Ollie's Bargain Outlet (OLLI) - 2024 Q3 - Quarterly Report

Report Information This section provides key administrative details of the Form 10-Q filing for Ollie's Bargain Outlet Holdings, Inc - The document is a Quarterly Report on Form 10-Q for Ollie's Bargain Outlet Holdings, Inc. for the quarterly period ended October 28, 2023[2] - The registrant is classified as a Large accelerated filer[4] Common Stock Information | Metric | Value | | :--- | :--- | | Common Stock, $0.001 par value Trading Symbol | OLLI | | Exchange on which registered | The NASDAQ Stock Market LLC | | Shares outstanding as of December 1, 2023 | 61,592,272 | PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements and notes for Ollie's Bargain Outlet Holdings, Inc Condensed Consolidated Statements of Income This section presents the company's net sales, gross profit, operating income, net income, and EPS for the reported periods Condensed Consolidated Statements of Income (Thirteen Weeks Ended) | Metric | October 28, 2023 (in thousands) | October 29, 2022 (in thousands) | Change (%) | | :--------------------------------- | :------------------------------ | :------------------------------ | :--------- | | Net sales | $480,050 | $418,072 | 14.8% | | Gross profit | $194,111 | $164,676 | 17.9% | | Operating income | $39,069 | $29,532 | 32.3% | | Net income | $31,803 | $23,082 | 37.8% | | Basic EPS | $0.52 | $0.37 | 40.5% | | Diluted EPS | $0.51 | $0.37 | 37.8% | Condensed Consolidated Statements of Income (Thirty-nine Weeks Ended) | Metric | October 28, 2023 (in thousands) | October 29, 2022 (in thousands) | Change (%) | | :--------------------------------- | :------------------------------ | :------------------------------ | :--------- | | Net sales | $1,453,713 | $1,277,220 | 13.8% | | Gross profit | $569,366 | $449,611 | 26.6% | | Operating income | $130,145 | $63,222 | 105.9% | | Net income | $104,964 | $49,702 | 111.2% | | Basic EPS | $1.70 | $0.79 | 115.2% | | Diluted EPS | $1.69 | $0.79 | 113.9% | Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity at specific dates Condensed Consolidated Balance Sheets (in thousands) | Metric | October 28, 2023 | January 28, 2023 | October 29, 2022 | | :--------------------------------- | :--------------- | :--------------- | :--------------- | | Cash and cash equivalents | $159,555 | $210,596 | $182,104 | | Short-term investments | $104,477 | $60,165 | - | | Inventories | $532,370 | $470,534 | $523,728 | | Total current assets | $805,559 | $754,296 | $714,352 | | Property and equipment, net | $230,203 | $175,947 | $170,133 | | Total assets | $2,194,360 | $2,044,096 | $2,009,968 | | Total current liabilities | $289,103 | $259,285 | $252,193 | | Total liabilities | $753,986 | $682,027 | $691,846 | | Total stockholders' equity | $1,440,374 | $1,362,069 | $1,318,122 | Condensed Consolidated Statements of Stockholders' Equity This section outlines changes in stockholders' equity, including net income, stock-based compensation, and share repurchases Total Stockholders' Equity (in thousands) | Period | October 28, 2023 | October 29, 2022 | | :--------------------------------- | :--------------- | :--------------- | | Thirteen weeks ended | $1,440,374 | $1,318,122 | | Thirty-nine weeks ended | $1,440,374 | $1,318,122 | - For the thirteen weeks ended October 28, 2023, net income was $31.8 million, stock-based compensation expense was $3.0 million, and shares repurchased amounted to $(10.8) million[14] - For the thirty-nine weeks ended October 28, 2023, net income was $105.0 million, stock-based compensation expense was $9.0 million, and shares repurchased amounted to $(39.8) million[14] Condensed Consolidated Statements of Cash Flows This section summarizes cash flows from operating, investing, and financing activities for the thirty-nine-week periods Condensed Consolidated Statements of Cash Flows (Thirty-nine Weeks Ended, in thousands) | Activity | October 28, 2023 | October 29, 2022 | Change (YoY) | | :--------------------------------- | :--------------- | :--------------- | :----------- | | Net cash provided by operating activities | $110,861 | $979 | +$109,882 | | Net cash used in investing activities | $(125,301) | $(38,626) | -$(86,675) | | Net cash used in financing activities | $(36,601) | $(27,226) | -$(9,375) | | Net decrease in cash and cash equivalents | $(51,041) | $(64,873) | +$13,832 | - Purchases of property and equipment increased from $38.9 million in 2022 to $81.4 million in 2023[16] - Purchases of short-term investments were $206.8 million in 2023, with maturities of $162.5 million[16] Notes to Condensed Consolidated Financial Statements Provides detailed explanations and disclosures for the financial statements, covering accounting policies and financial commitments (1) Basis of Presentation and Summary of Significant Accounting Policies Describes Ollie's business model, fiscal year, financial statement preparation basis, and key accounting policies, including fair value disclosures - Ollie's Bargain Outlet Holdings, Inc. buys overproduced, overstocked, and closeout merchandise, augmenting with directly sourced private label products[18] - As of October 28, 2023, the Company has grown to 505 retail locations in 30 states[19] Short-term Investment Securities (as of October 28, 2023, in thousands) | Type | Amortized Cost | Fair Market Value | | :------------- | :------------- | :---------------- | | Treasury Bonds | $69,497 | $68,664 | | Municipal bonds | $34,980 | $34,558 | | Total | $104,477 | $103,222 | (2) Net Sales Explains revenue recognition policies, including retail sales, loyalty program discounts, and gift card breakage, with deferred revenue reconciliations - Revenue is recognized when merchandise is sold and the customer takes possession, including redeemed discounts from the Ollie's Army loyalty program and gift card breakage[31] Ollie's Army Loyalty Program Liability (Thirty-nine Weeks Ended, in thousands) | Metric | October 28, 2023 | October 29, 2022 | | :--------------------------------- | :--------------- | :--------------- | | Beginning balance | $8,130 | $7,782 | | Revenue deferred | $11,171 | $10,775 | | Revenue recognized | $(9,865) | $(10,786) | | Ending balance | $9,436 | $7,771 | Gift Card Liability (Thirty-nine Weeks Ended, in thousands) | Metric | October 28, 2023 | October 29, 2022 | | :--------------------------------- | :--------------- | :--------------- | | Beginning balance | $2,527 | $2,291 | | Gift card issuances | $3,097 | $3,112 | | Gift card redemption and breakage | $(3,271) | $(3,214) | | Ending balance | $2,353 | $2,189 | (3) Earnings per Common Share Details the calculation of basic and diluted earnings per common share, including the impact of stock options and restricted stock units Earnings per Common Share (in thousands, except per share amounts) | Metric | 13 Weeks Oct 28, 2023 | 13 Weeks Oct 29, 2022 | 39 Weeks Oct 28, 2023 | 39 Weeks Oct 29, 2022 | | :--------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Net income | $31,803 | $23,082 | $104,964 | $49,702 | | Basic EPS | $0.52 | $0.37 | $1.70 | $0.79 | | Diluted EPS | $0.51 | $0.37 | $1.69 | $0.79 | | Weighted avg. common shares outstanding - Basic | 61,682 | 62,507 | 61,807 | 62,603 | | Weighted avg. common shares outstanding - Diluted | 62,068 | 62,751 | 62,110 | 62,810 | - Certain stock options and restricted stock units were excluded from the diluted EPS calculation because their effect would have been antidilutive[34][35] (4) Leases Explains lease accounting under ASC 842, including classification, right-of-use assets, lease liabilities, and maturity analysis - The Company accounts for leases under ASC 842, classifying them as operating or financing leases and recording right-of-use assets and lease liabilities[36] Operating Lease Liabilities Maturity (as of October 28, 2023, in thousands) | Period | Amount | | :--------------------------------- | :----- | | Remainder of 2023 | $21,213 | | 2024 | $108,250 | | 2025 | $89,975 | | 2026 | $85,204 | | 2027 | $73,050 | | Thereafter | $180,155 | | Total undiscounted lease payments | $557,847 | | Less: Imputed interest | $(69,921) | | Total lease obligations | $487,926 | - The weighted-average remaining lease term was 6.6 years as of October 28, 2023, with a weighted-average discount rate of 3.8%[41] (5) Commitments and Contingencies States the company is involved in routine legal matters, not expecting material adverse effects on its financial position or operations - The Company is involved in claims and legal actions that arise in the ordinary course of its business[42] - Management does not believe that an unfavorable decision of any current claims or legal actions will have a material adverse effect on its financial position, results of operations, liquidity, or capital resources[42] (6) Accrued Expenses and Other Current Liabilities Details accrued expenses and other current liabilities, noting an increase primarily due to compensation, deferred revenue, and income taxes Accrued Expenses and Other Current Liabilities (in thousands) | Category | October 28, 2023 | January 28, 2023 | October 29, 2022 | | :--------------------------------- | :--------------- | :--------------- | :--------------- | | Compensation and benefits | $18,359 | $14,751 | $16,047 | | Deferred revenue | $11,789 | $10,657 | $9,960 | | Insurance | $11,316 | $9,141 | $11,209 | | Sales and use taxes | $10,833 | $6,567 | $9,860 | | Advertising | $6,959 | $6,582 | $7,247 | | Real estate | $6,025 | $6,283 | $8,124 | | Freight | $2,885 | $2,641 | $3,585 | | Other | $19,452 | $20,337 | $20,917 | | Total | $87,618 | $76,959 | $86,949 | (7) Debt Obligations and Financing Arrangements Details the $100.0 million revolving credit facility, amended to SOFR-based rates, with no outstanding borrowings and $91.8 million available - The Company has a five-year $100.0 million revolving credit facility, maturing on May 22, 2024[45] - The Credit Facility was amended on January 24, 2023, to replace LIBOR-based interest rates with SOFR-based rates[46] - As of October 28, 2023, there were no outstanding borrowings under the Revolving Credit Facility, with $91.8 million of borrowing availability[49] (8) Income Taxes Discusses effective tax rates, noting an increase primarily due to decreased discrete tax benefits from stock-based compensation and state tax changes Effective Tax Rates | Period | October 28, 2023 | October 29, 2022 | | :--------------------------------- | :--------------- | :--------------- | | Thirteen weeks ended | 26.1% | 24.1% | | Thirty-nine weeks ended | 25.1% | 22.5% | - The increase in effective tax rates was primarily due to a decrease in discrete tax benefits related to stock-based compensation and state tax rate changes[52][53] (9) Equity Incentive Plans Describes equity incentive plans for stock options and RSUs, summarizing activity and related compensation expense for employees, directors, and consultants - The 2015 equity incentive plan allows for the issuance of up to 5,250,000 shares, with 1,950,619 shares available for grant as of October 28, 2023[56] Stock Option Activity (Thirty-nine Weeks Ended October 28, 2023) | Metric | Number of options | | :--------------------------------- | :---------------- | | Outstanding at January 28, 2023 | 1,209,251 | | Granted | 144,630 | | Exercised | (152,583) | | Outstanding at October 28, 2023 | 1,153,918 | | Exercisable at October 28, 2023 | 596,980 | Restricted Stock Unit (RSU) Activity (Thirty-nine Weeks Ended October 28, 2023) | Metric | Number of shares | | :--------------------------------- | :--------------- | | Non-vested balance at January 28, 2023 | 276,278 | | Granted | 202,909 | | Vested | (96,226) | | Non-vested balance at October 28, 2023 | 358,157 | - Stock-based compensation expense was $3.0 million for the thirteen weeks and $9.0 million for the thirty-nine weeks ended October 28, 2023[63] (10) Common Stock Describes the common stock structure and share repurchase program, with $98.4 million remaining under authorization as of October 28, 2023 - The Company has authorized 500,000,000 shares of common stock and 50,000,000 shares of preferred stock (none issued)[65] - During the thirty-nine weeks ended October 28, 2023, the Company repurchased 634,733 shares of its common stock for $39.8 million[67] - As of October 28, 2023, $98.4 million remained under the share repurchase authorization, which was set to expire on December 15, 2023[67] (11) Transactions with Affiliated and Related Parties Discloses inventory purchases from a Hillman Solutions, Inc. subsidiary, where Ollie's CEO is a board member - The Company purchased inventory of $1.2 million from a subsidiary of Hillman Solutions, Inc. during the thirty-nine weeks ended October 28, 2023[70] - John Swygert, President and Chief Executive Officer of Ollie's, is a member of Hillman Solutions, Inc.'s Board of Directors[70] (12) Subsequent Events Reports the Board authorized an extension to the share repurchase program, moving its expiration from December 15, 2023, to March 31, 2026 - On November 30, 2023, the Board of Directors authorized an extension to the existing share repurchase program, extending its expiration from December 15, 2023, to March 31, 2026[71] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Provides management's perspective on financial condition and results, covering business overview, growth strategies, key performance indicators, and financial analysis Overview Describes Ollie's as a fast-growing, extreme value retailer offering a broad selection of brand name merchandise at reduced prices - Ollie's is a highly differentiated and fast-growing, extreme value retailer of brand name merchandise at drastically reduced prices[77] - The Company offers a broad selection of brand name products including housewares, bed and bath, food, floor coverings, health and beauty aids, books and stationery, toys, and electronics[77] Our Growth Strategy Outlines the company's expansion plans, including new store openings and distribution center development, to support future growth - The Company has expanded to 505 stores located in 30 states as of October 28, 2023, opening its 500th store in Iowa City, IA[78] - The Company recently completed the expansion of its York, PA distribution center and acquired land in Princeton, IL, for a fourth distribution center, expected to be occupied in the first half of fiscal 2024[79] - Distribution capabilities are expected to support between 700 and 750 stores with the expanded York, PA DC and the addition of the fourth DC[79] - New store model targets 25,000 to 35,000 square feet, an average initial cash investment of approximately $1.0 million, and target new store sales of approximately $4.0 million in their first full year[80] How We Assess the Performance of Our Business and Key Line Items Identifies the key financial and operational metrics used by management to evaluate the company's business performance - Key measures used to assess business performance include number of new stores, net sales, comparable store sales, gross profit and gross margin, SG&A, pre-opening expenses, operating income, EBITDA, and Adjusted EBITDA[85] - Comparable store sales measure performance of a store beginning on the first day of the sixteenth full fiscal month following the store's opening[91] - Adjusted EBITDA is defined as net income before net interest income or expense, depreciation and amortization expenses, and income taxes, further adjusted for non-cash stock-based compensation expense and gains on insurance settlements[104] Factors Affecting the Comparability of our Results of Operations Discusses external and internal factors, such as seasonality and store openings, influencing the comparability of financial results Store Openings and Closings | Period | New Stores Opened | Stores Closed | | :--------------------------------- | :---------------- | :------------ | | Third quarter of fiscal 2023 | 23 | — | | Third quarter of fiscal 2022 | 15 | (1) | | Thirty-nine weeks ended October 28, 2023 | 38 | (1) | | Thirty-nine weeks ended October 29, 2022 | 35 | (3) | - The business is seasonal, with demand generally highest in the fourth fiscal quarter due to the holiday sales season, leading to peak inventory levels, accounts payable, and accrued expenses in the third and fourth fiscal quarters[108] Results of Operations Analyzes the company's financial performance, including net sales, gross profit, operating income, and net income, for the reported periods Key Financial Performance (Q3 Fiscal 2023 vs. Q3 Fiscal 2022) | Metric | October 28, 2023 | October 29, 2022 | Change (%) | | :--------------------------------- | :--------------- | :--------------- | :--------- | | Net Sales | $480.1M | $418.1M | 14.8% | | Comparable Store Sales Change | 7.0% | 1.9% | +510 bps | | Gross Profit | $194.1M | $164.7M | 17.9% | | Gross Margin | 40.4% | 39.4% | +100 bps | | SG&A (% of Net Sales) | 29.5% | 29.9% | -40 bps | | Operating Income | $39.1M | $29.5M | 32.3% | | Net Income | $31.8M | $23.1M | 37.8% | | Adjusted EBITDA | $51.1M | $39.5M | 29.5% | Key Financial Performance (YTD Fiscal 2023 vs. YTD Fiscal 2022) | Metric | October 28, 2023 | October 29, 2022 | Change (%) | | :--------------------------------- | :--------------- | :--------------- | :--------- | | Net Sales | $1.454B | $1.277B | 13.8% | | Comparable Store Sales Change | 6.5% | (5.4)% | +1190 bps | | Gross Profit | $569.4M | $449.6M | 26.6% | | Gross Margin | 39.2% | 35.2% | +400 bps | | SG&A (% of Net Sales) | 28.0% | 28.2% | -20 bps | | Operating Income | $130.1M | $63.2M | 105.9% | | Net Income | $105.0M | $49.7M | 111.2% | | Adjusted EBITDA | $164.6M | $91.7M | 79.5% | - The increase in gross margin was primarily due to favorable supply chain costs and higher merchandise margins, partially offset by higher shrink[117][126] Liquidity and Capital Resources Examines the company's sources of liquidity, capital expenditures, and share repurchase activities to support its operations and growth - Primary sources of liquidity are net cash flows from operating activities and available borrowings under the $100.0 million Revolving Credit Facility[134] - As of October 28, 2023, the Company had $91.8 million available to borrow under its Revolving Credit Facility and $264.0 million of cash and cash equivalents and short-term investments on hand[134] - Capital expenditures for the thirty-nine weeks ended October 28, 2023, were $81.4 million, primarily for new store openings, store remodels, distribution centers (including the fourth DC in Princeton, IL), and IT investments[134] - The Company repurchased 634,733 shares of common stock for $39.8 million during the thirty-nine weeks ended October 28, 2023, with $98.4 million remaining under its share repurchase authorization[140] Critical Accounting Policies and Estimates Confirms that there have been no significant changes to the company's critical accounting policies and estimates since the last annual report - There have been no significant changes in the Company's critical accounting policies and estimates as disclosed in its Annual Report[148] Recently Issued Accounting Pronouncements States that no recently issued accounting pronouncements are currently applicable to the company's financial reporting - No recently issued accounting pronouncements are applicable[149] Item 3. Quantitative and Qualitative Disclosures About Market Risk Addresses market risks, including interest rate risk and inflation, noting no material changes from the Annual Report and historically immaterial inflation effects - The Company is subject to interest rate risk in connection with borrowings under its Revolving Credit Facility, which bears interest at variable rates, but had no outstanding variable rate debt as of October 28, 2023[150] - There have been no material changes in the market risks described in the Annual Report[150] - The effects of inflation on the Company's historical results of operations and financial condition have been immaterial, though future impacts cannot be assured[151] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of October 28, 2023, with no material changes to internal control over financial reporting - Management concluded that disclosure controls and procedures were effective at a reasonable assurance level as of October 28, 2023[152] - There were no changes to internal control over financial reporting during the third quarter of fiscal 2023 that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[153] PART II - OTHER INFORMATION Item 1. Legal Proceedings States the company is involved in routine legal claims, not expecting material adverse effects on its financial position or operations - The Company may be involved in claims and legal actions that arise in the ordinary course of its business[154] - Management does not believe that an unfavorable decision of any current claims or legal actions will have a material adverse effect on its financial position, results of operations, liquidity, or capital resources[154] Item 1A. Risk Factors Refers to the detailed description of risk factors in the company's Annual Report and states that there have been no material changes to these risks - There have been no material changes from the risk factors previously disclosed in the Company's Annual Report[155] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Provides information on common stock repurchases during the thirteen weeks ended October 28, 2023, under the publicly announced program Share Repurchases (Thirteen Weeks Ended October 28, 2023) | Period | Total Shares Repurchased | Average Price Paid per Share | | :--------------------------------- | :----------------------- | :--------------------------- | | July 30, 2023 through August 26, 2023 | — | $0.00 | | August 27, 2023 through September 30, 2023 | 57,701 | $76.72 | | October 1, 2023 through October 28, 2023 | 84,752 | $74.25 | | Total | 142,453 | | - As of October 28, 2023, $98.4 million remained under the share repurchase authorization[158] Item 5. Other Information Discloses that several executives entered into or modified Rule 10b5-1 trading plans for common stock sales during the thirteen weeks ended October 28, 2023 - During the thirteen weeks ended October 28, 2023, several executives entered into or modified written Rule 10b5-1 trading plans for the purchase or sale of the Company's securities[159][161] - These plans are intended to satisfy the conditions specified in Rule 10b5-1(c) under the Exchange Act for an affirmative defense against liability for trading on the basis of material nonpublic information[159] Item 6. Exhibits Lists all exhibits filed with the Form 10-Q, including certifications from the CEO and CFO, and Inline XBRL documents - Exhibits include certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) and 18 U.S.C. Section 1350[164] - Inline XBRL Instance Document and Taxonomy Extension Documents are submitted electronically with the report[164] SIGNATURES Confirms the official signing of the report by the company's Senior Vice President and Chief Financial Officer - The report was signed on December 6, 2023, by Robert Helm, Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) of Ollie's Bargain Outlet Holdings, Inc[169]