TORONTO
,
February 10, 2022
(press release)
–
Indigo Books & Music Inc. (TSX: IDG), Canada's largest book and lifestyle retailer reported financial results for the 13-week period ended January 1, 2022 compared to the 13-week period ended December 26, 2020.
Indigo Books & Music Inc. Logo (CNW Group/Indigo Books & Music Inc.)
Revenue for the quarter increased $65.3 million or 17.9% to $430.7 million compared to the same period last year, and $47.0 million or 12.2% to pre-pandemic levels (13-week period ended December 28, 2019.) The Company delivered on sales growth despite disruption from the Omicron variant and the reintroduction of severe pandemic restrictions in several key jurisdictions during the three most critical December selling weeks. Prior to these impacts, third-quarter results demonstrated exceptionally strong momentum in both the retail and online channels.
While retail traffic was challenged by the Omicron environment, customers shopped the Company's store network with intent and its print and general merchandise assortment strongly resonated, driving revenues above the same period last year. The combined efforts of its strong assortment and scaled-back promotional strategy lifted the penetration of full-priced sales by double-digits, delivering profitable top-line growth. The Company's lifestyle and toy businesses performed remarkably well, driven by the respective success of its proprietary brand program and strategic inventory buys, while its print business benefited from renewed interest in reading, lifting book sales across all categories.
The Company's omnichannel growth to pre-pandemic levels was driven by its online channel, which surged over the past two years and delivered growth of 86.3% compared to the same quarter in fiscal 2020 (13-week period ended December 28, 2019.)
Commenting on the results, CEO Heather Reisman said: "These results demonstrate the success of our efforts to provide a meaningfully curated offering to our customers, the power of our position as the Country's leading bookseller, and the strength of the Indigo brand. We built incredibly strong momentum early in the holiday season and were pleased we could still deliver growth despite being challenged by an unrelenting set of pandemic conditions. We look forward to seeing through this global pandemic to a place where we can fire on all cylinders."
Adjusted EBITDA for the quarter was $52.0 million compared to $37.8 million for the same period last year, an increase of $14.2 million. This improvement was driven by robust sales and merchandise margin performance. It is worth noting, that these results were achieved against significantly elevated freight and last-mile logistics costs associated with a challenged global supply chain, and against last year's meaningful COVID-19 labour support for home office and field leadership.
Indigo reported net earnings of $45.1 million ($1.62 net earnings per basic common share) compared to net earnings of $30.7 million ($1.11 net earnings per basic common share) last year, an improvement of $14.4 million or 46.9%, for the reasons discussed.
With no outstanding debt and a cash balance of $189.9 million, the Company continues to be well positioned to manage through any further uncertainty stemming from COVID-19.
Analyst/Investor Call
Indigo will host a conference call for analysts and investors to review these results at 10:00 a.m. (Eastern Time) tomorrow, February 11th, 2022. The call can be accessed by dialing 416-764-8659 from within the Toronto area, or 1-888-664-6392 outside of Toronto. The eight-digit participant code is 37572134.
A playback of the call will also be available by telephone until 11:59 p.m. (ET) on February 18th, 2022. The call playback can be accessed after 12:00 p.m. (ET) on February 11th, 2022, 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 572134. 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; 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 1, 2021 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 press 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, baby, kids, wellness and lifestyle products, that support their customers every day and at key life stages by simplifying their journey to live with intention. 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.
Indigo founded the Indigo Love of Reading Foundation in 2004 to address the underfunding of public elementary school libraries and the literacy challenges faced by children in high-needs communities across Canada. The Foundation provides grants to high-needs elementary schools so they can transform their libraries with the purchase of new books and educational resources. Most recently, in the wake of the COVID-19 pandemic and unprecedented nation-wide school closures, the Foundation committed $1.0 million to provide books to families in need. With the support of the Company, its customers, employees, and suppliers, the Foundation has committed over $33 million to more than 3,000 high-needs elementary schools 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 |
| |
January 1, |
December 26, |
April 3, |
| (thousands of Canadian dollars) |
2022 |
2020 |
2021 |
| |
|
|
|
| ASSETS |
|
|
|
| Current |
|
|
|
| Cash and cash equivalents |
189,872 |
229,424 |
84,935 |
| Accounts receivable |
18,223 |
26,395 |
22,976 |
| Inventories |
274,682 |
218,163 |
215,114 |
| Prepaid expenses |
6,579 |
7,937 |
12,278 |
| Income taxes receivable |
- |
138 |
- |
| Derivative assets |
197 |
- |
- |
| Other assets |
3,520 |
3,202 |
2,120 |
| Total current assets |
493,073 |
485,259 |
337,423 |
| Loan receivable |
- |
446 |
- |
| Property, plant, and equipment, net |
66,520 |
80,982 |
77,131 |
| Right-of-use assets, net |
335,378 |
366,104 |
361,864 |
| Intangible assets, net |
19,353 |
21,475 |
20,916 |
| Equity investment, net |
2,156 |
2,350 |
2,156 |
| Total assets |
916,480 |
956,616 |
799,490 |
| LIABILITIES AND EQUITY |
|
|
|
| Current |
|
|
|
| Accounts payable and accrued liabilities |
244,424 |
249,992 |
145,193 |
| Unredeemed gift card liability |
75,269 |
68,626 |
58,053 |
| Provisions |
1,481 |
2,185 |
2,365 |
| Deferred revenue |
22,197 |
16,880 |
16,486 |
| Short-term lease liabilities |
66,298 |
63,022 |
67,603 |
| Derivative liabilities |
27 |
1,716 |
1,622 |
| Total current liabilities |
409,696 |
402,421 |
291,322 |
| Long-term accrued liabilities |
1,048 |
1,371 |
2,090 |
| Long-term provisions |
649 |
696 |
827 |
| Long-term lease liabilities |
453,088 |
491,378 |
482,671 |
| Total liabilities |
864,481 |
895,866 |
776,910 |
| Equity |
|
|
|
| Share capital |
227,069 |
226,986 |
226,986 |
| Contributed surplus |
14,338 |
14,075 |
13,782 |
| Retained deficit |
(189,954) |
(177,202) |
(216,668) |
| Accumulated other comprehensive income (loss) |
546 |
(3,109) |
(1,520) |
| Total equity |
51,999 |
60,750 |
22,580 |
| Total liabilities and equity |
916,480 |
956,616 |
799,490 |
| Consolidated Statements of Earnings (Loss) and Comprehensive Earnings (Loss) |
| (Unaudited) |
| |
13-week |
13-week |
39-week |
39-week |
| |
period ended |
period ended |
period ended |
period ended |
| |
January 1, |
December 26, |
January 1, |
December 26, |
| (thousands of Canadian dollars, except per share data) |
2022 |
2020 |
2022 |
2020 |
| |
|
|
|
|
| Revenue |
430,666 |
365,426 |
841,560 |
705,786 |
| Cost of sales |
(252,427) |
(217,940) |
(482,883) |
(440,773) |
| Gross profit |
178,239 |
147,486 |
358,677 |
265,013 |
| Operating, selling, and other expenses |
(127,079) |
(110,843) |
(313,940) |
(264,948) |
| Operating profit |
51,160 |
36,643 |
44,737 |
65 |
| Net interest expense |
(5,991) |
(5,921) |
(18,068) |
(18,466) |
| Earnings (loss) before income taxes |
45,169 |
30,722 |
26,669 |
(18,401) |
| Income tax recovery (expense) |
(49) |
- |
45 |
- |
| Net earnings (loss) |
45,120 |
30,722 |
26,714 |
(18,401) |
| |
|
|
|
|
| Other comprehensive income (loss) |
|
|
|
|
| Items that are or may be reclassified subsequently to net
earnings (loss), net of taxes: |
|
|
|
|
| Change in fair value of cash flow hedges |
(110) |
(3,151) |
116 |
(4,654) |
| Reclassification of realized loss (gain) |
(22) |
(861) |
1,632 |
(856) |
| Foreign currency translation adjustment |
245 |
(597) |
318 |
(597) |
| Other comprehensive income (loss) |
113 |
(4,609) |
2,066 |
(6,107) |
| |
|
|
|
|
| Total comprehensive earnings (loss) |
45,233 |
26,113 |
28,780 |
(24,508) |
| |
|
|
|
|
| Net earnings (loss) per common share |
|
|
|
|
| Basic |
$ |
1.62 |
$ |
1.11 |
$ |
0.96 |
$ |
(0.67) |
| Diluted |
$ |
1.60 |
$ |
1.09 |
$ |
0.94 |
$ |
(0.67) |
| Consolidated Statements of Cash Flows |
| (Unaudited) |
| |
13-week |
13-week |
39-week |
39-week |
| |
period ended |
period ended |
period ended |
period ended |
| |
January 1, |
December 26, |
January 1, |
December 26, |
| (thousands of Canadian dollars) |
2022 |
2020 |
2022 |
2020 |
| |
|
|
|
|
| OPERATING ACTIVITIES |
|
|
|
|
| Net earnings (loss) |
45,120 |
30,722 |
26,714 |
(18,401) |
| Adjustments to reconcile net earnings (loss) to cash flows
from operating activities |
|
|
|
|
| Depreciation of property, plant, and equipment |
3,992 |
4,129 |
12,043 |
13,020 |
| Depreciation of right-of-use assets |
7,549 |
10,183 |
26,697 |
31,728 |
| Amortization of intangible assets |
2,785 |
3,187 |
9,269 |
9,718 |
| Loss on disposal of capital assets |
6 |
- |
36 |
247 |
| Share-based compensation |
(23) |
425 |
578 |
1,031 |
| Directors' compensation recognized in contributed surplus |
- |
74 |
- |
222 |
| Deferred income tax expense (recovery) |
49 |
- |
(45) |
- |
| Rent concessions |
- |
(462) |
- |
(4,141) |
| Other |
942 |
(787) |
338 |
(899) |
| Net change in non-cash working capital balances related to
operations |
71,310 |
54,853 |
69,538 |
111,540 |
| Interest expense |
6,123 |
6,154 |
18,617 |
19,107 |
| Interest income |
(132) |
(233) |
(549) |
(641) |
| Cash flows from operating activities |
137,721 |
108,245 |
163,236 |
162,531 |
| |
|
|
|
|
| INVESTING ACTIVITIES |
|
|
|
|
| Net purchases of property, plant, and equipment |
(523) |
(1,543) |
(1,546) |
(3,528) |
| Addition of intangible assets |
(2,059) |
(2,385) |
(7,707) |
(6,635) |
| Proceeds from disposal of equity investment |
- |
- |
516 |
- |
| Interest received |
132 |
233 |
549 |
641 |
| Cash flows used for investing activities |
(2,450) |
(3,695) |
(8,188) |
(9,522) |
| |
|
|
|
|
| FINANCING ACTIVITIES |
|
|
|
|
| Repayment of principal on lease liabilities |
(10,273) |
(7,052) |
(31,316) |
(25,890) |
| Interest paid |
(6,123) |
(6,154) |
(18,617) |
(19,107) |
| Proceeds from share issuances |
32 |
- |
61 |
- |
| Cash flows used for financing activities |
(16,364) |
(13,206) |
(49,872) |
(44,997) |
| |
|
|
|
|
| Effect of foreign currency exchange rate changes on cash and
cash equivalents |
(940) |
559 |
(239) |
939 |
| |
|
|
|
|
| Net increase in cash and cash equivalents during the period |
117,967 |
91,903 |
104,937 |
108,951 |
| Cash and cash equivalents, beginning of period |
71,905 |
137,521 |
84,935 |
120,473 |
| Cash and cash equivalents, end of period |
189,872 |
229,424 |
189,872 |
229,424 |
| Non-IFRS Financial Measures |
| |
| The following table reconciles adjusted EBITDA to net earnings (loss) before income taxes, the most comparable IFRS measure: |
| |
|
|
|
|
| |
13-week |
13-week |
39-week |
39-week |
| |
period ended |
period ended |
period ended |
period ended |
| |
January 1, |
December 26, |
January 1, |
December 26, |
| (millions of Canadian dollars) |
2022 |
2020 |
2022 |
2020 |
| Revenue |
430.7 |
365.4 |
841.6 |
705.8 |
| Cost of sales |
(252.4) |
(217.9) |
(482.9) |
(440.8) |
| Cost of operations |
(80.0) |
(69.4) |
(186.6) |
(154.2) |
| Selling, general and administrative expenses |
(32.7) |
(23.9) |
(79.3) |
(57.2) |
| Depreciation of right-of-use assets |
(7.5) |
(10.2) |
(26.7) |
(31.7) |
| Finance charges related to leases |
(6.1) |
(6.2) |
(18.6) |
(19.1) |
| Adjusted EBITDA1 |
52.0 |
37.8 |
47.5 |
2.8 |
| Depreciation of property, plant and equipment |
(4.0) |
(4.1) |
(12.0) |
(13.0) |
| Amortization of intangible assets |
(2.8) |
(3.2) |
(9.3) |
(9.7) |
| Gain on disposal of capital assets |
- |
- |
- |
0.9 |
| Net interest income |
0.1 |
0.2 |
0.5 |
0.6 |
| Earnings (loss) before income taxes |
45.2 |
30.7 |
26.7 |
(18.4) |
| 1Earnings before interest, taxes, depreciation, amortization, asset disposals, and share of loss from equity investments, and includes IFRS 16
right-of-use asset depreciation and associated finance charges. |
SOURCE Indigo Books & Music Inc.
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