Snap One (SNPO) 23 Mar 222021 Q4 Earnings call transcript

Good afternoon, and welcome to Snap One Holdings Corp.'s Fiscal Fourth Quarter and Full Year 2021 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Snap One Senior Vice President of Finance, Eric Steele. Sir, please proceed. Eric Steele Thank you, operator. Good afternoon, and welcome to Snap One's Fiscal Fourth Quarter and Full Year 2021 Earnings Conference Call.

call recorded. this reminder, a is being As

Joining our CFO. CEO; from Snap John Heyman, One are and us today Mike Carlet, our

undue we performance, limited statements, financial do like should prepared would placed response or to reliance additional begin, future everyone including, in and of Before our but not upon expectations, questions, that events not forward-looking to statements statements remarks statements be management guarantee performance. and remind forward-looking therefore, These your future may to, make not contain them. we future

are non-GAAP expectations information expectations the press Although date we section changes involve and SEC. referenced broadcast, GAAP accurate in reasonable, believe Risk of this call. could based Form in obligation directly no and of time-sensitive most call with to filed risks after inherent current These measure. call of occur any as only these Actual including Factors reflect the are XXXX. our to is in of company's materially. March those we statement or comparable identified results registration This All are also differ measures financial undertake to management statements events uncertainties, this revise statements that XX, S-X the reconciled contains our that the on today's the release earnings on

being on call Finally, recording made everyone replay I remind would for webcast Relations Investor our and a is website to this conference that be available at like will investors.snapone.com.

our Eric, And will - website. John we results then for remarks be I to everyone, call highlights, going A to now the updates financial afternoon. joining John start and the year some on our accompanying discuss results, also I'll us these the Mike up thanks as addition for that, Carlet, welcome, have CFO, of found over provide that, this with and the John? I'm Heyman before posted a call Heyman. our questions. presentation to earnings Relations Investor which today to and also Thanks, XXXX and we'll to our as turn off the In the for and well a after over share outlook. CEO, turn opening webcast, supplemental review our can With recent quarter call a closing

As global brief professional One, empowers integrators here everyone reminder provide smart end for connectivity to scale. a living joy, and listening, deliver we that on at a security to consumers a platform Snap

them to living cycle. project is untapped. to the to our As of with integrators we partners and these do-it-for-me growing digital of smart power distributor a living and smart that third-party allow support believe it's We further products our a across using residential large e-commerce our commercial The successfully with are who integrators, and proprietary through work distribute to software customers platforms life and the growing integration leading serve integrators. we're and facilities. XX,XXX our and our workflow professionals entrenched network over solutions network proprietary We their that opportunity brick-and-mortar our positioned revolution portal strategically

living Snap will of professional local smart promise turn, continues end need increasing of deliver these we smart number scaled rely integrators to anticipate solutions consumers a In these to the get living. for demand to rise, platform As done. job professionals on successfully like the on an One

exploring perspective, in tremendous smart consumer us. solutions demand and enhance satisfaction. the we of new meet integrators who with education their for perspective, are and with we life in profits, installations, own are integrators Here through business business that at to workflow branch growth and through experience serve; convenience on on award-winning business reliability we're front their while supports We easier infrastructure. small for higher our make two, one, easier new profitable partners to to out service to which and enhance solutions, platform needs. tools our support a investing we're our our training platforms: Snap the new investing durable One, solutions. engage and physical platform local our to workflow their rolling We're lack best we're workflow these focusing and that meets the on X capacity flexibility the aim living us this focusing end our convenience with our integrators want offerings provide methodically to help ways expand nationwide infrastructure opportunity critical to efficiency a way do curriculum in company portal. and e-commerce also in businesses grow simultaneously to platform support, From businesses. and to value-added openings robust for to to capitalize From our increase on positioning Parasol. to We from our convenience We're product footprint investing digital to like a integrators We the

We backs. have integrators' our

our innovative needs, OvrC money. with integrators The will integrators third-party a ever this product integrated Snap relied solutions time making And the explore new that one key to investments. support that top to expanding products like Regarding saving experiences. continue integrated also monetize we're create platforms, of industry provide to years. drive see of it one-stop OS purchasing integrator platforms investing We're in and of to will installation transforming few and an success we implements software we valuable curated industry new is and in continue shop systems. our One the the on integrated Snap over also of investments develop and We're integrating no new product and ways deliver continuing seamless in products will software to We for and deliver value-added from has products to and One. efficiency software product disparate ControlX's big standpoint, that their to mind. the innovation making that our a services to coming X make amazing an capabilities easier platforms, profitability than amount be that efficiencies, leading users. From This future new with install and them of configure, together believe end to one next also convenience portfolio significant integrator industry workflow portfolio

Let XX% $X me $X year net take increase reflect in past just few minutes Snap on and over a a company, on was an the We for the a as-reported year generating an prior billion banner sales, of from XXXX became basis. year. One. billion

model basis. an delivered record business prior XX% million, from EBITDA $XXX of of attractive increase Our year the with profitability an as-reported adjusted on

of those initiatives while a challenging a range integrator on Finally, for navigating highlight customers our day. backdrop depend to supply each chain now. a we across strategic achievements of us successfully couple I'll deliver executed who

we First, our every one job, reflect product one one the platform. platform, for as company, be One company aspiration to one the Snap need integrators rebranded business partner professional to that

continue We today The (sic) the another continue future. this [ the and leading to Rewards all journey. one with experience vision launch Partner our Snap encompasses company recent proof industry which in the on Snap One all-new loyalty ] the our partner unifies Partners point to execute are program, under name Reward program we intent as One on single of our a

growth for into and markets a opportunity our July. fortify to our our listing and of Entering in key hard partners diligently achieved performance, strong integrator making this we're than reality the success grateful with efforts grow within supporting human establish provided and our strategy, to of record stakeholders successful employees, year's the possible, a to our financial business. and the in preparation against track More partners company presence the this work investors, in we team key our of worth capital worked expanded build public public have of execute our our we went milestone. community a investor invest other our IPO, Second, has further and mission. Since an the delivering to

Our also partner year, successful. the reinforcing to availability one deploy enabled strategically to possible inventory professional integrators throughout best to the our IPO be balance that the our ensure has sheet us need

sustainable operationally, in growth. terms reflects success our the synergy growth strong XXXX our drive execution In playbook we've growth our against to long-term of future, proven out that laid in

our execute key each speak and year-end network; omnichannel revenue increase our share local innovate existing with software executing integrators, physical of XXXX, in key nationwide. the domestic footprint to we in markets, branches local reminder, our new increasing branches integrator three, our and out Our software XX X of these finally, expand as with strategy, global our of briefly. growth includes integrators; our technology-enabled One, in services one, models; continued bringing X build which in products, two, new a continuing to strategy with footprint opening to wallet terms fifth, new is with rooted, I'll share wallet develop M&A. workflow pillars: and strategic about four, solutions; against existing

Our integrator network. professionals incremental expansion to we're in relationships, our it purchase We and existing Two, reach expands strengthens global our expanding intend local XXXX. continue geographic branch building our integrator adds it on occasions, home number markets. the growth XXXX, commercial year-over-year integrators tech, in network the transacting applications experienced integrator and we focused the globe. security, and residential, with commercial around across In of security

workflow acquisition Three, solutions. develop service innovation targeted our will 'XX Adding Staub January international with Snap investments driver XXXX, industry remain we integrators Electronics sharpened strategy, resourced and plan. focus In new growth upgrades and to in including both notice. past made important tech-enabled our portfolios, the new products, One our this international into in to an we and for and growth of on our the our and product third-party have beyond. significant Additionally, our continued took XXXX markets first- ecosystem software business and

Analysis were as record XX or Our Awards. CE Brand the leading product brand XXX setting XX X Pro subcategories XXXX services the products in across identified #X and recognized times a

ControlX and more alternative certified Ring; Sound continued now also Roku. as than XXXX, our development and ever, innovation to year, our in well. more we market. positioning looking Josh.ai Four, ControlX voice levels. XXXX, improve including new and Parasol, of enabled a support extended productivity many strategic new our fourth as integrator e-commerce In we develop and their control, distributor platform. strategic of third-party driver Control; product industry-leading big through first-of-its-kind sales. In robust voice third-party This our suite remote personalize new software our over to proprietary capabilities end investments our enables is integrators. added consolidated service quarter, and Over to the development vendors past and to we portal, revenue the us paying in new system. models. by Denon X% we've and which we services provider the Marantz management choice coming builds remain for Pro have of OvrC Today, partnership in private with contributing on several access that driving to subscribers are brands; for about expanded offering, This are remotely for net a to and software basis solutions intend company including In we the network, an product the thoughtfully forward further committed the investment Overall, to tech. partner a We our control on a our our releases United, XXX,XXX XSight we product existing product have our us service consumers XX/X to remote announced and recurring service

we Given a is installed homes active XXX,XXX subscription base. our approximately meaningful penetration today increase opportunity within believe ControlX to we growing, and have in

more positioning the way One revenue become and solutions living innovative offerings and smart to our lead we are with integrators models. Snap As software-centric,

to deliver backbone living, a in our From strategic The M&A. tuned applications. ahead. value consumers. in continue to heavily execute and X products, product updates Snap software that exciting we'll solutions invest fifth, the to to muscles. Networks, and acquisition solutions In commercial and digital enterprise-grade networking is announcements design, to on perspective, configuration, both flex and further smart acquired end an network support enhanced this M&A XXXX, strategic offers Stay And integrators One's networking platforms networking monitoring quarters we the residential finally, continue Access for provider for services. our continued and we of We

of product combination Canadian our distributor M&A. continued in we acquisition brings branch a X of January. to Staub's to locations, count internationally branch Staub business faster for partners support More develop choice, we've branch across integrators total We're with January. local our provide superior excited as of to targeted announced long-time together the presence openings and Electronics locations our Additionally, product This professional and Canada. expand X organic acquisition to XX local presence more bringing through recently, fulfillment

serve pursue to continue to best products, expect and to accretive solutions our that into workflow allow us acquisitions disciplined, adjacent expand enhance geographies software that We base. our integrator and markets and

Due entered beyond, will and on to to backs. services more continued guidance. XXXX ahead touch I'm guidance. provide and uncertainty, the the our outlook look confident Mike, in who durable residential will and smart supply with against detail in have to to very expect in adoption remain living we $X.XX and Demand high deliver XXXX our of and success. months to and for over adjusted of guidance continue busy, advance. the Mike rationale outlook Despite booked wind for growth XXXX out business. products to execution we will net uptake, these chain continued foundational and long-term healthy million to the growth these and billion in strong pillars 'XX sales end many the integrators for detailed trends In and remain As our to on are factors, And ability remains both high. our to strong we our up conviction at at we're EBITDA, deliver before our more turning commercial X going extremely short- growth in provide $XXX our light in our range.

move a Mike? - company, our 'XX's being outlook to of CFO, public Carlet, turn With we into the for continued to foreseeable Carlet fiscal over financial Mike A build I'll current momentum results Thanks, future. first poised the are on 'XX's that, detail. call Michael and discuss John. to year the in greater As full the we

the full fiscal which fourth to XXXX XXXX, XX, quarter year quarter week $XXX.X net for approximately period. $XXX.X year-ago million, million Turning in fourth million Net XX% increased sales. in in now quarter to a XXXX. of added financial sales the our up the from had $XX December results fiscal in comparable ended and fourth fiscal XXth We

increased XX%. Excluding net approximately week, that XXth sales

the strong increased sales and, approximately fiscal year-ago from sales the would XX% net that Again, excluding up ended period. $XXX.X by December growth and comparable during net demand had the geographies, was local XX%. spend week by transacting $X.XXX ramp across billion, net overall week, year local full and per year in a Networks and this driven increases product year-over-year with in XXXX, XXrd acquired sales we Growth year have the in markets year X year-end. to For quarter The quarter, recent end XX, driven to the million in of benefit the opened new categories, of cumulative Access prior branch the the branch year, in and of integrators count branches integrator. of XX the was fiscal opened recently local including most new since also bringing as X increased total

we X and in product Additionally, across QX. from proprietary benefited QX price portfolio enacted our increases

supply deliver took digits in a and proactive comparable sales non-GAAP that for fiscal million chain of in to measurement single or While in headwind of of measures Contribution XX% million low integrators. operating mid-single-digits up we our from the $XX.X $XXX.X headwind and XX.X% the performance, net a net represented period. year-ago sales to headwind fourth quarter increased or the XX.X% the for year, mitigate challenges margin, quarter,

in product our in skews branch this growth is is in margin our The full increased we see sales sales, more our our sales the margin or of the The in towards e-commerce increases in percentage third-party outpacing due to growth primarily $XXX.X margin sales as XX.X% net up platform. sales that the sales. year-ago net million third-party expansion to to as were part higher comparable growth. we're than net on footprint, due decreases of contribution were growth For a the XXXX, $XXX.X or in of primarily The XX% product seeing mix, million third-party which in to period. year sales net from contribution local contribution XX.X% due of product product proprietary

for relative needs products. proposition. prior broader typically As part componentry declined our a our a also of reminder, footprint of dollars. third-party shop third-party portfolio product of lower as chain strategic the capturing and product a related challenges. an supply one-stop the branch as percentage remains while sales to provide of curated to net Contribution and integrator has percentage a their due incremental proprietary and integrators costs to important sales a contribution margin expansion logistics contribution year enhancing seek our margin to increased value net relative to with margin loyalty local We industry-wide product The

leveraged enacted we of course over and partially net administrative $XX.X year-ago integrator strategic the pricing fiscal the to in million Specifically, in air rate comparable net actions sales period. These quarter fourth use to of meet or $XX.X the XX.X% categories. general product of XXXX contribution key freight by year. from margin the demand were or Selling, XX.X% across million the increased offset sales expenses of XX% pressures

warranty, the comparable to were of $XXX.X leverage increases as For cost our expenses, XX% while XXXX, the actions expenses XX, adjusting SG&A a sales taken agreement operating year. mitigate a associated realized add-backs, connection into with Networks; SG&A variable quarter shipping, in IPO, up net equity-based were sales compensation SG&A strategic to The company; compensation receivable a XXXX. for in in tax investments expense of net costs public After percentage including lieu during and The XX.X% as increased increases cost operating expense growth of return to increases our credit full card primarily fees of year-ago certain the December and finally, for from paid the year to owners in or expenses, COVID-XX acquired and volume; sales, in to Access in for in of or driven ongoing $XXX.X year the the the participation higher our recognition remaining levels initiatives; becoming XX.X% their support spending sales interest the entered and due outbound to million impacts by of the reduction the normalized processing with increased of IP modest due ended IPO. net lapping expenses million the period. we costs in to

Over of the a we unified the operating as long we and operating expect business term, continue scales expense leverage efficiencies to realize realize the platform. to

net quarter of year-ago to loss comparable million period. $X.X Our $X.X compared million a fourth the loss totaled in in the net

which the expenses, XXXX, The year million of XXXX. year increases to the For net totaled compared in to net primarily $XX.X SG&A million was or X% X.X% $XX.X full performance, measurement loss net for discussed. XXXX full due the sales loss non-GAAP of in quarter net the million a of increase EBITDA, the as $XX.X previously increased loss to net is to of Adjusted in or sales year-ago period. $XX compared operating a XX.X% in fourth million comparable

the a quarter performance, net comparable another to leverage in sales contribution income, net full growth X.X% of quarter to EBITDA net year-over-year, or fiscal in sales net or the net period. as was XXXX, from sales, the XX.X% XX% to modest in and offset margin million of of margin million adjusted measurement ended fiscal of declining XX% $XX.X expenses. increase the attributable in Adjusted EBITDA by percentage December growth, For X.X% EBITDA year of year-ago percentage net primarily for of year XXXX. of sales. sales in net the XX, increases full increased sales in million the increased a adjusted or percentage or million $X.X sales from adjusted offset sales and XX% net non-GAAP $XX.X operating the add-backs net year as on SG&A are adjusted SG&A $XXX.X of to decreases a primarily up attributable and contribution The as year by The

XXXX, use million negative period. growth net December were or prior to ended expenses. margin use to primarily period. in SG&A decrease Free sales was in the cash increase was adjusted to of to including operating increases of sales vendor the a chain working the net prepaid the net $XX our to year comparable increased increase by million cash in resulting net compared in net of net balance capital, free compared year-ago of contribution year attributable against X.X% XX, XX% quarter as and from cash $XX.X million inventory year-ago These The the in in growth, used an deposits. full equivalents this offset XXXX, or $XX.X XX, income sheet $XX.X months sales flow fourth million and fiscal cash million driven by flow, of measurement to were activities. or in the year-end. And in strategic attributable comparable the increases non-GAAP cash used increases in cash in December primarily X.X% At full and December operating uncertainty, activities of $XX.X supply of operating XXXX, $XX.X For XX protect million ended and in end was net XX, of performance, XXXX,

the maturing refinancing. secured Now and of to of we touch more $XXX agreement plan in pay-down a December, senior The facility our of strengthening million loans credit refinancing secured our sheet. favorable maturing revolving debt, I $XXX want on secured in new consisting senior $XXX X completed financing securing terms senior credit our million a note, years Of provides in and years. aggregate debt for for our X million in aggregate, in of principal balance

provide the to remainder a the of few our the minutes over for just before turn I'll take to I outlook Now call financial John, back year.

annual EBITDA business. we for As overall these believe key as Snap the net metrics the provides as indicators guidance for a reminder, well be adjusted sales of as to our One performance

to As at demand strong see solutions. for living fiscal look continue we smart XXXX, we

the branch to on the We as to growth from to XX% follows. after expect XXrd growth, $X.XX fiscal adjusted remove to believe our growth that to XX-week openings. year as-reported billion, sales compared a to $X.XX and historical of volume, includes factors an XX% come impact which XXXX are local week. will on of We organic XX% and an XX% actions sales basis net the of net contributing XX% of basis pricing adjusting fiscal the our an to billion between and XX% 'XX range increase increase prior

Electronics, On as-reported of come Access Staub as XXXX including the net the impact; basis, X% growth sales in completed the January. mentioned headwind. a the in recently M&A, year Networks' full John and impact from X% of week we Another XXrd an closed represents which will lapping

margin by to We $XXX long-term Presenting a point rate range Among XX-week pressures of headwinds. rate margin reflects factors an basis when represents fiscal year XX would from were of X% and and to million chain to EBITDA XXXX inflation basis full well to range company and adjusted XX.X% compared EBITDA adjusted X% increase an million, on on EBITDA adjusted point between basis. The 'XX of as-reported drive prior expect as representing XX% to X% $XXX the a guidance. increase rate. to potential adjusted growth others, The normalizing our for public a considered guidance a supply XX%. XXXX basis represent EBITDA developing our EBITDA both investments decline adjusted as contribution year implied of to compression expense following XXX adjusted the margin margin year-over-year driven our costs, operating

sustainable researches any us in potential around adjacent conviction the fund and for go-to-market long our to plan from investments continue We will long-term believe software near as and given and to in these research in First, international. commercial, development, reinvestment and growth outperformance such well net investments develop term, position sales markets to growth. security XXXX and we

As beyond, pace our of we to and investments XXXX we to look expect normalize. forward

scalable company. regarding actions. our headwinds, the historical as pricing company build-out cost given and supply chain public corporate our public costs we the Second, the we and inflation support third, And year a and impact of to pressure to dynamic incur to evolving expect growth full situation see of continue infrastructure of in excess the

extent our observe adjust chain margin pricing we as to use been Our rates. long-term we'll inflationary sustained supply philosophy pricing and to pressures, has costs. mitigate To those maintain to continue lever the to a

of reminder, financial any the the to a ability proprietary business be in the future. reflected confident highly and XXXX, current of foreseeable actions will a grow as as remain upside implemented increase future pricing our may take our our well we in Overall, additional to price we health guidance. we sustainably February for as As in

summary. now So to to I'd comments. Heyman additional that turn A John? Thanks, my for call Mike. over John John the back completes - like

few closing demand Integrators we're capacity. our thesis. a we Q&A. more than far their one, before existing investing see thoughts growth Just Number in hit

New us. been teams a chain channels we emerging product and believe will models through to are supply Number job are which our doing and and in managing of logistics new great launches and growing, persist XXXX. two, issues, exciting continue front have throughout

Our deliver has our keep #X partners priority and for integration to been projects moving.

our our the priorities will and supply scale quite in Q&A. more impacts but over for longer a end the XXXX. guide supply The the term, has the #X the and capacity short it of around integrator time. moderation Session solutions in and we platforms chain for in our We we'll us The long-term obfuscates joining that assure chain model. our to and finally, we're and we quarter End MSRP increases operating you Question-and-Answer partners over using for in way Snap Snap term. that will These up continue and levers. earnings for the year And full Our investments for bullish are investing priority and it performance customer, will drive better company's XXXX One our today will for financial see us Thank of price, other to conference call. One's been Q&A margin in And protect order. believe that, fourth with that growth open fiscal operating leadership

disconnect. now may You