Steven Madden(US:SHOO)2024-05-02 18:55PART I – FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements and detailed notes for the period ended March 31, 2024, covering key financial positions, performance, and cash flows Condensed Consolidated Balance Sheets As of March 31, 2024, total assets decreased slightly to $1.304 billion, driven by reduced cash, while liabilities also declined and equity remained stable Key Balance Sheet Items (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $807,294 | $854,832 | | Cash and cash equivalents | $131,501 | $204,640 | | Inventories | $201,960 | $228,990 | | Total Assets | $1,304,153 | $1,347,943 | | Total Current Liabilities | $332,512 | $377,624 | | Total Liabilities | $460,546 | $499,911 | | Total Stockholders' Equity | $843,607 | $848,032 | Condensed Consolidated Statements of Income For Q1 2024, total revenue increased to $552.4 million, with net income rising to $43.9 million and diluted EPS reaching $0.60 year-over-year Q1 2024 vs Q1 2023 Income Statement Highlights (in thousands, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total Revenue | $552,381 | $463,834 | | Gross Profit | $224,815 | $195,092 | | Income from Operations | $56,746 | $46,511 | | Net Income Attributable to Steven Madden, Ltd. | $43,934 | $36,730 | | Diluted EPS | $0.60 | $0.48 | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities increased to $15.7 million in Q1 2024, with $52.5 million used in financing activities, leading to a $73.1 million net decrease in cash Cash Flow Summary for Three Months Ended March 31 (in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(15,705) | $(13,275) | | Net cash used in investing activities | $(4,618) | $(2,426) | | Net cash used in financing activities | $(52,531) | $(49,740) | | Net decrease in cash and cash equivalents | $(73,139) | $(64,734) | Notes to Condensed Consolidated Financial Statements - Unaudited The notes detail key events and accounting treatments, including a $4.3 million hosiery business acquisition, a $1.7 million trademark impairment, and $32.6 million in share repurchases, alongside segment revenue breakdown - On March 1, 2024, the company acquired the Steve Madden and Betsey Johnson hosiery business from Gina Group LLC for a cash consideration of $4.26 million. The acquisition included inventories, reacquired rights, and goodwill29 - In Q1 2024, the company recorded a pre-tax non-cash impairment charge of $1.7 million related to the GREATS® trademark, writing its value down to $4.45 million, following a $6.52 million impairment charge in Q4 202366 - During Q1 2024, the company repurchased 773,000 shares of its common stock for approximately $32.6 million, at a weighted average price of $42.25 per share, with $142.8 million remaining available for future repurchases as of March 31, 202446 Revenue by Segment (in thousands) | Segment | Q1 2024 Revenue | Q1 2023 Revenue | | :--- | :--- | :--- | | Wholesale Footwear | $295,660 | $282,321 | | Wholesale Accessories/Apparel | $142,576 | $79,816 | | Direct-to-Consumer | $112,331 | $99,600 | | Licensing | $1,814 | $2,097 | | Total Revenue | $552,381 | $463,834 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes Q1 2024 financial results, highlighting a 19.1% revenue increase to $552.4 million driven by wholesale and direct-to-consumer growth, improved operating income, and a review of liquidity Results of Operations Consolidated revenue for Q1 2024 increased 19.1% year-over-year, primarily driven by a 78.6% surge in Wholesale Accessories/Apparel, despite a slight decrease in gross margin - Wholesale Accessories/Apparel revenue increased 78.6% YoY, driven by incremental revenue from the acquisition of Almost Famous and strength in Steve Madden handbags106 - Wholesale Footwear revenue grew 4.7% YoY, primarily driven by sales growth in the private label business105 - Direct-to-Consumer revenue increased 12.8% YoY, with growth in both brick-and-mortar and e-commerce channels, and gross margin in this segment improved due to reduced promotional activity107 Liquidity and Capital Resources The company maintains a strong liquidity position with $143.1 million in cash and no debt, confident in meeting future operating needs and announcing a $0.21 per share quarterly dividend - As of March 31, 2024, the company had $143.1 million in cash, cash equivalents, and short-term investments, with no debt outstanding111113 - Cash used in financing activities in Q1 2024 was $52.5 million, consisting mainly of $37.3 million for share repurchases and $15.4 million for dividend payments117 - On April 30, 2024, the Board of Directors approved a quarterly cash dividend of $0.21 per share, payable on June 21, 2024122 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company identifies minimal interest rate risk due to no variable-rate borrowings, manages foreign currency risk with forward contracts, and acknowledges inflation as a potential headwind - Interest rate risk is considered immaterial as of March 31, 2024, because the company had no cash borrowings under its variable-rate Credit Facility128 - To mitigate foreign currency risk, the company had entered into forward foreign exchange contracts with notional amounts totaling $78.5 million as of March 31, 2024131 - The company acknowledges that inflation poses a risk by potentially reducing consumer spending and increasing labor, overhead, and logistics costs124133 Item 4. Controls and Procedures The CEO and CFO concluded that disclosure controls were effective as of March 31, 2024, with the assessment of internal controls excluding the recently acquired Almost Famous business - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2024135 - The assessment of internal controls over financial reporting did not include the internal controls of Almost Famous, acquired in October 2023, which represented 8.4% of consolidated total assets and 7.4% of consolidated total revenue for the quarter137 PART II – OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various legal proceedings, but management believes any resulting liabilities will not materially impact financial condition or results of operations - In the opinion of management, liabilities resulting from various pending legal proceedings are not expected to have a material impact on the company's financial condition or results of operations140 Item 1A. Risk Factors There have been no material changes from the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023 - There have been no material changes from the risk factors previously disclosed in the company's 2023 Form 10-K142 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2024, the company repurchased 883,000 shares of common stock, with 773,000 shares acquired under the publicly announced program at an average price of $42.31 per share Share Repurchases for Q1 2024 | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Program | | :--- | :--- | :--- | :--- | | Jan 2024 | 22,000 | $41.59 | 0 | | Feb 2024 | 16,000 | $43.17 | 0 | | Mar 2024 | 845,000 | $42.31 | 773,000 | | Total | 883,000 | $42.31 | 773,000 | Item 5. Other Information During the first quarter of 2024, none of its directors or officers adopted, modified, or terminated any Rule 10b5-1 trading plans or other non-Rule 10b5-1 trading arrangements - During the three months ended March 31, 2024, no directors or officers adopted, modified, or terminated any contract, instruction, or written plan for the purchase or sale of the company's securities intended to satisfy the conditions of Rule 10b5-1(c)145