Floor & Decor(FND) - 2024 Q3 - Quarterly Results

Executive Summary & Key Financial Highlights Third Quarter Fiscal 2024 Performance Floor & Decor reported a slight increase in net sales for Q3 FY2024, reaching $1,117.9 million, up 0.9% year-over-year, while comparable store sales decreased by 6.4%, and profitability metrics saw declines compared to the prior year Third Quarter Fiscal 2024 Key Financials | Metric | Q3 FY2024 (Millions) | Q3 FY2023 (Millions) | Change (%) | Basis Point Change | Source Chunks | | :---------------------- | :------------------- | :------------------- | :--------- | :----------------- | :------------ | | Net Sales | $1,117.9 | $1,107.8 | 0.9% | - | [1, 3] | | Comparable Store Sales | -6.4% | - | - | - | [1, 3] | | Operating Income | $66.3 | $84.8 | -21.8% | - | [4] | | Operating Margin | 5.9% | 7.7% | - | -180 bps | [4] | | Net Income | $51.7 | $65.9 | -21.6% | - | [4] | | Diluted EPS | $0.48 | $0.61 | -21.3% | - | [1, 4] | | Adjusted EBITDA | $132.9 | $140.9 | -5.7% | - | [5] | Year-to-Date Fiscal 2024 Performance For the thirty-nine weeks ended September 26, 2024, Floor & Decor experienced a slight decrease in net sales and a more significant decline in comparable store sales, with all key profitability metrics also seeing double-digit percentage decreases compared to the same period in fiscal 2023 Year-to-Date Fiscal 2024 Key Financials | Metric | YTD FY2024 (Millions) | YTD FY2023 (Millions) | Change (%) | Basis Point Change | Source Chunks | | :---------------------- | :-------------------- | :-------------------- | :--------- | :----------------- | :------------ | | Net Sales | $3,348.4 | $3,365.8 | -0.5% | - | [5] | | Comparable Store Sales | -9.0% | - | - | - | [5] | | Operating Income | $197.0 | $275.3 | -28.4% | - | [6] | | Operating Margin | 5.9% | 8.2% | - | -230 bps | [6] | | Net Income | $158.4 | $208.9 | -24.2% | - | [6] | | Diluted EPS | $1.46 | $1.94 | -24.7% | - | [6] | | Adjusted EBITDA | $392.8 | $443.4 | -11.4% | - | [6] | - The company opened 20 new warehouse stores year-to-date, contributing to its expansion strategy[5] CEO Commentary CEO Tom Taylor acknowledged the challenging demand environment for home improvement and hard surface flooring but expressed pride in the team's execution and cost management, which led to Q3 diluted EPS exceeding expectations, as the company continues to implement strategies for market share growth while prudently managing profitability and maintaining a strong balance sheet - Demand for large project discretionary home improvement and hard surface flooring spending remained challenging[2] - Diluted earnings per share of $0.48 for Q3 FY2024 exceeded expectations[2] - The company is implementing strategies to grow market share, manage profitability, and maintain a strong balance sheet[2] - Floor & Decor opened 11 new warehouse-format stores in Q3 FY2024, bringing the total to 241 warehouse stores and five design studios[2] Fiscal Year 2024 Outlook Floor & Decor updated its outlook for the fiscal year ending December 26, 2024, projecting net sales between $4,400 million and $4,430 million, with comparable store sales expected to decrease by 7.5% to 8.5%, diluted EPS forecasted between $1.65 and $1.75, and plans to open 30 new warehouse stores Updated Fiscal Year 2024 Outlook | Metric | Outlook (Approximate) | Source Chunks | | :---------------------------- | :-------------------- | :------------ | | Net Sales | $4,400M to $4,430M | [8] | | Comparable Store Sales | (8.5)% to (7.5)% | [8] | | Diluted EPS | $1.65 to $1.75 | [8] | | Adjusted EBITDA | $490M to $500M | [8] | | Depreciation and Amortization | $235M | [8] | | Interest Expense, Net | $4M | [8] | | Tax Rate | 18% | [8] | | Diluted Weighted Average Shares | 108M shares | [8] | | New Warehouse Stores Opened | 30 | [8] | | Capital Expenditures | $360M to $390M | [8] | Company Overview About Floor & Decor Holdings, Inc. Floor & Decor is a multi-channel specialty retailer and commercial flooring distributor, operating 241 warehouse-format stores and five design studios across 38 states, offering a wide range of in-stock hard-surface flooring and related installation materials at everyday low prices - Floor & Decor is a multi-channel specialty retailer and commercial flooring distributor[12] - As of September 26, 2024, the company operates 241 warehouse-format stores and five design studios across 38 states[12] - The company offers a broad assortment of in-stock hard-surface flooring, including tile, wood, laminate, vinyl, and natural stone, along with decorative accessories, wall tile, and installation materials[12] Conference Call Information A conference call to discuss the third quarter fiscal 2024 financial results was scheduled for October 30, 2024, at 5:00 p.m. Eastern Time, with a live audio webcast and a recorded replay made available online and via phone until November 6, 2024 - A conference call for Q3 FY2024 results was held on October 30, 2024, at 5:00 p.m. ET[9] - A live audio webcast and recorded replay are available at ir.flooranddecor.com[9][10] - The telephone replay is available until November 6, 2024, using pin number 13748389[10] Financial Statements Condensed Consolidated Statements of Operations The Condensed Consolidated Statements of Operations provide a detailed breakdown of the company's revenues, costs, and profitability for both the thirteen-week and thirty-nine-week periods ended September 26, 2024, compared to the prior fiscal year Thirteen Weeks Ended September 26, 2024 For the third quarter of fiscal 2024, net sales increased slightly, while gross profit improved, but operating expenses rose significantly, leading to a decrease in operating income, net income, and diluted EPS compared to the same period in fiscal 2023 Condensed Consolidated Statements of Operations (Thirteen Weeks) | Metric | Sep 26, 2024 (Thousands) | Sep 28, 2023 (Thousands) | % Increase (Decrease) | Source Chunks | | :-------------------------------- | :----------------------- | :----------------------- | :-------------------- | :------------ | | Net Sales | $1,117,926 | $1,107,812 | 0.9% | [18] | | Cost of Sales | $632,056 | $640,357 | (1.3)% | [18] | | Gross Profit | $485,870 | $467,455 | 3.9% | [18] | | Selling and Store Operating | $339,135 | $308,581 | 9.9% | [18] | | General and Administrative | $67,687 | $59,870 | 13.1% | [18] | | Pre-opening | $12,731 | $14,232 | (10.5)% | [18] | | Total Operating Expenses | $419,553 | $382,683 | 9.6% | [18] | | Operating Income | $66,317 | $84,772 | (21.8)% | [18] | | Interest Expense, Net | $189 | $1,246 | (84.8)% | [18] | | Income Before Income Taxes | $66,128 | $83,526 | (20.8)% | [18] | | Income Tax Expense | $14,438 | $17,603 | (18.0)% | [18] | | Net Income | $51,690 | $65,923 | (21.6)% | [18] | | Diluted Earnings Per Share | $0.48 | $0.61 | (21.3)% | [18] | Thirty-nine Weeks Ended September 26, 2024 For the first thirty-nine weeks of fiscal 2024, net sales saw a minor decrease, while gross profit increased, but a substantial rise in operating expenses led to significant declines in operating income, net income, and diluted EPS compared to the same period in fiscal 2023 Condensed Consolidated Statements of Operations (Thirty-nine Weeks) | Metric | Sep 26, 2024 (Thousands) | Sep 28, 2023 (Thousands) | % Increase (Decrease) | Source Chunks | | :-------------------------------- | :----------------------- | :----------------------- | :-------------------- | :------------ | | Net Sales | $3,348,354 | $3,365,763 | (0.5)% | [19] | | Cost of Sales | $1,901,424 | $1,949,557 | (2.5)% | [19] | | Gross Profit | $1,446,930 | $1,416,206 | 2.2% | [19] | | Selling and Store Operating | $1,014,888 | $923,658 | 9.9% | [19] | | General and Administrative | $202,135 | $185,060 | 9.2% | [19] | | Pre-opening | $32,951 | $32,226 | 2.2% | [19] | | Total Operating Expenses | $1,249,974 | $1,140,944 | 9.6% | [19] | | Operating Income | $196,956 | $275,262 | (28.4)% | [19] | | Interest Expense, Net | $2,807 | $9,006 | (68.8)% | [19] | | Income Before Income Taxes | $194,149 | $266,256 | (27.1)% | [19] | | Income Tax Expense | $35,761 | $57,357 | (37.7)% | [19] | | Net Income | $158,388 | $208,899 | (24.2)% | [19] | | Diluted Earnings Per Share | $1.46 | $1.94 | (24.7)% | [19] | Condensed Consolidated Balance Sheets As of September 26, 2024, Floor & Decor's total assets increased to $4,932.2 million from $4,662.6 million at December 28, 2023, primarily driven by higher cash and cash equivalents and fixed assets, net, while inventories saw a decrease, with total liabilities and stockholders' equity also increasing proportionally Condensed Consolidated Balance Sheets (Selected Items) | Metric | Sep 26, 2024 (Thousands) | Dec 28, 2023 (Thousands) | Source Chunks | | :----------------------------------- | :----------------------- | :----------------------- | :------------ | | Cash and Cash Equivalents | $180,771 | $34,382 | [20] | | Inventories, Net | $1,046,007 | $1,106,150 | [20] | | Total Current Assets | $1,388,865 | $1,316,640 | [20] | | Fixed Assets, Net | $1,763,980 | $1,629,917 | [20] | | Total Assets | $4,932,229 | $4,662,550 | [20] | | Total Current Liabilities | $1,193,020 | $1,152,013 | [20] | | Total Long-Term Liabilities | $1,628,154 | $1,579,547 | [20] | | Total Liabilities | $2,821,174 | $2,731,560 | [20] | | Total Stockholders' Equity | $2,111,055 | $1,930,990 | [20] | Condensed Consolidated Statements of Cash Flows For the thirty-nine weeks ended September 26, 2024, net cash provided by operating activities decreased significantly compared to the prior year, while net cash used in investing activities also decreased, and net cash used in financing activities saw a substantial reduction, primarily due to changes in revolving line of credit activities, resulting in an overall net increase in cash and cash equivalents Condensed Consolidated Statements of Cash Flows (Thirty-nine Weeks) | Cash Flow Activity | Sep 26, 2024 (Thousands) | Sep 28, 2023 (Thousands) | Source Chunks | | :-------------------------------------- | :----------------------- | :----------------------- | :------------ | | Net Cash Provided by Operating Activities | $501,768 | $698,975 | [22] | | Net Cash Used in Investing Activities | ($349,360) | ($431,070) | [22] | | Net Cash Used in Financing Activities | ($6,019) | ($216,071) | [22] | | Net Increase in Cash and Cash Equivalents | $146,389 | $51,834 | [22] | | Cash and Cash Equivalents, End of Period | $180,771 | $61,628 | [22] | Non-GAAP Financial Measures Definition of Non-GAAP Financial Measures Floor & Decor uses non-GAAP financial measures, specifically EBITDA and Adjusted EBITDA, to supplement GAAP performance measures, with EBITDA defined as net income before interest, taxes, depreciation, and amortization, and Adjusted EBITDA further adjusting for non-cash stock-based compensation and other non-core operating items, which are used by management and the board to assess financial performance, evaluate business strategies, and compare against peers, but they have limitations and should not be considered alternatives to GAAP measures - EBITDA is defined as net income before interest, taxes, depreciation, and amortization[14] - Adjusted EBITDA further adjusts EBITDA to eliminate the impact of non-cash stock-based compensation expense and certain items not indicative of core operating performance[14] - Management and the board use EBITDA and Adjusted EBITDA to assess financial performance, enterprise value, evaluate business strategies, make budgeting decisions, and compare performance against peer companies[15] - These non-GAAP measures have limitations and should not be considered alternatives to net income or other GAAP performance measures[16] Reconciliation of GAAP to Non-GAAP Financial Measures The company provides reconciliations of its non-GAAP financial measures (EBITDA and Adjusted EBITDA) to the most directly comparable GAAP financial measure (Net Income) for both the thirteen-week and thirty-nine-week periods, detailing the adjustments made Thirteen Weeks Ended September 26, 2024 For the third quarter, Net Income (GAAP) was reconciled to EBITDA and Adjusted EBITDA by adding back depreciation and amortization, interest expense, income tax expense, stock-based compensation, and other adjustments Reconciliation of GAAP to Non-GAAP (Thirteen Weeks) | Metric | Sep 26, 2024 (Thousands) | Sep 28, 2023 (Thousands) | Source Chunks | | :-------------------------------- | :----------------------- | :----------------------- | :------------ | | Net Income (GAAP) | $51,690 | $65,923 | [24] | | Depreciation and Amortization | $57,328 | $50,336 | [24] | | Interest Expense, Net | $189 | $1,246 | [24] | | Income Tax Expense | $14,438 | $17,603 | [24] | | EBITDA | $123,645 | $135,108 | [24] | | Stock-based Compensation Expense | $10,031 | $5,289 | [24] | | Other | ($779) | $542 | [24] | | Adjusted EBITDA | $132,897 | $140,939 | [24] | Thirty-nine Weeks Ended September 26, 2024 For the year-to-date period, Net Income (GAAP) was reconciled to EBITDA and Adjusted EBITDA, showing the impact of adding back non-cash and non-core operating expenses Reconciliation of GAAP to Non-GAAP (Thirty-nine Weeks) | Metric | Sep 26, 2024 (Thousands) | Sep 28, 2023 (Thousands) | Source Chunks | | :-------------------------------- | :----------------------- | :----------------------- | :------------ | | Net Income (GAAP) | $158,388 | $208,899 | [25] | | Depreciation and Amortization | $171,044 | $145,439 | [25] | | Interest Expense, Net | $2,807 | $9,006 | [25] | | Income Tax Expense | $35,761 | $57,357 | [25] | | EBITDA | $368,000 | $420,701 | [25] | | Stock-based Compensation Expense | $25,618 | $20,336 | [25] | | Other | ($866) | $2,329 | [25] | | Adjusted EBITDA | $392,752 | $443,366 | [25] | Other Disclosures Comparable Store Sales Definition Comparable store sales measure period-over-period net sales changes for stores that have been open for at least thirteen full fiscal months, ensuring comparability, including e-commerce, regional account manager, and design studio sales fulfilled by qualifying stores, but excluding sales from the Spartan Surfaces, LLC subsidiary - A store is included in comparable store sales calculation on the first day of the thirteenth full fiscal month following its opening[13] - Changes in square footage of existing comparable stores (remodels, relocations within the same trade area) do not exclude them from the calculation[13] - Stores closed for a full fiscal month or longer are excluded for each full month they are closed[13] - E-commerce, regional account manager, and design studio sales are included if fulfilled by a qualifying comparable store[13] - Sales through the Spartan Surfaces, LLC subsidiary are excluded from comparable store sales[13] Forward-Looking Statements This section contains forward-looking statements regarding the company's future operating results, financial position, business strategy, and plans, which are based on current expectations and involve known and unknown risks and uncertainties that could cause actual results to differ materially, and the company does not guarantee future events or results and does not plan to publicly update or revise these statements unless required by law - Forward-looking statements cover future operating results, financial position, business strategy, and management objectives[28] - These statements are based on current expectations, assumptions, estimates, and projections, and involve known and unknown risks and uncertainties[29] - Important factors that could cause actual results to differ materially include economic decline, challenges in new store growth, inability to manage competition, supply chain disruptions, and geopolitical risks[30] - The company does not guarantee future events or results and does not plan to publicly update or revise forward-looking statements, except as required by applicable law[30][31] Investor Contacts Contact information for investor relations is provided for inquiries regarding Floor & Decor Holdings, Inc.'s financial information - Investor contacts are Wayne Hood, Senior Vice President of Investor Relations, and Matt McConnell, Senior Manager of Investor Relations[32] - Wayne Hood can be reached at 678-505-4415 or wayne.hood@flooranddecor.com[32] - Matt McConnell can be reached at 770-257-1374 or matthew.mcconnell@flooranddecor.com[32]