Q1 2022 1847 Goedeker Inc Earnings Call
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Good morning, and welcome to the 18th forty-seven get occur first quarter 2022 earnings call.
All participants will be in listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero on the call today are Chief Executive Officer, Albert Albert for Tea, 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 the Safe Harbor provisions under the private Securities Litigation Reform Act of 1995.
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 risks described in the company's filings with the S. E C.
Any forward looking statements made.
Made on this conference call speak only as of today's date of May 16th 2022 and the company assumes no obligation to update any of these forward looking statements to reflect events or circumstances that occur.
Her after today second we had a few special items in our first quarter results, which we excluded from our trends for non-GAAP purposes, 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 them.
More information and our cautionary statement, which cover these topics in more detail.
A replay of the conference call will be available on the 18th forty-seven get occur investment relation website. This week at this time I'll turn the call over to Albert <unk> for opening comments. Please go ahead Mr. Flaherty.
Good morning, and thank you for joining today's call I am excited to discuss our financial results for the first quarter. In addition to providing updates on key initiatives that we believe will drive long term growth and value creation.
I will begin by touching on our financials for the quarter, which Maria will discuss in further detail shortly.
Despite widespread macroeconomics.
Challenges I am proud of the results our team has delivered at the start of the year.
We achieved sales of $152 $8 million, representing a more than 23% increase over combined pro forma sales for Q1 2021.
Gross margin of 23, 5%.
And net income of $5 $5 million and adjusted EBITDA of $13 $5 million in the first quarter of 2022, we also continued.
Executing on key initiatives to strengthen our underlying business and its capital structure.
The macro macroeconomics environment does not change the fact that we have tremendous opportunity.
In the home appliance market.
To lean into expertise technology capabilities and scale to seize this opportunity here are a few key updates.
First I would like to provide an update on our rebranding process.
I am excited to share that we have selected a human name logo and brand ethos.
We plan to announce in the coming weeks.
On our last call in March last year, with a very much a year of transition and transformation for our business.
This rebrand marks an important milestone in our journey.
And I guess you get occur in appliances connection under one single unified name and brand.
The name and he says we selected reflect our vision to be more than just a retailer but to become a home in appliance platform that empowers customers throughout the entire purchasing journey.
From inspiration to installation.
It is important to note that continuity remains a top priority. During this rebrand as we are keenly aware of the name recognition, we carry with appliances connection in particular.
This is why our marketing and branding team will be working diligently over the next several months to build brand equity and ensure a smooth rollout of our new brand.
Second with respect to our B to B solution offering as we've previously stated we had approximately $20 million of new projects in the pipeline at the end of Q1.
And we are already seeing some exciting projects in the pipeline for Q2, such as a new 1.2 million dollar project.
For 859 unit residential building remodel.
That we have been recently awarded.
We are pleased with the early progress we had made.
And we are working to build on the pipeline throughout the remainder of the year.
With a similar pace, we have seen in Q1 as previously noted.
These are longer term projects that may take six to 18 months to come to fruition.
This said we expect this pipeline.
Will materialize into significant b to B revenue growth in 2023 third we continue.
To be optimistic about bringing new warehouses online and the right location at the right time, where pricing and supply chain becomes more normalized.
Tight supply is the fact that we must consider as we want to ensure that any new warehouses that we bring online could be stocked with the proper inventory at the right cost.
We remain focused on identifying opportunities to expand our fulfillment network, including throughout affordable and targeted M&A before handing the call over to Maria I would like to dress, our recently announced $140 million credit agreement with Bank of America. We appreciate the overwhelming positive feedback.
I have received from shareholders and.
And we are glad that you share the excitement for what this strategic capital means for our business. We view. This credit agreement is a testament to the strength of our business and its long term trajectory.
We secured this affordable non dilutive capital to support our key strategic and corporate initiatives, including building out our b to B model.
Dziedzic partnership expanding our fulfillment capabilities and enhancing our technology stack.
Additionally.
We are well positioned to continue optimizing our capital structure, including by executing on our previously announced share repurchase program and any programs authorized in the future.
I'll now conclude my initial remarks and turn it over to Maria Johnson to provide an overview of financial performance.
Thanks Albert.
Morning, everybody.
Net product sales for the quarter $152 8 million compared to $142 7 million south for the last quarter and $23 7 million pets for myself for the first quarter 'twenty 'twenty a lot.
Gross profit for the quarter was $35 9 million and while our gross margin has increased 60 basis points from the last quarter from 22, 9% to 23, 5%.
Increased freight costs.
In part to higher energy costs continuous, causing some margin compression.
They skew one shipping cost approximately 40 basis points higher than we saw in 'twenty to 'twenty a lot on a pro forma basis.
Operating expenses for the quarter were approximately 25 eight.
<unk> is the largest expense items being personnel costs.
7 million, if I can call it investment in top talent.
2 million severance costs.
Bank and credit card fees of $6 2 million.
General and administrative expenses of $5 6 million, reflecting a more normalized level and almost 21% reduction versus Q4, 'twenty, one which was impacted by unpaid historical invoices and advertising expense of $4 3 million.
Net income for the quarter was $5 9 million or six cents per diluted common share compared to a loss of 31 5 million or 57 cents per diluted common share for the first quarter 'twenty to 'twenty one.
Net income was up 56% versus last quarter.
Adjusted EBITDA for the quarter was 16.5 to me that there was.
The margin up 9%.
Compared to $11 3 million they bet, though was that 8% margin last quarter.
Yeah.
It's a band of the first quarter. The company had working capital of $24 9 million and incurred negative cash flow from operations of city point 7 million, which reflects $8 2 million of additional investment in inventory this quarter, that's a continual facing supply chain challenges.
Additionally, the company had cash and cash equivalents of $25 8 million at the end of the quarter roughly flat with the prior quarter.
With respect to our outlook, we are reaffirming our previously articulated full year guidance provided on our fourth quarter earnings call.
We forecast high teens to low 20 sales calls, but they are compared to 'twenty to 'twenty, one pro forma sales and gross margins and adjusted EBITDA margins relatively flat the wawa 'twenty to 'twenty, one full year pro forma results, which were 23, 3% and 9%.
While we continue to face uncertainty caused by sustained supply chain stops them.
Second inflation and geopolitical uncertainty, we hope to refine our outlook over the course of the year macroeconomic headwinds.
Now I will hand, the presentation back to Outback for closing comments I'll bet.
Thank you Maria.
As you can see our sales have continued to build steadily on a year over year basis and sequentially.
Margin continues to be impacted by supply chain challenges and other transitory factors. However, as we make progress on our fulfillment network expansion and the supply chain eases, we expect the benefits from lower shipping costs, which will help stabilize long term margin.
Additionally, we continue to build inventory to mitigate uncertainties related to the global supply chain, which we expect to help strengthen our ability to fill orders over the quarters to come I.
I told you in my first call as a CEO that we are in what I view as our foundation building phase we have continued to make meaningful progress in our key priorities, which we believe will drive long term growth for our business as I highlighted in my opening remarks, I am incredibly proud of them.
Strides our talented team has made in the past quarter, particularly with our rebrand process building out our b to B solution offering.
The new partnerships and then and then to find opportunities to expand our fulfillment network I look forward to working with the rest of the refreshed management team as we strive to capture additional market share and drive towards our goal of a billion dollars in sales in the next few years.
I'll conclude there and at this time ask the operator to open the call up for any questions.
We will now begin the question and answer session to ask a question you May Press Star then one on 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 the roster.
Our first question comes from Ryan Meyers from.
Lake Street capital markets. Please go ahead.
Hey, good morning, guys. Thanks for taking my questions. The first one for me. So now that you guys have the $140 million credit agreement Shored up and you do have some growth capital what is at the top of the list as far as growth initiatives go.
Hey, good morning, Ryan how are you.
Very well. Thank you how are you.
Good good yeah. So we have a lot of.
As you can imagine.
And we restructured the debt so we have a lot of.
Pipeline and the mix from Cree, obviously top of mind is our capital structure, we're going to look at that second half to build out our inventory in certain locations, but move it around from one warehouse to another warehouse, we have our fulfillment centers that we're gonna be pressing out around the country.
Looking at building that out would be to be offering a solution.
And obviously I was the ultimate goal is to focus on the business and grow the business.
Yeah.
Great that's helpful and nice to have that done. So you know I just wondering if you could speak to what the order still rates were during the quarter and if we have seen any sort of improvement there as we have progressed through 2022.
Unfortunately, not had I mean, it's it's almost holding studies of what it was in the past I would say Q4 of 2021, we're looking anywhere from about 63 and a half.
63% fill rates, we're still struggling with the same struggles that we havent passed hopefully we're looking forward to next.
Your next Q2 Q3 did you get some type of relief in the supply chain.
Okay, and then you know when you look at your overall inventory levels right now how do you stand and do you think inventories in a good spot where were you guys do you want to get a little bit more aggressive on the distribution center is you think that you'll be able to kind of sufficiently filled days with inventory.
That's really what has been the struggle in or going out there and opening up the other fulfillment centers, obviously, you want to be able to buy the right inventory at the right cost I bring in the correct inventory correct location.
And to New Jersey, and distributing back out doesn't really help what were trying to do is making sure that our fulfillment centers, where we stand them up we have the correct product with the right cost.
In the right locations, we're not bringing in extra has just started we just got a distributed inventory rather than having everything in new Jersey tried to just shoot it out throughout the country. So that good service to our customer much faster, which results obviously in better conversion.
But a shifting cost and unless touches which hopefully reduces the amount of damages and cancellations.
Great. That's helpful. And then last one for me and you've kind of alluded to this a little bit on the call, but can you just sort of talk about you know what kind of macro environment. You guys are baking into the full year guidance and sort of the guidance that you're giving right. Now is just kind of a continuation of the current environment that we're in right now and if we see some sort of improvement whether it's inflation and supply chain are you.
Shipping and logistics, we can potentially see some sort of upside to that.
Yep, So we baked in similarly to what we've seen them in into Q4, and Q3 of 2021 and what has happened in the past I would say three months, there's a lot of things going on from the war in claims inflation.
Fuel surcharges.
So we baked it in and that's why we put in our guidance.
Slide two we show than in the past 2021 and we're forecasting high teens to low twenties and growth. So we baked that in we're baking in what we've seen in the past and where we're seeing right now and in the current environment.
And just to add to that Hi, This is Maria.
I think there is a possibility obviously that they might go back and reevaluate.
Now our guidance.
Economic conditions that go in the future about that at this point there is just too much uncertainty to make any change to the guidance.
Great. That's helpful. Thanks, guys.
Thank you.
The next question comes from Adam Wilke from Greystone Capital Management. Please go ahead.
Yeah.
Hey, good morning, Thanks for taking my questions, a really strong quarter and was happy to see the results great job.
I'm wondering a lot of my questions were asked previously so that's good I'm wondering if you can help help us break down sort of a mix between volume and pricing on the <unk>.
Sales results this quarter.
I'm sure you know.
So a mix between sales I'm, sorry, I just missed the last piece of that mix between the sales and what pricing Yeah. Let me ask let me ask another way I'm interested in hearing your commentary regarding pricing versus volume.
And then kind of how you see things what happened in the quarter and how you see things shaking out for the year.
Yeah. So if you're just referring to the pricing a lot of the price increases that we've seen they were already.
Just out of an announced early.
I'd say early quarter Q4 at the end of Q4 and the beginning of the year Q1. So we haven't seen any new price increases unless the ones that you already announced in the past there have been a new price increase they've just been the mouse and it's starting to roll into Q2, I would say April 1st of our 2022, So we haven't seen any new.
Price increases some of the manufacturers announced some increases maybe coming up in June soon.
But it's relatively similar to what the pricing is relatively similar to what we had in Q4. So we are.
Again this is like this uncertainty that's happening with fuel surcharges.
Has not been taking a major effect yet and in the marketplace from a pricing standpoint, we will just have to wait and see how the manufacturer will apply if they will apply any type of changes in the next quarter or after.
Okay, Great that's helpful. Thanks.
And then your commentary about guidance somewhat indicates that there may be room to maybe update.
That or increase full year targets.
I know you answered this a little bit.
A few minutes ago, but.
I'm interested in hearing maybe your commentary about things on the supply chain side your expectations for the rest of the year. Some people are maybe causing for things to sort of normalize or ease a little bit in the back half of 2022.
Seeing the same or is it more business as usual headwinds might not abate until 'twenty three any any color there would be helpful. Thanks.
So we're we've been treating it the same way we're seen in past 2000 22021. We're navigating this same type of issues that we had in 2021 21.
We're not seeing any major relief, there's a lot of manufacturers still happening.
Back orders some of them until 2023 or maybe mid 'twenty 'twenty three so we're still having a lot of challenges in the supply chain. Some of the product categories may see some type of relief earlier or faster than other categories, but we're focused primarily on the better and best particular product not just the.
Appliances. So we I don't think we're going to see any type of major change in the next quarter hopefully we could do something in Q3 or Q4.
Okay, Great that's helpful.
And then you answered some questions on this as well I was really happy to see the new financing press release come through especially given the lender and the terms that's great.
And I wanted to just kind of pressed a little bit on the capital allocation side.
You know if you take a look sort of across the landscape of your peers, whether that's consumer durables hard line distributors ecommerce businesses. The valuation gap is enormous between you guys and many others. Despite your really strong execution and ability to basically weather. This current environment.
As you know are supply chain issues higher input cost inflation.
People are pointing to lessening demand.
<unk> also confirmed full year guidance margin targets and really I mean don't seem to be slowing down at this point.
And so you might be one of if not the only company selling appliances, that's actually growing sales sequentially and year over year. Despite all this talk of consumer weakness recession on the horizon et cetera. So I know it's early in terms of the emerge business I know youre still telling the story and sort of making sure investors understand.
And the thesis here, but if this keeps up and you guys continue to execute you'll be trading at a valuation that implies basically that youre, a distressed business, which clearly is not true so.
I'd be interested in just kind of hearing your comments surrounding that and maybe what steps you're interested in taking.
To help sort of close that valuation gap.
Do you feel about your buyback program given that the new financing et cetera anything would be helpful. Thank you.
Sure.
Just to refer it back a little bit about the buyback program.
I'm not sure if you're aware or not but we were in the blackout period.
Probably you know as you know from the last announcement that we made until tomorrow is our first day of the open period, but I can't really speculate of other what other stuff that we have in the pipeline and what we're willing to do what we told him. He understand to your point is we are way undervalued and.
And we will do what we have to do on our additive perform we're going to go focus on the business, we want to make sure that the business is strong it's healthy.
And it's no way to any pointed in distressed.
One since I took office until now as you could see the strength of our business and the belief from Bofa.
They went out there and you gave us a $140 million allowance. It's it's a testament to what we're doing we're trying to do as a company.
And not only just that's an appliance company, we are focused on and overall growth.
Our community we are building out our structure and the foundation that we're going to we want to own the appliance business, along with creating a convenient for consumers to be able to be inspired and we're going to finish it with installation that's far better than anybody else. That's out there on the market. That's really all the social because right now we're focused on the business with focus on the company.
So because of the growth of the company and the health of the company.
Great well I can appreciate that great job and thank you for taking my questions I appreciate it.
Absolutely.
Yeah.
Again, if you have a question. Please press Star then one on.
Our next question comes from Joe Grunfeld from a private Investor. Please go ahead.
Yeah, great quarter, guys to be Frank My my questions, where we're fully answered, but I guess it was one thing I would ask is.
The credit facility with Bank of America gave you.
To the Gentleman's point from gravestone earlier was literally the entire market value of your company do you think people are now looking at that with a name like Bofa in there and it's creating somewhat of a pause are you seeing.
Any incoming calls from other boutique shops or anything that are starting to take an interest in your company because again of the disparity that was just mentioned.
Thank you Joe Yeah, absolutely to your point is bank of America gave us $140 million credit facility. It's it's almost.
At the same amount of money of our market cap.
I'll definitely weigh on the value and we are seeing a lot more boutique shops, and we are seeing a lot more analyst coverage and they're communicating with us a lot more of the story hasn't been out there hasnt been told in the past obviously what are the management has had in the past I'm not sure if they they told the story of what we're all about.
To your point is yes, we are seeing more coverage, we are hoping for more coverage and we're doing everything that we count on our end to reach out to the analyst and reach out to a proper coverage to tell the story, but the story out there.
Yeah.
Thank you much.
Thank you.
There are no more questions in the queue.
This concludes our question and answer session and the conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Okay.
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