Grows Q4 Revenue by 8% and Adjusted
EBITDA(1) by 20%
Raises Quarterly Dividend and Issues 2024 Outlook
MARKHAM,
ON, March 5, 2024 /CNW/ - Pet Valu
Holdings Ltd. ("Pet Valu" or the "Company") (TSX: PET), the
leading Canadian specialty retailer of pet food and pet-related
supplies, today announced its financial results for the fourth
quarter and fiscal year ended December 30, 2023.
Fourth Quarter Highlights
- System-wide sales(2) were $379.0 million, an increase of 5.1% versus the
prior year. Same-store sales growth(2) was 1.9%,
driven by same-store average spend per transaction
growth(2).
- Revenue was $286.9 million, up
7.8% versus the prior year, similar to system-wide sales
growth.
- Adjusted EBITDA was $71.3
million, up 20.2% versus the prior year, representing 24.8%
of revenue. Operating income was $48.3
million, up 13.8% versus the prior year.
- Net income was $28.8 million, up
from $25.9 million in the prior
year.
- Adjusted Net Income(1) was $39.1 million or $0.54 per diluted share, both up 25.6% versus the
prior year.
- Opened 17 new stores and ended the quarter with 783 stores
across the network.
- The Board of Directors of the Company declared a dividend of
$0.11 per common share.
Fiscal Year Highlights
- System-wide sales were $1,419.7
million, an increase of 10.0% versus the prior year.
Same-store sales growth was 5.2%, primarily driven by same-store
average spend per transaction growth.
- Revenue was $1,055.9 million, up
10.9% versus last year, similar to system-wide sales growth.
- Adjusted EBITDA was $231.0
million, up 7.5% versus the prior year, representing 21.9%
of revenue. Operating income was $160.7
million, up 0.3% versus the prior year.
- Net income was $89.5 million,
down from $100.8 million in the prior
year.
- Adjusted Net Income was $116.5
million or $1.61 per diluted
share, up 1.7% and 1.3%, respectively, versus the prior year.
2024 Outlook
- The Company expects revenue between $1.11 and $1.14
billion, supported by same-store sales growth between 2% and
5% and 40-50 new store openings, Adjusted EBITDA between
$248 and $254
million, and Adjusted Net Income per Diluted
Share(3) between $1.57 and $1.63.
"Our merchandising, marketing and in-store teams successfully
navigated shifting consumer demand, to deliver revenue and profit
growth in-line with our expectations for the fourth quarter and
full year 2023," said Richard
Maltsbarger, President and Chief Executive Officer of Pet
Valu.
"Looking into 2024, we plan to deliver another year of growth,
further strengthening our leadership in the Canadian pet industry,"
continued Mr. Maltsbarger. "We have a full agenda of exciting
initiatives such as launching Performatrin Culinary, upgrading our
digital platform and completing the majority of our supply chain
transformation, helping drive an inflection in our free cash flow
growth as we approach 2025."
Financial Results for the Fourth Quarter Fiscal 2023
All comparative figures below are for the 13-week period
ended December 30, 2023, compared to the 13-week period ended
December 31, 2022.
Revenue was $286.9 million
in Q4 2023, an increase of $20.9
million, or 7.8%, compared to $266.0
million in Q4 2022. The increase in revenue was driven by
growth in retail sales, as well as franchise and other
revenues.
Same-store sales growth was 1.9% in Q4 2023
primarily driven by a 3.0% increase in same-store average spend per
transaction and partially offset by a 1.1% decrease in same-store
transactions. This is compared to same-store sales growth of 11.8%
in Q4 2022, which primarily consisted of a 4.6% increase in
same-store transactions and a 6.9% increase in same-store average
spend per transaction.
Gross profit increased by $2.2
million, or 2.3%, to $98.5
million in Q4 2023, compared to $96.3
million in Q4 2022. Gross profit margin was 34.3% in Q4
2023, compared to 36.2% in Q4 2022. Excluding costs related to the
supply chain transformation of 2.2%, the gross profit margin was
36.5% and increased by 0.3%. The increase was primarily driven by:
(i) favourable product margins including lower inbound freight
costs; (ii) higher franchise fees; and partially offset by
(iii) vendor recoveries in Q4 2022 associated with supply chain
disruptions; (iv) increased discounts related to planned
promotional activity; and (v) the unfavourable impact of the weaker
Canadian dollar on non-domestic sourced products primarily
denominated in U.S. dollars.
Selling, general and administrative ("SG&A") expenses
were $50.2 million in Q4 2023, a
decrease of $3.7 million, or 6.8%,
compared to $53.9 million in Q4 2022.
SG&A expenses represented 17.5% and 20.3% of total revenue for
Q4 2023 and Q4 2022, respectively. The decrease of $3.7 million in SG&A expenses was primarily
due to: (i) lower technology expenditures mostly from project-based
implementation costs associated with new information technology
systems; (ii) decreased compensation costs due to lower variable
compensation expenses; and (iii) lower professional fees.
Adjusted EBITDA increased by $12.0 million, or 20.2%, to $71.3 million in Q4 2023, compared to
$59.3 million in Q4 2022. Adjusted
EBITDA excludes $0.9 million of
higher costs from business transformation, share-based
compensation, information technology transformation, other
professional fees, investment in associate, asset impairment, and
gain in foreign exchange. Adjusted EBITDA also increased due to
higher EBITDA(1) of $11.1 million in Q4 2023 compared to Q4 2022.
Adjusted EBITDA as a percentage of revenue(3) was
24.8% and 22.3% in Q4 2023 and Q4 2022, respectively.
Net interest expense was $8.5
million in Q4 2023, an increase of $2.0 million, or 31.5%, compared to $6.4 million in Q4 2022. The increase was
primarily driven by higher interest expense on lease liabilities
resulting from the new Greater Toronto
Area ("GTA") distribution centre and the new Metro Vancouver
Region ("MVR") distribution centre.
Income taxes were $11.3 million in Q4 2023 compared to
$9.8 million in Q4 2022, an
increase of $1.5 million year over
year. The increase in income taxes was primarily the result of
higher taxable earnings in Q4 2023. The effective income tax rate
was 28.2% in Q4 2023 compared to 27.4% in Q4 2022. The Q4 2023 and
Q4 2022 effective tax rate was higher than the blended statutory
rate of 26.5% primarily due to non-deductible expenses.
Net income increased by $2.9
million to $28.8 million
in Q4 2023, compared to $25.9 million in Q4 2022 mainly from the
factors described above and a net change of $0.4 million from foreign exchange.
Adjusted Net Income increased by $8.0 million to $39.1 million in Q4 2023, compared to
$31.1 million in Q4 2022.
Adjusted Net Income as a percentage of revenue(3)
was 13.6% in Q4 2023 and 11.7% in Q4 2022, respectively. The 1.9%
year over year increase results from the factors described
above.
Adjusted Net Income per Diluted Share increased by
$0.11 to $0.54 in Q4 2023, compared to $0.43 in Q4 2022. The 25.6% year over year
increase results primarily from the factors described above.
Cash at the end of the fourth quarter totaled
$28.4 million.
Free Cash Flow(1) amounted to
$34.3 million in Q4 2023
compared to $25.0 million in Q4
2022, an increase of $9.3 million primarily driven by a decrease
in cash used for investing activities primarily due to lower Net
Capital Expenditures(1) and an increase in cash
from operating activities, partially offset by an increase in
payments of principal and interest on lease liabilities due to the
timing of payments, the new GTA distribution centre and store
network expansion.
Inventory at the end of Q4 2023 was $122.1 million compared to $118.4 million at the end of Q4 2022, an
increase of $3.7 million primarily
due to growth in revenue, improved vendor fill rates and timing of
receipts resulting from global supply chain improvements.
Financial Results for Fiscal 2023
All comparative figures below are for the 52-week period
ended December 30, 2023, compared to the 52-week period ended
December 31, 2022.
Revenue was $1,055.9 million in Fiscal 2023, an increase
of $104.2 million, or 10.9%, compared
to $951.7 million in Fiscal 2022. The
increase in revenue was driven by growth in retail sales, as well
as franchise and other revenues.
Same-store sales growth was 5.2% in Fiscal 2023
primarily driven by a 4.4% increase in same-store average spend per
transaction and a 0.7% increase in same-store transactions.
Same-store sales growth in Fiscal 2023 included a negative impact
of approximately 0.3%, due to the timing of New Year's day. This is
compared to same-store sales growth of 17.1% in Fiscal 2022 which
primarily consisted of an 11.8% increase in same-store transactions
and a 4.8% increase in same-store average spend per
transaction.
Gross profit increased by $12.8 million, or 3.6%, to $365.1 million in Fiscal 2023, compared to
$352.3 million in Fiscal 2022. Gross
profit margin was 34.6% of revenue in Fiscal 2023 compared to 37.0%
in Fiscal 2022. Excluding the costs related to the supply chain
transformation of 1.1%, the gross profit margin was 35.7% and
decreased by 1.3%. The gross profit margin decrease was
primarily driven by: (i) the unfavourable impact of the
weaker Canadian dollar on non-domestic sourced products primarily
denominated in U.S. dollars; (ii) duty and vendor recoveries in
Fiscal 2022 associated with COVID relief measures and supply chain
disruptions; (iii) higher discounts related to planned promotional
activity; and (iv) higher wholesale merchandise sales due to
increased franchise penetration and improved fill rates to
franchisees partially offset by (v) favourable product margins
including lower inbound freight costs.
Selling, general and administrative expenses were
$204.4 million in Fiscal 2023, an
increase of $12.3 million, or 6.4%,
compared to $192.1 million in
Fiscal 2022. SG&A expenses represented 19.4% and 20.2% of total
revenue for Fiscal 2023 and Fiscal 2022, respectively. The increase
of $12.3 million in SG&A
expenses was mostly due to: (i) increased compensation costs as a
result of headcount and salary investments partially offset by
lower variable compensation; (ii) higher depreciation and
amortization on property, equipment, and software from store growth
and information technology investments; (iii) higher advertising
expenses; and partially offset by (iv) lower professional fees.
Adjusted EBITDA increased by $16.2 million, or 7.5%, to $231.0 million in Fiscal 2023, compared to
$214.8 million in Fiscal 2022.
Adjusted EBITDA excludes $6.9 million of higher costs from business
transformation, investment in associate, share-based compensation,
information technology transformation, other professional fees,
asset impairment, and loss on foreign exchange. Adjusted EBITDA
also increased due to higher EBITDA of $9.3 million in Fiscal 2023 compared to
Fiscal 2022. Adjusted EBITDA as a percentage of revenue was 21.9%
and 22.6% in Fiscal 2023 and Fiscal 2022, respectively.
Net interest expense was $30.6 million in Fiscal 2023, an increase of
$10.2 million, or 49.7%, compared to
$20.5 million in Fiscal 2022.
The increase was primarily driven by higher interest expense on the
2021 Term Facility (as defined in the Company's management's
discussion and analysis ("MD&A") for the fiscal year ended
December 30, 2023) resulting from higher interest rates
compared to Fiscal 2022.
Income taxes were $35.6 million in Fiscal 2023 compared to
$37.9 million in Fiscal 2022, a
decrease of $2.3 million year over
year. The decrease in income taxes was primarily the result of
lower taxable earnings in Fiscal 2023. The effective income tax
rate was 28.5% in Fiscal 2023 compared to 27.3% in Fiscal 2022. The
Fiscal 2023 effective tax rate was higher than the blended
statutory rate of 26.5% primarily because of the loss on the
derecognition of the call option and impairment related to an
investment in associate and non-deductible expenses. The Fiscal
2022 effective tax rate was higher than the blended statutory rate
of 26.5% primarily because of non-deductible expenses.
Net income decreased by $11.2
million to $89.5 million
in Fiscal 2023, compared to $100.8 million in Fiscal 2022. In addition
to the factors described above, the change in net income is also
explained by the impairment and loss on the derecognition of the
call option related to an investment in associate and a decrease in
loss on foreign exchange of $0.9
million in Fiscal 2023.
Adjusted Net Income increased by $2.0 million to $116.5 million in Fiscal 2023, compared to
$114.6 million in Fiscal 2022.
Adjusted Net Income as a percentage of revenue was 11.0% in Fiscal
2023 and 12.0% in Fiscal 2022. The 1.0% year over year decrease
results from the factors described above.
Adjusted Net Income per Diluted Share increased by
$0.02 to $1.61 in Fiscal 2023, compared to $1.59 in Fiscal 2022. The 1.3% year over year
increase results primarily from the factors described above.
Free Cash Flow amounted to $48.7 million in Fiscal 2023 compared to
$50.2 million in Fiscal 2022, a
decrease of $1.5 million
primarily driven by an increase in repayment of principal and
interest on lease liabilities due to the new GTA distribution
centre, store network expansion, and renewal of existing leases,
partially offset by an increase in cash from operating activities
and a decrease in cash used for investing activities.
|
(1) This is
a non-IFRS financial measure. Non-IFRS financial measures are not
recognized measures under IFRS and do not have standardized
meanings prescribed by IFRS. They are therefore unlikely to be
comparable to similar measures presented by other companies. Refer
to "Non-IFRS and Other Financial Measures" and "Selected
Consolidated Financial Information" below, including for a
reconciliation of the non-IFRS measures used in this release to the
most comparable IFRS measures. Also refer to the sections entitled
"How We Assess the Performance of our Business", "Non-IFRS and
Other Financial Measures" and "Selected Consolidated Financial
Information and Industry Metrics" in the MD&A for the fiscal
year ended December 30, 2023, incorporated by reference herein, for
further details concerning EBITDA, Adjusted EBITDA, Adjusted Net
Income, Free Cash Flow, and Net Capital Expenditures including
definitions and reconciliations to the relevant reported IFRS
measure.
|
|
(2) This is
a supplementary financial measure. Refer to "Non-IFRS and Other
Financial Measures" below and to the section entitled "How We
Assess the Performance of our Business" in the MD&A for the
fiscal year ended December 30, 2023 for the definitions of
supplementary financial measures.
|
|
(3) This is
a non-IFRS ratio. Non-IFRS ratios are not recognized measures under
IFRS and do not have standardized meanings prescribed by IFRS. They
are therefore unlikely to be comparable to similar measures
presented by other companies. Refer to "Non-IFRS and Other
Financial Measures" below and to the section entitled "How We
Assess the Performance of our Business" in the MD&A for the
fiscal year ended December 30, 2023 for the definitions of non-IFRS
ratios and each non-IFRS measure that is used as a component of
such non-IFRS ratios.
|
Dividends
On March 4,
2024, the Board of Directors of the Company declared a
dividend of $0.11 per common share
payable on April 15, 2024 to holders
of common shares of record as at the close of business on
March 28, 2024.
Outlook
For the full year 2024, the Company
expects:
- Revenue between $1.11 and
$1.14 billion, supported by
same-store sales growth of between 2% and 5%, 40 to 50 new store
openings and higher wholesale merchandise sales penetration with
Chico franchisees;
- Adjusted EBITDA between $248 and
$254 million, supported by operating
expense leverage, partially offset by pricing investment;
- Adjusted Net Income per Diluted Share between $1.57 and $1.63,
which incorporates approximately $20
million pre-tax, or $0.20 per
diluted share, of incremental depreciation and lease liability
interest expense associated with the new GTA and MVR distribution
centres;
- Business transformation costs of approximately $17 million pre-tax, information technology costs
of approximately $7 million pre-tax,
and share-based compensation of approximately $8 million pre-tax, all of which are excluded
from Adjusted EBITDA and Adjusted Net Income per Diluted Share;
and
- Net Capital Expenditures of approximately $55 million, roughly half of which is
attributable to investments in the Company's supply chain
transformation.
Conference Call Details
A conference call to discuss the Company's fourth quarter
results is scheduled for March 5,
2024, at 8:30 a.m. ET. To
access Pet Valu's conference call, please dial 1-833-950-0062 (ID:
762645). A live webcast of the call will also be available through
the Events & Presentations section of the Company's website at
https://investors.petvalu.com/.
For those unable to participate, a playback will be available
shortly after the conclusion of the call by dialing 1-866-813-9403
(ID: 319248) and will be accessible until March 12, 2024. The webcast will also be archived
and available through the Events & Presentations section of the
Company's website at https://investors.petvalu.com/.
About Pet Valu
Pet Valu is Canada's leading
retailer of pet food and pet-related supplies with over 700
corporate-owned or franchised locations across the country. For
more than 40 years, Pet Valu has earned the trust and loyalty of
pet parents by offering knowledgeable customer service, a premium
product offering and engaging in-store services. Pet Valu's
neighbourhood stores offer more than 7,000 competitively-priced
products, including a broad assortment of premium, super premium,
holistic and award-winning proprietary brands. To learn more,
please visit: www.petvalu.com.
Non-IFRS and Other Financial Measures
This press release makes reference to certain non-IFRS measures
and non-IFRS ratios. These measures and ratios are not recognized
measures under IFRS and do not have a standardized meaning
prescribed by IFRS. They are therefore unlikely to be comparable to
similar measures presented by other companies. Rather, these
measures are provided as additional information to complement IFRS
measures by providing further understanding of the Company's
results of operations from management's perspective. Accordingly,
they should not be considered in isolation nor as a substitute for
analysis of the Company's financial information reported under
IFRS. Pet Valu uses non-IFRS measures, including "EBITDA",
"Adjusted EBITDA", "Adjusted Net Income", "Free Cash Flow" and "Net
Capital Expenditures", and non-IFRS ratios, including "Adjusted
EBITDA as a percentage of revenue", "Adjusted Net Income as a
percentage of revenue", and "Adjusted Net Income per Diluted
Share". This press release also makes reference to certain
supplementary financial measures that are commonly used in the
retail industry, including "System-wide sales", "Same-store sales",
"Same-store sales growth", and "Same-store average spend per
transaction growth". These non-IFRS measures, non-IFRS ratios and
supplementary financial measures are used to provide investors with
supplemental measures of Pet Valu's operating performance and thus
highlight trends in its core business that may not otherwise be
apparent when relying solely on IFRS financial measures. The
Company also believes that securities analysts, investors and other
interested parties frequently use non-IFRS measures, non-IFRS
ratios and these supplementary financial measures in the evaluation
of issuers. Management uses non-IFRS measures, non-IFRS ratios and
supplementary financial measures in order to facilitate operating
performance comparisons from period to period, to prepare annual
operating budgets and to determine components of management
compensation. Refer to the MD&A for the fiscal year ended
December 30, 2023 for further information on non-IFRS
measures, non-IFRS ratios (including each non-IFRS measure that is
used as a component of such non-IFRS ratios) and supplementary
measures, including for their definition and, for non-IFRS
measures, a reconciliation to the most comparable IFRS measure.
Forward-Looking Information
Some of the information contained in this press release is
forward-looking information. Forward-looking information is
provided as at the date of this press release and is based on
management's opinions, estimates and assumptions in light of its
experience and perception of historical trends, current trends,
current conditions and expected future developments, as well as
other factors that management believes appropriate and reasonable
in the circumstances. Such forward-looking information is intended
to provide information about management's current expectations and
plans, and may not be appropriate for other purposes. Pet Valu does
not undertake to update any such forward-looking information
whether as a result of new information, future events or otherwise,
except as required under applicable Canadian securities laws.
Actual results and the timing of events may differ materially from
those anticipated in the forward-looking information as a result of
various factors. Particularly, information regarding our
expectations of future results, targets, performance achievements,
prospects or opportunities, including the information under the
headings "2024 Outlook" and "Outlook" in this press release, is
"future-oriented financial information" or a "financial outlook"
within the meaning of applicable securities legislation, which is
based on the factors and assumptions, and subject to the risks, as
set out herein and in the Company's annual information form dated
March 4, 2024 ("AIF"). In some
cases, forward-looking information can be identified by the use of
forward-looking terminology such as "plans", "targets", "expects"
or "does not expect", "is expected", "an opportunity exists",
"budget", "scheduled", "estimates", "outlook", "forecasts",
"projection", "prospects", "strategy", "intends", "anticipates",
"does not anticipate", "believes", "continue", or variations of
such words and phrases or statements that certain actions, events
or results "may", "could", "would", "should", "might", "will",
"will be taken", "occur" or "be achieved". In addition, any
statements that refer to expectations, intentions, projections or
other characterizations of future events or circumstances contain
forward-looking information.
Many factors could cause our actual results, level of activity,
performance or achievements, future events or developments, or
outlook to differ materially from those expressed or implied by the
forward-looking information, including, without limitation, the
factors discussed in the "Risk Factors" section of the AIF. A copy
of the AIF and the Company's other publicly filed documents can be
accessed under the Company's profile on SEDAR+ at
www.sedarplus.ca.
The Company cautions that the list of risk factors and
uncertainties described in the AIF is not exhaustive and other
factors could also adversely affect its results. Readers are urged
to consider the risks, uncertainties and assumptions carefully in
evaluating forward-looking information and are cautioned not to
place undue reliance on such information.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
Consolidated Statements of Income and Comprehensive
Income
(Unaudited, expressed in thousands of Canadian
dollars, except per share amounts)
|
Quarters
Ended
|
Fiscal Years
Ended
|
|
December 30,
2023
|
December 31,
2022
|
December 30,
2023
|
December 31,
2022
|
|
13
weeks
|
13
weeks
|
52
weeks
|
52
weeks
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
Retail
sales
|
$
110,089
|
$
109,289
|
$
421,828
|
$
402,586
|
|
Franchise and other
revenues
|
176,819
|
156,755
|
634,039
|
549,111
|
|
Total
revenue
|
286,908
|
266,044
|
1,055,867
|
951,697
|
|
|
|
|
|
|
Cost of
sales
|
188,407
|
169,740
|
690,730
|
599,400
|
|
Gross
profit
|
98,501
|
96,304
|
365,137
|
352,297
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
50,236
|
53,893
|
204,411
|
192,105
|
|
Total operating
income
|
48,265
|
42,411
|
160,726
|
160,192
|
|
|
|
|
|
|
Interest expenses,
net
|
8,456
|
6,429
|
30,646
|
20,478
|
|
(Gain) Loss on foreign
exchange
|
(256)
|
180
|
188
|
1,111
|
|
Other loss
(income)
|
—
|
139
|
4,718
|
(68)
|
|
Income before income
taxes
|
40,065
|
35,663
|
125,174
|
138,671
|
|
|
|
|
|
|
Income tax
expense
|
11,300
|
9,782
|
35,626
|
37,905
|
|
Net
income
|
28,765
|
25,881
|
89,548
|
100,766
|
|
|
|
|
|
|
Other comprehensive
income, net of tax:
|
|
|
|
|
|
Currency translation
adjustments that
may be reclassified to
net income, net of tax
|
—
|
(5)
|
18
|
20
|
|
Comprehensive income
for the period
attributable to the
shareholders of the
Company
|
$
28,765
|
$
25,876
|
$
89,566
|
$
100,786
|
|
|
|
|
|
|
Basic net income per
share attributable to the
common
shareholders
|
$
0.40
|
$
0.37
|
$
1.26
|
$
1.43
|
|
Diluted net income
per share attributable to the
common
shareholders
|
$
0.40
|
$
0.36
|
$
1.24
|
$
1.40
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Income to EBITDA and Adjusted
EBITDA
(Unaudited, in thousands of Canadian dollars
unless otherwise noted)
|
Quarters
Ended
|
Fiscal Years
Ended
|
|
December 30,
2023
|
December 31,
2022
|
December 30,
2023
|
December 31,
2022
|
|
13
weeks
|
13
weeks
|
52
weeks
|
52
weeks
|
|
Reconciliation of
net income to Adjusted EBITDA:
|
|
|
|
|
|
Net income
|
$
28,765
|
$
25,881
|
$
89,548
|
$
100,766
|
|
Depreciation and
amortization
|
14,999
|
10,332
|
50,718
|
38,073
|
|
Interest expenses,
net
|
8,456
|
6,429
|
30,646
|
20,478
|
|
Income tax
expense
|
11,300
|
9,782
|
35,626
|
37,905
|
|
EBITDA
|
63,520
|
52,424
|
206,538
|
197,222
|
|
Adjustments to
EBITDA:
|
|
|
|
|
|
Information technology
transformation costs(1)
|
864
|
1,984
|
3,309
|
5,313
|
|
Business transformation
costs(2)
|
4,037
|
1,482
|
9,689
|
2,697
|
|
Other professional
fees(3)
|
225
|
714
|
741
|
1,873
|
|
Share-based
compensation(4)
|
2,866
|
1,930
|
5,855
|
6,248
|
|
Asset
impairments(5)
|
—
|
448
|
—
|
448
|
|
(Gain) loss on foreign
exchange(6)
|
(256)
|
180
|
188
|
1,111
|
|
Investment in
associate(7)
|
—
|
139
|
4,718
|
(68)
|
|
Adjusted
EBITDA
|
$
71,256
|
$
59,301
|
$
231,038
|
$
214,844
|
|
Adjusted EBITDA as a
percentage of revenue
|
24.8 %
|
22.3 %
|
21.9 %
|
22.6 %
|
|
Notes:
|
|
(1)
|
Represents discrete,
project-based implementation costs associated with new information
technology systems and discrete Software-as-a-Service ("SaaS")
arrangements for transformational initiatives supporting
merchandise planning, inventory and order management, e-commerce
and omni-channel capabilities, customer relationship management and
other key processes.
|
|
(2)
|
Represents expenses
associated with supply chain transformation initiatives such as
duplicative warehousing and distribution costs, implementation
costs associated with new information technology systems and other
transition costs incurred during the transition to a new
distribution centre. The expenses included in cost of sales in Q4
2023 and Fiscal 2023 were $2.4 million and $5.0 million,
respectively (Q4 2022 and Fiscal 2022 – $nil). The expenses
included in selling, general, and administrative expenses were $0.8
million and $3.9 million in Q4 2023 and Fiscal 2023, respectively
(Q4 2022 and Fiscal 2022 – $1.5 million and $2.7 million,
respectively). Additionally, business transformation costs include
$0.8M of severance related expenses associated with restructuring
activities in certain business support functions in Q4 2023 and
Fiscal 2023 (Q4 2022 and Fiscal 2022 – $nil).
|
|
(3)
|
Professional fees
primarily incurred with respect to: (i) the Canada Revenue Agency's
("CRA") examination of the Company's Canadian tax filings for the
2016 fiscal year and in Fiscal 2023 for the 2018 fiscal year; (ii)
acquisition and integration costs incurred in relation to Chico in
Fiscal 2022; and (iii) professional fees incurred with respect to
the secondary offering of the Company's common shares
completed on November 17, 2022 ("the "2022 Secondary Offering") and
June 1, 2023 (the "2023 Secondary Offering").
|
|
(4)
|
Represents share-based
compensation in respect of our amended and restated share option
plan, long-term incentive plan, and deferred share unit
plan.
|
|
(5)
|
Non-cash impairment
charge taken against certain right-of-use assets for closed or
relocated corporate-owned stores.
|
|
(6)
|
Represents foreign
exchange gains and losses.
|
|
(7)
|
Represents the
Company's share of loss from associate of $nil and $3.4 million for
Q4 2023 and Fiscal 2023, respectively (Q4 2022 and Fiscal 2022 –
$0.2 million and $0.5 million, respectively) and loss or
(gain) on the fair value of the related call option for Q4 2023 and
Fiscal 2023 of $nil and $1.3 million, respectively (Q4 2022 and
Fiscal 2022 – $(0.1) million and $(0.6) million,
respectively).
|
Reconciliation of Net Income to Adjusted Net
Income
(Unaudited, in thousands of Canadian dollars
unless otherwise noted)
|
Quarters
Ended
|
Fiscal Years
Ended
|
|
December 30,
2023
|
December 31,
2022
|
December 30,
2023
|
December 31,
2022
|
|
13
weeks
|
13
weeks
|
52
weeks
|
52
weeks
|
|
Reconciliation of
net income to Adjusted Net Income:
|
|
|
|
|
|
Net income
|
$
28,765
|
$
25,881
|
$
89,548
|
$
100,766
|
|
Adjustments to net
income:
|
|
|
|
|
|
Information technology
transformation costs(1)
|
864
|
1,984
|
3,309
|
5,313
|
|
Business transformation
costs(2)
|
9,558
|
1,482
|
18,790
|
2,697
|
|
Other professional
fees(3)
|
225
|
714
|
741
|
1,873
|
|
Share-based
compensation(4)
|
2,866
|
1,930
|
5,855
|
6,248
|
|
Asset
impairments(5)
|
—
|
448
|
—
|
448
|
|
(Gain) loss on foreign
exchange(6)
|
(256)
|
180
|
188
|
1,111
|
|
Investment in
associate(7)
|
—
|
139
|
4,718
|
(68)
|
|
Tax effect of
adjustments to net income
|
(2,926)
|
(1,631)
|
(6,611)
|
(3,817)
|
|
Adjusted Net
Income
|
$
39,096
|
$
31,127
|
$
116,538
|
$
114,571
|
|
Adjusted Net Income
as a percentage of revenue
|
13.6 %
|
11.7 %
|
11.0 %
|
12.0 %
|
|
Adjusted Net Income
per Diluted Share
|
$
0.54
|
$
0.43
|
$
1.61
|
$
1.59
|
|
Notes:
|
|
(1)
|
Represents discrete,
project-based implementation costs associated with new information
technology systems and discrete SaaS arrangements for
transformational initiatives supporting merchandise planning,
inventory and order management, e-commerce and omni-channel
capabilities, customer relationship management and other key
processes.
|
|
(2)
|
Represents expenses
associated with supply chain transformation initiatives such as
duplicative warehousing and distribution costs, implementation
costs associated with new information technology systems, and other
transition costs incurred during the transition to a new
distribution centre. This also includes duplicative depreciation
expense on property and equipment and right-of-use assets, and
interest expense on lease liabilities. The expenses included in
cost of sales in Q4 2023 and Fiscal 2023 were $6.3 million and
$11.4 million, respectively (Q4 2022 and Fiscal 2022 – $nil). The
expenses included in selling, general, and administrative expenses
were $0.8 million and $3.9 million in Q4 2023 and Fiscal 2023,
respectively (Q4 2022 and Fiscal 2022 – $1.5 million and $2.7
million, respectively). The interest expense on the lease liability
in Q4 2023 and Fiscal 2023 were $1.7 million and $2.7 million,
respectively (Q4 2022 and Fiscal 2022 – $nil). Additionally,
business transformation costs include $0.8M of severance related
expenses associated with restructuring activities in certain
business support functions in Q4 2023 and Fiscal 2023,
respectively (Q4 2022 and Fiscal 2022 – $nil).
|
|
(3)
|
Professional fees
primarily incurred with respect to: (i) the CRA's examination of
the Company's Canadian tax filings for the 2016 fiscal year and in
Fiscal 2023 for the 2018 fiscal year; (ii) acquisition and
integration costs incurred in relation to Chico in Fiscal 2022; and
(iii) professional fees incurred with respect to the 2022 Secondary
Offering and 2023 Secondary Offering.
|
|
(4)
|
Represents share-based
compensation in respect of our amended and restated share option
plan, long-term incentive plan, and deferred share unit
plan.
|
|
(5)
|
Non-cash impairment
charge taken against certain right-of-use assets for closed or
relocated corporate-owned stores.
|
|
(6)
|
Represents foreign
exchange gains and losses.
|
|
(7)
|
Represents the
Company's share of loss from associate of $nil and $3.4 million for
Q4 2023 and Fiscal 2023, respectively (Q4 2022 and Fiscal 2022 –
$0.2 million and $0.5 million, respectively) and loss or
(gain) on the fair value of the related call option for Q4 2023 and
Fiscal 2023 of $nil and $1.3 million, respectively (Q4 2022 and
Fiscal 2022 – $(0.1) million and $(0.6) million,
respectively).
|
Consolidated Statements of Cash
Flows
(Unaudited, in thousands of Canadian dollars)
|
Quarters Ended
|
Fiscal Years
Ended
|
|
December 30,
2023
|
December 31,
2022
|
December 30,
2023
|
December 31,
2022
|
|
13
weeks
|
13
weeks
|
52
weeks
|
52
weeks
|
|
Cash provided by
(used in):
|
|
|
|
|
|
Operating
activities:
|
|
|
|
|
|
Net income for the
period
|
$
28,765
|
$
25,881
|
$
89,548
|
$
100,766
|
|
Adjustments for items
not affecting cash:
|
|
|
|
|
|
Depreciation and
amortization
|
14,999
|
10,332
|
50,718
|
38,073
|
|
Impairment of
right-of-use assets
|
—
|
448
|
—
|
448
|
|
Deferred franchise
fees
|
196
|
354
|
333
|
420
|
|
Gain on disposal of
property and equipment
|
(1,837)
|
(1,242)
|
(3,158)
|
(1,561)
|
|
Loss on sale of
right-of-use assets
|
417
|
333
|
1,106
|
793
|
|
(Gain) loss on foreign
exchange
|
(256)
|
180
|
188
|
1,111
|
|
(Gain) loss on
financial instruments
|
—
|
(52)
|
1,302
|
(551)
|
|
Share-based
compensation expense
|
2,866
|
1,930
|
5,855
|
6,248
|
|
Share of loss from
associate
|
—
|
191
|
3,416
|
483
|
|
Interest expenses,
net
|
8,456
|
6,429
|
30,646
|
20,478
|
|
Income tax
expense
|
11,300
|
9,782
|
35,626
|
37,905
|
|
Income taxes
paid
|
(13,321)
|
(5,550)
|
(56,451)
|
(36,673)
|
|
Security deposits
paid
|
—
|
—
|
—
|
(5,073)
|
|
Changes in non-cash
operating working capital:
|
|
|
|
|
|
Accounts
receivable
|
(3,209)
|
(1,228)
|
(4,949)
|
(6,834)
|
|
Inventories
|
12,978
|
17,614
|
(3,563)
|
(26,133)
|
|
Prepaid
expenses
|
1,637
|
(4,979)
|
(2,952)
|
(8,194)
|
|
Accounts payable and
accrued liabilities
|
(7,777)
|
(13,483)
|
(12,321)
|
1,818
|
|
Net cash provided by
operating activities
|
55,214
|
46,940
|
135,344
|
123,524
|
|
Financing
activities:
|
|
|
|
|
|
Proceeds from exercise
of share options
|
—
|
3,368
|
4,349
|
8,062
|
|
Dividends paid on
common shares
|
(7,146)
|
(4,251)
|
(28,536)
|
(16,927)
|
|
Repayment of 2021 Term
Facility
|
(4,438)
|
(2,219)
|
(45,750)
|
(8,875)
|
|
Interest paid on
long-term debt
|
(5,862)
|
(5,987)
|
(13,526)
|
(18,626)
|
|
Repayment of principal
on lease liabilities
|
(13,876)
|
(7,371)
|
(52,944)
|
(43,212)
|
|
Interest paid on lease
liabilities
|
(5,347)
|
(3,065)
|
(16,498)
|
(11,853)
|
|
Standby letter of
credit commitment fees
|
—
|
(745)
|
(872)
|
(1,373)
|
|
Net cash used in
financing activities
|
(36,669)
|
(20,270)
|
(153,777)
|
(92,804)
|
|
Investing
activities:
|
|
|
|
|
|
Business acquisition,
net of cash acquired
|
—
|
—
|
(3,000)
|
(12,538)
|
|
Purchases of property
and equipment
|
(15,029)
|
(22,140)
|
(57,291)
|
(38,833)
|
|
Purchase of intangible
assets
|
(568)
|
(738)
|
(3,257)
|
(3,424)
|
|
Proceeds on disposal
of property and equipment
|
3,709
|
2,261
|
6,579
|
3,643
|
|
Right-of-use asset
initial direct costs
|
(1,173)
|
(939)
|
(2,627)
|
(2,157)
|
|
Tenant
allowances
|
450
|
787
|
1,635
|
1,459
|
|
Notes
receivable
|
38
|
55
|
1,088
|
950
|
|
Lease
receivables
|
8,075
|
7,033
|
30,344
|
27,050
|
|
Interest received on
lease receivables and other
|
2,822
|
2,651
|
10,887
|
8,703
|
|
Investment in
associate
|
—
|
(399)
|
—
|
(2,178)
|
|
Repurchase of
franchises
|
—
|
—
|
(512)
|
—
|
|
Net cash used in
investing activities
|
(1,676)
|
(11,429)
|
(16,154)
|
(17,325)
|
|
Effect of exchange
rate on cash
|
234
|
11
|
(3)
|
(429)
|
|
Net increase
(decrease) in cash
|
17,103
|
15,252
|
(34,590)
|
12,966
|
|
Cash, beginning of
period
|
11,341
|
47,782
|
63,034
|
50,068
|
|
Cash, end of
period
|
$
28,444
|
$
63,034
|
$
28,444
|
$
63,034
|
Free Cash Flows
(Unaudited, expressed in
thousands of Canadian dollars)
|
Quarters
Ended
|
Fiscal Years
Ended
|
|
December 30,
2023
|
December 31,
2022
|
December 30,
2023
|
December 31,
2022
|
|
13
weeks
|
13
weeks
|
52
weeks
|
52
weeks
|
|
|
|
|
|
|
Cash provided by
operating activities
|
$
55,214
|
$
46,940
|
$
135,344
|
$
123,524
|
|
Cash used in investing
activities
|
(1,676)
|
(11,429)
|
(16,154)
|
(17,325)
|
|
Repayment of principal
on lease liabilities
|
(13,876)
|
(7,371)
|
(52,944)
|
(43,212)
|
|
Interest paid on lease
liabilities
|
(5,347)
|
(3,065)
|
(16,498)
|
(11,853)
|
|
Notes
receivable
|
(38)
|
(55)
|
(1,088)
|
(950)
|
|
Free Cash
Flow
|
$
34,277
|
$
25,020
|
$
48,660
|
$
50,184
|
Consolidated Statements of Financial
Position
(Audited, expressed in thousands of Canadian
dollars)
|
As at December
30,
2023
|
As at December
31,
2022
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
Cash
|
$
28,444
|
$
63,034
|
|
Accounts and other
receivables
|
27,875
|
22,965
|
|
Inventories,
net
|
122,069
|
118,410
|
|
Income taxes
recoverable
|
6,012
|
—
|
|
Prepaid expenses and
other assets
|
19,403
|
22,262
|
|
Current portion of
lease receivables
|
34,332
|
29,827
|
|
Total current
assets
|
238,135
|
256,498
|
|
|
|
|
Non-current
assets:
|
|
|
|
Long-term lease
receivables
|
159,101
|
141,187
|
|
Right-of-use assets,
net
|
237,941
|
82,242
|
|
Property and
equipment, net
|
120,493
|
91,774
|
|
Intangible assets,
net
|
52,205
|
52,280
|
|
Goodwill
|
97,562
|
97,574
|
|
Deferred tax
assets
|
7,230
|
6,652
|
|
Investment in
associate
|
—
|
4,708
|
|
Other
assets
|
4,240
|
7,261
|
|
Total non-current
assets
|
678,772
|
483,678
|
|
|
|
|
Total
assets
|
$
916,907
|
$
740,176
|
|
|
|
|
Liabilities and
shareholders' equity
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable and
accrued liabilities
|
$
88,416
|
$
103,782
|
|
Provisions
|
669
|
—
|
|
Income taxes
payable
|
—
|
15,141
|
|
Current portion of
deferred franchise fees
|
1,344
|
1,197
|
|
Current portion of
lease liabilities
|
64,068
|
51,335
|
|
Current portion of
long-term debt
|
17,750
|
17,750
|
|
Total current
liabilities
|
172,247
|
189,205
|
|
|
|
|
Non-current
liabilities:
|
|
|
|
Long-term deferred
franchise fees
|
4,166
|
4,017
|
|
Long-term lease
liabilities
|
379,833
|
215,966
|
|
Long-term
debt
|
275,474
|
320,063
|
|
Deferred tax
liabilities
|
8,864
|
8,250
|
|
Other
liabilities
|
3,977
|
2,299
|
|
Provisions
|
2,626
|
—
|
|
Total non-current
liabilities
|
674,940
|
550,595
|
|
|
|
|
Total
liabilities
|
847,187
|
739,800
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
Common
shares
|
321,752
|
316,208
|
|
Contributed
surplus
|
6,877
|
4,107
|
|
Deficit
|
(258,768)
|
(319,780)
|
|
Currency translation
reserve
|
(141)
|
(159)
|
|
Total shareholders'
equity
|
69,720
|
376
|
|
|
|
|
Total liabilities
and shareholders' equity
|
$
916,907
|
$
740,176
|
|
|
|
SOURCE Pet Valu Canada Inc.