Yahoo Finance Indigo Reports FY24 Second Quarter Results
TORONTO, Nov. 7, 2023 /CNW/ - Indigo Books & Music Inc. (TSX: IDG), Canada's leading book and lifestyle retailer, reported financial results for the 13-week period ended September 30, 2023 compared to the 13-week period ended October 1, 2022.
The Company recognized total revenue of $206.9 million in the quarter, compared to revenue of $236.2 million in the same period last year, when the Company achieved its highest ever merchandise sales in a second fiscal quarter. Sales in both the retail and online channels in the current year were negatively impacted by the downward pressures of a challenging macro-economic environment. This has reduced overall consumer demand and customers continue to show price sensitivity, noted by lifts in sales during key promotional events, which put pressure on sales margins. This was compounded by temporary disruptions from the launch of the Company's modernized website. The new platform has provided improved functionality and agility, and an overall superior customer experience, however online revenue was impacted during the launch period. By the end of the quarter, most critical disruptions had been resolved, leading to improvements in online conversion.
Commenting on the results, CEO Heather Reisman said: "I am delighted to be back as CEO. I look forward to working with our team to re-energize our connection to our customers who have long considered Indigo their 'happy place'. We have a clear road map and are committed to returning Indigo to profitability and growth. I am also pleased to share that this month we opened a new store at The Well, in downtown Toronto. It fully reflects our mission to inspire reading and enrich the lives of our customers and from the moment we opened our doors has been embraced by the local community."
Adjusted EBITDA for the quarter was a loss of $13.8 million, compared to a loss of $10.6 million in the prior year. The Company focused on cost containment in key areas of the business. These actions indeed helped mitigate the impact of lost sales to profitability, resulting in a decrease in Adjusted EBITDA of only $3.2 million compared to the same period last year. This cost containment will continue to be a focus moving forward, as the Company looks to adapt to the pressures of the current macro-economic environment, re-evaluate the economics of its operations and improve profitability. Net loss for the quarter totaled $22.4 million ($0.80 net loss per basic common share) compared to a net loss of $15.9 million ($0.57 net loss per basic common share) in the prior year, impacted by the items discussed above, as well as certain non-recurring costs incurred in the quarter.
Analyst/Investor Call
Indigo will host a conference call for analysts and investors to review these results at 9:00 a.m. (Eastern Time) tomorrow, November 8th, 2023.
To join the conference call without operator assistance, you may register and enter your phone number at https://emportal.ink/3ZbAsmR to receive an instant automated call back.
The call can also be accessed through an operator by dialing 416-764-8659 from within the Toronto area, or 1-888-664-6392 outside of Toronto. The eight-digit participant code is 55615556.
A playback of the call will also be available by telephone until 11:59 p.m. (ET) on November 15th, 2023. The call playback can be accessed after 12:00 p.m. (ET) on November 8th, 2023, by dialing 416-764-8677 from within the Toronto area, or 1-888-390-0541 outside of Toronto. The six-digit replay passcode number is 615556#. The conference call transcript will be archived in the Investor Relations section of the Indigo website, www.indigo.ca.
Forward-Looking Statements
Statements contained in this news release that are not historical facts are "forward-looking information" within the meaning of applicable Canadian securities legislation. To the extent any forward-looking information constitutes "financial outlooks" within the meaning of applicable Canadian securities laws, such information is being provided as preliminary financial and operational results. Financial outlooks, as with forward-looking information generally, are, without limitation, based on the assumptions and subject to various risks and uncertainties that could cause actual results to differ materially from those expressed in or implied in this news release. Among the key factors that could cause such differences are: general economic, market or business conditions, which include geopolitical events such as war, acts of terrorism, and civil disorder and the adverse impacts of inflationary pressures; ongoing impacts from the ransomware attack; the future impacts and government response to the COVID-19 pandemic, including any impact to online and/or retail operations of the Company; competitive actions by other companies; changes in laws or regulations; and other factors, many of which are beyond the control of the Company, as set out in the Company's annual information form dated June 27, 2023 and available on the Company's issuer profile on SEDAR at www.sedar.com.
Undue reliance should not be placed on such forward-looking information and no assurance can be given that such events will occur in the disclosed time frames or at all. Any forward-looking information included in this news release is made as of the date of this news release and the Company does not undertake an obligation to publicly update such forward-looking information to reflect new information, subsequent events or otherwise unless required by applicable securities laws.
Non-IFRS Financial Measures
The Company prepares its consolidated financial statements in accordance with International Financial Reporting Standards ("IFRS"). In order to provide additional insight into the business, the Company has also provided non-IFRS data, specifically Adjusted EBITDA, in this news release. These measures do not have standardized meanings prescribed by IFRS and are therefore specific to Indigo and may not be comparable to similar measures presented by other companies.
For additional context see "Results of Operations" and "Non-IFRS Financial Measures" in the Management's Discussion and Analysis (which can be found at www.indigo.ca/investor-relations or www.sedar.com).
About Indigo Books & Music Inc.
Indigo is a publicly traded Canadian company listed on the Toronto Stock Exchange (IDG). Indigo is Canada's leading book and lifestyle retailer, offering a curated assortment of books, gifts, home, wellness, fashion, paper, baby and kids products, that support customers by simplifying their journey to Living with Intention. The Company operates retail stores in all ten provinces and one territory in Canada, and also has retail operations in the United States through a wholly-owned subsidiary, operating one retail store in Short Hills, New Jersey. Retail operations are seamlessly integrated with the Company's digital channels, including the www.indigo.ca website and the mobile applications, which are extensions of the physical stores and offer customers an expanded assortment of book titles, along with a meaningfully curated assortment of general merchandise. Indigo believes in real books, in living life fully and generously, in being kind to each other and that stories – big and little – connect us.
The Company supports a separate registered charity, called the Indigo Love of Reading Foundation (the "Foundation"), which is committed to addressing educational inequality, and more specifically, the literacy crisis in Canada. The Foundation provides resources including new books and learning materials, training and year-round curation support to help ensure teachers, education staff, school administrators and other key stakeholders have the tools they need to promote literacy in their communities. With the support of the Company, its customers, employees, and suppliers, the Foundation has committed over $35.0 million to more than 1,000,000 students across Canada since 2004.
To learn more about Indigo, please visit the "Our Company" section at indigo.ca.
Consolidated Balance Sheets | |||
(Unaudited) | |||
As at | As at | As at | |
September 30, | October 1, | April 1, | |
(thousands of Canadian dollars) | 2023 | 2022 | 2023 |
ASSETS | |||
Current | |||
Cash and cash equivalents | 27,678 | 22,635 | 65,113 |
Accounts receivable | 13,045 | 14,708 | 14,069 |
Inventories | 316,054 | 379,713 | 244,063 |
Prepaid expenses | 7,351 | 7,891 | 6,830 |
Derivative assets | — | 7,041 | 699 |
Other assets | 1,665 | 1,323 | 1,254 |
Total current assets | 365,793 | 433,311 | 332,028 |
Property, plant, and equipment, net | 48,691 | 59,068 | 52,464 |
Right-of-use assets, net | 303,861 | 317,850 | 318,302 |
Intangible assets, net | 37,903 | 28,601 | 35,287 |
Total assets | 756,248 | 838,830 | 738,081 |
LIABILITIES AND EQUITY (DEFICIT) | |||
Current | |||
Accounts payable and accrued liabilities | 220,155 | 246,452 | 169,860 |
Related party credit facility | 43,000 | 20,000 | — |
Unredeemed gift card liability | 58,568 | 57,021 | 66,887 |
Provisions | 2,224 | 575 | 1,879 |
Deferred revenue | 19,566 | 21,056 | 20,129 |
Short-term lease liabilities | 70,432 | 69,583 | 69,161 |
Total current liabilities | 413,945 | 414,687 | 327,916 |
Long-term accrued liabilities | 1,132 | 840 | 1,007 |
Long-term provisions | 784 | 764 | 851 |
Long-term lease liabilities | 411,304 | 430,095 | 428,284 |
Total liabilities | 827,165 | 846,386 | 758,058 |
Equity (Deficit) | |||
Share capital | 227,707 | 227,090 | 227,094 |
Contributed surplus | 15,321 | 15,033 | 15,463 |
Retained deficit | (313,869) | (254,709) | (262,969) |
Accumulated other comprehensive income (loss) | (76) | 5,030 | 435 |
Total equity (deficit) | (70,917) | (7,556) | (19,977) |
Total liabilities and equity (deficit) | 756,248 | 838,830 | 738,081 |
Consolidated Statements of Loss and Comprehensive Loss | ||||
(Unaudited) | ||||
13-week | 13-week | 26-week | 26-week | |
period ended | period ended | period ended | period ended | |
September 30, | October 1, | September 30, | October 1, | |
(thousands of Canadian dollars, except per share data) | 2023 | 2022 | 2023 | 2022 |
Revenue | 206,885 | 236,247 | 386,056 | 440,803 |
Cost of sales | (125,224) | (140,762) | (229,724) | (263,570) |
Gross profit | 81,661 | 95,485 | 156,332 | 177,233 |
Operating, selling, and other expenses | (97,402) | (106,666) | (194,181) | (208,009) |
Operating loss | (15,741) | (11,181) | (37,849) | (30,776) |
Net interest expense | (6,651) | (6,217) | (12,866) | (12,396) |
Loss before income taxes | (22,392) | (17,398) | (50,715) | (43,172) |
Income tax recovery (expense) | — | 1,499 | (185) | 1,866 |
Net loss | (22,392) | (15,899) | (50,900) | (41,306) |
Other comprehensive income (loss) | ||||
Items that are or may be reclassified subsequently to net loss, net of taxes: | ||||
Change in fair value of cash flow hedges | — | 4,848 | (71) | 6,738 |
Reclassification of realized gain | — | (690) | (443) | (932) |
Foreign currency translation adjustment | (117) | (156) | 3 | (291) |
Other comprehensive income (loss) | (117) | 4,002 | (511) | 5,515 |
Total comprehensive loss | (22,509) | (11,897) | (51,411) | (35,791) |
Net loss per common share | ||||
Basic | $(0.80) | $(0.57) | $(1.82) | $(1.49) |
Diluted | $(0.80) | $(0.57) | $(1.82) | $(1.49) |
Consolidated Statements of Cash Flows | ||||
(Unaudited) | ||||
13-week | 13-week | 26-week | 26-week | |
period ended | period ended | period ended | period ended | |
September 30, | October 1, | September 30, | October 1, | |
(thousands of Canadian dollars) | 2023 | 2022 | 2023 | 2022 |
OPERATING ACTIVITIES | ||||
Net loss | (22,392) | (15,899) | (50,900) | (41,306) |
Adjustments to reconcile net loss to cash flows used for operating activities | ||||
Depreciation of property, plant, and equipment | 3,723 | 3,967 | 7,437 | 7,943 |
Depreciation of right-of-use assets | 10,299 | 10,586 | 20,571 | 21,065 |
Amortization of intangible assets | 3,407 | 3,091 | 5,543 | 5,827 |
Loss on disposal of capital assets | — | 68 | — | 74 |
Gain on disposal of equity investment | — | (186) | — | (186) |
Share-based compensation | 122 | 172 | 251 | 415 |
Deferred income tax expense (recovery) | — | (1,499) | 185 | (1,866) |
Other | (1,271) | (248) | (1,591) | (400) |
Net change in non-cash working capital balances related to operations | (16,176) | (22,038) | (30,083) | (37,115) |
Interest expense | 6,944 | 6,371 | 13,473 | 12,728 |
Interest income | (293) | (154) | (607) | (332) |
Cash flows used for operating activities | (15,637) | (15,769) | (35,721) | (33,153) |
INVESTING ACTIVITIES | ||||
Net purchases of property, plant, and equipment | (1,594) | (71) | (3,766) | (2,162) |
Addition of intangible assets | (2,984) | (7,234) | (8,012) | (13,258) |
Proceeds from disposal of equity investment | — | 283 | — | 283 |
Interest received | 293 | 154 | 607 | 332 |
Cash flows used for investing activities | (4,285) | (6,868) | (11,171) | (14,805) |
FINANCING ACTIVITIES | ||||
Repayment of principal on lease liabilities | (10,995) | (11,617) | (21,836) | (23,253) |
Interest paid | (6,944) | (6,371) | (13,473) | (12,728) |
Related party credit facility | 43,000 | 20,000 | 43,000 | 20,000 |
Proceeds from share issuances | 43 | — | 220 | — |
Cash flows from (used for) financing activities | 25,104 | 2,012 | 7,911 | (15,981) |
Effect of foreign currency exchange rate changes on cash and cash equivalents | 1,271 | 92 | 1,546 | 105 |
Net increase (decrease) in cash and cash equivalents during the period | 6,453 | (20,533) | (37,435) | (63,834) |
Cash and cash equivalents, beginning of period | 21,225 | 43,168 | 65,113 | 86,469 |
Cash and cash equivalents, end of period | 27,678 | 22,635 | 27,678 | 22,635 |
Non-IFRS Financial Measures | |||||||||
The following table reconciles Adjusted EBITDA to net loss before income taxes, the most comparable IFRS measure: | |||||||||
13-week | 13-week | 26-week | 26-week | ||||||
period ended | period ended | period ended | period ended | ||||||
September 30, | October 1, | September 30, | October 1, | ||||||
(millions of Canadian dollars) | 2023 | 2022 | 2023 | 2022 | |||||
Revenue | 206.9 | 236.2 | 386.1 | 440.8 | |||||
Cost of sales | (125.2) | (140.8) | (229.7) | (263.6) | |||||
Cost of operations | (54.7) | (63.7) | (109.0) | (120.5) | |||||
Selling, general and administrative expenses | (24.0) | (25.4) | (49.0) | (52.8) | |||||
Depreciation of right-of-use assets | (10.3) | (10.6) | (20.6) | (21.1) | |||||
Finance charges related to leases | (6.5) | (6.4) | (13.0) | (12.7) | |||||
Adjusted EBITDA1 | (13.8) | (10.6) | (35.2) | (29.8) | |||||
Depreciation of property, plant and equipment | (3.7) | (4.0) | (7.4) | (7.9) | |||||
Amortization of intangible assets | (3.4) | (3.1) | (5.5) | (5.8) | |||||
Loss on disposal of capital assets | — | (0.1) | — | (0.1) | |||||
Gain on disposal of equity investment | — | 0.2 | — | 0.2 | |||||
Net interest income (expense) | (0.1) | 0.2 | 0.2 | 0.3 | |||||
Non-recurring legal fees | (0.3) | — | (0.7) | — | |||||
Restructuring costs | (2.0) | — | (2.4) | — | |||||
Expenses from ransomware attack | (0.4) | — | (1.0) | — | |||||
Insurance proceeds from ransomware attack | 1.3 | — | 1.3 | — | |||||
Loss before income taxes | (22.4) | (17.4) | (50.7) | (43.2) | |||||
1 Earnings before interest, taxes, depreciation, amortization, asset disposals, and certain non-recurring or unusual amounts, and includes IFRS 16 right-of-use asset depreciation and associated finance charges. | |||||||||
SOURCE Indigo Books & Music Inc.
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