Academy(ASO) - 2025 Q2 - Quarterly Results

Executive Summary & Highlights Second Quarter 2024 Performance Overview Academy Sports + Outdoors reported a decline in net sales and comparable sales for Q2 2024, with GAAP diluted EPS of $1.95 and Adjusted diluted EPS of $2.03; despite sales challenges, the company achieved a 60% increase in year-to-date Adjusted Free Cash Flow, which was used to return $107 million to shareholders | Metric | Q2 2024 | Q2 2023 | Change % | | :------------------------------------ | :------ | :------ | :------- | | Net sales | $1,549.0M | $1,583.1M | (2.2)% | | Comparable sales | (6.9)% | (7.5)% | | | Income before income tax | $186.5M | $203.3M | (8.2)% | | Net income | $142.6M | $157.1M | (9.2)% | | Adjusted net income | $148.6M | $163.6M | (9.2)% | | Earnings per common share, diluted | $1.95 | $2.01 | (3.0)% | | Adjusted earnings per common share, diluted | $2.03 | $2.09 | (2.9)% | - Year-to-Date Adjusted Free Cash Flow increased by 60%[1] - The company returned $107 million to shareholders in Q2[1] CEO's Strategic Commentary CEO Steve Lawrence highlighted progress in strategic initiatives, including new store openings, omni-channel enhancements, and a new loyalty program launch, while inventory discipline led to gross margin expansion and reduced units per store, with future focus on increasing traffic and conversion through targeted marketing and loyalty program expansion - Opened nine new stores in the upcoming quarter and enhanced omni-channel capabilities, including DoorDash integration[2] - Launched a new loyalty program to leverage customer excitement[2] - Inventory discipline resulted in a 50 basis points gross margin expansion and a 5% reduction in units per store[2] - Future focus includes increasing traffic and conversion for stores and website through improved targeted marketing and expanding the new loyalty program[2] Financial Results Second Quarter Operating Results For the thirteen weeks ended August 3, 2024, Academy Sports + Outdoors reported a decrease in net sales and net income compared to the prior year, with a slight decline in diluted EPS | Metric | Thirteen Weeks Ended Aug 3, 2024 | Thirteen Weeks Ended July 29, 2023 | Change % | | :------------------------------------ | :------------------------------- | :------------------------------- | :------- | | Net sales | $1,549.0M | $1,583.1M | (2.2)% | | Comparable sales | (6.9)% | (7.5)% | | | Income before income tax | $186.5M | $203.3M | (8.2)% | | Net income | $142.6M | $157.1M | (9.2)% | | Adjusted net income | $148.6M | $163.6M | (9.2)% | | Earnings per common share, diluted | $1.95 | $2.01 | (3.0)% | | Adjusted earnings per common share, diluted | $2.03 | $2.09 | (2.9)% | Year-to-Date Operating Results Year-to-date operating results for the twenty-six weeks ended August 3, 2024, show a decrease in net sales, income before income tax, and net income compared to the previous year | Metric | Twenty-Six Weeks Ended Aug 3, 2024 | Twenty-Six Weeks Ended July 29, 2023 | Change % | | :------------------------------------ | :------------------------------- | :------------------------------- | :------- | | Net sales | $2,913.2M | $2,966.7M | (1.8)% | | Comparable sales | (6.4)% | (7.4)% | | | Income before income tax | $284.2M | $322.0M | (11.7)% | | Net Income | $219.1M | $251.0M | (12.7)% | | Adjusted net income | $230.3M | $266.6M | (13.6)% | | Earnings per common share, diluted | $2.93 | $3.19 | (8.2)% | | Adjusted earnings per common share, diluted | $3.08 | $3.39 | (9.1)% | Balance Sheet Highlights As of August 3, 2024, the company's cash and cash equivalents increased, merchandise inventories saw a slight rise, and long-term debt decreased significantly compared to July 29, 2023 | Balance Sheet Item | August 3, 2024 | July 29, 2023 | Change % | | :----------------- | :------------- | :------------ | :------- | | Cash and cash equivalents | $324.6M | $311.3M | 4.3% | | Merchandise inventories, net | $1,366.6M | $1,309.0M | 4.4% | | Long-term debt, net | $483.6M | $583.7M | (17.1)% | Capital Allocation & Store Expansion Academy Sports + Outdoors increased share repurchases and dividends paid year-over-year, and declared a quarterly cash dividend; the company also continued its store expansion strategy, opening one new store in Q2 and three year-to-date | Capital Allocation Item | Twenty-Six Weeks Ended Aug 3, 2024 | Twenty-Six Weeks Ended July 29, 2023 | Change % | | :---------------------- | :------------------------------- | :------------------------------- | :------- | | Share repurchases | $222.3M | $157.6M | 41.1% | | Dividends paid | $16.1M | $13.8M | 16.7% | - A quarterly cash dividend of $0.11 per share was declared on September 5, 2024, payable on October 17, 2024[7] - One new store was opened during the second quarter, bringing the total to three stores, with plans for 15 to 17 new stores in fiscal 2024[7] Fiscal 2024 Outlook Revised Full Year Guidance Academy Sports + Outdoors revised its fiscal 2024 guidance downwards for net sales, sales growth, comparable sales, net income, and EPS, while reaffirming its gross margin rate guidance | Metric | Updated Guidance (Low end) | Updated Guidance (High end) | Previous Guidance (Low end) | Previous Guidance (High end) | | :------------------------------------ | :------------------------- | :-------------------------- | :-------------------------- | :--------------------------- | | Net sales | $5,895.0M | $6,075.0M | $6,070.0M | $6,350.0M | | Sales growth | (4.3)% | (1.4)% | (1.5)% | 3.0% | | Comparable sales | (6.0)% | (3.0)% | (4.0)% | 1.0% | | Gross margin rate | 34.3% | 34.7% | 34.3% | 34.7% | | GAAP net income | $400.0M | $460.0M | $455.0M | $530.0M | | Adjusted net income | $420.0M | $480.0M | - | - | | GAAP earnings per common share, diluted | $5.45 | $6.20 | $6.05 | $7.05 | | Adjusted earnings per common share, diluted | $5.75 | $6.50 | - | - | | Capital expenditures | $175M | $225M | $225M | $275M | | Adjusted free cash flow | $290M | $340M | $290M | $375M | - The earnings per common share guidance reflects a tax rate of approximately 23.0% and does not include any potential future share repurchases using the $476 million remaining authorization[10] CFO's Commentary on Outlook CFO Carl Ford attributed challenging Q2 sales to a tough economy, a temporary distribution center backlog, and an active storm season, emphasizing continued expense and inventory management by leveraging a healthy balance sheet and strong cash flow for capital allocation - Q2 sales were impacted by a tough economy, a temporary distribution center backlog due to a new warehouse management system, and an active storm season[8] - The company will continue to manage expenses and inventory levels while focusing on driving top-line growth[8] - The company maintains a healthy balance sheet and top quartile cash flow generation, which will be deployed towards its capital allocation strategy[8] Company Information About Academy Sports + Outdoors Academy Sports + Outdoors is a leading full-line sporting goods and outdoor recreation retailer in the U.S., operating 285 stores across 19 states, with a mission to provide 'Fun for All' through localized merchandising and a broad assortment of brands - Academy is a leading full-line sporting goods and outdoor recreation retailer in the United States[13] - As of the end of the quarter, Academy operates 285 stores across 19 states[13] - The company's mission is to provide 'Fun for All' with a localized merchandising strategy and a product assortment focusing on outdoor, apparel, footwear, and sports & recreation categories, including national and private label brands[13] Conference Call Details Academy hosted a conference call on September 10, 2024, to discuss its financial results, with webcast and dial-in options available, and a replay accessible on the company's website - A conference call was hosted on September 10, 2024, at 10:00 a.m. Eastern Time[12] - The call was webcast at investors.academy.com[12] - Dial-in information: U.S. callers 1-877-407-3982, International callers 1-201-493-6780, Passcode 13748429[12] - A replay of the conference call will be available for approximately 30 days on the Company's website[12] Financial Statements (GAAP) Consolidated Statements of Income The consolidated statements of income provide a detailed breakdown of the company's revenues, costs, and profits for both the thirteen-week and twenty-six-week periods ended August 3, 2024, compared to the prior year Thirteen Weeks Ended August 3, 2024 | Metric | August 3, 2024 (in thousands) | Percentage of Sales (Aug 3, 2024) | July 29, 2023 (in thousands) | Percentage of Sales (Jul 29, 2023) | | :------------------------------------ | :---------------------------- | :-------------------------------- | :--------------------------- | :--------------------------------- | | Net sales | $1,548,980 | 100.0% | $1,583,077 | 100.0% | | Cost of goods sold | $990,255 | 63.9% | $1,019,631 | 64.4% | | Gross margin | $558,725 | 36.1% | $563,446 | 35.6% | | Selling, general and administrative expenses | $368,639 | 23.8% | $352,483 | 22.3% | | Operating income | $190,086 | 12.3% | $210,963 | 13.3% | | Income before income taxes | $186,546 | 12.0% | $203,273 | 12.8% | | Net income | $142,588 | 9.2% | $157,075 | 9.9% | | Earnings Per Common Share: Basic | $1.99 | | $2.06 | | | Earnings Per Common Share: Diluted | $1.95 | | $2.01 | | Twenty-Six Weeks Ended August 3, 2024 | Metric | August 3, 2024 (in thousands) | Percentage of Sales (Aug 3, 2024) | July 29, 2023 (in thousands) | Percentage of Sales (Jul 29, 2023) | | :------------------------------------ | :---------------------------- | :-------------------------------- | :--------------------------- | :--------------------------------- | | Net sales | $2,913,200 | 100.0% | $2,966,686 | 100.0% | | Cost of goods sold | $1,898,681 | 65.2% | $1,936,125 | 65.3% | | Gross margin | $1,014,519 | 34.8% | $1,030,561 | 34.7% | | Selling, general and administrative expenses | $722,050 | 24.8% | $693,402 | 23.4% | | Operating income | $292,469 | 10.0% | $337,159 | 11.4% | | Income before income taxes | $284,198 | 9.8% | $321,952 | 10.9% | | Net income | $219,053 | 7.5% | $251,045 | 8.5% | | Earnings Per Common Share: Basic | $3.00 | | $3.28 | | | Earnings Per Common Share: Diluted | $2.93 | | $3.19 | | Consolidated Balance Sheets The consolidated balance sheets show the company's financial position, with total assets increasing to $4.87 billion as of August 3, 2024, compared to $4.68 billion on July 29, 2023. Key changes include increases in merchandise inventories and accounts payable, and a decrease in long-term debt | Balance Sheet Item | August 3, 2024 (in thousands) | February 3, 2024 (in thousands) | July 29, 2023 (in thousands) | | :------------------------------------ | :---------------------------- | :------------------------------ | :--------------------------- | | Total assets | $4,874,358 | $4,676,713 | $4,675,416 | | Total liabilities | $2,921,964 | $2,722,063 | $2,937,377 | | Stockholders' equity | $1,952,394 | $1,954,650 | $1,738,039 | | Cash and cash equivalents | $324,568 | $347,920 | $311,336 | | Merchandise inventories, net | $1,366,616 | $1,194,159 | $1,309,033 | | Accounts payable | $704,578 | $541,077 | $669,832 | | Long-term debt, net | $483,617 | $484,551 | $583,729 | Consolidated Statements of Cash Flows The consolidated statements of cash flows indicate that net cash provided by operating activities increased year-over-year for the twenty-six weeks ended August 3, 2024, while net cash used in investing and financing activities also increased, resulting in a net decrease in cash and cash equivalents | Cash Flow Activity | Twenty-Six Weeks Ended Aug 3, 2024 (in thousands) | Twenty-Six Weeks Ended July 29, 2023 (in thousands) | | :------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | | Net cash provided by operating activities | $291,023 | $243,566 | | Net cash used in investing activities | ($73,739) | ($107,846) | | Net cash used in financing activities | ($240,636) | ($161,529) | | NET DECREASE IN CASH AND CASH EQUIVALENTS | ($23,352) | ($25,809) | | CASH AND CASH EQUIVALENTS AT END OF PERIOD | $324,568 | $311,336 | Non-GAAP Financial Measures & Reconciliations Definition of Non-GAAP Measures Academy Sports + Outdoors presents non-GAAP financial measures like Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income, Adjusted Earnings per Common Share, and Adjusted Free Cash Flow to provide additional insights into financial performance and comparability between periods, excluding certain items - Non-GAAP measures (Adjusted EBITDA, Adjusted EBIT, Adjusted Net Income, Adjusted EPS, Adjusted Free Cash Flow) are presented as supplemental measures of financial performance[14] - These measures are useful to investors by providing additional information on comparisons between periods, excluding certain items that affect overall comparability[14] - Non-GAAP financial measures should be considered in addition to, and not as an alternative for, GAAP results[14] Adjusted EBITDA and Adjusted EBIT Reconciliation The company reconciles GAAP net income to Adjusted EBITDA and Adjusted EBIT by adding back interest expense, income tax expense, depreciation and amortization, equity compensation, and write-off of deferred loan costs | Metric | Thirteen Weeks Ended Aug 3, 2024 (in thousands) | Thirteen Weeks Ended July 29, 2023 (in thousands) | Twenty-Six Weeks Ended Aug 3, 2024 (in thousands) | Twenty-Six Weeks Ended July 29, 2023 (in thousands) | | :------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Net income | $142,588 | $157,075 | $219,053 | $251,045 | | Interest expense, net | $9,071 | $11,313 | $18,557 | $22,543 | | Income tax expense | $43,958 | $46,198 | $65,145 | $70,907 | | Depreciation and amortization | $28,918 | $25,760 | $57,771 | $52,021 | | Equity compensation | $7,955 | $8,501 | $14,093 | $19,883 | | Write off of deferred loan costs | — | — | $449 | — | | Adjusted EBITDA | $232,490 | $248,847 | $375,068 | $416,399 | | Less: Depreciation and amortization | ($28,918) | ($25,760) | ($57,771) | ($52,021) | | Adjusted EBIT | $203,572 | $223,087 | $317,297 | $364,378 | Adjusted Net Income and Adjusted EPS Reconciliation This section reconciles GAAP net income and EPS to their adjusted non-GAAP counterparts by accounting for equity compensation, write-off of deferred loan costs, and their tax effects; it also provides a reconciliation for the fiscal 2024 guidance | Metric | Thirteen Weeks Ended Aug 3, 2024 (in thousands) | July 29, 2023 (in thousands) | Twenty-Six Weeks Ended Aug 3, 2024 (in thousands) | July 29, 2023 (in thousands) | | :------------------------------------ | :---------------------------------------------- | :--------------------------- | :---------------------------------------------- | :--------------------------- | | Net income | $142,588 | $157,075 | $219,053 | $251,045 | | Equity compensation | $7,955 | $8,501 | $14,093 | $19,883 | | Write off of deferred loan costs | — | — | $449 | — | | Tax effects of these adjustments | ($1,901) | ($2,008) | ($3,333) | ($4,378) | | Adjusted Net Income | $148,642 | $163,568 | $230,262 | $266,550 | | Earnings per common share: Basic | $1.99 | $2.06 | $3.00 | $3.28 | | Earnings per common share: Diluted | $1.95 | $2.01 | $2.93 | $3.19 | | Adjusted earnings per common share: Basic | $2.07 | $2.15 | $3.16 | $3.49 | | Adjusted earnings per common share: Diluted | $2.03 | $2.09 | $3.08 | $3.39 | | Metric | Fiscal Year Ending Feb 1, 2025 (Low Range) | Fiscal Year Ending Feb 1, 2025 (High Range) | | :------------------------------------ | :----------------------------------------- | :------------------------------------------ | | Net Income | $400.0M | $460.0M | | Equity compensation | $27.0M | $27.0M | | Tax effects of these adjustments | ($7.0M) | ($7.0M) | | Adjusted Net Income | $420.0M | $480.0M | | Earnings Per Common Share, Diluted | $5.45 | $6.20 | | Adjusted Earnings Per Common Share, Diluted | $5.75 | $6.50 | Adjusted Free Cash Flow Reconciliation Adjusted Free Cash Flow is calculated by subtracting net cash used in investing activities from net cash provided by operating activities; for the twenty-six weeks ended August 3, 2024, Adjusted Free Cash Flow was $217.3 million | Metric | Thirteen Weeks Ended Aug 3, 2024 (in thousands) | July 29, 2023 (in thousands) | Twenty-Six Weeks Ended Aug 3, 2024 (in thousands) | July 29, 2023 (in thousands) | | :------------------------------------ | :---------------------------------------------- | :--------------------------- | :---------------------------------------------- | :--------------------------- | | Net cash provided by operating activities | $91,346 | $191,431 | $291,023 | $243,566 | | Net cash used in investing activities | ($41,384) | ($67,299) | ($73,739) | ($107,846) | | Adjusted Free Cash Flow | $49,962 | $124,132 | $217,284 | $135,720 | Additional Information Forward-Looking Statements This section contains a disclaimer regarding forward-looking statements, emphasizing that they are based on current expectations and are subject to various risks and uncertainties that could cause actual results to differ materially; the company undertakes no obligation to update these statements - Forward-looking statements are not guarantees of future performance[16] - Actual results may differ materially due to changes in global, regional, or local economic, business, competitive, market, regulatory, environmental, and other factors, many of which are beyond Academy's control[16] - Academy undertakes no obligation to publicly update or review any forward-looking statement, except as required by applicable securities laws[16] Investor & Media Contacts Contact information for investor relations and media inquiries is provided for stakeholders - Investor Contact: Matt Hodges, VP, Investor Relations, 281-646-5362, matt.hodges@academy.com[17] - Media Contact: Allan Rojas, Director, Communications, 281-944-6048, allan.rojas@academy.com[18]