1-800-FLOWERS.COM, Inc. — Form 10-Q Summary
Reporting period: First quarter of fiscal 2021, three months ended September 27, 2020; comparable period ended September 29, 2019. Amounts below are in U.S. dollars. The company sells floral, personalized, gourmet food and gift products through e-commerce, retail and wholesale channels, and operates BloomNet florist services.
Key financial results
| Metric | Q1 FY2021 | Q1 FY2020 | Change |
|---|---|---|---|
| Revenue | $283.8 million | $187.3 million | +51.5% |
| Gross profit / margin | $115.5 million / 40.7% | $76.1 million / 40.7% | Margin unchanged |
| Operating loss | $(13.5) million | $(20.7) million | Loss narrowed |
| Net loss / diluted loss per share | $(9.8) million / $(0.15) | $(15.3) million / $(0.24) | Loss narrowed |
| Adjusted EBITDA (non-GAAP) | $3.2 million | $(11.3) million | Improved |
| Cash used in operating activities | $(90.7) million | $(112.8) million | Use decreased |
E-commerce revenue rose 85.1% to $238.9 million and represented most sales growth. The company fulfilled approximately 3.0 million e-commerce orders, up 67.0%, while average order value increased 1.4% to $72.19. Reported revenue includes $20.4 million from PersonalizationMall after its acquisition. Management also reported 40.6% revenue growth on a pro forma basis excluding the acquisition. Segment revenue increased 78.0% in Consumer Floral & Gifts, 28.7% in BloomNet and 26.3% in Gourmet Foods & Gift Baskets.
Financial position and liquidity
Cash and cash equivalents were $11.0 million at quarter-end, down from $240.5 million at June 28, 2020. Working capital was $41.5 million, compared with $198.3 million. Cash used in investing activities was $258.2 million, principally the $250.9 million PersonalizationMall acquisition; capital expenditures were $7.0 million. Financing activities provided $119.4 million, including borrowings and repayments. Seasonal inventory purchases and other working-capital changes also contributed to operating cash use.
Total debt, net of deferred financing costs, was $213.0 million, versus $92.6 million at June 28. This comprised $25.0 million drawn on the revolver and $192.5 million in term loans before financing costs. The amended credit facility increased revolver commitments to $250 million and added a $100 million term loan. The company said it was in compliance with debt covenants at September 27 and expected available funding and operating cash flows to meet anticipated needs for at least 12 months. It also noted that seasonal working-capital borrowings typically peak in November.
Material changes, outlook and risks
- PersonalizationMall acquisition: Closed August 3 for approximately $250.9 million after working-capital and related adjustments. The preliminary allocation included $133.3 million of goodwill and $76.0 million of identifiable intangibles; the allocation remained subject to revision. The acquired business reported approximately $171.2 million in fiscal 2020 revenue.
- Profitability and costs: Gross margin held at 40.7%. Marketing and sales expense increased 41.2%, but declined to 28.3% of revenue from 30.4%. General and administrative expense rose 31.1%, including $4.9 million of PersonalizationMall litigation and transaction costs. Adjusted EBITDA and adjusted net loss are non-GAAP measures; adjusted net loss was $6.5 million, or $(0.10) per share.
- COVID-19: Management attributed elevated everyday gifting and e-commerce demand in part to the pandemic. It cited reduced wholesale orders, closed Harry & David stores, added workplace safety and operating costs, and expected third-party shipping capacity constraints and delivery cost increases. The company permanently closed 38 of 39 Harry & David stores in fiscal 2020.
- Guidance: The company did not provide full-year fiscal 2021 guidance because of economic uncertainty. For fiscal Q2, it expected consolidated revenue growth of 22%–26%, e-commerce growth above 40%, and adjusted EBITDA and EPS growth of 18%–23% versus the prior-year quarter. These are forward-looking expectations, not reported results.
- Seasonality and contingencies: The holiday quarter has historically generated nearly half of annual revenue and all earnings, though management said growth in everyday gifting may reduce seasonality. Bed Bath & Beyond’s lawsuit concerning the acquisition was dismissed with prejudice after settlement and closing; management said other ordinary-course claims were not expected to have a material adverse effect.
Investor verification priorities
- Track whether Q2 guidance was achieved and whether demand trends persist beyond pandemic-related shifts, especially after the holiday season.
- Assess cash generation, seasonal inventory needs, revolver usage and debt repayment capacity against the $41.5 million working-capital position and increased debt.
- Verify PersonalizationMall’s integration, contribution to revenue and margins, and any material revisions to its preliminary purchase-price allocation.
- Monitor wholesale demand, carrier capacity and shipping, labor and pandemic-related costs, as these may pressure margins despite strong e-commerce sales.
- Distinguish GAAP losses from management’s adjusted EBITDA and adjusted net loss, including the effect of acquisition-related costs and other exclusions.