Summer Infant (SUMR) 11 Aug 192019 Q2 Earnings call transcript

Good day, and welcome to the SUMR Brands' Fiscal 2019 Second Quarter Conference Call and Webcast. [Operator Instructions].

I would like to now turn the conference over to Mr. Chris Witty, Vice President, Investor Relations. Please go ahead.

the XXXX to Call. Quarter welcome and SUMR Second Brands' Conference Hello, me is Paul and today the Francese. company's With call Messner; the on CEO, Mark CFO, I safe a would to statement. brief now like harbor provide forward-looking call and XXXX statements This include that to outlook beyond. SUMR relate for Brands' may are various forward-looking actual uncertainties cause risks that statements. statements These and from events these and could results to subject to differ materially XXXX, risk report year the the to other factors quarterly XX, on ended XX-K refer the our annual contained Form Please company's Securities on the Form for December in Commission. XX-Q its reports in and and Exchange with filings

believes management call, investors understanding meaningful changes share. the net metrics gain income in to adjusted of operations. SUMR may During company adjusted These EBITDA, measures, adjusted help make references financial are a per earnings non-GAAP Brands' and the which

yesterday more the on financial to measures see included For in GAAP table for issued financial please company's results non-GAAP reconciliation of non-GAAP evening. information the measures, a release

that, I'd And call Mark like to the with Mark? Messner. to turn over

for potties, sales gates, and that that's everyone. our "R" financial reported good time positioners lost $XX.X the underscoring which sales start across first benefited second hard monitors I'll up development our key bathers, conference from Chris, categories, demand. overview a make quarter detail. and strollers, in quarter, place year-over-year through first joining you of seasonal X.X% product today. We to We initiatives providing growth, go trends Babies our recent including monitors. overall of will new reflecting posted appreciate positive developments, quarters up taken higher marks work call Notably, Paul an of net after the number sales and and many results Us. at in We by over Thanks, million, the the this morning, product factors

XXXX, customers, reflecting as even as of from XXXX. versus and across mid-tier three portfolio our across well I'm X.X% year-over-year nice into specialty We about at tariffs half growth partners ongoing this on now cautiously our product saw sales the and our with lower the heading impact dynamics the demand I'm as across total a second revenue optimistic was pleased Chinese goods top XX%. off turnaround, overall challenged

As we're I've said in our and our costs, results this management of challenging previous and manage new China the head-on pricing dedication continue sure away be to Been time with when customers. attacking issue focused from our quarters, negotiate and organization. resource to appropriate a reflect entire but

second development, Director the drive a strollers at most him his and BabyTrend, channel and well-known recently and Graco We business organizations efforts was traditional Brian lagged of mid-tier performance Brian new as year. has juvenile positions accounts, and where in to including space, distribution other management. expanding quarter, hired seats, the gear In we certain Hultz and improved new XX at years' our many addition, development retail experience this forward related focusing in over Sales business with during on particularly brings across specialty customers, to products. car leader look

Aside line top quarter. from this accomplishments also other we our results, several marked

paid face the further review our speak which $X.X posted streamline achievements to of line we made These quarter, inventory efforts by X.X% G&A first turns. As uncertain Paul in ongoing past with will of X versus to year-over-year, environment. numbers better performance we've a significantly the better million bottom growth. us even operations position in I'm progress pleased reduced going the capital, cash, our increased debt an moment, forward, these reduce accelerate and tariff working generated quarters, and for down

marketing and discuss some in me detail. product let Now trends

are and buybuy our another telling me are picked gaining many us bathers our up Walmart, vendor. a benefiting few, just of with We to literally solid new space, viewing placement just partners products a accepting found categories. look products will more key as come. our this and concepts, business and Target, earlier to board from be across shelf that we're how potties, this our growth more exploded, channel XX% strollers out year: of year-to-date within appreciate our We core by at the Lowe's the together, They're let innovative there emphasize our they we're innovation Amazon and First, name of our up us favorably products Baby, expanded since margins strollers introducing on has Walmart year. and

as websites. accounts, real get at our we for automatically with new social space that but more and smaller, concepts on introductions a Amazon, same been new so out is shelf we At consumers last successes, Born to which specialty In brick-and-mortar to and channel impressive. We've while domestically placement success Make pumped many presence. has makes with busy discussed with very our much line, mid-tier we the online Free with at the for emphasize many time, time, innovative the a same international own no competition continue partners, new time our channels we estate improve quarter, of products. variety the through our as know and need focus fierce connecting mistake, new increasing that

the center the outside of in our quarter, U.K. To fully China during distribution became targeting overseas operational markets that end,

We Baby become and juvenile or Children rapidly products. infant participated in respected show China, a in Expo CBME for Maternity Shanghai, also has the trade recently which

reviews ramp the Kind Germany be attending lot later our up are orders numerous. Cologne, accolades show seeing We're the Jugend We a of will likewise line year, portfolios in in September. positive and interests for during + this product to

together at items is as the statements to into have the with incremental such regard but count. much we innovation you product bring Some heard really bigger introducing the include There'll an much we've brick-and-mortar -- be got SKU year, guys be number this we'll commentary market. of online stores a it placements

so and marketing our heavily to given success sales, advertising and our we've As to invested date. do can in be e-commerce seen this to continue quarter, drive we'll

Born nicely ramping brand getting and is good reviews. Our Free

taking we the concept, to the steps we'll this and with profitability path along optimistic costs So work growth, strengthen focused right on to feel reduce continue debt going our balance load and remain accelerate towards other We're delevering about brands the to on forward. new sheet. our company. decreasing and We

as that have the at doing and resource near-term for consumer situation since year as possible. responding to adjust impact to We've to channel that customers, the channels mitigate margins a prices goods and end minimizes way In our and become hand-in-hand the on rapidly appropriate, adept China, retail in we're ongoing safeguards working to the tariffs raise products. our distribution and individual been the last with suppliers much from partners where insulates

and exempt continue We we'll to our resource tariff a business. look to as for as course ongoing efficiencies manufacturing of business part practice, regular of areas

detail. With results that, it Paul I'll turn over in Paul? review our to financial to

everyone. Mark, good Thanks, morning, and

release As related press issued reminder, and our night. XX-Q a were last

to addition to call, In filings. encourage I you listening this to our review

the by accounts $XX.X and monitors, bathers Second and compared second foreign a quarter, X and months net lower were from the The the by and the impact strollers, million, were exchange. U.S. into overseas revenues for core $XX.X potties, positioners, goods the saw year-over-year product quarters of company from impacted growth fiscal gates, specialty XXXX, X.X% X quarter. for up imported including XX% million negatively X.X% across China from sales ended across tariff -- with but on categories, XX, XXXX sales down but mid-tier March

optimistic for trends. purchasing cautiously remainder remain quarter XXXX, second of about We benefits the normally growth the although, from seasonal

China resources accounts. focus in we are dedicated to advertising investing Mark an our trends fuel to and opened recently personnel We we mature center expansion declining e-commerce As in now on reverse distribution as and the overseas specialty this channel. mentioned, growing in have international

last $XX.X from in fiscal $XX.X XXXX for and tariffs including imported XXXX, gross additional and goods sales of primarily quarter and the was Gross of due year-over-year product second versus versus as was million the XXXX margin warehousing year. impact The XX% million decline profit freight China, to in margin from on mix a percent our cost. XX.X% was

have mitigating we mentioned, Mark actively further levels expect risen reduced on are be As the to inventory them managing and are XX%, actively to and tariffs, going working the our of which impact we forward.

QX margins half XX. through given It increase adjustments the and customers. to will greater of year, channel May on the on time take flow may effect to the and However, additional took QX partners impact have first tariffs a the price that in our than for

Selling expense was $X versus quarter of XXXX million second in year. $X.X the last million

in percent selling marketing of a XXXX, reflecting in XXXX was sales, product tied year, costs and online X.X% to versus advertising primarily higher initiatives. this X.X% As launches fiscal expense net

$X.X expenses XXXX. of million And The in import quarter XX.X% costs. sales, the second XXXX million year large sales in prior General versus second was year direct a by a share percent quarter which have G&A program XX.X% no to versus the last as administrative comparison were $X.X of and period. in of

$X.XX net second tied debt of cost decline year. compared X to reflects reported year-over-year million per of second $X.X that other in me, share $X.X the The million for $X.X for in quarter write-off million fiscal $X.XX $X.X initiatives per XXXX. $X.X the unamortized versus of EBITDA due Interest the $X.X This -- with labor refinancing. net many million XXXX company's expense included previously expense versus of million or Note of year. the repayment income XXXX, XXXX company's of million quarter XXXX to lower the was was interest past or months the the fees XXXX in undertaken of XXXX. a to was a streamlining associated loss over quarter XX, June company Adjusted share expenses million excuse $X.X second last of finance and ended the June

million XXXX as in in X% compared last Adjusted fiscal permitted was percent adjusted EBITDA $X.X of a XXXX add-back net charges million year versus bank year. prior EBITDA sales with in included the X.X% period. And in $X.X

balance the to turning Now sheet.

reduced million and XX, had debt, As of $X.X million million XX, generated the June XX, fiscal bank period of $XX.X debt as of the million December cash during compared approximately Summer Debt XXXX $X.X of of ended and of from $X.X bank cash company was first as June versus XXXX. the million operations with quarter of $XX.X XXXX, of XXXX. cash Infant approximately

going continue large We spending will the not of forward. And year. balance we use this of anticipate flow delever sheet for remainder the do to outlays cash capital to

in of we as the that with our a return improving cost partnering forward. share new are of capital take going development, product hard on suppliers look We

the $XX.X capital XX, second as to million December X.Xx. $XX.X inventory with was quarter million improving end of working Inventory compared the turns XXXX, ongoing and reflecting at of management

which XX, to was the of goal. beginning forward. to fiscal our Trade sales DSO level compared Days around receivables remains is June product Our the million at reflecting at reduce year, inventory million outstanding $XX shipments. or the end was million with goal $XX current of going $XX.X higher

Accounts flow, factor remains payable XX, $XX.X improving $XX.X focus and XXXX, compared reducing capital beginning at accrued the inventory as an million was of in and in with increasing year. operating important million cash the of fiscal DSO and June management expenses will on future. turns we continue to the Working

million $X.X during cash approximately year in period. the million credit. from the in quarter, generated $X.X had line company of of operations our prior second compared million quarter the $X.X The availability end under of to the we approximately At

I'll over to turn operator to up questions. to open the that, you, With it the to call operator. Over

Instructions]. [Operator

Eric with Beder Research. first Consumer Small comes from The Cap question

has you that the passthrough How tariffs been? your in consumers how Congratulations to home and talk of has acceptance you quarter. bit, number to of your Could the the had only pricing know been ability a a -- ways. little I for

to we gotten hard they've we've And our and accepted to increases worked our customers, most options. products of and retail Yes, on needed, where certainly the pass reposition through to increases Eric. have remerchandising partners

at So we to our items customers replace points. and regularly with different participate price actively out swap

how looking noticed increase. driving, business, share that to of kind but leaving your the you're And the gains at in What monitor is Great. starting [indiscernible] I monitors? it's

Pixel in some Yes. our entries brick-and-mortar of and very line both Well, we online. have doing monitors, in well, new Baby they're and

are widely being by consumers. innovations So the there accepted new

also monitor we've that margins line the improved we're improvement about at that there. the time. So excited on made range same we've And our and

new to you and here? on And what of product rest look should of we level kind out the next terms year And kind drive thinking to guess, of of in potential are be about introductions you the categories? early when what focusing I of in next, this terms

investing we're distribution general. in in Well, Yes. heavily online

both expansion, So DXC going see walmart.com. expense our on be online sorry, you'll -- BXC is e-commerce like to marketing I'm destination, towards Amazon, and own our Target, focused our

So we're We're brand making good making our investment investment there. products. also SwaddleMe heavy in

a on lot SwaddleMe. in see you're to of going -- And so work

website a the -- lot -- growth. new beginning SwaddleMe under for products new a one is in the new to see You'll new see going area brand you're year. with And of

-- to big, QX for also a see that you'll at you're year. new like mentioned, in you'll system I fills just one but area of new see next some Another QX going pipeline Walmart, travel see was our products, stroller one in

a of e-commerce. both So items, in fill lot new brick-and-mortar new on pipeline and

Yes going your to Eric, question just tariffs. back on

important it's product approaches tariffs. to impact numerous, with taken several note approaches. the being of we've about I think of actually our under XX% think I Obviously, to the tariff, had we've take to that XX% mitigate

Some of them successful. have been very

Chinese against of taking of that implement taking going that difficult along the time products in all we're because supply taken, that when U.S. our I probably you items. that that of asking to normally but probably is well. U.S. to ones above longest is pursuing certain the pretty We've dollar advantage we all -- mentioned, countries, we're the actively implemented. we've will actually back going ultimate increase. the gone a rise impact nontariff going base for already to some those of ask once that's think takes take supportive the but we've successful, there one amount resourcing of had But I've considering very on devalued of price negotiations all the being a the the into the advantage those get them its higher is so we've because things we're and of X%. trying We're that well. prices. a been have most one there's pass actions period concessions And for And on we're Mexico, waiting to and aggressively That's And of time mitigating to and obviously, we're some pursued of at as doing looking our of overall, as We be as Vietnam. them actively recent currency cost retail

Okay. And question. last

that should So your the term? international of do the what be, guys done you size go? I do a out that where with China Because business can think U.K., longer term, looking lot you and longer is where And internationally? business know you have think out

When it you XX% at international do in to grow. about I'll our our look and that include We number, Canada expect of business, it's business.

efficiently. place in international our in China that it that help We to will service expect do a Now grow. we've warehouse put us customers more

look of and have of seen -- about benefit Canada, already. actually now, X%. we international the Canada it's that X% of warehouse World will another right We some business But -- at our being Rest with if is you the

congrats good half guys back again, luck the for of and Okay the year.

Eric. Thanks

[ph] comes Capital. The Devon Johnson with next from question Greg

to efforts quarter. Looks a lot of a like it wanted on of was Made of a key your solid progress some there. I ask really just questions. couple

structure that balance improve you our there? further what strengthen being, and in one able to ways continue to at your first you The might steps sheet were looking be

Yes.

focuses -- top Brands. at is we One the here line. are We SUMR have obviously growing two primary

equally strengthening And better already looking our obviously, inroads sheet. is our we're as inventory. in we've in important Greg, it at several The second controlling fronts. some made balance focus, good

meetings us XX receivables, weekly Our that. goal need We better our retailers. We is and have would it $XX the at with the Xx inventory we do third days say already on is I to terms our And about redo payment utilize we we or And buying. we're to now, goal. what forecast better be to to get have end our help to better. and our expect right million down to our by quarter. need turns of

the to that. needle difficult on really move it's So

us supportive supply for to as terms with and have I've places charge gotten AP, payment of with -- additional invalid and base. as us very years. focus is going aggressively some terms. cash. that number to in They've the a for been paid payment have we So we really before, backs be far They work to as an we've mentioned will drive challenge our any a agreed

hitting cost actually when the And net suppliers taking our in best we that's So all a products. company. of levers And a improving the capital some the capital right of your the have improving absorbing area. sheet at balance look #X with as obviously Obviously, new the the line. tooling focus also, hard that way new of working we're is introduce we top we're

that the So I ahead want we see well. into realize same have we to think that as will a levels. in gradual because grow move we gradual the business at the reduction year, debt say to I we our time, as

the a feel I gradual having going forward. level debt about reduction in So good

Okay.

to of it had actions if sounds It I quick excited be two. then the lot there, a a good excellent. follow-up Okay, or progress And see develops. like

talked Could fits maybe just more area lot in elaborate increasing you're and about you color some of there. your give driving that that a specifically, on You taking into the resources plans? focus growth little e-commerce actions e-commerce a how or and us on you're the

that on try longer eyeballs within can world, now, specialty our those right Yes. our big branded them us short of see to on product and well. websites items. in on our SwaddleMe time on going lot SwaddleMe those in under investing we but with on consumers as we blankets. branded consumers SwaddleMe going as website, expansion for the are feel view heavily to you're website margin brand in and and a own just e-commerce keep us to see work We're to to and some We're we period keep a longer with like with products you're SwaddleMe, of key SwaddleMe, not driving other some go drivers I'll items the a basically back general,

accentuate Born we're through with those under different brands. different you've different and demographics these we'll launches website a and with and new Free, just with connecting brands. new product And consumers that seen -- So branded

are So e-commerce, ahead our channels. from a lot to obviously, social investing e-commerce and and of websites world those we're curve that in getting by and sales brick-and-mortar of transferring the

are I'll Instructions]. [Operator for Mr. There turn any Messner no in remarks. queue closing further so the it back questions to

you talking everybody, call. Thank our look to for to next conference joining forward you, We quarter.

The conference you for now has presentation. concluded. today's Thank attending

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