Q4 2021 1847 Goedeker Inc Earnings Call
Good morning, and welcome to 18, 47 go Decker's fourth quarter and full year 2020 earnings call.
All participants will be in listen only mode.
Should you need assistance. Please signal conference specialist Starkey followed by zero.
On the call today are Chief Executive Officer, Albert <unk>, and Chief Financial Officer Maria Johnson.
First please note that various remarks about future expectations plans and prospects constitute forward looking statements for the purposes of Safe Harbor provisions under the private Securities Litigation Reform Act of 99 five.
The company cautions that these forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated including the risks described in the company's filings with the FCC.
Any forward looking statement made on this conference call speak only as of today's date March 31 2022.
And the company assumes no obligation to update any of these forward looking statements.
We reflect events or circumstances that occur after today.
Second we had a few special items in our fourth quarter results, which we excluded from our trends for non-GAAP purposes.
We were and we will reference these non-GAAP results in our remarks today.
So please see our press release from this morning, and our Investor Relations website for more information and our cautionary statement, which cover these topics in more detail.
A replay of the conference call will be available on the 18 47 go Ducker Investor Relations website. This week.
At this time I'll turn the call over to Albert <unk> for opening comments. Please go ahead Mr. <unk> good morning, and thank you for joining today's call.
Before getting into our results for the fourth quarter and the full year I want to take a moment to reflect the past year.
2021 was a year of transformation forget occur in appliances connection.
Through our June 2021 acquisition of appliances connection we have evolved into a growth oriented e-commerce platform.
We're in an expansive selection of household appliances throughout the United States.
When I became the CEO of the combined entity in September of last year I knew we had our work cut out for us and there would be both challenges and rewarding moments on the road ahead.
I think that sums up the last couple of quarters.
We encountered some unprecedented issues, while still managing to rapidly grow in a profitable manner.
On my first official earnings call as CEO I laid out a set of strategic initiatives developed along with the board that should solidify our foundation for long term growth.
We have made meaningful progress on many of these initiatives and look forward to further executing in 2022.
First we have made a significant stride overhauling our leadership team with several key hires as well announcing the recent departure of senior leaders from the legacy <unk> business.
Have added new executives with decades of experience in supply chain.
Distribution logistics.
And home delivery e-commerce marketing and merchandising.
These individuals are aligned with our mission of long term vision and share our belief that we can take this business to the next level.
Moving forward recruiting top tier talent at all levels remain a major priority.
Second we created even deeper relationship with our customers in 2021, we experienced more than 30 million annual website visits compared to 10 million site visits in 2020.
I mean over 450000 white glove deliveries and now have over 670000 product reviews and expert help us on the website.
This resulted in a 53% customer retention rate.
Third we have made.
Progress in the early stages of our fulfillment network expansion, we have indentified the geographic areas, we want to be and to get closer to the customer and further penetrate markets that are experiencing the highest levels of housing development and home remodeling although.
We currently are holding off on entering into agreements due to inventory and the supply chain issues, we expect to add at least two new fulfillment centers over the next year.
Fourth we are on track to announce our new name and brand ethos in the first half of this physical year.
This will align with our vision to become a home and appliance platform that empowers customers throughout the purchasing journey from inspiration to installation.
We are in the process of enhancing the content and resources available now.
Website that will ultimately help us create more meaningful relationship with our customers.
Lastly, we have made some early progress in our <unk> solution offering.
We have 20 million plus of new B to B project in the pipeline.
As of Q1, and we are working to build on this pipeline throughout the remainder of the year. We expect that these will be longer term projects.
That may take six to 18 months to come to fruition.
But we believe this pipeline will materialize into significant revenue growth in 2023.
Additionally, on the beat to be front, we rolled out the pro.
Plus and design pro plus.
Which our interactive platforms on our website that enables designers and builders to conveniently built projects price I'm purchase in one place.
While I am proud of these milestones they did not come without the startup challenges we have to navigate.
Looting unprecedented supply chain headwinds that created inventory issues throughout the industry.
Growing pains related to becoming a large company, including combining appliances connection operations and other internal processes, but you've gotta care businesses.
Transitioning the company to appliances connection platform from <unk> legacy system.
It should not seamlessly plug ins and.
Outstanding bills from the legacy <unk> business that were settled in Q4.
The ship transition announced in late August .
The concern conveyed by certain shareholders, which ultimately led to management to refocus the company.
And then ongoing reassessment of our capital structure following shareholder feedback.
I would like to take a moment to address the last topic, specifically as you know we.
We announced a share repurchase program had been approved by the board in December .
Following that announcement, we were restricted by blackout periods. During the first quarter. However, the share repurchase remains top of mind for the management and the board.
While 2021 were certainly a year of challenges and transition we were encouraged.
The progress we have made and we're looking forward to what we can accomplish in 2022, our strong sales growth and positive EBITDA.
Fiscal year 2021 represent a solid foundation that we can build on I will now conclude my initial remarks.
And turn it over to Maria Johnson to provide an overview of financial performance.
Thanks, Hal back good morning, everybody.
Net product sales for the quarter, where the torch at $2 7 million compared to $107 3 million pro forma sales for the fourth quarter trying to play into it.
Pro forma net sales for the full year were 504 to $1 7 million compared to $367 7 million in places but.
Our full year sales came in on on the high end of our previously stated guidance.
Gross profit for the quarter was $32 6 million and our margin was 28%.
Pro forma gross profit for the Euro 126 million with a 28, 3% margin compared to 72 5 million with a 19, 7% margin in 'twenty to 'twenty one.
Gross margin also came in within our previously stated guidance.
Alright, thank expenses for the quarter were approximately $26 2 million was the largest expense items being general and administrative expenses of 7 million, which included several hundreds of thousands in our extending built towards the legacy you've got a company says that's west huddled in Q4.
So now costs of $6 3 million bank and credit card fees of $6 1 million and advertising expense a full point to Matt.
Net income for the quarter was 3.8 million or three cents per diluted common share compared to a loss of $6 9 million or a loss of seven cents per diluted common share for the fourth quarter point to point.
For the full year net income was 28 million or 17 cents per diluted common share.
Prior to a net loss of $11 2 million or a loss of 11 cents per diluted common share for fiscal year 'twenty to 'twenty.
Adjusted EBITDA for the quarter was 11 3 million with a margin of 8%.
And full year pro forma adjusted EBITDA was $48 7 million with a 9% margin.
And the balance of 'twenty to 'twenty, one the company had working capital of 16 million and incurred negative cash flow from operations. So patient 3 million, which included $34 million paid in their funds were cancellations for the legacy business, that's still work to transition that business model.
Additionally, the company had cash and cash equivalent of $25 7 million at the end for the quarter Iraq are flat with the prior quarter.
With respect to our outlook the combination of sustained supply chain disruption significant inflation and political uncertainty will impact us in 2022.
We're still forecasting high teens to low 20 sales calls once a year in gross margins and adjusted EBITDA relatively flat to our 'twenty to 'twenty one that is out there.
Hope to be able to find our outlook over the course of the year if macroeconomic headwinds.
Now I will hand, the presentation back to I'll bet for closing comments.
Albert.
Thank you Maria while we were able to hit our previously stated sales and gross margin guidance for the physical year of 2021, we feel strongly that this was a year of transition.
And the early stages of our foundation building phase, we believe that 2022 will be a year to start making more meaningful progress.
On our key priorities that will drive growth.
And we have already began to execute on these.
As I highlighted in my opening remarks with respect to margin tight supply remains a significant obstacle in the fourth quarter and generally throughout the year.
As the supply chain improves we expect to we expect to experience the benefit of rebates and promotional pricing.
Through our vendor relationships.
That along our plan fulfillment network expansion will likely create some long term margin expansion. We believe that by remaining focused on the following priorities, we will be able to pursue sustainable growth on undisputed category leadership.
Continuously improving our digital stack employee.
Marketing delivering great content and value.
Providing fast reliable shipping.
Offering extensive selection.
And sustaining expert customer care I still believe we are on the path to becoming a company with $1 billion in annual sales in the coming years I'll conclude there and at this time I'll ask the operator to open the call.
For any questions.
We will now begin the question and answer session.
That's a question you May press Star then one your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question will come from Ryan Meyers with Lake Street, You May now go ahead.
Hey, good morning, guys. Thank you for taking my questions. The first question for me I just wanted to dive into the guidance a little bit so the high teens to low 20% growth number is this growth over the 541 million pro forma number or the $362 million reported number.
Hi, Ryan.
It is although they are $5 1 million in pro forma numbers. So we are expecting strong growth in.
But until 'twenty, two definitely it's not going to be at its highest this year.
It's still in high teens low <unk>.
Okay, well, that's good to hear and then as a follow up to that you know just kind of can you unpack the growth number a little bit and see if there's a lot of it is coming from price or volume or is it kind of a combination of both.
Hum.
Hey, Brian . This is good morning celebrate so we continuing on the same path that we've been doing it for the past, let's say 10 years Theres a lot of organic growth in the company and that's what we're focused on continuing our organic growth and continue on working on fulfillment delivery upgrading our infrastructure.
It's still from the organic growth that we had a plant and pipeline from before.
Okay that makes sense and then can you just give us an update on order fill rates and kind of how they tracked during the quarter and what you guys are sort of seeing here in the first half of 2022.
Yep.
Unfortunately, there was a huge impact and continues to be an impact.
In Q4, I would say of 2021, our fill rates went down and.
And there was some impact on the fill rates of automation not just from having the same struggles from manufacturers of wait out until the end of 2023.
And that's why we were a little bit.
No what I'm, saying that it's the growth is going to be limited because of a supply chain issue, but we are working on enhancing that obviously as you guys saw in the last quarter, we continuing and enhancing inventory upgrading our infrastructure fulfillment.
I had a couple of more warehouses here in the New York market expanded our size of the warehouse.
More inventory.
But the challenge is still there for 2022.
Some categories are still not as good as they are supposed to be.
So I'll fill rate did go back down into the sixties at some point went down to about 50%. So right. So it is a tough challenge.
Hopefully seeing some like none.
And then on the you know in the next I would say Q2 Q3 of 2022.
Okay. No. That's helpful. That's all I had for questions. Thanks, guys.
No problem.
Our next question will come from Adam Wilke, What's Greystone capital management, you mean.
Go ahead.
Hey, guys. Good morning, Thanks, a lot for taking my question.
I just wanted to ask about sort of the guide for fiscal year 'twenty two.
On the EBITDA margin line your basically your commentary basically.
Outline for flat EBIT margins, but your commentary about.
The state of the World and your business being affected in a number of ways would maybe point to that not being the case.
So I'm wondering kind of where you might you feel like you might be.
Hit next year from our excuse me this year from a cost perspective, or if that's just kind of along the lines of being conservative.
Yes, I think we are saying that.
In 2010 to two we do have some headwinds, but we are going to try to continue reducing our cost.
Topshop continue working on streamlining.
Streamlining call operation and hopefully even though we do have some challenge edmunds might have might have to they should be able to maintain both gross margin and EBIT. The chassis is the same level. Thank you. Thanks.
Thanks, a lot.
Okay. That's helpful. Thanks, and then.
On the fulfillment center agreements or the efforts in that area I'm wondering.
Maybe if you can dig into a little bit the timing between signing an agreement and getting everything sort of fully operational.
And along those lines, if that's a situation where you know maybe you wouldn't benefit from.
Opening fulfillment centers immediately versus kind of waiting it out is that does that kind of commentary internally about maybe seeing where things shake out with the consumer on the demand side or could you maybe help me understand why you kind of wouldn't be pressing the gas in that area.
Sure we need to have the correct inventory of the correct location and enough of it to service that market.
And transitioning finding a lease obviously now as you guys know the lease market.
Or the pricing has been.
Skyrocketing as in the past couple of months I would say, but it's not the issue. The issue is we want to make sure that we have enough inventory to fulfill that particularly area in that particular product with the correct inventory.
Right now for us, it's literally just changing the P. O address where you want it delivered to deliver them to the Jersey, you can move them to Florida, that's not the major issue major issue you want to have an operation. That's cost effective you don't want to open up a warehouse that has 2030 people.
Those machinery, that's not that big of a deal for us to have the personnel to get it up and running that's usually about three months, but having enough inventory of having enough orders to make that warehouse cost effective just sports are key to it.
Routing the inventory to have an equivalent amount of inventories down in Jersey, Florida, California, and Texas is not a big not a big issue at all we have to do is just stuff, where you disaggregate the inventory. According to the locations we want to make sure that we have a streamline of that inventory and not sporadic inventory and that's what it is right now replace a P O six months ago.
Sometimes literally a year ago and it comes all at once or do you get a few of them had a time the manufacturers don't have real dth or real expectation we.
We need to have real expectation really is to be corrupt inventory correctly.
Yeah.
Okay. Great. That's helpful. Thank you and then last one just to reiterate.
You would it be fair to say you will be resumed are starting your buyback program as soon as possible for the year.
As soon as our blackout periods are.
Cool.
It allows us to do it.
Perfect well great job this year and thanks for taking my questions I appreciate it.
Thank you Adam.
Yeah.
And then if you have a question. Please press Star then one our next question will come from Peter wrap over with Arco Capital You May now go ahead.
So I just wanted to make a comment that.
Your your press release did say that you're at.
Growth guidance is off the actual results. So I would encourage you to put out an 8-K correcting that to the pro forma results because I'm sure there'll be some confusion in the market. This morning. So I guess, that's probably that's the first comment.
I guess I wanted I had two the two bigger kind of questions. One is I was hoping that you guys would discuss sort of your long term capital structure goals and how you plan to get there, obviously theres a lot of dilution with the warrants and I mean anything you can talk to us.
Other than the share buyback that would be.
And maybe your I guess capital allocation strategy and how you think about it generally would be great.
Yes.
To your point as you are aware of our stock buyback program already.
But to be honest with you we're not in a position right now to comment or speculate, but we don't really have any tests with guaranteed actions. So far but it is an amount of management and the board will continue focusing on creating a structure of the company.
Okay.
I appreciate that Oh, I guess my second question was more of your your growth. This year of teams are.
Now to 20% I was curious whether.
You have the ability to kind of parse that out between you know your I guess economic growth versus e-commerce , taking bigger share from you know from.
From the existing from the retail market and so how that dynamic is playing out you know whether what you're seeing in terms of market share from ecommerce in general.
Sure Great question.
To your point this is a very fragmented business.
We know that.
Known that for quite a while and that's why we entered this market.
So we know where we come in after right. There's a lot of independent retailers, we know that there.
They're not going to last for too long, especially in this economic environment, that's happening right now.
Don't have the platform the structure of the websites.
They're absolutely that the business is and we know thats its an ever changing business, it's not going to last and is that sustainable business.
And that's really where we focus on the beginning and that's why we entered the business. We understood. The business are we going to continue focusing on that aspect of it and that's what we see a lot of organic growth, we're going to capture a lot of the segments of dealers that are out there in the market would it be in that market, we're going to be of service to the market a lot better a lot more efficient.
And have real good long term continuous relationship with our customers and that's how we became a lot of our customers, we give them and provide them a differentiated experience and they're going to get anywhere else.
Okay.
I guess it.
I appreciate the color. Thank you that's all I.
Isn't it.
This concludes our Q&A session as well as the conference. Thank you for things day presentation, you may now disconnect.
And one more.
Yeah.