Wolverine World Wide(WWW) - 2024 Q3 - Quarterly Results

Q3 2024 Performance Overview Financial Highlights Wolverine Worldwide exceeded Q3 2024 guidance with strong Merrell and Saucony performance, achieving a record 45.3% gross margin and doubling diluted EPS to $0.28 - The company delivered better-than-expected revenue and earnings, led by Merrell and Saucony outpacing forecasts. Management highlighted a record gross margin and a doubling of earnings versus the previous year[2] Q3 2024 Key Financial Metrics (Ongoing Business) | Metric | Q3 2024 | Q3 2023 | Y/Y Change | | :--- | :--- | :--- | :--- | | Ongoing Total Revenue | $440.1 million | $473.3 million | (7.0)% | | Gross Margin | 45.3% | 40.8% | +450 bps | | Operating Margin | 8.0% | 5.2% | +280 bps | | Adjusted Operating Margin | 7.7% | 5.6% | +210 bps | | Diluted EPS | $0.28 | $0.11 | +154.5% | | Adjusted Diluted EPS | $0.29 | $0.11 | +163.6% | Q3 2024 Brand Revenue Performance | Brand | Revenue (Q3 2024) (in millions) | Y/Y Change | | :--- | :--- | :--- | | Merrell | $159.2 | +1.4% | | Saucony | $104.8 | (10.0)% | | Wolverine | $49.4 | (12.3)% | | Sweaty Betty | $46.3 | +3.0% | Balance Sheet Highlights The company significantly improved its Q3 balance sheet, reducing inventory by 49.4% to $285.5 million and net debt to $563 million - Inventory at the end of Q3 2024 was $285.5 million, a decrease of approximately 49.4% compared to the prior year[5] - Net debt at the end of Q3 2024 was $563 million, down $373 million from the prior year[5] Full-Year 2024 Outlook Updated Guidance Following strong Q3 performance, Wolverine Worldwide raised its full-year 2024 guidance for ongoing revenue, adjusted diluted EPS, and year-end net debt Full-Year 2024 Guidance Update | Metric | Previous Outlook | Updated Outlook | | :--- | :--- | :--- | | Ongoing Revenue | $1.71 billion - $1.73 billion | $1.730 billion - $1.745 billion | | Gross Margin | ~44.5% | ~44.5% (Unchanged) | | Adjusted Operating Margin | ~7.4% | ~7.2% | | Diluted EPS | $0.53 - $0.63 | $0.56 - $0.66 | | Adjusted Diluted EPS | $0.75 - $0.85 | $0.80 - $0.90 | | Year-End Inventory Decline | At least $75 million | ~ $85 million | | Year-End Net Debt | ~ $565 million | ~ $545 million | Detailed Financial Statements Consolidated Condensed Statements of Operations Q3 2024 revenue was $440.2 million, with gross margin improving to 45.3% and net earnings attributable to the company rising to $23.6 million Q3 Statement of Operations Summary (in millions) | Line Item | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Revenue | $440.2 | $527.7 | | Gross Profit | $199.2 | $215.4 | | Operating Profit | $35.2 | $27.3 | | Net Earnings Attributable to WWW | $23.6 | $8.6 | | Diluted EPS | $0.28 | $0.11 | Consolidated Condensed Balance Sheets As of September 28, 2024, total assets decreased to $1.76 billion, inventories nearly halved to $285.5 million, and total liabilities also decreased Balance Sheet Key Items (in millions) | Account | Sept 28, 2024 | Sept 30, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $140.2 | $160.4 | | Inventories, net | $285.5 | $563.8 | | Total assets | $1,758.7 | $2,231.3 | | Borrowings under revolving credit | $125.0 | $370.0 | | Long-term debt | $567.8 | $716.3 | | Stockholders' equity | $296.7 | $362.7 | Consolidated Condensed Statements of Cash Flows Year-to-date net cash from operating activities significantly improved to $97.7 million, with $95.1 million from investing and $238.6 million used in financing Year-to-Date Cash Flow Summary (in millions) | Activity | YTD Sept 28, 2024 | YTD Sept 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $97.7 | $7.0 | | Net cash provided by investing activities | $95.1 | $116.2 | | Net cash used in financing activities | ($238.6) | ($91.5) | | Decrease in cash and cash equivalents | ($44.4) | $29.2 | Non-GAAP Reconciliations and Supplemental Information Q3 2024 Non-GAAP Reconciliations This section reconciles Q3 2024 GAAP to non-GAAP metrics, showing ongoing business revenue of $440.1 million, adjusted operating margin of 7.7%, and adjusted diluted EPS of $0.29 - Reported Q3 2024 revenue of $440.2 million is adjusted to $440.1 million to reflect the ongoing business after accounting for the impact of the divested Sperry business[22] - The reported Q3 2024 operating margin of 8.0% is adjusted to 7.7% after excluding items like gains on asset sales, reorganization costs, and the impact of divestitures[28] - Reported Q3 2024 diluted EPS of $0.28 is adjusted to $0.29 on a non-GAAP basis[29] Divestiture Financial Summary The report quantifies the financial impact of divested businesses, which contributed $250.8 million revenue but an $8.9 million operating loss in FY2023 Financial Impact of Divestitures - Full Year 2023 (in millions) | Business | Revenue Impact | Operating Profit Impact | | :--- | :--- | :--- | | Sperry | $207.2 | $(10.3) | | Wolverine Leathers | $37.1 | $3.3 | | Keds | $6.5 | $(1.9) | | Total | $250.8 | $(8.9) | 2024 Guidance Reconciliation The company reconciles full-year 2024 GAAP to adjusted guidance, with adjusted diluted EPS of $0.80-$0.90 reflecting underlying profitability FY 2024 Guidance Reconciliation | Metric | GAAP Basis | Adjustments | As Adjusted | | :--- | :--- | :--- | :--- | | Revenue | $1,735 - $1,750 million | $(5) million | $1,730 - $1,745 million | | Operating Margin | 5.8% | +1.4% | 7.2% | | Diluted EPS | $0.56 - $0.66 | +$0.24 | $0.80 - $0.90 | Historical Adjustments for Comparability Fiscal 2023 revenue is adjusted for divestitures and business model changes, resulting in a comparable revenue base of $1.917 billion for accurate analysis - Fiscal 2023 reported revenue of $2,242.9 million is adjusted down by $250.8 million for the divestitures of the Keds, Leathers, and Sperry businesses, resulting in an ongoing business revenue of $1,992.1 million[35][44] - Further adjustments for business model changes in 2023 and 2024, such as transitioning Hush Puppies, Merrell Kids, and Saucony Kids to licensing models, reduce the comparable 2023 revenue base to $1,917.3 million[44]