Black Diamond, Inc. Reports First Quarter 2017 Results
Black Diamond, Inc reported financial results for the first quarter ended March 31, 2017.
First Quarter 2017 Financial Highlights vs. Same Year-Ago Quarter
- Sales of $41.6 million, up 9%.
- Gross margin up 90 basis points to 29.6%.
- Selling, general and administrative expenses down 12% to $12.5 million.
- Net loss was $1.5 million or $(0.05) per share, compared to a net loss of $4.0 million or $(0.13) per share.
- Adjusted net income before non-cash items increased to $0.5 million or $0.02 per share, compared to a loss of $2.2 million or $(0.07) per share.
First Quarter 2017 Financial Results
Sales in the first quarter of 2017 increased 9% to $41.6 million compared to $38.2 million in the same year-ago quarter. The increase was due to strong growth across each of the different product categories of climb, mountain, and ski. Sales were also up in every channel and geographic region. Foreign exchange had a minimal impact on the first quarter.
Gross margin increased 90 basis points to 29.6% compared to 28.7% in the year-ago quarter. The increase was primarily due to a favorable mix of higher margin products and retail channels.
Selling, general and administrative expenses in the first quarter decreased 12% to $12.5 million compared to $14.2 million in the year-ago quarter. The decline was due to the Company's continued realization of savings from its restructuring plan implemented in 2015 to realign resources within the organization.
Net loss in the first quarter was $1.5 million or $(0.05) per diluted share, compared to a net loss of $4.0 million or $(0.13) per diluted share. Net loss in the first quarter of 2017 included $2.0 million of non-cash items and minimal restructuring charges compared to $1.2 million of non-cash items, $0.5 million in restructuring costs and $0.1 million in transaction costs in the first quarter of 2016.
Adjusted net income, which excludes the non-cash items and restructuring charges, was $0.5 million or $0.02 per diluted share, compared to an adjusted net loss of $2.2 million or $(0.07) per diluted share in the first quarter of 2016.
Adjusted EBITDA was $0.6 million compared to $(2.4) million in the first quarter of 2016, with the increase primarily due to the aforementioned sales and gross margin improvements and prudent expense management.
At March 31, 2017, cash and cash equivalents totaled $73.6 million compared to $94.7 million at December 31, 2016. During the first quarter, the Company paid down its debt in full compared to total debt of $21.9 million at the end of 2016. Stockholders' equity was $159.3 million or approximately $5.31 per share based on approximately 30.0 million shares of the Company's common stock outstanding as of March 31, 2017.
"Our first quarter was the first clear sign that the steps we have taken to better serve our core customers are creating momentum, all while continuing to drive innovation in current and adjacent product categories," said John Walbrecht, president of Black Diamond Equipment. "We grew in all of our primary product categories and across all major markets, which was a key goal and a significant accomplishment in the current environment. This broad-based growth was made possible by our ability to better satisfy demand, which is a credit to the improvements we have made in our supply chain for 2017. We also began to make incremental investments back into the brand via enhanced R&D resources, while also furthering the development of our e-commerce platform.
"We believe our first quarter's results underscore the growing confidence our retail partners have in our strategy to refocus on the core components of the Black Diamond brand and underlying business. We expect the momentum we are experiencing from these early positive results to continue in 2017 as we further our renewed focus on strengthening the Black Diamond brand."
Reaffirmed 2017 Outlook
- The Company continues to anticipate its fiscal year 2017 sales to grow between 3%-7% to approximately $153 to $158 million compared to $148.2 million in 2016. On a constant currency basis, the Company expects sales to range between $154 to $159 million, or up 4%-7% compared to 2016.
- The Company continues to expect gross margin in fiscal 2017 to increase approximately 300 to 400 basis points and range between 32.5%-33.5% compared to 29.5% in 2016.
- The Company also continues to expect selling, general and administrative costs, including approximately $4.5 million of cash corporate overhead expenditures, to be approximately $50.5 million compared to $49.9 million in 2016. The Company expects approximately $2.5 million in capital expenditures in 2017.
Redeployment and Diversification Strategy
On November 9, 2015, the Company announced that it is seeking to redeploy its significant cash and cash equivalent balances. The Company expects to invest in high-quality, durable, cash flow-producing assets potentially unrelated to the outdoor industry in order to diversify its business and potentially monetize its substantial net operating losses. The Company intends to focus its search primarily in the United States, while also evaluating international investment opportunities should it find such opportunities attractive.
Net Operating Loss (NOL)
The Company estimates that it has available NOL carryforwards for U.S. federal income tax purposes of approximately $172 million. The Company's common stock is subject to a rights agreement dated February 7, 2008 that is intended to limit the number of 5% or more owners and therefore reduce the risk of a possible change of ownership under Section 382 of the the Internal Revenue Code of 1986, as amended. Any such change of ownership under these rules would limit or eliminate the ability of the Company to use its existing NOLs for federal income tax purposes. However, there is no guaranty that the rights agreement will achieve the objective of preserving the value of the NOLs.