic | 734,219 | 68.9% | | International | 332,009 | 31.1% | Net Sales by Brand (Q1 2024) | Brand | Net Sales ($ in thousands) | % of Total | | :--- | :--- | :--- | | Shark | 531,549 | 49.9% | | Ninja | 534,679 | 50.1% | Net Sales by Product Category (Q1 2024) | Category | Net Sales ($ in thousands) | % of Total | | :--- | :--- | :--- | | Cleaning Appliances | 421,920 | 39.6% | | Cooking and Beverage Appliances | 329,642 | 30.9% | | Food Preparation Appliances | 205,036 | 19.2% | | Other | 109,630 | 10.3% | Warranty Costs The company accrues estimated warranty costs upon sales recognition, with the ending warranty liability balance at $25.4 million as of March 31, 2024 Product Warranty Liability Rollforward | Activity | Q1 2024 ($ in thousands) | Q1 2023 ($ in thousands) | | :--- | :--- | :--- | | Beginning balance | 28,090 | 20,958 | | Accruals for warranties issued | 7,266 | 6,071 | | Settlements made | (9,086) | (6,954) | | Ending balance | 25,428 | 20,075 | Note 3: Condensed Consolidated Balance Sheet Components This note details key balance sheet components, highlighting 'Molds and tooling' as the largest property and equipment item and 'Accrued customer incentives' as the largest accrued expense Property and Equipment, Net (As of March 31, 2024) | Category | Gross Amount ($ in thousands) | | :--- | :--- | | Molds and tooling | 297,498 | | Computer and software | 101,374 | | Displays | 92,625 | | Total property and equipment, net | 168,418 | Accrued Expenses and Other Current Liabilities (As of March 31, 2024) | Category | Amount ($ in thousands) | | :--- | :--- | | Accrued customer incentives | 147,831 | | Accrued expenses | 74,132 | | Accrued compensation and benefits | 38,474 | | Total accrued expenses and other current liabilities | 412,141 | Note 4: Fair Value Measurements The company's fair value measurements as of March 31, 2024, include $1.9 million in Level 1 money market funds and $0.4 million in Level 2 derivative forward contracts - Financial assets measured at fair value consist of $1.9 million in money market funds (Level 1)54 - Financial liabilities measured at fair value consist of $370,000 in forward contracts (Level 2), down from $3.37 million at year-end 20235455 Note 5: Derivative Financial Instruments and Hedging SharkNinja utilizes USD-denominated forward contracts for currency hedging, with a notional amount of $279 million as of March 31, 2024, and recorded net gains of $3.0 million in Q1 2024 Notional Amount of Forward Contracts | Date | Notional Amount ($ in thousands) | | :--- | :--- | | March 31, 2024 | 279,000 | | December 31, 2023 | 350,000 | - For Q1 2024, there was a net gain of $3.0 million recorded in other comprehensive income related to hedging instruments, and a net loss of $1.2 million was reclassified from OCI to earnings59 Note 6: Intangible Assets, Net and Goodwill As of March 31, 2024, net intangible assets totaled $474.5 million, including $385.0 million in non-amortized trade names, alongside $834.0 million in goodwill Intangible Assets, Net (As of March 31, 2024) | Asset Type | Net Carrying Value ($ in thousands) | Amortization Status | | :--- | :--- | :--- | | Customer relationships | 39,745 | Amortizable | | Patents | 33,791 | Amortizable | | Developed technology | 15,964 | Amortizable | | Trade name and trademarks | 384,995 | Indefinite (Not Amortized) | | Total Intangible Assets, Net | 474,495 | | - Goodwill remained stable at $834.0 million as of March 31, 202462 - Total amortization expense for intangible assets was $5.9 million in Q1 202461 Note 7: Operating Leases Total lease cost increased to $10.2 million in Q1 2024, with $79.0 million in new operating lease right-of-use assets obtained, bringing total future minimum lease payments to $189.9 million - The company obtained $79.0 million in new operating lease right-of-use assets during Q1 2024, a substantial increase from $1.6 million in Q1 202365 Lease Metrics | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total Lease Cost ($ in thousands) | 10,170 | 7,783 | | Weighted-average remaining lease term (years) | 7.2 | 6.2 | | Weighted-average discount rate | 6.2% | 4.4% | Note 8: Debt The company's debt includes an $810.0 million term loan and a $500.0 million revolving credit facility, with $799.9 million outstanding on the term loan and $490.2 million available on the undrawn revolving facility as of March 31, 2024 - The company has a 2023 Credit Agreement providing for an $810.0 million term loan and a $500.0 million revolving credit facility, maturing in July 202866 Long-Term Debt Summary (As of March 31, 2024) | Component | Amount ($ in thousands) | | :--- | :--- | | 2023 Term Loans (Principal) | 799,875 | | Less: deferred financing costs | (5,009) | | Less: current portion | (29,219) | | Long-term debt, net of current portion | 765,647 | - As of March 31, 2024, no amounts were outstanding on the revolving facility, and $490.2 million was available for borrowing67 Note 9: Commitments and Contingencies As of March 31, 2024, the company reports no material long-term non-cancelable purchase obligations or legal proceedings expected to have a material adverse effect - Outstanding non-cancelable purchase obligations with a term of 12 months or longer were immaterial as of March 31, 202471 - The company is not presently a party to any litigation expected to have a material adverse effect on its business73 Note 10: Shareholders' Equity and Equity Incentive Plan The company's equity incentive plan resulted in $19.4 million in share-based compensation expense for Q1 2024, with $54.3 million in unrecognized RSU costs remaining RSU Activity (Q1 2024) | Activity | Number of Shares | | :--- | :--- | | Unvested as of Dec 31, 2023 | 3,857,986 | | Granted | 45,000 | | Vested | (1,372,022) | | Cancelled/Forfeited | (29,822) | | Unvested as of Mar 31, 2024 | 2,501,142 | Share-Based Compensation Expense (Q1 2024 vs Q1 2023) | Expense Category | Q1 2024 ($ in thousands) | Q1 2023 ($ in thousands) | | :--- | :--- | :--- | | Research and development | 3,499 | 230 | | Sales and marketing | 2,572 | 101 | | General and administrative | 13,355 | 517 | | Total | 19,426 | 848 | - As of March 31, 2024, unrecognized share-based compensation cost related to RSUs was $54.3 million, to be recognized over a weighted average of 1.7 years79 Note 11: Income Taxes The company's effective tax rate increased to 23.6% in Q1 2024, resulting in a $33.9 million provision for income taxes, primarily due to limitations on executive compensation deductibility Income Tax Provision and Effective Tax Rate | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Provision for income taxes ($ in millions) | 33.9 | 24.3 | | Effective Tax Rate (ETR) | 23.6% | 21.8% | - The increase in the ETR was primarily driven by limitations on deductible executive compensation82 Note 12: Net Income Per Share For Q1 2024, basic net income per share was $0.79 and diluted net income per share was $0.78, reflecting the dilutive effect of RSUs not present in Q1 2023 Net Income Per Share Calculation | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Income ($ in thousands) | 109,612 | 87,096 | | Weighted-average shares, basic | 139,448,556 | 138,982,872 | | Dilutive effect of RSUs | 1,254,469 | — | | Weighted-average shares, diluted | 140,703,025 | 138,982,872 | | Net income per share, basic | $0.79 | $0.63 | | Net income per share, diluted | $0.78 | $0.63 | Note 13: Related Party Transactions SharkNinja continues related party transactions with its former parent, JS Global, including $67.7 million in Q1 2024 purchases and $0.9 million in royalty income from brand licensing - Following the separation, the company continues to engage in transactions with its former parent, JS Global, covering sourcing, brand licensing, and R&D858788 Key Related Party Transactions (Q1 2024 vs Q1 2023) | Transaction | Q1 2024 ($ in thousands) | Q1 2023 ($ in thousands) | | :--- | :--- | :--- | | Cost of sales - purchases of goods and services, net | 67,696 | 291,199 | | Royalty income | 948 | — | Related Party Balances | Balance Sheet Item | March 31, 2024 ($ in thousands) | Dec 31, 2023 ($ in thousands) | | :--- | :--- | :--- | | Accounts receivable, net | 4,838 | 3,594 | | Accounts payable | 71,193 | 101,538 |