Sales increased 4.0%, or 6.2% in constant currency1

Comparable store sales increased 5.5%

Sales yield2 increased 8.0% to $1.49

Savers Value Village, Inc. (NYSE: SVV), (the “Company”) today announced financial results for the thirteen weeks ended July 1, 2023 (the “second quarter of 2023”).

Highlights for the Second Quarter of 2023, Compared to the Second Quarter of 2022

  • Net sales increased 4.0% to $379.1 million. Constant currency net sales1 increased 6.2% to $387.4 million.
  • Comparable store sales increased 5.5%, with U.S. and Canada up 5.6% and 5.5%, respectively.
  • Sales yield2 increased 8.0% to $1.49 per pound.
  • The Company opened one new store, ending the second quarter with 318 stores, a 2.9% net increase in the number of stores year over year.
  • Net income increased 13.6% to $35.1 million, or $0.24 per diluted share, from $30.9 million, or $0.21 per diluted share. Net income margin increased 70 basis points to 9.2%.
  • Adjusted net income1 totaled $32.6 million, or $0.22 Adjusted net income per diluted share1.
  • Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”)1 increased 4.7% to $89.3 million, and Adjusted EBITDA margin1 increased 10 basis points to 23.5%. Adjusted EBITDA1 included a $2.4 million negative impact from changes in foreign currency rates.

Mark Walsh, Chief Executive Officer, commented, “We are pleased with our strong second quarter results, which exceeded our expectations both on the top and bottom lines. At a time when consumers are seeking value and thinking more about sustainability, the popularity of thrifting continues to grow. We continue to leverage our proven business model and execute against our strategic initiatives to enhance our competitive position and drive profitable growth.”

1 Adjusted net income, Adjusted net income per diluted share, Adjusted EBITDA and Adjusted EBITDA margin, as well as amounts presented on a constant currency basis, are not measures recognized under U.S. generally accepted accounting principles (“GAAP”). For additional information on our use of non-GAAP financial measures, see “Non-GAAP Financial Measures”, “Constant Currency” and the accompanying financial tables which reconcile GAAP financial measures to these non-GAAP measures below.

 

2 Sales yield is presented on a currency neutral and comparable store sales growth basis. We define sales yield as retail sales generated per pound of processed volume.

Fiscal 2023 Outlook

The Company expects the following for the fifty-two weeks ended December 30, 2023 (“fiscal 2023”):

  • The opening of approximately 12 new stores;
  • Total net sales of approximately $1.51 billion;
  • Comparable store sales growth increase of approximately 5.0%;
  • Net income of approximately $23 million;
  • Adjusted net income of approximately $98 million1;
  • Adjusted EBITDA of approximately $320 million2;
  • Capital expenditures in the range of $100 to $105 million; and
  • GAAP-based diluted weighted average common shares outstanding of approximately 160.0 million.

Assumed in the Company’s net income is stock-based compensation of approximately $69 million reflecting equity issued in connection with the Company’s IPO, of which $48 million and $21 million is expected to be recognized during the third and fourth quarters, respectively.

1 Adjusted net income is not a measure recognized under U.S. GAAP. For additional information on our use of non-GAAP financial measures, see “Non-GAAP Financial Measures” and the accompanying financial tables which reconcile GAAP financial measures to non-GAAP measures below.

 

2 We have not reconciled guidance for Adjusted EBITDA to the corresponding GAAP financial measure because we cannot determine the probable significance of the various reconciling items, as certain items are outside of our control and cannot be reasonably predicted due to the fact that these items could vary significantly period to period. Accordingly, reconciliations to the corresponding GAAP financial measure is not available without unreasonable effort.

Initial Public Offering

On July 03, 2023, the Company completed its initial public offering (“IPO”) for the sale of 18.8 million shares of its common stock at a public offering price of $18.00 per share. Net proceeds to the Company from the IPO were $305.7 million after deducting underwriting discounts and commissions of $22.8 million and unpaid offering expenses of approximately $9.0 million. The Company used the net proceeds from its IPO, together with an additional $5.9 million of cash on its balance sheet, to redeem $55.0 million aggregate principal amount of the Senior Secured Notes and repay $252.4 million aggregate principal amount of outstanding borrowings under the Term Loan Facility, as well as accrued and unpaid interest and premium under the Term Loan Facility and the Notes. These transactions resulted in a loss on extinguishment of debt of $10.6 million. Following the partial redemption of the Senior Secured Notes and partial repayment of the Term Loan Facility, the total face value of debt outstanding was $819.8 million. Following the IPO, the Company’s net leverage was 2.3x which we define as total debt less unrestricted cash, divided by Adjusted EBITDA for the trailing twelve months.

Conference Call Information

A conference call to discuss the second quarter financial results is scheduled for today, August 10, 2023, at 4:30 p.m. ET.

Investors and analysts who wish to participate in the call are invited to dial +1 206 962-3782 (international callers, please dial +1 888 259-6580) approximately 10 minutes prior to the start of the call. Please reference Conference ID 74899986 when prompted. A live webcast of the conference call will be available over the Internet, which you may access by logging on to the Investor Relations section on the Company’s website at https://ir.savers.com/events-and-presentations/default.aspx.

A recorded replay of the call will be available shortly after the conclusion of the call and remain available until August 24, 2023. To access the telephone replay, dial +1 416 764-8692 (international callers, please dial +1 877 674 7070). The access code for the replay is 899986#. A replay of the webcast will also be available within two hours of the conclusion of the call and will remain available on the website for one year.

About the Savers Value Village™ family of thrift stores

As the largest for-profit thrift operator in the United States and Canada for value priced pre-owned clothing, accessories and household goods, our mission is to champion reuse and inspire a future where secondhand is second nature. Learn more about the Savers family of thrift stores, our impact, and the #ThriftProud movement at savers.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward looking statements can be identified by words such as “could,” “may,” “might,” “will,” “likely,” “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects,” “continues,” “projects” and similar references to future periods, or by the inclusion of forecasts or projections, the outlook for the Company’s future business, prospects, financial performance, including its fiscal 2023 outlook or financial guidance, and industry outlook. Forward-looking statements are based on the Company’s current expectations and assumptions regarding its business, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. As a result, the Company’s actual results may differ materially from those contemplated by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions, including, but not limited to, legislation, national trade policy, and the following: the Company’s failure to adequately procure and manage its inventory or anticipate consumer demand; changes in consumer confidence and spending; risks associated with its status as a “brick and mortar” only retailer; risks associated with intense competition; its failure to open new profitable stores, or successfully enter new markets on a timely basis or at all; the risks associated with doing business with international manufacturers and suppliers including, but not limited to, transportation and shipping challenges, and potential increases in tariffs on imported goods; outbreak of viruses or widespread illness, including the continued impact of COVID-19 and continuing or renewed regulatory responses thereto; risks associated with heightened geopolitical instability due to the Russia/Ukraine conflict; its inability to operate its stores due to civil unrest and related protests or disturbances; its failure to properly hire and to retain key personnel and other qualified personnel; its inability to obtain favorable lease terms for its properties; the failure to timely acquire, develop and open, the loss of, or disruption or interruption in the operations of, its centralized distribution centers; fluctuations in comparable store sales and results of operations, including on a quarterly basis; risks associated with its lack of operations in the growing online retail marketplace; risks associated with litigation, the expense of defense, and the potential for adverse outcomes; its inability to successfully develop or implement its marketing, advertising and promotional efforts; the seasonal nature of its business; risks associated with the timely and effective deployment, protection, and defense of computer networks and other electronic systems, including e-mail; changes in government regulations, procedures and requirements; risks associated with natural disasters, whether or not caused by climate change; and its ability to service indebtedness and to comply with its financial covenants together with each of the other factors set forth under the heading “Risk Factors” in its filings with the United States Securities and Exchange Commission (“SEC”). Any forward-looking statement made by us in this press release speaks only as of the date on which it is made. Factors or events that could cause the Company’s actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. The Company is not under any obligation (and specifically disclaims any such obligation) to update or alter these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Non-GAAP Financial Measures

The Company reports its financial results in accordance with GAAP. Adjusted net income, Adjusted net income per diluted share, Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures. The Company has included these non-GAAP measures in this press release as these are key measures used by its management and its board of directors to evaluate its operating performance and the effectiveness of its business strategies, make budgeting decision, and evaluate compensation decisions. Adjusted net income, Adjusted net income per diluted share, Adjusted EBITDA and Adjusted EBITDA margin have limitations as analytical tools and you should not consider them in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. There are limitations to using non-GAAP financial measures, including those amounts presented in accordance with the Company’s definitions of Adjusted net income, Adjusted net income per diluted share, Adjusted EBITDA and Adjusted EBITDA margin, as they may not be comparable to similar measures disclosed by its competitors, because not all companies and analysts calculate Adjusted net income, Adjusted net income per diluted share, Adjusted EBITDA and Adjusted EBITDA margin in the same manner. Because of these limitations, you should consider Adjusted net income, Adjusted net income per diluted share, Adjusted EBITDA and Adjusted EBITDA margin alongside other financial performance measures, including, as applicable, net income and the Company’s other GAAP results. The Company presents Adjusted net income, Adjusted net income per diluted share, Adjusted EBITDA and Adjusted EBITDA margin because we consider these meaningful measures to share with investors because they best allow comparison of the performance of one period with that of another period. In addition, Adjusted net income, Adjusted net income per diluted share, Adjusted EBITDA and Adjusted EBITDA margin afford investors a view of what management considers its operating performance to be and the ability to make a more informed assessment of such operating performance as compared with that of the prior period.

Adjusted net income is defined as net income excluding the impact of loss on extinguishment of debt, non-recurring stock-based compensation expense, transaction costs, divided-related bonus, certain other expenses, and the tax effect on the above adjustments. The Company defines Adjusted net income per diluted shares as Adjusted net income divided by diluted weighted average common shares outstanding.

The Company defines Adjusted EBITDA as net income before interest expense, net, income tax expense, and depreciation and amortization, Adjusted to exclude loss on extinguishment of debt, stock-based compensation expense, non-cash occupancy-related costs, lease intangible asset expense, pre-opening expenses, store closing expenses, executive transition costs, transaction costs, dividend-related bonus, and certain other adjustments. The Company defines Adjusted EBITDA margin as Adjusted EBITDA divided by net sales.

Constant Currency

The Company reports certain operating results on a constant-currency basis in order to facilitate period-to-period comparisons of its results without regard to the impact of fluctuating foreign currency exchange rates. The term foreign currency exchange rates refer to the exchange rates used to translate the Company's operating results for all countries where the transactional currency is not the U.S. Dollar into U.S. Dollars. Because the Company is a global company, foreign currency exchange rates used for translation may have a significant effect on its reported results. In general, the Company's financial results are affected positively by a weaker U.S. Dollar and are affected negatively by a stronger U.S. Dollar. References to operating results on a constant-currency basis mean operating results without the impact of foreign currency exchange rate fluctuations.

The Company believes disclosure of constant-currency results is helpful to investors because it facilitates period-to-period comparisons of its results by increasing the transparency of the underlying performance by excluding the impact of fluctuating foreign currency exchange rates. However, constant-currency results are non-GAAP financial measures and are not meant to be considered as an alternative or substitute for comparable measures prepared in accordance with GAAP. Constant-currency results have no standardized meaning prescribed by GAAP, are not prepared under any comprehensive set of accounting rules or principles and should be read in conjunction with the Company's consolidated financial statements prepared in accordance with GAAP. Constant-currency results have limitations in their usefulness to investors and may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by other companies.

Constant currency information compares results between periods as if exchange rates had remained constant period-over-period. During the thirteen weeks ended and twenty-six weeks ended July 1, 2023, as compared to the thirteen weeks ended and twenty-six weeks ended July 2, 2022, the U.S. dollar was stronger relative to the Canadian and Australian dollars which resulted in an unfavorable foreign currency impact on our operating results. To present this information, our current operating results in currencies other than the U.S. dollar are converted into U.S. dollars using the average exchange rates from the comparative prior period rather than the actual average exchange rates in effect.

 

SAVERS VALUE VILLAGE, INC. Condensed Consolidated Balance Sheets

(All amounts in thousands, except per share amounts, unaudited)

 

 

July 1, 2023

 

December 31, 2022

Current assets:

 

 

 

Cash and cash equivalents

$

111,565

 

 

$

112,132

 

Trade receivables, net of allowance for doubtful accounts

 

12,924

 

 

 

14,092

 

Inventories

 

30,192

 

 

 

21,822

 

Prepaid expenses and other current assets

 

57,039

 

 

 

35,647

 

Derivative asset – current

 

9,629

 

 

 

8,625

 

Total current assets

 

221,349

 

 

 

192,318

 

Property and equipment, net

 

209,208

 

 

 

190,518

 

Right-of-use lease assets

 

466,746

 

 

 

437,843

 

Goodwill

 

687,440

 

 

 

681,447

 

Intangible assets, net

 

168,614

 

 

 

170,651

 

Derivative asset – non-current

 

26,023

 

 

 

31,077

 

Other assets

 

3,788

 

 

 

3,961

 

Total assets

$

1,783,168

 

 

$

1,707,815

 

Current liabilities:

 

 

 

Accounts payable and accrued liabilities

$

104,006

 

 

$

80,748

 

Accrued payroll and related taxes

 

55,619

 

 

 

62,046

 

Lease liabilities – current

 

72,234

 

 

 

79,838

 

Current portion of long-term debt and short-term borrowings

 

13,250

 

 

 

50,250

 

Total current liabilities

 

245,109

 

 

 

272,882

 

Long-term debt, net

 

1,079,701

 

 

 

783,347

 

Lease liabilities – non-current

 

388,803

 

 

 

349,194

 

Deferred tax liabilities, net

 

68,652

 

 

 

63,141

 

Other liabilities

 

13,474

 

 

 

11,916

 

Total liabilities

 

1,795,739

 

 

 

1,480,480

 

Stockholders’ (deficit) equity:

 

 

 

Preferred stock

 

 

 

 

 

Common stock

 

 

 

 

 

Additional paid-in capital

 

227,335

 

 

 

226,327

 

Accumulated deficit

 

(275,801

)

 

 

(38,443

)

Accumulated other comprehensive income

 

35,895

 

 

 

39,451

 

Total stockholders’ (deficit) equity

 

(12,571

)

 

 

227,335

 

Total liabilities and stockholders’ (deficit) equity

$

1,783,168

 

 

$

1,707,815

 

 

SAVERS VALUE VILLAGE, INC. Condensed Consolidated Statements of Income

(All amounts in thousands, except per share amounts, unaudited)

 

 

Thirteen Weeks Ended

 

Twenty-Six Weeks Ended

 

July 1, 2023

 

July 2, 2022

 

July 1, 2023

 

July 2, 2022

 

Amount

 

% of Sales

 

Amount

 

% of Sales

 

Amount

 

% of Sales

 

Amount

 

% of Sales

Net sales

$

379,102

 

 

100.0

%

 

$

364,668

 

 

100.0

%

 

$

724,786

 

 

100.0

%

 

$

692,135

 

 

100.0

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of merchandise sold, exclusive of depreciation and amortization

 

154,945

 

 

40.9

 

 

 

146,794

 

 

40.3

 

 

 

300,698

 

 

41.5

 

 

 

290,749

 

 

42.0

 

Salaries, wages and benefits

 

67,342

 

 

17.7

 

 

 

66,103

 

 

18.1

 

 

 

159,974

 

 

22.1

 

 

 

131,536

 

 

19.0

 

Selling, general and administrative

 

73,259

 

 

19.3

 

 

 

76,298

 

 

20.9

 

 

 

150,304

 

 

20.7

 

 

 

148,771

 

 

21.5

 

Depreciation and amortization

 

14,693

 

 

3.9

 

 

 

14,043

 

 

3.9

 

 

 

29,177

 

 

4.0

 

 

 

26,692

 

 

3.9

 

Total operating expenses

 

310,239

 

 

81.8

 

 

 

303,238

 

 

83.2

 

 

 

640,153

 

 

88.3

 

 

 

597,748

 

 

86.4

 

Operating income

 

68,863

 

 

18.2

 

 

 

61,430

 

 

16.8

 

 

 

84,633

 

 

11.7

 

 

 

94,387

 

 

13.6

 

Other (expense) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

(27,734

)

 

(7.3

)

 

 

(14,807

)

 

(4.1

)

 

 

(52,204

)

 

(7.2

)

 

 

(29,401

)

 

(4.2

)

Gain (loss) on foreign currency, net

 

4,487

 

 

1.1

 

 

 

(6,251

)

 

(1.6

)

 

 

5,782

 

 

0.8

 

 

 

(8,268

)

 

(1.2

)

Other income, net

 

434

 

 

0.1

 

 

 

132

 

 

 

 

 

218

 

 

 

 

 

55

 

 

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

(6,011

)

 

(0.8

)

 

 

(1,023

)

 

(0.1

)

Other expense, net

 

(22,813

)

 

(6.1

)

 

 

(20,926

)

 

(5.7

)

 

 

(52,215

)

 

(7.2

)

 

 

(38,637

)

 

(5.5

)

Income before income taxes

 

46,050

 

 

12.1

 

 

 

40,504

 

 

11.1

 

 

 

32,418

 

 

4.5

 

 

 

55,750

 

 

8.1

 

Income tax expense

 

11,000

 

 

2.9

 

 

 

9,646

 

 

2.6

 

 

 

7,563

 

 

1.1

 

 

 

12,961

 

 

1.9

 

Net income

$

35,050

 

 

9.2

%

 

$

30,858

 

 

8.5

%

 

$

24,855

 

 

3.4

%

 

$

42,789

 

 

6.2

%

Net income per share, basic

$

0.25

 

 

 

 

$

0.22

 

 

 

 

$

0.18

 

 

 

 

$

0.30

 

 

 

Net income per share, diluted

$

0.24

 

 

 

 

$

0.21

 

 

 

 

$

0.17

 

 

 

 

$

0.29

 

 

 

Basic weighted average shares outstanding

 

141,712

 

 

 

 

 

141,545

 

 

 

 

 

141,705

 

 

 

 

 

141,545

 

 

 

Diluted weighted average shares outstanding

 

146,174

 

 

 

 

 

146,162

 

 

 

 

 

146,258

 

 

 

 

 

146,162

 

 

 

 

SAVERS VALUE VILLAGE, INC. Condensed Consolidated Statements of Cash Flows

(All amounts in thousands, unaudited)

 

 

Twenty-Six Weeks Ended

 

July 1, 2023

 

July 2, 2022

Cash flows from operating activities:

 

 

 

Net income

$

24,855

 

 

$

42,789

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Stock-based compensation expense

 

1,857

 

 

 

282

 

Amortization of debt issuance costs and debt discount

 

3,223

 

 

 

1,961

 

Depreciation and amortization

 

29,177

 

 

 

26,692

 

Operating lease expense

 

58,275

 

 

 

58,148

 

Deferred income taxes, net

 

5,290

 

 

 

3,748

 

Loss on extinguishment of debt

 

6,011

 

 

 

1,023

 

Other items, net

 

(10,800

)

 

 

14,080

 

Changes in operating assets and liabilities:

 

 

 

Trade receivables

 

(596

)

 

 

(7,099

)

Inventories

 

(8,291

)

 

 

(4,772

)

Prepaid expenses and other current assets

 

(19,466

)

 

 

(6,518

)

Accounts payable and accrued liabilities

 

24,727

 

 

 

(3,489

)

Accrued payroll and related taxes

 

(6,898

)

 

 

(19,962

)

Operating lease liabilities

 

(55,100

)

 

 

(55,376

)

Other liabilities

 

1,526

 

 

 

(989

)

Net cash provided by operating activities

 

53,790

 

 

 

50,518

 

Cash flows from investing activities:

 

 

 

Purchases of property and equipment

 

(47,167

)

 

 

(57,794

)

Net settlement of derivative instruments

 

32

 

 

 

(691

)

Net cash used in investing activities

 

(47,135

)

 

 

(58,485

)

Cash flows from financing activities:

 

 

 

Proceeds from issuance of long-term debt, net

 

529,247

 

 

 

 

Principal payments on long-term debt

 

(237,525

)

 

 

(6,866

)

Advances on revolving line of credit

 

42,000

 

 

 

53,000

 

Repayments of revolving line of credit

 

(79,000

)

 

 

(53,000

)

Prepayment premium on extinguishment of debt

 

 

 

 

(1,023

)

Net settlement of derivative instruments

 

3,889

 

 

 

 

Repurchase of shares and shares withheld to cover taxes

 

(849

)

 

 

 

Payment of debt issuance costs

 

(4,359

)

 

 

(161

)

Dividends paid

 

(262,235

)

 

 

 

Net cash used in financing activities

 

(8,832

)

 

 

(8,050

)

Effect of exchange rate changes on cash and cash equivalents

 

1,610

 

 

 

(898

)

Net change in cash and cash equivalents

 

(567

)

 

 

(16,915

)

Cash and cash equivalents at beginning of period

 

112,132

 

 

 

97,915

 

Cash and cash equivalents at end of period

$

111,565

 

 

$

81,000

 

 

 

 

 

The following unaudited table sets forth the computation of net income per basic and diluted share as shown on the face of the accompanying condensed consolidated statements of income:

 

SAVERS VALUE VILLAGE, INC. Supplemental Detail on Net Income Per Common Share Calculation

(Unaudited)

 

 

Thirteen Weeks Ended

 

Twenty-Six Weeks Ended

(in thousands, except per share data)

July 1, 2023

 

July 2, 2022

 

July 1, 2023

 

July 2, 2022

Numerator

 

 

 

 

 

 

 

Net income

$

35,050

 

$

30,858

 

$

24,855

 

$

42,789

Denominator

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

141,712

 

 

141,545

 

 

141,705

 

 

141,545

Dilutive effect of employee stock options and awards

 

4,462

 

 

4,617

 

 

4,553

 

 

4,617

Diluted weighted average common shares outstanding

 

146,174

 

 

146,162

 

 

146,258

 

 

146,162

Net income per share

 

 

 

 

 

 

 

Basic

$

0.25

 

$

0.22

 

$

0.18

 

$

0.30

Diluted

$

0.24

 

$

0.21

 

$

0.17

 

$

0.29

The following unaudited tables present net sales by segment for the periods presented:

 

SAVERS VALUE VILLAGE, INC. Supplemental Detail on Net Sales by Segment

(Unaudited)

 

 

Thirteen Weeks Ended

 

 

 

 

(dollars in thousands)

July 1, 2023

 

July 2, 2022

 

$ Change

 

% Change

U.S. Retail

$

196,500

 

$

188,199

 

$

8,301

 

4.4

%

Canada Retail

 

153,489

 

 

149,952

 

 

3,537

 

2.4

 

Other

 

29,113

 

 

26,517

 

 

2,596

 

9.8

 

Total net sales

$

379,102

 

$

364,668

 

$

14,434

 

4.0

%

 

Twenty-Six Weeks Ended

 

 

 

 

(dollars in thousands)

July 1, 2023

 

July 2, 2022

 

$ Change

 

% Change

U.S. Retail

$

380,521

 

$

362,222

 

$

18,299

 

5.1

%

Canada Retail

 

286,762

 

 

277,861

 

 

8,901

 

3.2

 

Other

 

57,503

 

 

52,052

 

 

5,451

 

10.5

 

Total net sales

$

724,786

 

$

692,135

 

$

32,651

 

4.7

%

SAVERS VALUE VILLAGE, INC.

Supplemental Information Reconciliation of GAAP to Non-GAAP Financial Measures (Unaudited)

The following information relates to non-GAAP financial measures and should be read in conjunction with the investor call held on August 10, 2023, discussing the Company’s financial condition and results of operations for the second quarter.

A reconciliation of net income and net income per diluted share on a GAAP basis to Adjusted net income and Adjusted net income per diluted share for the thirteen and twenty-six weeks ended July 1, 2023 and July 2, 2022 is presented in the table below:

 

Thirteen Weeks Ended

 

Twenty-Six Weeks Ended

(in thousands, except per share amounts)

July 1, 2023

 

July 2, 2022

 

July 1, 2023

 

July 2, 2022

Net income:

 

 

 

 

 

 

 

Net income

$

35,050

 

 

$

30,858

 

 

$

24,855

 

 

$

42,789

 

Loss on extinguishment of debt(1)

 

 

 

 

 

 

 

6,011

 

 

 

1,023

 

Non-recurring stock-based compensation expense(1)(2)

 

26

 

 

 

 

 

 

26

 

 

 

 

Transaction costs(1)(3)

 

780

 

 

 

386

 

 

 

1,720

 

 

 

1,180

 

Dividend-related bonus(1)(4)

 

 

 

 

 

 

 

24,097

 

 

 

 

(Gain) loss on foreign currency, net(1)

 

(4,487

)

 

 

6,251

 

 

 

(5,782

)

 

 

8,268

 

Other adjustments(1)(5)

 

170

 

 

 

3,515

 

 

 

(464

)

 

 

3,356

 

Tax effect on adjustments

 

1,018

 

 

 

(3,228

)

 

 

(7,426

)

 

 

(4,397

)

Adjusted net income

$

32,557

 

 

$

37,782

 

 

$

43,037

 

 

$

52,219

 

 

 

 

 

 

 

 

 

Net income per share - diluted:

 

 

 

 

 

 

 

Net income per diluted share

$

0.24

 

 

$

0.21

 

 

$

0.17

 

 

$

0.29

 

Loss on extinguishment of debt(1)

 

 

 

 

 

 

 

0.04

 

 

 

0.01

 

Non-recurring stock-based compensation expense(1)(2)

 

 

 

 

 

 

 

 

 

 

 

Transaction costs(1)(3)

 

0.01

 

 

 

 

 

 

0.01

 

 

 

0.01

 

Dividend-related bonus(1)(4)

 

 

 

 

 

 

 

0.16

 

 

 

 

(Gain) loss on foreign currency, net(1)

 

(0.03

)

 

 

0.04

 

 

 

(0.04

)

 

 

0.06

 

Other adjustments(1)(5)

 

 

 

 

0.02

 

 

 

 

 

 

0.02

 

Tax effect on adjustments

 

0.01

 

 

 

(0.02

)

 

 

(0.05

)

 

 

(0.03

)

Adjusted net income per diluted share*

$

0.22

 

 

$

0.26

 

 

$

0.29

 

 

$

0.36

 

*May not foot due to rounding

(1)

Presented pre-tax.

(2)

Reflects stock-based compensation expense related to restricted stock units issued in connection with the Company’s IPO.

(3)

Transaction costs are comprised of non-capitalizable expenses related to the Company’s IPO and the 2nd Ave. acquisition, such as accounting, consulting and legal fees.

(4)

Represents dividend-related bonus and related taxes paid in conjunction with the Company’s February 2023 dividend.

(5)

Other adjustments include loss on asset disposals. The twenty-six weeks ended July 1, 2023 further includes legal settlement proceeds of $0.5 million.

A reconciliation of the Company’s fiscal 2023 outlook for net income on a GAAP basis to Adjusted net income is presented in the table below:

 

Fifty-Two Weeks Ended

(in millions)

December 30, 2023

Net income:

 

Net income

$

23

 

Loss on extinguishment of debt(1)

 

17

 

Non-recurring stock-based compensation expense(1)(2)

 

69

 

Transaction costs(1)(3)

 

2

 

Dividend-related bonus(1)(4)

 

24

 

Gain on foreign currency, net(1)

 

(6

)

Other adjustments(1)(5)

 

(0.5

)

Tax effect on adjustments

 

(31

)

Adjusted net income

$

98

 

(1)

Presented pre-tax.

(2)

Reflects stock-based compensation expense related to performance-based options and restricted stock units issued in connection with the Company’s IPO.

(3)

Transaction costs are comprised of non-capitalizable expenses related to the Company’s IPO and the 2nd Ave. acquisition, such as accounting, consulting and legal fees.

(4)

Represents dividend-related bonus and related taxes paid in conjunction with the Company’s February 2023 dividend.

(5)

Reflects legal settlement proceeds of $0.5 million.

A reconciliation of GAAP net income to Adjusted EBITDA for the thirteen and twenty-six weeks ended July 1, 2023 and July 2, 2022 is presented in the table below:

 

Thirteen Weeks Ended

 

Twenty-Six Weeks Ended

(dollars in thousands)

July 1, 2023

 

July 2, 2022

 

July 1, 2023

 

July 2, 2022

Net income

$

35,050

 

 

$

30,858

 

 

$

24,855

 

 

$

42,789

 

Interest expense, net

 

27,734

 

 

 

14,807

 

 

 

52,204

 

 

 

29,401

 

Income tax expense

 

11,000

 

 

 

9,646

 

 

 

7,563

 

 

 

12,961

 

Depreciation and amortization

 

14,693

 

 

 

14,043

 

 

 

29,177

 

 

 

26,692

 

Loss on extinguishment of debt(1)

 

 

 

 

 

 

 

6,011

 

 

 

1,023

 

Stock-based compensation expense(2)

 

940

 

 

 

120

 

 

 

1,857

 

 

 

282

 

Non-cash occupancy-related costs(3)

 

714

 

 

 

818

 

 

 

1,411

 

 

 

1,511

 

Lease intangible asset expense(4)

 

1,027

 

 

 

2,865

 

 

 

2,153

 

 

 

5,083

 

Pre-opening expenses(5)

 

1,214

 

 

 

881

 

 

 

2,592

 

 

 

2,620

 

Store closing expenses(6)

 

419

 

 

 

837

 

 

 

867

 

 

 

661

 

Executive transition costs(7)

 

 

 

 

231

 

 

 

 

 

 

1,124

 

Transaction costs(8)

 

780

 

 

 

386

 

 

 

1,720

 

 

 

1,180

 

Dividend-related bonus(9)

 

 

 

 

 

 

 

24,097

 

 

 

 

(Gain) loss on foreign currency, net

 

(4,487

)

 

 

6,251

 

 

 

(5,782

)

 

 

8,268

 

Other adjustments(10)

 

170

 

 

 

3,515

 

 

 

(464

)

 

 

3,356

 

Adjusted EBITDA

$

89,254

 

 

$

85,258

 

 

$

148,261

 

 

$

136,951

 

Net income margin

 

9.2

%

 

 

8.5

%

 

 

3.4

%

 

 

6.2

%

Adjusted EBITDA margin

 

23.5

%

 

 

23.4

%

 

 

20.5

%

 

 

19.8

%

(1)

Removes the effects of the loss on debt extinguishment in relation to the partial repayment of outstanding borrowings under the Term Loan Facility on February 6, 2023 and the repayment of a mortgage loan on January 6, 2022.

(2)

Represents non-cash stock based compensation expense related to stock options and restricted stock units granted to certain of the Company’s employees and directors.

(3)

Represents the difference between cash and straight-line lease expense for all periods.

(4)

Represents lease expense associated with acquired lease intangibles. Prior to the adoption of Topic 842, this expense was included within depreciation and amortization.

(5)

Pre-opening expenses include expenses incurred in the preparation and opening of new stores and processing locations, such as payroll, training, travel, occupancy and supplies.

(6)

Costs associated with the closing of certain retail locations, including lease termination costs, amounts paid to third parties for rent reduction negotiations, and fees paid to landlords for store closings.

(7)

Represents severance costs associated with executive leadership changes and the 2nd Ave. Acquisition.

(8)

Transaction costs are comprised of non-capitalizable expenses related to the Company’s IPO and the 2nd Ave. acquisition, such as accounting, consulting and legal fees.

(9)

Represents dividend-related bonus and related taxes paid in conjunction with the Company’s February 2023 dividend.

(10)

Other adjustments include loss on asset disposals. The twenty-six weeks ended July 1, 2023 further includes legal settlement proceeds of $0.5 million.

Constant-currency

The Company calculates constant-currency net sales by translating current-period net sales using the average exchange rates from the comparative prior period rather than the actual average exchange rates in effect. The Company’s constant-currency net sales are not financial measures prepared in accordance with GAAP.

A reconciliation of GAAP net sales to constant-currency net sales for the thirteen and twenty-six weeks ended July 1, 2023 and July 2, 2022 is presented in the table below:

 

Thirteen Weeks Ended

 

 

 

 

(dollars in thousands)

July 1, 2023

 

July 2, 2022

 

$ Change

 

% Change

Net sales

$

379,102

 

$

364,668

 

$

14,434

 

4.0

%

Impact of foreign currency

 

8,258

 

 

n/a

 

 

8,258

 

n/m

Constant-currency net sales

$

387,360

 

$

364,668

 

$

22,692

 

6.2

%

 

Twenty-Six Weeks Ended

 

 

 

 

(dollars in thousands)

July 1, 2023

 

July 2, 2022

 

$ Change

 

% Change

Net sales

$

724,786

 

$

692,135

 

$

32,651

 

4.7

%

Impact of foreign currency

 

17,767

 

 

n/a

 

 

17,767

 

n/m

Constant-currency net sales

$

742,553

 

$

692,135

 

$

50,418

 

7.3

%

n/a - not applicable

n/m - not meaningful

Supplemental Metrics

In assessing the performance of the Company’s business, it considers a variety of supplemental metrics to evaluate the performance of its business, identify trends, formulate financial projections and make strategic decisions. The Company believes that these metrics provide useful information to investors and others in understanding and evaluating its results of operations in the same manner as its management team.

The following table summarizes certain supplemental metrics for the thirteen and twenty-six weeks ended July 1, 2023 and July 2, 2022:

 

Thirteen Weeks Ended

 

Twenty-Six Weeks Ended

 

July 1, 2023

 

July 2, 2022

 

July 1, 2023

 

July 2, 2022

Comparable Store Sales Growth

 

 

 

 

 

 

 

United States

5.6 %

 

1.7 %

 

5.6 %

 

4.8 %

Canada

5.5 %

 

61.7 %

 

7.1 %

 

51.8 %

Total(1)

5.5 %

 

22.4 %

 

6.3 %

 

21.3 %

Number of Stores

 

 

 

 

 

 

 

United States

152

 

149

 

152

 

149

Canada

154

 

150

 

154

 

150

Total(1)

318

 

309

 

318

 

309

Pounds processed (lbs mm)

246

 

256

 

485

 

496

Sales yield

$ 1.49

 

$ 1.38

 

$ 1.44

 

$ 1.33

(1)

Total comparable store sales growth and total number of stores includes the Company’s Australia retail locations, in addition to the United States and Canada.

 

Investor: John Rouleau/Lyn Walther ICR, Inc. Investors@savers.com

Media: Sara Gaugl Savers Value Village sgaugl@savers.com

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