1-800-FLOWERS.COM, Inc. — Q3 FY2021 Form 10-Q
Reporting period: Fiscal third quarter ended March 28, 2021; comparisons are with the quarter ended March 29, 2020. Unless noted, amounts are in millions of dollars. The filing also reports the nine months ended March 28, 2021.
Business context
The company sells flowers, gifts, gourmet foods and personalized products through e-commerce, retail, wholesale and florist-network services. It acquired PersonalizationMall on August 3, 2020, for approximately $250.9 million. The acquisition contributed $40.2 million of Q3 revenue and $182.8 million for the nine-month period. The company attributed growth to e-commerce demand, everyday gifting, marketing and merchandising investments, and acquisitions.
Key financial results
| Metric | Q3 FY2021 | Q3 FY2020 | Nine months FY2021 | Nine months FY2020 |
|---|---|---|---|---|
| Revenue | $474.2 (+70.1%) | $278.8 | $1,635.3 (+52.6%) | $1,071.7 |
| Gross profit / margin | $184.7 / 38.9% | $107.5 / 38.5% | $698.4 / 42.7% | $452.8 / 42.2% |
| Operating income (loss) | $(0.3) | $(10.9) | $133.8 | $68.0 |
| Net income (loss) | $1.4 | $(9.7) | $105.3 | $49.2 |
| Diluted EPS | $0.02 | $(0.15) | $1.58 | $0.74 |
| Adjusted EBITDA (non-GAAP) | $15.4 | $(2.4) | $182.9 | $97.0 |
Q3 e-commerce revenue rose 83.2% to $424.8 million; orders increased 81.2% to approximately 6.3 million. Average order value rose 1.1% to $67.88. Q3 segment revenue increased 70.6% in Consumer Floral & Gifts, 27.7% in BloomNet and 82.7% in Gourmet Foods & Gift Baskets. For the nine months, wholesale and retail revenue fell, with management citing reduced big-box customer orders and the closure of Harry & David stores.
Q3 marketing and sales expense increased 62.7% to $127.9 million, while technology and development rose 20.0% to $14.3 million and general and administrative expense rose 54.3% to $30.9 million. Interest expense increased to $1.6 million from $0.1 million, mainly reflecting acquisition-related borrowing. The quarter included a $2.3 million income tax benefit; the reported effective tax rate was 255.6%, affected by the small pretax loss.
Cash flow, liquidity and debt
- For the nine months, operating cash flow was $218.2 million, versus $117.3 million a year earlier. Investing cash outflow was $279.0 million, including the $250.9 million PersonalizationMall acquisition and $26.8 million of capital expenditures. Financing provided $77.1 million. Cash increased $16.3 million to $256.8 million.
- At March 28, 2021, working capital was $144.6 million, down from $198.3 million at June 28, 2020. Current assets were $448.5 million and current liabilities $303.9 million.
- Debt totaled $187.5 million before deferred financing costs, or $183.7 million net carrying value; cash exceeded net carrying debt by approximately $73.1 million. The company had no revolver borrowings outstanding. Its amended credit facility provides a $250 million revolver, seasonally reduced to $125 million from January 1 through August 1; the company was in compliance with its covenants.
- The credit agreement is secured by substantially all company assets. Management expected cash and available funding to cover operating needs for at least 12 months, with revolver borrowing anticipated for pre-holiday manufacturing and inventory needs in fiscal Q2 2022.
Changes, outlook and risks
Revenue and earnings increased substantially year over year, driven primarily by online demand and the inclusion of PersonalizationMall. Comparable nine-month revenue growth excluding PersonalizationMall was 35.5%, according to management. Gross margin improved modestly overall, although segment-level pressures included florist fulfillment, shipping, product and labor costs. Management also cited pandemic-related safety costs, carrier capacity constraints and lower wholesale demand. The company stated that COVID-19’s future effects remain uncertain and may affect customers, suppliers, staffing, operations and financial results.
Management’s FY2021 outlook was revenue growth of approximately 40% to more than $2.0 billion, adjusted EBITDA of $208–$213 million and EPS of $1.75–$1.80. For Q4 FY2021, it forecast revenue growth of 10%–15%, adjusted EBITDA of $25–$30 million and EPS of $0.18–$0.20. Q4 EBITDA and EPS ranges were below prior-year results of $32.5 million and $0.23, respectively; management cited a difficult comparison, higher digital marketing costs and the timing of Easter-related revenue. It reported strong floral e-commerce demand through the first four weeks of Q4.
The PersonalizationMall purchase-price allocation remained preliminary and could be revised during the measurement period. Its acquisition litigation with Bed Bath & Beyond was settled and dismissed with prejudice after the transaction closed. Management said other routine claims were not expected to have a material adverse effect. The filing reported no material changes to previously disclosed risk factors. The board authorized an additional $40 million of share repurchases after quarter-end; $4.5 million remained under the prior authorization at March 28, 2021.
Investor facts to verify
- How much of current growth persists as pandemic-driven e-commerce comparisons normalize, and how results develop after the stated Q4 outlook.
- PersonalizationMall integration, profitability, acquisition-related synergies, and any final purchase-accounting changes or impairment indicators.
- Whether shipping, fulfillment, labor and marketing costs pressure margins, particularly in floral and BloomNet operations.
- Seasonal cash requirements, inventory and purchase commitments, variable-rate debt exposure, and continued compliance with credit covenants.
- The assumptions and reconciliations underlying non-GAAP adjusted EBITDA and EPS guidance, alongside GAAP results.