Coastal Contacts Inc. ("Coastal.com"
or "Coastal"
or "the Company") (TSX:COA) (Stockholm:COA) one of the largest
online retailers of vision care products in the world, today
announced its financial results for the third fiscal quarter ended
July 31, 2012.
During the third quarter of fiscal 2012 Coastal Contacts
generated record revenues of $50.3 million dollars.
Mr. Roger Hardy, Coastal's Founder and CEO, commented, "We
continued to make significant progress in Coastal's key strategic
areas throughout the third quarter.
Our core contact lens business continued its stable and
predictable growth, generating strong operating margins greater
than 10% on a consolidated basis, which the Company is using to
fund growth in the large and attractive glasses category. Contact
lens revenues grew 3% during the third quarter and 5% for the first
nine months of fiscal 2012.
Our glasses category grew to $45.4 million in the twelve months
ended July 31, 2012 compared to $34.3 million in the preceding
twelve months, an increase of 32%.
Our early stage online glasses business in the United States
experienced a revenue increase of 71% while glasses units grew 77%
during the third quarter, as a result of our strategy to drive
customer adoption. We are encouraged by our growth and remain
committed to building out the online eyewear segment in the U.S.
Replicating the successful Canadian business model in this large
and highly attractive market remains a key focus and we plan to
continue investment spending in the coming quarters in order to
further accelerate our growth and market penetration.
Our glasses business in Canada showed average order size
increases of 60% when compared with the same period in 2011, as a
result of product and marketing investments designed to serve a
growing return customer base in this now well established and
profitable business.
Improvements to our glasses offering on our North American sites
under the "Real Style, Real Value" theme is enriching our customer
experience and improving retention rates by offering greater
selection and style.
We focused our investments on the core North American glasses
market, where we anticipate building a leadership position.
We are taking a similar focused approach in Europe as
we shift investments from multiple markets to those where Coastal
has leadership positions.
Our investments in in-house manufacturing, inventory, processing
systems and customer service are creating significant barriers that
we believe result in a customer experience which will propel
Coastal forward in the coming quarters.
We closely monitor NPS (Net Promoter Scores) to gain metric
driven feedback on how we are viewed by our customers.
We view NPS scores as one of the leading indicators of future sales
and believe our industry leading customer experience will
differentiate Coastal from our competitors."
Some highlights of the quarter:
- Record third quarter sales of $50.3 million
- Total order volume was approximately 584,000
- Total glasses shipped was approximately 248,000 units
- Glasses shipped into U.S. market increased 77% to 126,000
units, representing 51% of total glasses units shipped in the
quarter
- Total glasses sales in the quarter were $11.5 million
with gross profit margins of 48%
- Total contact lens sales increased 3% to $38.8 million with
gross profit margins of 41%
- Coastal grew its base of vision corrected customers by 27%
to approximately 4.1 million compared to 3.3 million, year over
year
- Coastal's in-house designer brands of eyewear comprised 70% of
total glasses units shipped
- Initiated investment in a second production line to manufacture
free form progressive lenses in-house to address growing demand and
market opportunity
Year to date highlights include:
- Total pairs of glasses shipped were 706,000, an increase of 27
%
- Overall revenues increased 8 % to $145 million
- Glasses revenues grew 20 % to $34 million
- Contact lens revenues grew 5 % to $111 million
- Adjusted EBITDA was $1.8 million compared to $0.9 million
Mr. Hardy commented, "It's been an exciting year so far at
Coastal as we shipped approximately 1.7 million orders during
the first nine months of fiscal 2012. Our approach is becoming even
more focused on specific markets which are attractive for a variety
of strategic reasons. Our investments in building the
industry's best customer experience is designed to cause our
customers to advocate on our behalf, sharing our unbeatable
combination of value, quality, selection and speed.
It is an exciting time at Coastal and we look forward to
reporting continued progress in the coming quarters."
Key financial metrics for the third quarter of 2012 compared to
the same period in 2011:
- Gross profit was $21.4 million or 43% of sales, compared to
$21.1 million or 43% of sales
- Fulfillment expenses remained constant at 10% of sales
- Selling and Marketing expenses decreased to $12.2 million or
24% of sales compared with $12.6 or 25% of sales
- General and Administration expenses were $5.2 million or 10% of
sales compared with $5.2 or 11% of sales
- Adjusted EBITDA was ($0.1) million, compared to ($0.4)
million
- Loss for the period was $1.9 million or $0.07 per share,
compared to a loss of $1.5 million or $0.06 per share (earnings per
share for the period were calculated based on the number of
outstanding shares after the one new for two old share
consolidation that was effected September 5, 2012)
- Non-cash share-based compensation remained steady at $0.2
million for the quarter
- Cash and cash equivalents of $15.4 million at the end of the
quarter
Subsequent to the end of the third fiscal quarter, Coastal
announced a share consolidation effective September 5,
2012. The consolidation was made on the basis of two
pre-consolidation common shares for each one post-consolidation
common share. Shareholders of the Company authorized the
Consolidation at the Company's Annual and Special Meeting of
Shareholders held on April 20, 2012. Company shares trade
under the symbol "COA" and new CUSIP number 19044R207.
The Consolidation reduces the number of outstanding common
shares of the Company from approximately 56.7 million to
approximately 28.4 million.
COASTAL CONTACTS
INC. |
CONDENSED CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION (unaudited) |
(Stated in Thousands of
Canadian Dollars) |
|
|
|
|
|
|
|
|
|
|
July 31, |
October
31, |
|
2012 |
2011 |
|
|
|
ASSETS |
|
|
Current assets |
|
|
Cash and cash equivalents |
$ 15,403 |
$ 16,864 |
Trade and other receivables |
8,059 |
6,013 |
Inventory |
21,510 |
26,228 |
Prepaid expenses |
3,391 |
3,125 |
Income tax
receivable |
-- |
79 |
Total current assets |
48,363 |
52,309 |
Non-current assets |
|
|
Deferred tax asset |
85 |
97 |
Property, equipment and leasehold
improvements |
8,844 |
8,960 |
Intangible assets |
10,928 |
10,882 |
Goodwill |
8,177 |
8,518 |
Total non-current
assets |
28,034 |
28,457 |
TOTAL ASSETS |
$ 76,397 |
$ 80,766 |
|
|
|
LIABILITIES AND EQUITY |
|
|
Current liabilities |
|
|
Trade and other payables |
$ 33,107 |
$ 36,098 |
Provisions |
1,063 |
1,057 |
Income taxes payable |
519 |
-- |
Finance lease obligation |
2,252 |
2,646 |
Operating line of credit |
3,799 |
-- |
Other current liabilities |
252 |
280 |
Total current
liabilities |
40,992 |
40,081 |
Non-current liabilities |
|
|
Other long-term liabilities |
723 |
859 |
Finance lease obligation |
490 |
1,911 |
Long-term operating line of credit |
-- |
1,500 |
Deferred tax liability |
2,992 |
3,306 |
Total non-current
liabilities |
4,205 |
7,576 |
Total
liabilities |
45,197 |
47,657 |
|
|
|
Equity |
|
|
Share capital |
|
|
Authorized: |
|
|
Unlimited common shares without par
value |
|
|
Unlimited Class A preferred shares
without par value |
|
|
Issued and outstanding: |
|
|
28,355,745 common shares [2011-
28,110,579] |
41,368 |
40,667 |
Share-based payments reserve |
3,468 |
2,934 |
Accumulated other comprehensive earnings
(loss) |
(473) |
372 |
Deficit |
(13,163) |
(10,864) |
Total Equity |
31,200 |
33,109 |
TOTAL LIABILITIES AND
EQUITY |
$ 76,397 |
$ 80,766 |
|
|
|
|
|
COASTAL CONTACTS
INC. |
CONDENSED CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS (unaudited) |
(Stated in Thousands of
Canadian Dollars, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
Three months
ended July 31 |
Nine months ended
July 31 |
Notes |
2012 |
2011 |
2012 |
2011 |
|
|
|
|
|
|
|
|
|
|
Sales |
$ 50,324 |
$ 49,589 |
$ 145,385 |
$ 134,036 |
Cost of sales |
28,898 |
28,482 |
84,130 |
77,291 |
Gross
profit |
21,426 |
21,107 |
61,255 |
56,745 |
|
|
|
|
|
Fulfillment |
5,090 |
4,666 |
13,964 |
13,066 |
Selling and marketing |
12,180 |
12,582 |
33,483 |
31,978 |
General and administration |
5,227 |
5,221 |
14,919 |
15,757 |
Results from operating
activities |
(1,071) |
(1,362) |
(1,111) |
(4,056) |
|
|
|
|
|
Financing costs (income) |
848 |
(261) |
917 |
(119) |
|
|
|
|
|
Loss before income
taxes |
(1,919) |
(1,101) |
(2,028) |
(3,937) |
|
|
|
|
|
Income tax expense (recovery) - current |
(43) |
406 |
527 |
643 |
Income tax recovery -
deferred |
(15) |
(22) |
(256) |
(781) |
Net income tax expense
(recovery) |
(58) |
384 |
271 |
(138) |
|
|
|
|
|
Net loss for the
period |
(1,861) |
(1,485) |
(2,299) |
(3,799) |
|
|
|
|
|
Other comprehensive
loss |
|
|
|
|
Foreign currency
translation differences |
(33) |
(624) |
(845) |
(125) |
Total comprehensive loss for
the period |
$ (1,894) |
$ (2,109) |
$ (3,144) |
$ (3,924) |
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share |
$ (0.07) |
$ (0.06) |
$ (0.08) |
$ (0.14) |
|
|
|
|
|
|
|
|
|
|
Weighted average number of common
shares outstanding - basic and diluted |
28,335,556 |
27,704,882 |
28,226,417 |
27,663,191 |
Coastal Contacts will host a conference call to review the
financial results and Company operations on Thursday, September 13,
2012 at 4:30pm ET. Participating in the call will be
Roger Hardy, Founder and CEO, Gary Collins, President and Nick
Bozikis, CFO.
To attend the call, participants may dial:
North American Toll Free
|
1-888-892-3255 |
|
|
Sweden |
46 852 503 436 |
A replay of the call will be available for 7
days. To access the replay listeners may
dial:
Local/International |
1-800-937-6305 |
|
|
Passcode |
561271 |
The following selected financial information is qualified
in its entirety by, and should be read in conjunction with our
audited consolidated financial statements for the fiscal year ended
October 31, 2011 and accompanying notes and Management's Discussion
and Analysis which may be viewed on SEDAR at www.sedar.com.
Coastal's risks and uncertainties are discussed in detail in the
Company's Annual Information Form dated December 14, 2011, which is
also available on SEDAR.
Adjusted EBITDA as referenced in this news release is a Non-IFRS
measure and is defined as earnings before interest, taxes,
depreciation and amortization, share based compensation and
restructuring charges. See "Supplemental Non-IFRS Measures"
herein.
The following table provides a reconciliation of net income to
Adjusted EBITDA:
|
For the three
months ended July 31, |
For the nine
months ended July 31, |
($000's) |
2012 |
2011 |
2012 |
2011 |
|
|
|
|
|
Net loss |
(1,861) |
(1,485) |
(2,299) |
(3,799) |
|
|
|
|
|
Depreciation and amortization |
752 |
757 |
2,190 |
2,006 |
Interest expense, net |
98 |
75 |
329 |
210 |
Income tax expense (recovery) |
(58) |
384 |
271 |
(138) |
Share-based payments expense |
171 |
240 |
747 |
600 |
Foreign exchange (gain) loss |
750 |
(336) |
588 |
(330) |
Management change costs |
-- |
-- |
-- |
2,335 |
Adjusted EBITDA |
(148) |
(375) |
1,826 |
884 |
Transition to International Financial Reporting Standards
Coastal adopted IFRS for the 2012 fiscal year as required by the
CICA Accounting Standards Board. The financial statements,
including the fiscal 2011 comparative figures are prepared in
accordance with IFRS and IAS 34, Interim Financial
Reporting. Reconciliations prepared in accordance with IFRS 1,
First-time Adoption of International Financial Reporting Standards
are provided in note 12 of the unaudited condensed consolidated
interim financial statements. The transition to IFRS did not result
in a material impact on the Coastal's business functions or
activities.
Supplemental Non-IFRS Measures
Adjusted EBITDA is a non-IFRS measure that does not have any
standardized meaning prescribed by IFRS and is therefore unlikely
to be comparable to similar measures presented by other companies.
Adjusted EBITDA should be considered in addition to, and not as a
substitute for, net earnings, cash flows and other measures of
financial performance and liquidity reported in accordance with
IFRS.
Adjusted EBITDA is a measure we believe is useful in assessing
performance and highlighting trends on an overall basis. Adjusted
EBITDA differs from the most comparable IFRS measure, net earnings,
primarily because it does not include interest, income taxes,
amortization, depreciation, restructuring cost and share-based
compensation expense.
New orders, reorders, shipped orders and active customers are
non-IFRS measures that do not have a standardized meaning
prescribed by IFRS and are therefore unlikely to be comparable to
similar measures presented by other companies. New orders are
orders shipped to new customers, net of returns. Reorders are
orders shipped to returning customers, net of returns.
About Coastal Contacts Inc.:
Coastal Contacts, Inc. is one of the largest online retailers of
vision care products in the world. Coastal empowers customers
to easily browse, try on and buy eyewear—saving time, money and
sanity. With every pair of qualifying frames purchased, Coastal
donates a pair to someone in need through its Change the View
project. Founded in 2000, Coastal designs, produces and distributes
the largest selection of glasses and contact lenses on the
Internet, including a unique combination of designer glasses,
contact lenses, sunglasses, and vision care
accessories. Coastal serves customers in more than 150
countries through the Coastal Contacts family of websites
including: Coastal.com, ClearlyContacts.ca, Lensway.com,
Lensway.co.uk, Lensway.se, Lensway.com.br, ClearlyContacts.com.au,
ClearlyContacts.co.nz, Contactsan.com, and Coastallens.com.
Cautionary Note Regarding Forward-Looking Information
and Statements
Certain of the statements and information contained in this news
release which are not current statements or historical facts
constitute "forward-looking information" within the meaning of
applicable Canadian Securities laws and "forward-looking
statements" within the meaning of the United States Private
Securities Litigation Reform Act of 1995. Forward-looking
information and statements are typically identified by use of the
words "may", "would", "could", "will", "intend", "plan",
"anticipate", "believe", "estimate", "expect", "goal", "target",
"should", "likely", "potential", "continue", "project", "forecast",
"prospects", and similar expressions.
Forward-looking information and statements are based on the
then-current expectations, beliefs, assumptions, estimates and
forecasts about our business and the industry and markets in which
we operate. Forward-looking information and statements are
not guarantees of future performance and involve risks,
uncertainties and assumptions which are difficult to predict.
Persons reading this news release are cautioned that
forward-looking information and statements are only predictions,
and that our actual future results or performance may be materially
different due to a number of factors. These factors include,
but are not limited to: changes in the market; potential downturns
in economic conditions; our ability to implement our business
strategies; competition from traditional and online retailers;
limited suppliers; limited availability of inventory; inventory
risk; disruption in our distribution facilities; mergers and
acquisitions; foreign currency exchange rate fluctuations;
regulatory requirements; demand for contact lenses, glasses and
related vision care products; the risk that we will not be
successful in defending against litigation; dependence on the
internet; and other factors referred to under the section entitled
"Risk Factors" in our most recently filed Annual Information Form,
dated December 14, 2011. These risks, as well as others,
could cause actual results and events to vary significantly.
Accordingly, readers should not place undue reliance on
forward-looking information and statements, which are qualified in
their entirety by this cautionary note.
The forward-looking information and statements contained herein
are made as of the date of this news release and we expressly
disclaim any intent or obligation to update such information or
statements except as required by applicable law.
CONTACT: For Further Information:
Terry Vanderkruyk
Vice President, Corporate Development
Coastal Contacts Inc.
604.676.4498
terryv@coastal.com
or
Liolios Group Inc.
Scott Liolios or Cody Slach
Tel 949.574.3860
COA@liolios.com