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Six Flags Reports First Quarter 2023 Performance

ARLINGTON, Texas–(BUSINESS WIRE)–
Six Flags Entertainment Corporation (NYSE: SIX), the world’s largest regional theme park company and the largest operator of water parks in North America, today reported first quarter Revenue of $142 million, Net Loss of $70 million, and an Adjusted EBITDA loss of $17 million.

“We are pleased to have delivered record first quarter revenue and the second-highest first quarter Adjusted EBITDA in our company’s history, which we believe are proof points that our new strategy and our new culture are beginning to take hold,” said Selim Bassoul, President and CEO. “Looking ahead, our team is excited to launch numerous special events this summer, including Viva La Fiesta, Flavors of the World, Six Flags Fireworks Spectacular, and parades. These events, combined with exciting new rides and attractions and our focused investments in infrastructure, should help us deliver an enhanced guest experience this year. We are still in the early stages of our transformation, but with our season pass sales accelerating and our attendance improving, we are encouraged by our recent progress.”

First Quarter 2023 Results
		Three Months Ended
(Amounts in millions, except per share data)		April 2, 2023				April 3, 2022				% Change vs. 2022
Total revenue		$	142			$	138			3	%
Net loss attributable to Six Flags Entertainment		$	(70	)		$	(66	)		N/M
Loss per share, diluted		$	(0.84	)		$	(0.76	)		N/M
Adjusted EBITDA (1) , (3)		$	(17	)		$	(17	)		N/M
Attendance			1.6				1.7			(5	)%
Spending per capita figures(2)
Total guest spending per capita		$	80.88			$	75.46			7	%
Admissions spending per capita		$	47.81			$	43.28			10	%
In-park spending per capita		$	33.07			$	32.18			3	%

Total revenue for first quarter 2023 increased $4 million, or 3%, compared to first quarter 2022, driven by higher guest spending per capita, partially offset by lower attendance. The decrease in attendance was driven primarily by severe weather in our California and Texas parks.

The $5.42 increase in guest spending per capita compared to first quarter 2022 consisted of a $4.53 increase in Admissions spending per capita and a $0.89 increase in In-park spending per capita. The increase in guest spending per capita was driven by higher revenue from memberships beyond the initial 12-month commitment period, which is recognized evenly each month and includes a portion of revenue that is allocated to Park admissions revenue and to Park food, merchandise and other revenue. Higher membership revenue in first quarter 2023 increased Admissions spending per capita and In-park spending per capita by approximately $5 and $1, respectively, versus the prior year. Excluding this impact, Admissions spending per capita and In-park spending per capita in first quarter 2023 were essentially flat versus the prior year period.

The company had a net loss of $70 million in first quarter 2023, compared to a net loss of $66 million in first quarter 2022. The loss per share was $0.84 compared to a loss per share of $0.76 in first quarter 2022, driven by higher operating costs partially offset by an increase in revenue. Operating costs increased in first quarter 2023 versus the prior year due primarily to higher advertising spend. Adjusted EBITDA loss in first quarter 2023 was $17 million, essentially flat with the prior year ⁽³⁾.

As of April 2, 2023, the company had total reported debt of $2,452 million, and cash or cash equivalents of $65 million. Deferred revenue was $152 million as of April 2, 2023, a decrease of $33 million, or 18%, from April 3, 2022. The decrease was primarily due to a lower Active Pass base as of April 2, 2023 versus April 3, 2022. In first quarter 2023, the company invested $25 million in new capital, net of insurance recoveries.

On May 3, 2023, the company completed the private sale of $800.0 million in aggregate principal amount of 7.25% senior unsecured notes due 2031. The net proceeds from this offering were used to repay $892.6 million, or 94.01% of the aggregate principal amount outstanding, of the 4.875% senior unsecured Notes due 2024. In addition, the company increased the capacity of the Revolving Credit Facility from $350 million to $500 million.

Conference Call

At 7:00 a.m. Central Time today, May 8, 2023, the company will host a conference call to discuss its first quarter 2023 financial performance. The call is accessible through either the Six Flags Investor Relations website at investors.sixflags.com or by dialing 1-833-629-0614 in the United States or +1-412-317-9257 outside the United States and requesting the Six Flags earnings call. A replay of the call will be available on the company’s investor relations site https://investors.sixflags.com

About Six Flags Entertainment Corporation

Six Flags Entertainment Corporation is the world’s largest regional theme park company with 27 parks across the United States, Mexico and Canada. For 62 years, Six Flags has entertained hundreds of millions of guests with world-class coasters, themed rides, thrilling water parks and unique attractions. Six Flags is committed to creating an inclusive environment that fully embraces the diversity of our team members and guests. For more information, visit www.sixflags.com

Forward Looking Statements

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding (i) the effect, impact, potential duration or other implications of the COVID-19 pandemic or virus variants, and any expectations we may have with respect thereto including the continuing efficacy of the COVID-19 vaccines, (ii) the adequacy of our cash flows from operations, available cash and available amounts under our credit facilities to meet our liquidity needs, including in the event of a prolonged closure of one or more of our parks, (iii) our ability to execute our strategy to significantly improve our financial performance and the guest experience, (iv) expectations regarding consumer demand for regional, outdoor, out-of-home entertainment, including for our parks, and (v) expectations regarding our annual income tax liability and the availability and effect of net operating loss carryforwards and other tax benefits.

Forward-looking statements include all statements that are not historical facts and often use words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “may,” “should,” “could” and variations of such words or similar expressions. These statements may involve risks and uncertainties that could cause actual results to differ materially from those described in such statements. These risks and uncertainties include, among others, factors impacting attendance, such as local conditions, natural disasters, contagious diseases, including COVID-19 and Monkeypox, or the perceived threat of contagious diseases, events, disturbances and terrorist activities; regulations and guidance of federal, state and local governments and health officials regarding the response to COVID-19 or other health emergencies such as Monkeypox, including with respect to business operations, safety protocols and public gatherings; economic impact of political instability and conflicts globally, including the war in Ukraine; recall of food, toys and other retail products sold at our parks; accidents or incidents involving the safety of guests and employees, or contagious disease outbreaks occurring at our parks or other parks in the industry and adverse publicity concerning our parks or other parks in the industry; availability of commercially reasonable insurance policies at reasonable rates; inability to achieve desired improvements and our financial performance targets; adverse weather conditions such as excess heat or cold, rain and storms; general financial and credit market conditions, including our ability to access credit or raise capital; the increased cost of capital due to raising interest rates; macro-economic conditions (including supply chain issues and the impact of inflation on customer spending patterns); changes in public and consumer tastes; construction delays in capital improvements or ride downtime; competition with other theme parks, water parks and entertainment alternatives; dependence on a seasonal workforce; unionization activities and labor disputes; laws and regulations affecting labor and employee benefit costs, including increases in state and federally mandated minimum wages, and healthcare reform; environmental laws and regulations; laws and regulations affecting corporate taxation; pending, threatened or future legal proceedings and the significant expenses associated with litigation; cybersecurity risks; and other factors could cause actual results to differ materially from the company’s expectations, including the risk factors or uncertainties listed from time to time in the company’s filings with the Securities and Exchange Commission (the “SEC”). Although we believe that the expectations reflected in such forward-looking statements are reasonable, we make no assurance that such expectations will be realized and actual results could vary materially. Reference is made to a more complete discussion of forward-looking statements and applicable risks contained under the captions “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in our Annual and Quarterly Reports on Forms 10-K and 10-Q, and our other filings and submissions with the SEC, each of which are available free of charge on the company’s investor relations website at investors.sixflags.com and on the SEC’s website at www.sec.gov.

Footnotes
(1)		See the following financial statements and Note 4 to those financial statements for a discussion of Adjusted EBITDA (a non-GAAP financial measure) and its reconciliation to net income (loss).
(2)		We use certain per capita operational metrics that measure the performance of our business on a per guest basis and believe that these metrics provide relevant and useful information for investors because they assist in comparing our operating performance on a consistent basis, make it easier to compare our results with those of other companies and our industry and allows investors to review performance in the same manner as our management. Total guest spending per capita is the total revenue generated from our guests, on a per guest basis, through admissions and in-park spending. Total guest spending per capita is calculated by dividing the sum of Park admissions revenue and Park food merchandise and other revenue by total attendance. Admissions revenue per capita is the total revenue generated from our guests, on a per guest basis, to enter our parks. Admissions revenue per capita is calculated by dividing Park admission revenue by total attendance. Non-admissions revenue per capita is the total revenue generated from our guests, on a per guest basis, on items sold within our parks, such as food, games and merchandise. Non-admission revenue per capita is calculated by dividing Park food, merchandise and other revenue by total attendance.
(3)		During 2023, we reclassified the net pension-related expense (benefit) to other (income) expense, net. in our consolidated statements of operations. This reclassification has been reflected in all periods presented. As a result, Adjusted EBITDA for the three-month period ended April 3, 2022, declined by $1.2 million as compared to the previously reported figure.

Statement of Operations Data
		Three Months Ended								Twelve Months Ended
		April 2, 2023				April 3, 2022				April 2, 2023				April 3, 2022
(Amounts in thousands, except per share data)			(unaudited)				(unaudited)				(unaudited)				(unaudited)
Park admissions		$	76,303			$	72,987			$	738,731			$	824,302
Park food, merchandise and other			52,786				54,269				569,482				678,496
Sponsorship, international agreements and accommodations			13,101				10,851				54,106				50,190
Total revenues			142,190				138,107				1,362,319				1,552,988
Operating expenses (excluding depreciation and amortization shown separately below)			108,870				109,719				589,811				663,651
Selling, general and administrative expenses (excluding depreciation and amortization shown separately below) (1)			44,247				39,257				166,848				214,287
Costs of products sold			9,765				10,115				107,796				128,628
Depreciation and amortization			29,114				29,049				117,189				114,650
Loss on impairment of park assets			—				—				16,943				—
Loss on disposal of assets			2,435				(2,100	)			8,462				9,517
Operating (loss) income			(52,241	)			(47,933	)			355,270				422,255
Interest expense, net			36,302				37,530				140,362				151,546
Loss on debt extinguishment			—				—				17,533				—
Other (income), expense net			(832	)			(688	)			(228	)			6,464
(Loss) income before income taxes			(87,711	)			(84,775	)			197,603				264,245
Income tax (benefit) expense			(17,852	)			(19,113	)			48,221				62,379
Net (loss) income		$	(69,859	)		$	(65,662	)		$	149,382			$	201,866
Less: Net income attributable to noncontrolling interests			—				—				(44,651	)			(41,766	)
Net (loss) income attributable to Six Flags Entertainment Corporation		$	(69,859	)		$	(65,662	)		$	104,731			$	160,100
Weighted-average common shares outstanding:
Basic:			83,207				86,197				83,620				85,958
Diluted:			83,207				86,197				84,615				86,913
Loss per average common share outstanding:
Basic:		$	(0.84	)		$	(0.76	)		$	1.04			$	1.86
Diluted:		$	(0.84	)		$	(0.76	)		$	1.02			$	1.84

(1)

Includes stock-based compensation of $3,314 and $4,225 for the three-month periods ended April 2, 2023, and April 3, 2022, respectively and stock-based compensation of $6,762 and $19,050 for the twelve-month periods ended April 2, 2023, and April 3, 2022.

		As of
		April 2, 2023				January 1, 2023				April 3, 2022
(Amounts in thousands, except share data)		(unaudited)								(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	64,749			$	80,122			$	252,203
Accounts receivable, net			45,462				49,405				86,461
Inventories			41,016				44,811				39,161
Prepaid expenses and other current assets			83,639				66,452				55,454
Total current assets			234,866				240,790				433,279
Property and equipment, net:
Property and equipment, at cost			2,621,518				2,592,485				2,528,135
Accumulated depreciation			(1,380,846	)			(1,350,739	)			(1,280,969	)
Total property and equipment, net			1,240,672				1,241,746				1,247,166
Other assets:
Right-of-use operating leases, net			156,376				158,838				184,643
Debt issuance costs			2,230				2,764				4,365
Deposits and other assets			20,272				17,905				10,779
Goodwill			659,618				659,618				659,618
Intangible assets, net of accumulated amortization of $290, $284 and $266 as of April 2, 2023, January 1, 2023 and April 3, 2022, respectively			344,158				344,164				344,182
Total other assets			1,182,654				1,183,289				1,203,587
Total assets		$	2,658,192			$	2,665,825			$	2,884,032
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable		$	43,513			$	38,887			$	65,652
Accrued compensation, payroll taxes and benefits			14,417				15,224				22,444
Accrued insurance reserves			34,032				34,053				32,423
Accrued interest payable			27,527				38,484				33,217
Other accrued liabilities			60,032				67,346				94,052
Deferred revenue			152,096				128,627				185,094
Short-term borrowings			170,000				100,000				—
Short-term lease liabilities			12,040				11,688				11,383
Total current liabilities			513,657				434,309				444,265
Noncurrent liabilities:
Long-term debt			2,281,841				2,280,531				2,631,246
Long-term lease liabilities			166,562				164,804				180,464
Other long-term liabilities			28,477				30,714				10,502
Deferred income taxes			162,973				184,637				133,264
Total noncurrent liabilities			2,639,853				2,660,686				2,955,476
Total liabilities			3,153,510				3,094,995				3,399,741
Redeemable noncontrolling interests			521,395				521,395				522,067
Stockholders’ deficit:
Preferred stock, $1.00 par value			—				—				—
Common stock, $0.025 par value, 280,000,000 shares authorized; 83,279,300, 83,178,294 and 86,248,545 shares issued and outstanding at April 2, 2023, January 1, 2023 and April 3, 2022, respectively			2,082				2,079				2,156
Capital in excess of par value			1,107,258				1,104,051				1,124,603
Accumulated deficit			(2,055,359	)			(1,985,500	)			(2,088,913	)
Accumulated other comprehensive loss, net of tax			(70,694	)			(71,195	)			(75,622	)
Total stockholders’ deficit			(1,016,713	)			(950,565	)			(1,037,776	)
Total liabilities and stockholders’ deficit		$	2,658,192			$	2,665,825			$	2,884,032

		Three Months Ended
		April 2, 2023				April 3, 2022
(Amounts in thousands)		(unaudited)				(unaudited)
Cash flows from operating activities:
Net loss		$	(69,859	)		$	(65,662	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			29,114				29,049
Stock-based compensation			3,314				4,225
Interest accretion on notes payable			278				278
Amortization of debt issuance costs			1,566				1,978
Loss (gain) on disposal of assets			2,435				(2,100	)
Deferred income tax benefit			(20,672	)			(18,347	)
Other			30				5,220
Changes in operating assets and liabilities:
Decrease in accounts receivable			7,426				11,535
Increase in inventories, prepaid expenses and other current assets			(18,672	)			(11,512	)
Decrease (increase) in deposits and other assets			2,834				(4,600	)
Decrease in ROU operating leases			2,847				2,585
Increase in accounts payable, deferred revenue, accrued liabilities and other long-term liabilities			12,070				6,815
Increase in operating lease liabilities			1,977				2,161
Decrease in accrued interest payable			(10,957	)			(17,337	)
Net cash used in operating activities			(56,269	)			(55,712	)
Cash flows from investing activities:
Additions to property and equipment			(25,488	)			(32,071	)
Property insurance recoveries			481				3,081
Net cash used in investing activities			(25,007	)			(28,990	)
Cash flows from financing activities:
Repayment of borrowings			(10,000	)			—
Proceeds from borrowings			80,000				—
Payment of debt issuance costs			(970	)			—
Payment of cash dividends			—				(14	)
Proceeds from issuance of common stock			—				299
Payment of tax withholdings on equity-based compensation through shares withheld			(104	)			(3	)
Reduction in finance lease liability			(247	)			(201	)
Net cash provided by financing activities			68,679				81
Effect of exchange rate on cash			(2,776	)			1,239
Net change in cash and cash equivalents			(15,373	)			(83,382	)
Cash and cash equivalents at beginning of period			80,122				335,585
Cash and cash equivalents at end of period		$	64,749			$	252,203

Definition and Reconciliation of Non-GAAP Financial Measures

We prepare our financial statements in accordance with United States generally accepted accounting principles (“GAAP”). In our press release, we make reference to non-GAAP financial measures including Modified EBITDA, Adjusted EBITDA and Adjusted EBITDA minus capex. The definition for each of these non-GAAP financial measures is set forth below in the notes to the reconciliation tables. We believe that these non-GAAP financial measures provide important and useful information for investors to facilitate a comparison of our operating performance on a consistent basis from period to period and make it easier to compare our results with those of other companies in our industry. We use these measures for internal planning and forecasting purposes, to evaluate ongoing operations and our performance generally, and in our annual and long-term incentive plans. By providing these measures, we provide our investors with the ability to review our performance in the same manner as our management.

However, because these non-GAAP financial measures are not determined in accordance with GAAP, they are susceptible to varying calculations, and not all companies calculate these measures in the same manner. As a result, these non-GAAP financial measures as presented may not be directly comparable to a similarly titled non-GAAP financial measure presented by another company. These non-GAAP financial measures are presented as supplemental information and not as alternatives to any GAAP financial measures. When reviewing a non-GAAP financial measure, we encourage our investors to fully review and consider the related reconciliation as detailed below.

The following tables set forth a reconciliation of net (loss) income to Adjusted EBITDA for the three-month periods and twelve-month periods ended April 2, 2023, and April 3, 2022:

		Three Months Ended								Twelve Months Ended
(Amounts in thousands, except per share data)		April 2, 2023				April 3, 2022				April 2, 2023				April 3, 2022
Net (loss) income		$	(69,859	)		$	(65,662	)		$	149,382			$	201,866
Income tax (benefit) expense			(17,852	)			(19,113	)			48,221				62,379
Other (income) expense, net(2)			(832	)			(688	)			(228	)			6,464
Loss on debt extinguishment			—				—				17,533				—
Interest expense, net			36,302				37,530				140,362				151,546
Loss (gain) on disposal of assets			2,435				(2,100	)			8,462				9,517
Depreciation and amortization			29,114				29,049				117,189				114,650
Loss on impairment of park assets			—				—				16,943				—
Stock-based compensation			3,314				4,225				6,762				19,050
Modified EBITDA(3)		$	(17,378	)		$	(16,759	)		$	504,626			$	565,472
Third party interest in EBITDA of certain operations(4)			—				—				(44,651	)			(41,766	)
Adjusted EBITDA(3)		$	(17,378	)		$	(16,759	)		$	459,975			$	523,706
Capital expenditures, net of property insurance recovery(5)			(25,007	)			(28,990	)			(107,526	)			(127,599	)
Adjusted EBITDA minus CAPEX(3)		$	(42,385	)		$	(45,749	)		$	352,449			$	396,107

(2)		Amounts recorded as “Other (income) expense, net” include certain non-recurring costs incurred in conjunction with changes made to our organizational structure in December 2021. During 2023, we reclassified the net pension-related expense (benefit) to other (income) expense, net. in our consolidated statements of operations. This reclassification has been reflected in all periods presented. As a result of this reclassification, Adjusted EBITDA for the three-month and twelve-month periods ended April 3, 2022, declined by $1.2 million and $4.5 million, respectively, as compared to the previously reported figure.
(3)		“Modified EBITDA,” a non-GAAP measure, is defined as our consolidated income (loss) from continuing operations: excluding the following: the cumulative effect of changes in accounting principles, discontinued operations gains or losses, income tax expense or benefit, restructure costs or recoveries, reorganization items (net), other income or expense, gain or loss on early extinguishment of debt, equity in income or loss of investees, interest expense (net), gain or loss on disposal of assets, gain or loss on the sale of investees, amortization, depreciation, stock-based compensation, and fresh start accounting valuation adjustments. Modified EBITDA, as defined herein, may differ from similarly titled measures presented by other companies. Management uses non-GAAP measures for budgeting purposes, measuring actual results, allocating resources and in determining employee incentive compensation. We believe that Modified EBITDA provides relevant and useful information for investors because it assists in comparing our operating performance on a consistent basis, makes it easier to compare our results with those of other companies in our industry as it most closely ties our performance to that of our competitors from a park-level perspective and allows investors to review performance in the same manner as our management.
		“Adjusted EBITDA,” a non-GAAP measure, is defined as Modified EBITDA minus the interests of third parties in the Modified EBITDA of properties that are less than wholly owned (consisting of Six Flags Over Georgia, Six Flags White Water Atlanta and Six Flags Over Texas). Adjusted EBITDA is approximately equal to “Parent Consolidated Adjusted EBITDA” as defined in our secured credit agreement, except that Parent Consolidated Adjusted EBITDA excludes Adjusted EBITDA from equity investees that is not distributed to us in cash on a net basis and has limitations on the amounts of certain expenses that are excluded from the calculation. Adjusted EBITDA as defined herein may differ from similarly titled measures presented by other companies. Our board of directors and management use Adjusted EBITDA to measure our performance and our current management incentive compensation plans are based largely on Adjusted EBITDA. We believe that Adjusted EBITDA is frequently used by all our sell-side analysts and most investors as their primary measure of our performance in the evaluation of companies in our industry. In addition, the instruments governing our indebtedness use Adjusted EBITDA to measure our compliance with certain covenants and, in certain circumstances, our ability to make certain borrowings. Adjusted EBITDA, as computed by us, may not be comparable to similar metrics used by other companies in our industry.
		“Adjusted EBITDA minus capex,” a non-GAAP measure, is defined as Adjusted EBITDA minus capital expenditures, net of property insurance recoveries. Adjusted EBITDA minus capex as defined herein may differ from similarly titled measures presented by other companies. Our board of directors and managed use Adjusted EBITDA minus capex to measure our performance and our current management incentive compensation plans are based largely on Adjusted EBITDA minus capex. We believe that Adjusted EBITDA minus capex is frequently used by all our sell-side analysts and most investors as their primary measure of our performance in the evaluation of companies in our industry. Adjusted EBITDA minus capex, as computer by us, may not be comparable to similar metrics used by other companies in our industry.
(4)		Represents interests of non-controlling interests in the Adjusted EBITDA of Six Flags Over Georgia, Six Flags Over Texas and Six Flags White Water Atlanta.
(5)		Capital expenditures, net of property insurance recovery (“CAPEX”) represents cash spent on property, plant and equipment, net of property insurance recoveries.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230508005234/en/

Evan Bertrand

Vice President and Treasurer

+1-972-595-5180

[email protected]

KEYWORDS: Texas United States North America

INDUSTRY KEYWORDS: Destinations Travel Theme Parks Vacation Family Consumer Tourist Attractions Entertainment

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LL Flooring Reports First Quarter 2023 Financial Results

RICHMOND, Va.–(BUSINESS WIRE)–
LL Flooring Holdings, Inc. (“LL Flooring” or “Company”) (NYSE: LL), a leading specialty retailer of hard-surface flooring in the U.S., today announced financial results for the quarter ended March 31, 2023.

“As expected, the first quarter was very challenging and our performance reflected the impact the difficult macro backdrop had on discretionary home improvement spending. In addition, we continue to experience pressure from brand awareness and operational challenges that impacted first quarter results. Despite the near-term volatility, we remain focused on areas of improvement that will help stabilize our results and drive long-term growth opportunities. These include further broadening and growing our brand awareness among consumers to drive traffic; ensuring a consistent customer experience across our omnichannel network to improve conversion; and improving operating efficiencies by actively working to reduce costs while focusing investments on our top growth priorities,” said President and Chief Executive Officer Charles Tyson.

Tyson continued, “Despite the headwinds that we are facing, we remain confident in our ability to deliver the high-touch service of an independent flooring retailer combined with the value, assortment and convenience of a national brand. To that end, we continue to execute on our strategic initiatives of growing sales to Pro customers, building brand awareness, improving the customer experience and innovating new products. Additionally, in response to customer feedback, we have launched a new category pilot in carpet in four stores with plans to be in 20 additional stores by the end of the second quarter as we serve as the comprehensive flooring solution provider for our customers. We are also pleased to announce we are opening a third distribution center in Dallas in the third quarter which will further optimize our supply chain network.”

Tyson concluded, “As we look to the remainder of 2023, we expect the macro backdrop to remain challenging as elevated inflation and higher interest rates drive a more cautious consumer and pressure higher ticket discretionary purchases. We have also been impacted by the enforcement of the Uyghur Forced Labor Prevention Act (“UFLPA”) as it relates to the importation of polyvinyl chloride (PVC) which is resulting in delays in receipt of certain vinyl flooring products. We are diligently working to provide the additional documentation that has been requested by U.S. Customs. During Q1, we experienced continued delays, incremental expenses and lost sales as a result of detention notices within the vinyl product category. Together these factors have limited our sales visibility for the balance of the year. Despite these challenges, we remain focused on driving sales through our initiatives, and we are working diligently to align our cost structure with the help of outside consultants. Importantly, looking beyond 2023, the medium to long-term outlook for repair and remodel spending remains strong and we remain confident in the long-term fundamentals of our business.”

First Quarter Financial Highlights

• Net sales of $240.7 million decreased 13.7% compared to the same period last year, driven by lower spending by consumers versus last year combined with a decline in Pro sales.
• Total comparable store sales decreased 15.4% versus the same period last year.
• Gross margin of 36.6% decreased 70 basis points as a percentage of sales, driven by $2.1 million in incremental costs related to customs delays on flooring products that contain PVC as a consequence of the UFLPA.
  • Excluding the vinyl charges, adjusted gross margin¹ of 37.4% increased 20 basis points as a percentage of net sales compared to the same period last year, primarily reflecting the Company’s ability to offset higher material and transportation costs (collectively up more than 500 basis points) through pricing, promotion and alternative country/vendor sourcing strategies.

• SG&A as a percentage of net sales of 42.0% increased 650 basis points compared to the first quarter of last year and included a $0.3 million charge for legal fees charged to earnings related to CBP requests for additional documentation on imports of flooring products that contain PVC as a consequence of the UFLPA. Excluding the impact of the legal fees, Adjusted SG&A¹ as a percentage of net sales of 41.9% increased 640 basis points compared to the first quarter of last year.
  • The increases in both SG&A and Adjusted SG&A as a percentage of net sales were due primarily to expense deleverage from lower sales volumes.

  • In addition, operating expenses were higher due to the planned investments in our growth strategies including: costs associated with new stores, investments in technology and digital enhancements to improve the customer experience, and consulting fees related to realigning our cost structure, as well as inflationary cost increases. The increase was partially offset by restructuring cost savings and lower variable costs due to lower sales volume.

• Operating margin of (5.5)% decreased 730 basis points compared to the first quarter of last year. Adjusted operating margin¹ of (4.5)% decreased 620 basis points compared to the first quarter of last year.
• Loss per Diluted Share of $0.37 decreased $0.51 compared to the first quarter of last year. Adjusted Loss Per Diluted Share¹ of $0.31 decreased $0.44 compared to the first quarter of last year.
• During the first quarter, the Company opened one new store, bringing total stores to 443 as of March 31, 2023.

¹Please refer to the “Non-GAAP and Other Information” section and the GAAP to non-GAAP reconciliation tables below for more information.

Cash Flow & Liquidity

As of March 31, 2023, the Company had liquidity of $157 million, consisting of excess availability under its Credit Agreement of $150 million, and cash and cash equivalents of $7 million.

During the first quarter of 2023, the Company generated $26 million of cash flows from operating activities primarily driven by sell throughs of merchandise inventories rebuilt from the prior year end and reduced inventory purchases.

2023 Business Outlook

The Company continues to navigate uncertainty in the macroeconomic environment due to consumer confidence, inflation, a volatile interest and mortgage rate environment and lower existing home sales. As a result, the Company is not providing financial guidance at this time.

The Company is, however, providing the following commentary. The Company expects:

• Full year revenues to continue to be challenged due to macro uncertainty further exacerbated by the customs delays related to the UFLPA. The timing and resolution of the customs hold is unknown and difficult to forecast. In addition, the company continues to focus on areas of improvement including increasing brand awareness and ensuring a seamless customer experience.

• Adjusted gross margins are expected to improve year-over-year, with a stronger second half, driven primarily by a reduction in international shipping rates and sourcing costs. The Company will continue to monitor the competitive pricing environment to inform its pricing and promotion strategies. In addition, the Company expects its gross margin rate in 2023 to benefit from a greater mix of our premium Duravana brand which carries higher margins and delivers on customer needs for scratch-resistant and waterproof flooring.

• SG&A dollar spend and SG&A spend as a percentage of sales are expected to increase year-over-year, primarily due to continued deleverage from lower sales volumes, inflationary pressures on wages and benefits and investments in its new distribution center and customer relationship management platform, which it expects will support higher sales levels and make its operating structure more efficient over time. The Company has engaged consultants to undergo a comprehensive strategic review of the cost structure.

• Capital expenditures in the range of approximately $15 million to $20 million in 2023, primarily to support the new distribution center, productivity investments, maintenance CapEx and three store openings.

Learn More about LL Flooring

• Our commitment to quality, compliance, the communities we serve and corporate giving: https://llflooring.com/corp/quality.html
• Follow us on social media: Facebook, Instagram and Twitter.

Conference Call and Webcast Information

The Company plans to host a conference call and audio webcast on May 8, 2023, at 8:00 a.m. Eastern Time. The conference may be accessed by dialing (833) 470-1428 or (404) 975-4839 and entering pin number 223759. A replay will be available approximately two hours after the call ends through June 5, 2023 and may be accessed by dialing (929) 458-6194 and entering pin number 972837. The live conference call and replay can also be accessed via audio webcast at the Investor Relations section of the Company’s website, www.LLFlooring.com.

About LL Flooring

LL Flooring is one of the country’s leading specialty retailers of hard-surface flooring with more than 440 stores nationwide. The Company seeks to offer the best customer experience online and in stores, with more than 500 varieties of hard-surface floors featuring a range of quality styles and on-trend designs. LL Flooring’s online tools also help empower customers to find the right solution for the space they’ve envisioned. LL Flooring’s extensive selection includes waterproof hybrid resilient, waterproof vinyl plank, solid and engineered hardwood, laminate, bamboo, porcelain tile, and cork, with a wide range of flooring enhancements and accessories to complement. LL Flooring stores are staffed with flooring experts who provide advice, Pro partnership services and installation options for all of LL Flooring’s products, the majority of which is in stock and ready for delivery.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This press release includes statements of the Company’s expectations, intentions, plans and beliefs that constitute “forward-looking statements” within the meanings of the Private Securities Litigation Reform Act of 1995. These statements, which may be identified by words such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “assumes,” “believes,” “thinks,” “estimates,” “seeks,” “predicts,” “could,” “projects,” “targets,” “potential,” “will likely result,” and other similar terms and phrases, are based on the beliefs of the Company’s management, as well as assumptions made by, and information currently available to, the Company’s management as of the date of such statements. These statements are subject to risks and uncertainties, all of which are difficult to predict and many of which are beyond the Company’s control.

The Company specifically disclaims any obligation to update these statements, which speak only as of the dates on which such statements are made, except as may be required under the federal securities laws. For a discussion of the risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, see the “Risk Factors” section of the Company’s annual report on Form 10-K for the year ended December 31, 2022, and the Company’s other filings with the Securities and Exchange Commission (“SEC”). Such filings are available on the SEC’s website at www.sec.gov and the Company’s Investor Relations website at https://investors.llflooring.com.

Non-GAAP and Other Information

To supplement the financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses the following non-GAAP financial measures in the body of this press release and in the supplemental tables at the end of the release: (i) Adjusted Gross Profit; (ii) Adjusted Gross Margin; (iii) Adjusted SG&A; (iv) Adjusted SG&A as a Percentage of Net Sales; (v) Adjusted Operating (Loss) Income; (vi) Adjusted Operating Margin; (vii) Adjusted Other Expense; (viii) Adjusted Other Expense as a Percentage of Net Sales; (ix) Adjusted (Loss) Earnings; and (x) Adjusted (Loss) Earnings per Diluted Share. These non-GAAP financial measures should be viewed in addition to, and not in lieu of, financial measures calculated in accordance with GAAP. These supplemental measures may vary from, and may not be comparable to, similarly titled measures by other companies.

The non-GAAP financial measures are presented because we believe the non-GAAP financial measures provide useful information to management and investors regarding certain financial and business trends related to our financial condition and results of operations, These measures provide an additional tool for investors to use in evaluating our ongoing operating performance, and management, in certain cases, uses them to determine incentive compensation. The presented non-GAAP financial measures exclude items that management does not believe reflect our core operating performance, which include incremental costs of sales and associated legal costs related to disruptions to supply chain and other trade regulations and changes in antidumping and countervailing duties, as such items are outside of our control or due to their inherent unusual, non-operating, unpredictable, non-recurring, or non-cash nature. Reconciliations of these non-GAAP financial measures are provided on the pages that follow (certain numbers may not sum due to rounding).

(Tables Follow)

LL Flooring Holdings, Inc. Condensed Consolidated Balance Sheets (Unaudited) In Thousands
		March 31,				December 31,
		2023				2022
Assets
Current Assets:
Cash and Cash Equivalents		$	6,977			$	10,800
Merchandise Inventories			307,738				332,296
Prepaid Expenses			10,443				9,054
Other Current Assets			14,441				17,598
Total Current Assets			339,599				369,748
Property and Equipment, net			100,421				101,758
Operating Lease Right-of-Use Assets			125,096				123,172
Net Deferred Tax Assets			17,533				13,697
Other Assets			5,628				5,578
Total Assets		$	588,277			$	613,953
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts Payable		$	54,361			$	47,733
Customer Deposits and Store Credits			46,560				43,767
Accrued Compensation			6,429				9,070
Sales and Income Tax Liabilities			3,462				3,574
Accrual for Legal Matters and Settlements			21,494				22,159
Operating Lease Liabilities – Current			30,564				34,509
Other Current Liabilities			24,680				19,712
Total Current Liabilities			187,550				180,524
Other Long-Term Liabilities			6,192				6,162
Operating Lease Liabilities – Long-Term			101,219				99,186
Credit Agreement			47,000				72,000
Total Liabilities			341,961				357,872
Commitments and Contingencies
Stockholders’ Equity:
Common Stock ($0.001 par value; 35,000 shares authorized; 30,916 and 30,758 shares issued and 28,798 and 28,695 shares outstanding at March 31, 2023, and December 31, 2022, respectively)			31				31
Treasury Stock, at cost (2,118 and 2,063 shares, respectively)			(153,562	)			(153,331	)
Additional Capital			232,890				231,839
Retained Earnings			166,957				177,542
Total Stockholders’ Equity			246,316				256,081
Total Liabilities and Stockholders’ Equity		$	588,277			$	613,953

LL Flooring Holdings, Inc. Condensed Consolidated Statements of Operations (Unaudited) In Thousands, Except per Share Amounts
		Three Months Ended March 31,
		2023				2022
Net Sales
Net Merchandise Sales		$	210,497			$	244,271
Net Services Sales			30,201				34,761
Total Net Sales			240,698				279,032
Cost of Sales
Cost of Merchandise Sold			128,397				147,419
Cost of Services Sold			24,301				27,534
Total Cost of Sales			152,698				174,953
Gross Profit			88,000				104,079
Selling, General and Administrative Expenses			101,185				99,025
Operating (Loss) Income			(13,185	)			5,054
Other Expense (Income)			1,159				(15	)
(Loss) Income Before Income Taxes			(14,344	)			5,069
Income Tax (Benefit) Expense			(3,759	)			1,032
Net (Loss) Income and Comprehensive (Loss) Income		$	(10,585	)		$	4,037
Net (Loss) Income per Common Share—Basic		$	(0.37	)		$	0.14
Net (Loss) Income per Common Share—Diluted		$	(0.37	)		$	0.14
Weighted Average Common Shares Outstanding:
Basic			28,717				29,145
Diluted			28,717				29,417

LL Flooring Holdings, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) In Thousands
		Three Months Ended March 31,
		2023				2022
Cash Flows from Operating Activities:
Net (Loss) Income		$	(10,585	)		$	4,037
Adjustments to Reconcile Net (Loss) Income:
Depreciation and Amortization			4,669				4,492
Deferred Income Taxes (Benefit) Provision			(3,836	)			157
Income on Vouchers Redeemed for Legal Settlements			(253	)			(423	)
Stock-Based Compensation Expense			1,051				873
Provision for Inventory Obsolescence Reserves			572				(110	)
Gain on Disposal of Fixed Assets			—				(9	)
Changes in Operating Assets and Liabilities:
Merchandise Inventories			23,574				(64,793	)
Accounts Payable			8,045				26,037
Customer Deposits and Store Credits			2,793				2,251
Prepaid Expenses and Other Current Assets			1,826				(2,448	)
Accrued Compensation			(2,641	)			(2,523	)
Other Assets and Liabilities			934				9,058
Net Cash Provided by (Used in) Operating Activities			26,149				(23,401	)
Cash Flows from Investing Activities:
Purchases of Property and Equipment			(4,741	)			(5,250	)
Other Investing Activities			—				61
Net Cash Used in Investing Activities			(4,741	)			(5,189	)
Cash Flows from Financing Activities:
Borrowings on Credit Agreement			66,000				—
Payments on Credit Agreement			(91,000	)			—
Common Stock Repurchased			(231	)			(810	)
Other Financing Activities			—				282
Net Cash Used in Financing Activities			(25,231	)			(528	)
Net Decrease in Cash and Cash Equivalents			(3,823	)			(29,118	)
Cash and Cash Equivalents, Beginning of Period			10,800				85,189
Cash and Cash Equivalents, End of Period		$	6,977			$	56,071
Supplemental Disclosure of Non-Cash Operating and Financing Activities:
Relief of Inventory for Vouchers Redeemed for Legal Settlements		$	412			$	714
Tenant Improvement Allowance for Leases			(66	)			(665	)

LL Flooring Holdings, Inc. GAAP to Non-GAAP Reconciliation
Items impacting gross margin with comparisons to the prior-year periods include:
		Three Months Ended March 31,
		2023								2022
		$				% of Sales				$				% of Sales
		(in thousands, except percentage data)
Gross Profit/Margin, as reported (GAAP)		$	88,000				36.6	%		$	104,079				37.3	%
Vinyl Charges1			2,138				0.9	%			—				—	%
Antidumping and Countervailing Adjustments2			—				—	%			(241	)			(0.1	)%
Adjustment Items Subtotal			2,138				0.9	%			(241	)			(0.1	)%
Adjusted Gross Profit/Margin (non-GAAP measures)		$	90,138				37.4	%		$	103,838				37.2	%

	1	This amount represents costs related to customs delays on flooring products that contain PVC as a consequence of the UFLPA.
	2	This amount represents net antidumping and countervailing income associated with applicable prior-year shipments of engineered hardwood from China.

Items impacting SG&A with comparisons to the prior-year periods include:
		Three Months Ended March 31,
		2023								2022
		$				% of Sales				$				% of Sales
		(in thousands, except percentage data)
SG&A, as reported (GAAP)		$	101,185				42.0	%		$	99,025				35.5	%
Legal and Professional Fees3			280				0.1	%			—				—	%
Adjusted SG&A (a non-GAAP measure)		$	100,905				41.9	%		$	99,025				35.5	%

1

This amount represents incremental legal fees charged to earnings related to CBP requests for additional documentation on imports of flooring products that contain PVC as a consequence of the UFLPA. This does not include all legal costs incurred by the Company.

LL Flooring Holdings, Inc. GAAP to Non-GAAP Reconciliation
Items impacting operating (loss) income and operating margin with comparisons to the prior-year periods include:
		Three Months Ended March 31,
		2023								2022
		$				% of Sales				$				% of Sales
		(in thousands, except percentage data)
Operating (Loss) Income, as reported (GAAP)		$	(13,185	)			(5.5	)%		$	5,054				1.8	%
Gross Margin Adjustment Items:
Vinyl Charges1			2,138				0.9	%			—				—	%
Antidumping and Countervailing Adjustments2			—				—	%			(241	)			(0.1	)%
Gross Margin Adjustment Items Subtotal			2,138				0.9	%			(241	)			(0.1	)%
SG&A Adjustment Items:
Legal and Professional Fees3			280				0.1	%			—				—	%
SG&A Adjustment Items Subtotal			280				0.1	%			—				—	%
Adjusted Operating (Loss) Income/ Margin (a non-GAAP measure)		$	(10,767	)			(4.5	)%		$	4,813				1.7	%

1,2,3		See the Gross Profit and SG&A sections above for more detailed explanations of these individual items.

Items impacting other expense (income) with comparisons to the prior year periods include:
		Three Months Ended March 31,
		2023								2022
		$				% of Sales				$				% of Sales
		(in thousands, except percentage data)
Other Expense (Income), as reported (GAAP)		$	1,159				0.5	%		$	(15	)			—	%
Interest Impact Related to Antidumping and Countervailing Adjustments4			—				—	%			(84	)			—	%
Adjusted Other Expense/Adjusted Other Expense as a % of Sales (a non-GAAP measure)		$	1,159				0.5	%		$	69				—	%

4

This amount represents the interest income impact of certain antidumping and countervailing adjustments related to applicable prior-year shipments of engineered hardwood from China.

LL Flooring Holdings, Inc. GAAP to Non-GAAP Reconciliation
Items impacting earnings per diluted share with comparisons to the prior-year periods include:
		Three Months Ended March 31,
		2023				2022
		(in thousands, except per share data)
Net (Loss) Income, as reported (GAAP)		$	(10,585	)		$	4,037
Net (Loss) Income per Diluted Share (GAAP)		$	(0.37	)		$	0.14
Gross Margin Adjustment Items:
Vinyl Charges1			2,138				—
Antidumping and Countervailing Adjustments2			—				(241	)
Gross Margin Adjustment Items Subtotal			2,138				(241	)
SG&A Adjustment Items:
Legal and Professional Fees3			280				—
SG&A Adjustment Items Subtotal			280				—
Other Expense (Income) Adjustment Items:
Interest Impact Related to Antidumping and Countervailing Adjustments4			—				(84	)
Other Expense (Income) Adjustment Items Subtotal			—				(84	)
Income Tax Adjustment5			(636	)			85
Adjusted (Loss) Earnings		$	(8,803	)		$	3,797
Adjusted (Loss) Earnings per Diluted Share (a non-GAAP measure)		$	(0.31	)		$	0.13

1,2,3,4		See the Gross Profit, SG&A and Other Expense (Income) sections above for more detailed explanations of these individual items.
5		Income tax adjustment is defined as the sum of gross margin, SG&A, and other expense (income) adjustment items multiplied by the Company’s federal incremental rate, which was 26.3% for the periods ended March 31, 2023 and 2022.

 

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LL Flooring Investor Relations

ICR

Bruce Williams

[email protected]

Tel: 804-420-9801

KEYWORDS: Virginia United States North America

INDUSTRY KEYWORDS: Retail Specialty Construction & Property Interior Design

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