UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended
or
For the transition period from ___ to ___
Commission File No.
1-800-FLOWERS.COM, Inc.
(Exact name of registrant as specified in its charter)
| | |
| (State of incorporation) | (I.R.S. Employer Identification No.) |
| | ( |
| (Address of principal executive offices) (Zip code) | (Registrant’s telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered |
| | | The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| ☐Large accelerated filer | ☑ |
| ☐Non-accelerated filer | |
| |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The number of shares outstanding of each of the Registrant’s classes of common stock as of May 3, 2024:
| Class A common stock: |
| Class B common stock: |
1-800-FLOWERS.COM, Inc.
FORM 10-Q
For the quarterly period ended March 31, 2024
| Page |
||
| Part I. |
||
| Item 1. |
||
| Condensed Consolidated Balance Sheets – March 31, 2024 (Unaudited) and July 2, 2023 |
||
| Notes to Condensed Consolidated Financial Statements (Unaudited) |
||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
| Item 3. |
||
| Item 4. |
||
| Part II. |
||
| Item 1. |
||
| Item 1A. |
||
| Item 2. |
||
| Item 3. |
||
| Item 4. |
||
| Item 5. |
||
| Item 6. |
||
|
|
||
PART I. – FINANCIAL INFORMATION
ITEM 1. – CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1-800-FLOWERS.COM, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except for share data)
| March 31, 2024 | July 2, 2023 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Trade receivables, net | ||||||||
| Inventories | ||||||||
| Prepaid and other | ||||||||
| Total current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Goodwill | ||||||||
| Other intangibles, net | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders' Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Current maturities of long-term debt | ||||||||
| Current portion of long-term operating lease liabilities | ||||||||
| Total current liabilities | ||||||||
| Long-term debt, net | ||||||||
| Long-term operating lease liabilities | ||||||||
| Deferred tax liabilities, net | ||||||||
| Other liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (See Note 14) | ||||||||
| Stockholders' equity: | ||||||||
| Preferred stock, $ par value, shares authorized, issued | ||||||||
| Class A common stock, $ par value, shares authorized, and shares issued at March 31, 2024 and July 2, 2023, respectively | ||||||||
| Class B common stock, $ par value, shares authorized, shares issued at March 31, 2024 and July 2, 2023 | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Treasury stock, at cost, and Class A shares at March 31, 2024 and July 2, 2023, respectively and Class B shares at March 31, 2024 and July 2, 2023 | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
1-800-FLOWERS.COM, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(in thousands, except for per share data)
(unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| March 31, | April 2, | March 31, | April 2, | |||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Net revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Marketing and sales | ||||||||||||||||
| Technology and development | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Goodwill and intangible impairment | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Interest expense, net | ||||||||||||||||
| Other (income) expense, net | ( | ) | ( | ) | ||||||||||||
| Income (loss) before income taxes | ( | ) | ( | ) | ( | ) | ||||||||||
| Income tax (benefit) expense | ( | ) | ( | ) | ||||||||||||
| Net income (loss) and comprehensive net income (loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Basic net income (loss) per common share | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Diluted net income (loss) per common share | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Weighted average shares used in the calculation of net income (loss) per common share: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
1-800-FLOWERS.COM, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders' Equity
(in thousands, except share data)
(unaudited)
| Three Months Ended March 31, 2024 and April 2, 2023 | ||||||||||||||||||||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional | Other | Total | |||||||||||||||||||||||||||||||||||||
| Class A | Class B | Paid-in | Retained | Comprehensive | Treasury Stock | Stockholders’ | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Earnings | Loss | Shares | Amount | Equity | |||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | - | ( | ) | |||||||||||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | ||||||||||||||||||||||||||||||||||||||||
| Acquisition of Class A treasury stock | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||
| Balance at January 1, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | - | ( | ) | |||||||||||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||||||||||||||
| Conversion – Class B into Class A | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
| Acquisition of Class A treasury stock | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance at April 2, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||
1-800-FLOWERS.COM, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders' Equity
(in thousands, except share data)
(unaudited)
| Nine Months Ended March 31, 2024 and April 2, 2023 | ||||||||||||||||||||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional | Other | Total | |||||||||||||||||||||||||||||||||||||
| Class A | Class B | Paid-in | Retained | Comprehensive | Treasury Stock | Stockholders’ | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Earnings | Loss | Shares | Amount | Equity | |||||||||||||||||||||||||||||||
| Balance at July 2, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||
| Net income | - | - | - | |||||||||||||||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | ||||||||||||||||||||||||||||||||||||||||
| Acquisition of Class A treasury stock | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||
| Balance at July 3, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | - | ( | ) | |||||||||||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||||||||||||||
| Conversion – Class B into Class A | ( | ) | ( | ) | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Acquisition of Class A treasury stock | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance at April 2, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
1-800-FLOWERS.COM, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| Nine Months Ended | ||||||||
| March 31, | April 2, | |||||||
| 2024 | 2023 | |||||||
| Operating activities: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
| Goodwill and intangible impairment | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of deferred financing costs | ||||||||
| Deferred income taxes | ( | ) | ( | ) | ||||
| Bad debt expense | ||||||||
| Stock-based compensation | ||||||||
| Other non-cash items | ( | ) | ( | ) | ||||
| Changes in operating items: | ||||||||
| Trade receivables | ( | ) | ( | ) | ||||
| Inventories | ||||||||
| Prepaid and other | ||||||||
| Accounts payable and accrued expenses | ( | ) | ( | ) | ||||
| Other assets and liabilities | ||||||||
| Net cash provided by operating activities | ||||||||
| Investing activities: | ||||||||
| Acquisitions, net of cash acquired | ( | ) | ||||||
| Capital expenditures | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing activities: | ||||||||
| Acquisition of treasury stock | ( | ) | ( | ) | ||||
| Proceeds from exercise of employee stock options | ||||||||
| Proceeds from bank borrowings | ||||||||
| Repayment of bank borrowings | ( | ) | ( | ) | ||||
| Debt issuance cost | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Net change in cash and cash equivalents | ||||||||
| Cash and cash equivalents: | ||||||||
| Beginning of period | ||||||||
| End of period | $ | $ | ||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
1-800-FLOWERS.COM, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 1 – Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared by 1-800-FLOWERS.COM, Inc. and Subsidiaries (the “Company”) in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and nine-month periods ended March 31, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2024. These financial statements should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended July 2, 2023, which provides a more complete understanding of our accounting policies, financial position, operating results and other matters.
The Company’s quarterly results may experience seasonal fluctuations. Due to the seasonal nature of the Company’s business, and its continued expansion into non-floral products, the Thanksgiving through Christmas holiday season, which falls within the Company’s second fiscal quarter, is expected to generate over 40% of the Company’s annual revenues, and all of its earnings. Due to the number of major floral gifting occasions, including Mother's Day, Valentine’s Day, Easter, and Administrative Professionals Week, revenues also have historically risen during the Company’s fiscal third and fourth quarters in comparison to its fiscal first quarter.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Revenue Recognition
Net revenue is measured based on the amount of consideration that we expect to receive, reduced by discounts and estimates for credits and returns (calculated based upon previous experience and management’s evaluation). Service and outbound shipping charged to customers are recognized at the time the related merchandise revenues are recognized and are included in net revenues. Inbound and outbound shipping and delivery costs are included in cost of revenues. Net revenues exclude sales and other similar taxes collected from customers.
A description of our principal revenue generating activities is as follows:
| ● | E-commerce revenues - consumer products sold through our online and telephonic channels. Revenue is recognized when control of the merchandise is transferred to the customer, which generally occurs upon shipment. Payment is typically due prior to the date of shipment. |
| ● | Retail revenues - consumer products sold through our retail stores. Revenue is recognized when control of the goods is transferred to the customer, at the point of sale, at which time payment is received. |
| ● | Wholesale revenues - products sold to our wholesale customers for subsequent resale. Revenue is recognized when control of the goods is transferred to the customer, in accordance with the terms of the applicable agreement. Payment terms are typically 30 days from the date control over the product is transferred to the customer. |
| ● | BloomNet Services - membership fees as well as other service offerings to florists. Membership and other subscription-based fees are recognized monthly as earned. Services revenues related to orders sent through the floral network are variable, based on either the number of orders or the value of orders, and are recognized in the period in which the orders are delivered. The contracts within BloomNet Services are typically month-to-month and, as a result, no consideration allocation is necessary across multiple reporting periods. Payment is typically due less than 30 days from the date the services were performed. |
Deferred Revenues
Deferred revenues are recorded when the Company has received consideration (i.e. advance payment) before satisfying its performance obligations. As such, customer orders are recorded as deferred revenue prior to shipment or rendering of product or services. Deferred revenues primarily relate to e-commerce orders placed, but not shipped, prior to the end of the fiscal period, as well as for subscription programs, including our various food, wine, and plant-of-the-month clubs and our Celebrations Passport® program.
Our total deferred revenue as of July 2, 2023 was $
Impairment Evaluation
The Company performs its annual assessment of goodwill and indefinite-lived intangible impairment during its fiscal fourth quarter, or more frequently if events occur or circumstances change such that it is more likely than not that an impairment may exist. During the quarter ended December 31, 2023, as a result of a decline in the actual and projected revenue for the Company’s PersonalizationMall tradename (indefinite-lived intangible asset), as well as a higher discount rate resulting from the higher interest rate environment, the Company determined that an impairment assessment was required for this tradename. This assessment resulted in the Company recording a non-cash impairment charge of $
The Company concluded that goodwill and other indefinite-lived intangible assets, excluding its PersonalizationMall tradename, did not require an impairment assessment. See Note 5 – Goodwill and Intangible Assets, Net for further information.
Recently Issued Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 requires enhanced disclosures about significant segment expenses, includes enhanced interim disclosure requirements, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, provides new segment disclosure requirements for entities with a single reportable segment, and contains other disclosure requirements. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. ASU 2023-07 is to be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of ASU 2023-07 on its consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires the disclosure of additional information with respect to the reconciliation of the effective tax rate to the statutory rate for federal, state, and foreign income taxes and requires greater detail about significant reconciling items in the reconciliation. Additionally, the amendment requires disaggregated information pertaining to taxes paid, net of refunds received, for federal, state, and foreign income taxes. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and allows for either a prospective or retrospective approach on adoption. The Company is currently evaluating the impact of ASU 2023-09 on its consolidated financial statements and related disclosures.
Note 2 – Net Income (Loss) Per Common Share
Basic net income (loss) per common share is computed by dividing the net income (loss) during the period by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per common share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock.
The following table sets forth the computation of basic and diluted net income (loss) per common share:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| March 31, | April 2, | March 31, | April 2, | |||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (in thousands, except per share data) | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Denominator: | ||||||||||||||||
| Weighted average shares outstanding | ||||||||||||||||
| Effect of dilutive stock options and unvested restricted stock awards | ||||||||||||||||
| Diluted weighted-average shares outstanding | ||||||||||||||||
| Net income (loss) per common share | ||||||||||||||||
| Basic | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Diluted | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
Acquisition of Things Remembered
On January 10, 2023, the Company completed its acquisition of certain assets of the Things Remembered brand, a provider of personalized gifts, whose operations are integrated within the PersonalizationMall.com brand, in the Consumer Floral & Gifts segment. The Company used cash on hand to fund the $
The total consideration of $
Operating results of the Things Remembered business are reflected in the Company’s consolidated financial statements from the date of acquisition within the Consumer Floral & Gifts segment. Pro forma results of operations have not been presented, as the impact on the Company’s consolidated financial results was not material.
Note 4 – Inventory
The Company’s inventory, valued at the lower of cost or net realizable value, includes purchased and manufactured finished goods for sale, packaging supplies, crops, raw material ingredients for manufactured products and associated manufacturing labor, and is classified as follows:
| March 31, 2024 | July 2, 2023 | |||||||
| (in thousands) | ||||||||
| Finished goods | $ | $ | ||||||
| Work-in-process | ||||||||
| Raw materials | ||||||||
| Total inventory | $ | $ | ||||||
Note 5 – Goodwill and Intangible Assets, Net
The following table presents goodwill by segment and the related change in the net carrying amount:
| Gourmet | ||||||||||||||||
| Consumer | Foods & | |||||||||||||||
| Floral & | Gift | |||||||||||||||
| Gifts | BloomNet | Baskets | Total | |||||||||||||
| (in thousands) | ||||||||||||||||
| Balance at July 2, 2023 | $ | $ | $ | $ | ||||||||||||
| Measurement period adjustment for Things Remembered Acquisition | ||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | $ | ||||||||||||
The Company’s other intangible assets consist of the following:
| March 31, 2024 | July 2, 2023 | ||||||||||||||||||||||||||
| Gross | Gross | ||||||||||||||||||||||||||
| Amortization | Carrying | Accumulated | Carrying | Accumulated | |||||||||||||||||||||||
| Period | Amount | Amortization | Net | Amount | Amortization | Net | |||||||||||||||||||||
| (in years) | (in thousands) | ||||||||||||||||||||||||||
| Intangible assets with determinable lives | |||||||||||||||||||||||||||
| Investment in licenses | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Customer lists | |||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||
| Total intangible assets with determinable lives | |||||||||||||||||||||||||||
| Trademarks with indefinite lives | - | - | |||||||||||||||||||||||||
| Total identifiable intangible assets | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
Future estimated amortization expense is as follows: remainder of fiscal 2024 - $
The Company performs its annual assessment of goodwill and indefinite-lived intangible impairment during its fiscal fourth quarter, or more frequently if events occur or circumstances change such that it is more likely than not that an impairment may exist.
During the quarter ended December 31, 2023, as a result of a decline in the actual and projected revenue for the Company’s PersonalizationMall tradename (indefinite-lived intangible asset), as well as a higher discount rate resulting from the higher interest rate environment, the Company determined that an impairment assessment was required. The Company’s impairment test for the indefinite-lived intangible asset encompassed calculating a fair value of the indefinite-lived intangible asset and comparing that result to its carrying value. To determine fair value of the indefinite-lived intangible asset, the Company used an income approach, the relief-from-royalty method. This method assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to obtain the rights to use the comparable asset. Indefinite-lived intangible assets’ fair values require significant judgments in determining both the assets’ estimated cash flows as well as the appropriate discount and royalty rates applied to those cash flows to determine fair value. Based on the impairment assessment performed for the quarter ended December 31, 2023, the Company recorded a non-cash impairment charge of $
Equity investments without a readily determinable fair value
Investments in non-marketable equity instruments of private companies, where the Company does not possess the ability to exercise significant influence, are accounted for at cost, less impairment (assessed qualitatively at each reporting period), adjusted for observable price changes from orderly transactions for identical or similar investments of the same issuer. These investments are included within “Other assets” in the Company’s consolidated balance sheets. The aggregate carrying amount of the Company’s equity investments without a readily determinable fair value was $
Equity investments with a readily determinable fair value
The Company also holds certain trading securities associated with its Non-Qualified Deferred Compensation Plan (“NQDC Plan”). These investments are measured using quoted market prices at the reporting date and are included within the “Other assets” line item in the consolidated balance sheets (see Note 9 - Fair Value Measurements).
The Company’s current and long-term debt consists of the following:
| March 31, 2024 | July 2, 2023 | |||||||
| (in thousands) | ||||||||
| Revolver | $ | $ | ||||||
| Term Loans | ||||||||
| Deferred financing costs | ( | ) | ( | ) | ||||
| Total debt | ||||||||
| Less: current maturities of long-term debt | ||||||||
| Long-term debt, net | $ | $ | ||||||
On June 27, 2023, the Company, certain of its U.S. subsidiaries, the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent entered into a Third Amended and Restated Credit Agreement (the “Third Amended Credit Agreement”). The Third Amended Credit Agreement amends and restates the Company’s Second Amended and Restated Credit Agreement, dated as of May 31, 2019 (as amended by the First Amendment, dated as of August 20, 2020, the Second Amendment, dated as of November 8, 2021, and the Third Amendment, dated as of August 29, 2022). The Third Amended Credit Agreement, among other modifications: (i) increases the amount of the outstanding term loan (“Term Loan”) from approximately $
For each borrowing under the Third Amended Credit Agreement, the Company may elect that such borrowing bear interest at an annual rate equal to either: (1) a base rate plus an applicable margin varying based on the Company’s consolidated leverage ratio, where the base rate is the highest of (a) the prime rate, (b) the New York fed bank rate plus
The Third Amended Credit Agreement requires that while any borrowings or commitments are outstanding the Company comply with certain financial covenants and affirmative covenants as well as certain negative covenants that, subject to certain exceptions, limit the Company’s ability to, among other things, incur additional indebtedness, make certain investments and make certain restricted payments. The Company was in compliance with these covenants as of March 31, 2024. The Third Amended Credit Agreement is secured by substantially all of the assets of the Company.
The principal of the Term Loan is payable at a rate of $
Future principal term loan payments under the Third Amended Credit Agreement are as follows: $
Note 8 – Property, Plant and Equipment, Net
The Company’s property, plant and equipment consists of the following:
| March 31, 2024 | July 2, 2023 | |||||||
| (in thousands) | ||||||||
| Land | $ | $ | ||||||
| Orchards in production and land improvements | ||||||||
| Building and building improvements | ||||||||
| Leasehold improvements | ||||||||
| Production equipment | ||||||||
| Furniture and fixtures | ||||||||
| Computer and telecommunication equipment | ||||||||
| Software | ||||||||
| Capital projects in progress | ||||||||
| Property, plant and equipment, gross | ||||||||
| Accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Property, plant and equipment, net | $ | $ | ||||||
Note 9 – Fair Value Measurements
Cash and cash equivalents, trade and other receivables, prepaids, accounts payable and accrued expenses are reflected in the consolidated balance sheets at carrying value, which approximates fair value due to the short-term nature of these instruments. Although no trading market exists, the Company believes that the carrying amount of its debt approximates fair value due to its variable nature (these are level 2 investments). The Company’s investments in non-marketable equity instruments of private companies are carried at cost and are periodically assessed for other-than-temporary impairment when an event or circumstances indicate that an other-than-temporary decline in value may have occurred. The Company’s remaining financial assets and liabilities are measured and recorded at fair value (see table below). The Company’s non-financial assets, such as definite lived intangible assets and property, plant and equipment, are recorded at cost and are assessed for impairment when an event or circumstance indicates that an other-than-temporary decline in value may have occurred. Goodwill and indefinite lived intangibles are tested for impairment annually, or more frequently, if events occur or circumstances change such that it is more likely than not that an impairment may exist, as required under the accounting standards.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date. The authoritative guidance for fair value measurements establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under the guidance are described below:
| Level 1 | Valuations based on quoted prices in active markets for identical assets or liabilities that the entity has the ability to access. |
| Level 2 | Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities. |
| Level 3 | Valuations based on inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
The following table presents by level, within the fair value hierarchy, financial assets and liabilities measured at fair value on a recurring basis:
| Carrying | Fair Value Measurements | |||||||||||||||
| Value | Assets (Liabilities) | |||||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||||||
| (in thousands) | ||||||||||||||||
| As of March 31, 2024 | ||||||||||||||||
| Trading securities held in a “rabbi trust” (1) | $ | $ | $ | $ | ||||||||||||
| Total assets (liabilities) at fair value | $ | $ | $ | $ | ||||||||||||
| As of July 2, 2023 | ||||||||||||||||
| Trading securities held in a “rabbi trust” (1) | $ | $ | $ | $ | ||||||||||||
| Total assets (liabilities) at fair value | $ | $ | $ | $ | ||||||||||||
| (1) | The Company has established a NQDC Plan for certain members of senior management. Deferred compensation plan assets are invested in mutual funds held in a “rabbi trust,” which is restricted for payment to participants of the NQDC Plan. Trading securities held in a rabbi trust are measured using quoted market prices at the reporting date and are included in the “Other assets” line item, with the corresponding liability included in the “Other liabilities” line item in the consolidated balance sheets. |
Note 10 – Income Taxes
The Company computed the interim tax provision using an estimated annual effective rate, adjusted for discrete items. This estimate is used in providing for income taxes on a year-to-date basis and may change in subsequent interim periods. The Company’s effective tax rate for the three and nine months ended March 31, 2024 was
On a regular basis, the Company evaluates the recoverability of deferred tax assets and the need for a valuation allowance. Such evaluations involve the application of significant judgment. The Company considers multiple factors in its evaluation of the need for a valuation allowance, including reversal of deferred tax liabilities, available tax planning strategies that could be implemented to realize the deferred tax assets, and forecasted future taxable income. A valuation allowance is provided when it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. At both March 31, 2024 and July 2, 2023, the Company had valuation allowances of approximately $
The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions, and various foreign countries. The Company’s fiscal years 2020, 2021, and remain subject to U.S. federal examination. Due to ongoing state examinations and nonconformity with the U.S. federal statute of limitations for assessment, certain states remain open from fiscal The Company's foreign income tax filings from fiscal are open for examination by its respective foreign tax authorities, mainly Canada and Brazil.
The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. At March 31, 2024, the Company has an unrecognized tax benefit, including accrued interest and penalties, of approximately $
Note 11 – Business Segments
The Company’s management reviews the results of its operations by the following
| • | Consumer Floral & Gifts, |
| • | BloomNet, and |
| • | Gourmet Foods & Gift Baskets |
Segment performance is measured based on contribution margin, which includes only the direct controllable revenue and operating expenses of the segments. As such, management’s measure of profitability for these segments does not include the effect of corporate overhead (see (a) below), nor does it include depreciation and amortization, other (income) expense, net and income taxes, or stock-based compensation, which are included within corporate overhead. Assets and liabilities are reviewed at the consolidated level by management and not accounted for by segment.
| Three Months Ended | Nine Months Ended | |||||||||||||||
| March 31, | April 2, | March 31, | April 2, | |||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (in thousands) | ||||||||||||||||
| Net Revenues: | ||||||||||||||||
| Segment Net Revenues: | ||||||||||||||||
| Consumer Floral & Gifts | $ | $ | $ | $ | ||||||||||||
| BloomNet | ||||||||||||||||
| Gourmet Foods & Gift Baskets | ||||||||||||||||
| Corporate | ||||||||||||||||
| Intercompany eliminations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total net revenues | $ | $ | $ | $ | ||||||||||||
| Operating Income: | ||||||||||||||||
| Segment Contribution Margin: | ||||||||||||||||
| Consumer Floral & Gifts | $ | $ | $ | $ | ||||||||||||
| BloomNet | ||||||||||||||||
| Gourmet Foods & Gift Baskets | ( | ) | ( | ) | ||||||||||||
| Segment Contribution Margin Subtotal | ( | ) | ||||||||||||||
| Corporate (a) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Depreciation and amortization | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Operating income | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
(a) Corporate expenses consist of the Company’s enterprise shared service cost centers, and include, among other items, Information Technology, Human Resources, Accounting and Finance, Legal, Executive and Customer Service Center functions, as well as Stock-based compensation. In order to leverage the Company’s infrastructure, these functions are operated under a centralized management platform, providing support services throughout the organization. The costs of these functions, other than those of the Customer Service Center, which are allocated directly to the above categories based upon usage, are included within corporate expenses as they are not directly allocable to a specific segment.
The following tables represent a disaggregation of revenue from contracts with customers, by channel:
| Three Months Ended | ||||||||||||||||||||||||||||||||||||||||
| Consumer Floral & | Gourmet Foods & | Corporate and | ||||||||||||||||||||||||||||||||||||||
| Gifts | BloomNet | Gift Baskets | Eliminations | Consolidated | ||||||||||||||||||||||||||||||||||||
| March 31, 2024 | April 2, 2023 | March 31, 2024 | April 2, 2023 | March 31, 2024 | April 2, 2023 | March 31, 2024 | April 2, 2023 | March 31, 2024 | April 2, 2023 | |||||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||||||||||
| Net revenues | ||||||||||||||||||||||||||||||||||||||||
| E-commerce | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
| Other | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Total net revenues | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||
| Other revenues detail | ||||||||||||||||||||||||||||||||||||||||
| Retail and other | ||||||||||||||||||||||||||||||||||||||||
| Wholesale | ||||||||||||||||||||||||||||||||||||||||
| BloomNet services | ||||||||||||||||||||||||||||||||||||||||
| Corporate | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
| Eliminations | - | - | - | - | - | - | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Total other revenues | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||
| Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||
| Consumer Floral & | Gourmet Foods & | Corporate and | ||||||||||||||||||||||||||||||||||||||
| Gifts | BloomNet | Gift Baskets | Eliminations | Consolidated | ||||||||||||||||||||||||||||||||||||
| March 31, 2024 | April 2, 2023 | March 31, 2024 | April 2, 2023 | March 31, 2024 | April 2, 2023 | March 31, 2024 | April 2, 2023 | March 31, 2024 | April 2, 2023 | |||||||||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||||||||||||||||
| Net revenues | ||||||||||||||||||||||||||||||||||||||||
| E-commerce | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
| Other | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Total net revenues | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||
| Other revenues detail | ||||||||||||||||||||||||||||||||||||||||
| Retail and other | ||||||||||||||||||||||||||||||||||||||||
| Wholesale | ||||||||||||||||||||||||||||||||||||||||
| BloomNet services | ||||||||||||||||||||||||||||||||||||||||
| Corporate | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
| Eliminations | - | - | - | - | - | - | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Total other revenues | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||
The Company currently leases plants, warehouses, offices, store facilities, and equipment under various leases through fiscal 2036. Most lease agreements are of a long-term nature (over a year), although the Company does also enter into short-term leases, primarily for seasonal needs. Lease agreements may contain renewal options and rent escalation clauses and require the Company to pay real estate taxes, insurance, common area maintenance and operating expenses applicable to the leased properties. The Company accounts for its leases in accordance with ASC 842.
At contract inception, the Company determines whether a contract is, or contains, a lease by determining whether it conveys the right to control the use of the identified asset for a period of time, by assessing whether the Company has the right to obtain substantially all of the economic benefits from use of the identified asset and the right to direct the use of the identified asset.
At the lease commencement date, the Company determines if a lease should be classified as an operating or a finance lease (the Company currently has no finance leases) and recognizes a corresponding lease liability and a right-of-use asset on its Balance Sheet. The lease liability is initially and subsequently measured as the present value of the remaining fixed minimum rental payments (including base rent and fixed common area maintenance) using discount rates as of the commencement date. Variable payments (including most utilities, real estate taxes, insurance and variable common area maintenance) are expensed as incurred. Further, the Company elected a short-term lease exception policy, permitting it to not apply the recognition requirements of this standard to short-term leases (i.e. leases with terms of 12 months or less) and an accounting policy to account for lease and non-lease components as a single component for certain classes of assets. The right-of-use asset is initially and subsequently measured at the carrying amount of the lease liability adjusted for any prepaid or accrued lease payments, remaining balance of lease incentives received, unamortized initial direct costs, or impairment charges relating to the right-of-use asset. Right-of-use assets are assessed for impairment using the long-lived assets impairment guidance. The discount rate used to determine the present value of lease payments is the Company’s estimated collateralized incremental borrowing rate, based on the yield curve for the respective lease terms, as the Company generally cannot determine the interest rate implicit in the lease.
The Company recognizes expense for its operating leases on a straight-line basis over the lease term. As these leases expire, it can be expected that in the normal course of business they will be renewed or replaced. Renewal option periods are included in the measurement of lease liability, where the exercise is reasonably certain to occur. Key estimates and judgments in accounting for leases include how the Company determines: (1) lease payments, (2) lease term, and (3) the discount rate used in calculating the lease liability.
Additional information related to our leases is as follows:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| March 31, | April 2, | March 31, | April 2, | |||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| (in thousands) | ||||||||||||||||
| Lease costs: | ||||||||||||||||
| Operating lease costs | $ | $ | $ | $ | ||||||||||||
| Variable lease costs | ||||||||||||||||
| Short-term lease cost | ||||||||||||||||
| Sublease income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total lease costs | $ | $ | $ | $ | ||||||||||||
| Cash paid for amounts included in measurement of operating lease liabilities | $ | $ | ||||||||||||||
| Right-of-use assets obtained in exchange for new operating lease liabilities | $ | $ | ||||||||||||||
| March 31, | ||||
| 2024 | ||||
| (in thousands) | ||||
| Weighted-average remaining lease term - operating leases (in years) | ||||
| Weighted-discount rate - operating leases | % | |||
Maturities of lease liabilities in accordance with ASC 842 as of March 31, 2024 and reconciliation to balance sheet are as follows (in thousands):
| Fiscal Year: | ||||
| Remainder of 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total Future Minimum Lease Payments | ||||
| Less: Imputed Remaining Interest | ||||
| Total Operating Lease Liabilities | ||||
| Less: Current portion of long-term operating lease liabilities | ||||
| Long-term operating lease liabilities | $ |
Note 13 – Accrued Expenses
Accrued expenses consisted of the following:
| March 31, 2024 | July 2, 2023 | |||||||
| (in thousands) | ||||||||
| Payroll and employee benefits | $ | $ | ||||||
| Deferred revenue | ||||||||
| Accrued marketing expenses | ||||||||
| Accrued florist payout | ||||||||
| Accrued purchases | ||||||||
| Other | ||||||||
| Accrued Expenses | $ | $ | ||||||
Note 14 – Commitments and Contingencies
Litigation
There are various claims, lawsuits, and pending actions against the Company and its subsidiaries incident to the operations of its businesses. It is the opinion of management, after consultation with counsel, that the final resolution of such claims, lawsuits and pending actions will not have a material adverse effect on the Company's consolidated financial position, results of operations or liquidity.
Acquisition of Card Isle
On April 3, 2024, the Company completed its acquisition of Card Isle, an e-commerce greeting card company, expanding the Company’s presence in the greeting card category across all brands.
The Company used cash on its balance sheet to fund the approximate $
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” ("MD&A") is intended to provide an understanding of our financial condition, change in financial condition, cash flow, liquidity, and results of operations. The following MD&A discussion should be read in conjunction with the consolidated financial statements and notes to those statements that appear elsewhere in this Form 10-Q and in the Company’s Annual Report on Form 10-K, for the year ended July 2, 2023. The following discussion contains forward-looking statements that reflect the Company’s plans, estimates and beliefs. The Company’s actual results could differ materially from those discussed or referred to in the forward-looking statements. Factors that could cause or contribute to any differences include, but are not limited to, those discussed under the caption “Forward-Looking Information and Factors That May Affect Future Results,” under Part I, Item 1A, of the Company’s Annual Report on Form 10-K, for the year ended July 2, 2023 under the heading “Risk Factors” and Part II-Other Information, Item 1A in this Form 10-Q.
Business Overview
1-800-FLOWERS.COM, Inc. and its subsidiaries (collectively, the “Company”) is a leading provider of gifts designed to help inspire customers to give more, connect more, and build more and better relationships. The Company’s e-commerce business platform features an all-star family of brands, including: 1-800-Flowers.com®, 1-800-Baskets.com®, Cheryl’s Cookies®, Harry & David®, PersonalizationMall.com®, Shari’s Berries®, FruitBouquets.com®, Things Remembered®, Moose Munch®, The Popcorn Factory®, Wolferman’s Bakery®, Vital Choice®, Simply Chocolate®, and Card Isle®. Through the Celebrations Passport® loyalty program, which provides members with free standard shipping and no service charge on eligible products across our portfolio of brands, 1-800-FLOWERS.COM, Inc. strives to deepen relationships with customers. The Company also operates BloomNet®, an international floral and gift industry service provider offering a broad-range of products and services designed to help members grow their businesses profitably; Napco℠, a resource for floral gifts and seasonal décor; DesignPac Gifts, LLC, a manufacturer of gift baskets and towers; and Alice’s Table®, a lifestyle business offering fully digital floral, culinary and other experiences to guests across the country.
For additional information, see Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview” of our Annual Report on Form 10-K, for the year ended July 2, 2023.
Macro-economic Conditions
Overall, broader macro-economic conditions continue to impact our consumers as they continue to moderate their discretionary income. Consumers remain pressured by persistent inflation, higher interest rates, and the resumption of student loan repayments. Throughout the past several years, we have seen that customer spending on “Everyday” gifting occasions has slowed, whereas spending for the major holidays has held up better. However, customers did remain more conservative regarding their Christmas and Valentine's Day holiday spending than originally anticipated. In line with this, total consolidated revenues decreased 9.1% to $379.4 million and 9.2% to $1.47 billion during the three and nine months ended March 31, 2024, respectively, compared with the same periods of the prior year. As we look ahead to the end of fiscal 2024, we continue to expect our e-commerce sales trends to improve albeit at a slower pace than initially anticipated.
The challenging macro-economic conditions that have affected our customers have also impacted our operating costs. During the second quarter of fiscal 2022, in-bound and out-bound shipping, commodity, labor and fuel costs began to surge, and escalated throughout the balance of the year and into fiscal 2023. During our second quarter and third quarter of fiscal 2023, while certain commodity prices remained near historical highs, we began to see a more stable labor market, and significant year-over-year reductions in ocean freight costs. As a result of these trends, combined with our strategic pricing initiatives, automation efforts, and other internal management initiatives, we started to see year-over-year improvement in gross margin commencing in the second quarter of fiscal 2023. These trends and initiatives continued into fiscal 2024 and we saw a significant improvement in year-over-year gross margin in the third quarter and first nine months of fiscal 2024. This improvement and a reduction of expenses helped to offset the aforementioned year-over-year decline in sales.
Intangible Impairment
During the quarter ended December 31, 2023, as a result of a decline in the actual and projected revenue for the Company’s PersonalizationMall tradename, as well as a higher discount rate resulting from the higher interest rate environment, the Company determined that an impairment assessment was required for this tradename. This assessment resulted in the Company recording a non-cash impairment charge of $19.8 million to reduce the recorded carrying value of the PersonalizationMall tradename. See Note 5 – Goodwill and Intangible Assets, Net for further information.
Acquisition of Things Remembered
On January 10, 2023, the Company completed its acquisition of certain assets of the Things Remembered brand, a provider of personalized gifts, whose operations have been integrated within the PersonalizationMall.com brand, in the Consumer Floral & Gifts segment. The Company used cash on hand to fund the $5.0 million purchase, which included intellectual property, customer list, certain inventory, and equipment - see Note 3 –Acquisitions in Item 1.
Acquisition of Card Isle
On April 3, 2024, the Company completed its acquisition of Card Isle, an e-commerce greeting card company, expanding the Company’s presence in the greeting card category across all brands. The Company used cash on its balance sheet to fund the approximate $3.5 million purchase. – See Note 15 – Subsequent Events in Item 1.
Amended and Restated Credit Agreement
On June 27, 2023, the Company entered into a Third Amended and Restated Credit Agreement to, among other modifications, (i) increase the amount of the outstanding term loan from approximately $150 million to $200 million, (ii) decrease the amount of the commitments in respect of the revolving credit facility from $250 million to $225 million, subject to a seasonal reduction to an aggregate amount of $125 million for the period from January 1 to August 1, (iii) extend the maturity date of the outstanding term loan and the revolving credit facilities by approximately 48 months to June 27, 2028, and (iv) increase the applicable interest rate margins for SOFR and base rate loans by 25 basis points (See Note 7 - Debt, Net in Item 1, for details).
Company Guidance
For Fiscal 2024, the Company continues to expect revenue to remain pressured by a challenging consumer environment, but certain year-over-year trends continue to improve. The Company also expects continued improvement in gross margin.
As a result, the Company is reiterating its Fiscal 2024 guidance as follows:
| ● |
total revenues on a percentage basis to decline in a range of 7% to 9%, as compared with the prior year; |
| ● |
Adjusted EBITDA to be in a range of $95 million to $100 million; and |
| ● |
Free Cash Flow to be in a range of $60 million to $65 million. |
Refer to "Definitions of non-GAAP Financial Measures" for reconciliation of non-GAAP results to applicable GAAP results.
Definitions of non-GAAP Financial Measures:
We sometimes use financial measures derived from consolidated financial information, but not presented in our financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Certain of these are considered "non-GAAP financial measures" under the U.S. Securities and Exchange Commission rules. See below for definitions and the reasons why we use these non-GAAP financial measures. Where applicable, see the Segment Information and Results of Operations sections below for reconciliations of these non-GAAP measures to their most directly comparable GAAP financial measures. These non-GAAP financial measures are referred to as “non-GAAP” or “adjusted” below, as these terms are used interchangeably. Reconciliations for forward-looking figures would require unreasonable efforts at this time because of the uncertainty and variability of the nature and amount of certain components of various necessary GAAP components, including, for example, those related to compensation, tax items, amortization or others that may arise during the year, and the Company's management believes such reconciliations would be confusing or misleading to investors. For the same reasons, the Company is unable to address the probable significance of the unavailable information. The lack of such reconciling information should be considered when assessing the impact of such disclosures.
EBITDA and Adjusted EBITDA
We define EBITDA as net income (loss) before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for the impact of stock-based compensation, Non-Qualified Deferred Compensation Plan (“NQDC Plan”) Investment appreciation/depreciation, and certain items affecting period-to-period comparability. See Segment Information for details on how EBITDA and Adjusted EBITDA were calculated for each period presented.
The Company presents EBITDA and Adjusted EBITDA because it considers such information meaningful supplemental measures of its performance and believes such information is frequently used by the investment community in the evaluation of similarly situated companies. The Company uses EBITDA and Adjusted EBITDA as factors to determine the total amount of incentive compensation available to be awarded to executive officers and other employees. The Company's credit agreement uses EBITDA and Adjusted EBITDA to determine its interest rate and to measure compliance with certain covenants. EBITDA and Adjusted EBITDA are also used by the Company to evaluate and price potential acquisition candidates.
EBITDA and Adjusted EBITDA have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP. Some of the limitations are: (a) EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, the Company's working capital needs; (b) EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on the Company's debts; and (c) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future and EBITDA does not reflect any cash requirements for such capital expenditures. EBITDA and Adjusted EBITDA should only be used on a supplemental basis combined with GAAP results when evaluating the Company's performance.
Segment contribution margin and adjusted segment contribution margin
We define segment contribution margin as earnings before interest, taxes, depreciation and amortization, before the allocation of corporate overhead expenses. Adjusted segment contribution margin is defined as contribution margin adjusted for certain items affecting period-to-period comparability. See Segment Information for details on how segment contribution margin was calculated for each period presented.
When viewed together with our GAAP results, we believe segment contribution margin and adjusted segment contribution margin provide management and users of the financial statements meaningful information about the performance of our business segments.
Segment contribution margin and adjusted segment contribution margin are used in addition to and in conjunction with results presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP financial measures. The material limitation associated with the use of segment contribution margin and adjusted segment contribution margin is that they are an incomplete measure of profitability as they do not include all operating expenses or non-operating income and expenses. Management compensates for this limitation when using this measure by looking at other GAAP measures, such as operating income and net income.
Adjusted net income (loss) and adjusted net income (loss) per common share
We define adjusted net income (loss) and adjusted net income (loss) per common share as net income (loss) and net income (loss) per common share adjusted for certain items affecting period-to-period comparability. See Segment Information below for details on how adjusted net income (loss) and adjusted net income (loss) per common share were calculated for each period presented.
We believe that adjusted net income (loss) and adjusted net income (loss) per common share are meaningful measures because they increase the comparability of period-to-period results.
Since these are not measures of performance calculated in accordance with GAAP, they should not be considered in isolation of, or as a substitute for, GAAP net income (loss) and net income (loss) per common share, as indicators of operating performance and they may not be comparable to similarly titled measures employed by other companies.
Free Cash Flow
We define free cash flow as net cash provided by operating activities, less capital expenditures. The Company considers free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after the purchases of fixed assets, which can then be used to, among other things, invest in the Company’s business, make strategic acquisitions, strengthen the balance sheet, and repurchase stock or retire debt. Free cash flow is a liquidity measure that is frequently used by the investment community in the evaluation of similarly situated companies.
Since free cash flow is not a measure of performance calculated in accordance with GAAP, it should not be considered in isolation or as a substitute for analysis of the Company's results as reported under GAAP. A limitation of the utility of free cash flow as a measure of financial performance is that it does not represent the total increase or decrease in the company's cash balance for the period.
The following table reconciles net cash provided by operating activities, a GAAP measure, to free cash flow, a non-GAAP Measure.
| Nine Months Ended |
||||||||
| March 31, |
April 2, |
|||||||
| 2024 |
2023 |
|||||||
| (in thousands) | ||||||||
| Net cash provided by operating activities |
$ | 100,051 | $ | 73,064 | ||||
| Capital expenditures |
(26,482 | ) | (31,351 | ) | ||||
| Free Cash Flow |
$ | 73,569 | $ | 41,713 | ||||
The following table presents the net revenues, gross profit and segment contribution margin from each of the Company’s business segments, as well as consolidated EBITDA, and Adjusted EBITDA.
| Three Months Ended |
||||||||||||||||||||||||||||||||
| Things |
||||||||||||||||||||||||||||||||
| As Adjusted |
Goodwill and |
Remembered |
As Adjusted |
|||||||||||||||||||||||||||||
| Restructuring cost/ | (non-GAAP) | Intangible | Transaction | (non-GAAP) | % | |||||||||||||||||||||||||||
| March 31, 2024 |
Severance |
March 31, 2024 |
April 2, 2023 |
Impairment |
Costs |
April 2, 2023 |
Change |
|||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||||||||||
| Net revenues: |
||||||||||||||||||||||||||||||||
| Consumer Floral & Gifts |
$ | 221,207 | $ | - | $ | 221,207 | $ | 233,019 | $ | - | $ | - | $ | 233,019 | -5.1 | % | ||||||||||||||||
| BloomNet |
27,314 | 27,314 | 36,968 | 36,968 | -26.1 | % | ||||||||||||||||||||||||||
| Gourmet Foods & Gift Baskets |
130,989 | 130,989 | 147,863 | 147,863 | -11.4 | % | ||||||||||||||||||||||||||
| Corporate |
167 | 167 | 36 | 36 | 363.9 | % | ||||||||||||||||||||||||||
| Intercompany eliminations |
(272 | ) | (272 | ) | (320 | ) | (320 | ) | 15.0 | % | ||||||||||||||||||||||
| Total net revenues |
$ | 379,405 | $ | - | $ | 379,405 | $ | 417,566 | $ | - | $ | - | $ | 417,566 | -9.1 | % | ||||||||||||||||
| Gross profit: |
||||||||||||||||||||||||||||||||
| Consumer Floral & Gifts |
$ | 87,005 | $ | - | $ | 87,005 | $ | 88,317 | $ | - | $ | - | $ | 88,317 | -1.5 | % | ||||||||||||||||
| 39.3 | % | 39.3 | % | 37.9 | % | 37.9 | % | |||||||||||||||||||||||||
| BloomNet |
12,411 | 12,411 | 15,720 | 15,720 | -21.0 | % | ||||||||||||||||||||||||||
| 45.4 | % | 45.4 | % | 42.5 | % | 42.5 | % | |||||||||||||||||||||||||
| Gourmet Foods & Gift Baskets |
39,169 | 39,169 | 36,371 | 36,371 | 7.7 | % | ||||||||||||||||||||||||||
| 29.9 | % | 29.9 | % | 24.6 | % | 24.6 | % | |||||||||||||||||||||||||
| Corporate |
132 | 132 | 32 | 32 | 312.5 | % | ||||||||||||||||||||||||||
| 79.0 | % | 79.0 | % | 88.9 | % | 88.9 | % | |||||||||||||||||||||||||
| Total gross profit |
$ | 138,717 | $ | - | $ | 138,717 | $ | 140,440 | $ | - | $ | - | $ | 140,440 | -1.2 | % | ||||||||||||||||
| 36.6 | % | - | 36.6 | % | 33.6 | % | - | - | 33.6 | % | ||||||||||||||||||||||
| EBITDA (non-GAAP): |
||||||||||||||||||||||||||||||||
| Segment Contribution Margin (non-GAAP) (a): |
||||||||||||||||||||||||||||||||
| Consumer Floral & Gifts |
$ | 22,190 | $ | 630 | $ | 22,820 | $ | 26,136 | $ | - | $ | - | $ | 26,136 | -12.7 | % | ||||||||||||||||
| BloomNet |
7,506 | 69 | 7,575 | 10,982 | 10,982 | -31.0 | % | |||||||||||||||||||||||||
| Gourmet Foods & Gift Baskets |
(8,172 | ) | 538 | (7,634 | ) | (78,480 | ) | 64,586 | (13,894 | ) | 45.1 | % | ||||||||||||||||||||
| Segment Contribution Margin Subtotal |
21,524 | 1,237 | 22,761 | (41,362 | ) | 64,586 | - | 23,224 | -2.0 | % | ||||||||||||||||||||||
| Corporate (b) |
(36,221 | ) | 1,180 | (35,041 | ) | (30,015 | ) | 201 | (29,814 | ) | -17.5 | % | ||||||||||||||||||||
| EBITDA (non-GAAP) |
(14,697 | ) | 2,417 | (12,280 | ) | (71,377 | ) | 64,586 | 201 | (6,590 | ) | -86.3 | % | |||||||||||||||||||
| Add: Stock-based compensation |
3,046 | 3,046 | 2,487 | 2,487 | 22.5 | % | ||||||||||||||||||||||||||
| Add: Compensation charge related to NQDC Plan Investment Appreciation (Depreciation) |
3,534 | 3,534 | (1,446 | ) | (1,446 | ) | 344.4 | % | ||||||||||||||||||||||||
| Adjusted EBITDA (non-GAAP) |
$ | (8,117 | ) | $ | 2,417 | $ | (5,700 | ) | $ | (70,336 | ) | $ | 64,586 | $ | 201 | $ | (5,549 | ) | -2.7 | % | ||||||||||||
| Nine Months Ended |
||||||||||||||||||||||||||||||||||||
| Things |
||||||||||||||||||||||||||||||||||||
| As Adjusted |
Goodwill and |
Remembered |
As Adjusted |
|||||||||||||||||||||||||||||||||
| Intangible | Restructuring cost/ | (non-GAAP) | Intangible | Transaction | (non-GAAP) | % | ||||||||||||||||||||||||||||||
| March 31, 2024 |
Impairment |
Severance |
March 31, 2024 |
April 2, 2023 |
Impairment |
Costs |
April 2, 2023 |
Change |
||||||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||||||||||||||
| Net revenues: |
||||||||||||||||||||||||||||||||||||
| Consumer Floral & Gifts |
$ | 618,236 | $ | - | $ | - | $ | 618,236 | $ | 672,248 | $ | - | $ | - | $ | 672,248 | -8.0 | % | ||||||||||||||||||
| BloomNet |
83,420 | 83,420 | 103,187 | 103,187 | -19.2 | % | ||||||||||||||||||||||||||||||
| Gourmet Foods & Gift Baskets |
769,061 | 769,061 | 844,522 | 844,522 | -8.9 | % | ||||||||||||||||||||||||||||||
| Corporate |
716 | 716 | 152 | 152 | 371.1 | % | ||||||||||||||||||||||||||||||
| Intercompany eliminations |
(924 | ) | (924 | ) | (1,062 | ) | (1,062 | ) | 13.0 | % | ||||||||||||||||||||||||||
| Total net revenues |
$ | 1,470,509 | $ | - | $ | - | $ | 1,470,509 | $ | 1,619,047 | $ | - | $ | - | $ | 1,619,047 | -9.2 | % | ||||||||||||||||||
| Gross profit: |
||||||||||||||||||||||||||||||||||||
| Consumer Floral & Gifts |
$ | 252,503 | $ | - | $ | - | $ | 252,503 | $ | 262,510 | $ | - | $ | - | $ | 262,510 | -3.8 | % | ||||||||||||||||||
| 40.8 | % | 40.8 | % | 39.0 | % | 39.0 | % | |||||||||||||||||||||||||||||
| BloomNet |
39,883 | 39,883 | 44,086 | 44,086 | -9.5 | % | ||||||||||||||||||||||||||||||
| 47.8 | % | 47.8 | % | 42.7 | % | 42.7 | % | |||||||||||||||||||||||||||||
| Gourmet Foods & Gift Baskets |
303,276 | 303,276 | 302,902 | 302,902 | 0.1 | % | ||||||||||||||||||||||||||||||
| 39.4 | % | 39.4 | % | 35.9 | % | 35.9 | % | |||||||||||||||||||||||||||||
| Corporate |
680 | 680 | 166 | 166 | 309.6 | % | ||||||||||||||||||||||||||||||
| 95.0 | % | 95.0 | % | 109.2 | % | 109.2 | % | |||||||||||||||||||||||||||||
| Total gross profit |
$ | 596,342 | $ | - | $ | - | $ | 596,342 | $ | 609,664 | $ | - | $ | - | $ | 609,664 | -2.2 | % | ||||||||||||||||||
| 40.6 | % | - | - | 40.6 | % | 37.7 | % | - | - | 37.7 | % | |||||||||||||||||||||||||
| EBITDA (non-GAAP): |
||||||||||||||||||||||||||||||||||||
| Segment Contribution Margin (non-GAAP) (a): |
||||||||||||||||||||||||||||||||||||
| Consumer Floral & Gifts |
$ | 41,609 | $ | 19,762 | $ | 630 | $ | 62,001 | $ | 64,832 | $ | - | $ | - | $ | 64,832 | -4.4 | % | ||||||||||||||||||
| BloomNet |
25,981 | 69 | 26,050 | 29,847 | 29,847 | -12.7 | % | |||||||||||||||||||||||||||||
| Gourmet Foods & Gift Baskets |
98,953 | 538 | 99,491 | 26,313 | 64,586 | 90,899 | 9.5 | % | ||||||||||||||||||||||||||||
| Segment Contribution Margin Subtotal |
166,543 | 19,762 | 1,237 | 187,542 | 120,992 | 64,586 | - | 185,578 | 1.1 | % | ||||||||||||||||||||||||||
| Corporate (b) |
(100,221 | ) | 1,180 | (99,041 | ) | (91,595 | ) | 444 | (91,151 | ) | -8.7 | % | ||||||||||||||||||||||||
| EBITDA (non-GAAP) |
66,322 | 19,762 | 2,417 | 88,501 | 29,397 | 64,586 | 444 | 94,427 | -6.3 | % | ||||||||||||||||||||||||||
| Add: Stock-based compensation |
7,641 | 7,641 | 5,941 | 5,941 | 28.6 | % | ||||||||||||||||||||||||||||||
| Add: Compensation charge related to NQDC Plan Investment Appreciation (Depreciation) |
5,712 | 5,712 | (2,548 | ) | (2,548 | ) | 324.2 | % | ||||||||||||||||||||||||||||
| Adjusted EBITDA (non-GAAP) |
$ | 79,675 | $ | 19,762 | $ | 2,417 | $ | 101,854 | $ | 32,790 | $ | 64,586 | $ | 444 | $ | 97,820 | 4.1 | % | ||||||||||||||||||
| Reconciliation of net income (loss) to adjusted net income (loss) (non-GAAP): |
Three Months Ended |
Nine Months Ended |
||||||||||||||
| March 31, |
April 2, |
March 31, |
April 2, |
|||||||||||||
| 2024 |
2023 |
2024 |
2023 |
|||||||||||||
| (in thousands, except for share data) | ||||||||||||||||
| Net income (loss) |
$ | (16,903 | ) | $ | (70,993 | ) | $ | 14,762 | $ | (22,155 | ) | |||||
| Adjustments to reconcile net income (loss) to adjusted net income (loss) (non-GAAP) |
||||||||||||||||
| Add: Transaction costs |
- | 201 | - | 444 | ||||||||||||
| Add: Restructuring cost/Severance |
2,417 | - | 2,417 | - | ||||||||||||
| Add: Goodwill and intangible impairment |
- | 64,586 | 19,762 | 64,586 | ||||||||||||
| Deduct: Income tax effect on adjustments |
(3,538 | ) | (11,546 | ) | (3,538 | ) | (11,609 | ) | ||||||||
| Adjusted net income (loss) (non-GAAP) |
$ | (18,024 | ) | $ | (17,752 | ) | $ | 33,403 | $ | 31,266 | ||||||
| Basic and diluted net income (loss) per common share |
||||||||||||||||
| Basic |
$ | (0.26 | ) | $ | (1.10 | ) | $ | 0.23 | $ | (0.34 | ) | |||||
| Diluted |
$ | (0.26 | ) | $ | (1.10 | ) | $ | 0.23 | $ | (0.34 | ) | |||||
| Basic and diluted adjusted net income (loss) per common share (non-GAAP) |
||||||||||||||||
| Basic |
$ | (0.28 | ) | $ | (0.27 | ) | $ | 0.52 | $ | 0.48 | ||||||
| Diluted |
$ | (0.28 | ) | $ | (0.27 | ) | $ | 0.51 | $ | 0.48 | ||||||
| Weighted average shares used in the calculation of basic and diluted net income (loss) and adjusted net income (loss) per common share |
||||||||||||||||
| Basic |
64,489 | 64,767 | 64,703 | 64,660 | ||||||||||||
| Diluted |
64,489 | 64,767 | 65,057 | 64,660 | ||||||||||||
| Reconciliation of net income (loss) to Adjusted EBITDA (non-GAAP): |
Three Months Ended |
Nine Months Ended |
||||||||||||||
| March 31, |
April 2, |
March 31, |
April 2, |
|||||||||||||
| 2024 |
2023 |
2024 |
2023 |
|||||||||||||
| (in thousands) | ||||||||||||||||
| Net income (loss) |
$ | (16,903 | ) | $ | (70,993 | ) | $ | 14,762 | $ | (22,155 | ) | |||||
| Add: Interest expense and other, net |
(2,693 | ) | 3,116 | 3,138 | 11,150 | |||||||||||
| Add: Depreciation and amortization |
13,232 | 13,267 | 40,578 | 40,276 | ||||||||||||
| Add: Income tax (benefit) expense |
(8,333 | ) | (16,767 | ) | 7,844 | 126 | ||||||||||
| EBITDA |
(14,697 | ) | (71,377 | ) | 66,322 | 29,397 | ||||||||||
| Add: Stock-based compensation |
3,046 | 2,487 | 7,641 | 5,941 | ||||||||||||
| Add: Compensation charge related to NQDC plan investment Appreciation (Depreciation) |
3,534 | (1,446 | ) | 5,712 | (2,548 | ) | ||||||||||
| Add: Transaction costs |
- | 201 | - | 444 | ||||||||||||
| Add: Restructuring cost/Severance |
2,417 | - | 2,417 | - | ||||||||||||
| Add: Goodwill and intangible impairment |
- | 64,586 | 19,762 | 64,586 | ||||||||||||
| Adjusted EBITDA |
$ | (5,700 | ) | $ | (5,549 | ) | $ | 101,854 | $ | 97,820 | ||||||
(a) Segment performance is measured based on segment contribution margin or segment Adjusted EBITDA, reflecting only the direct controllable revenue and operating expenses of the segments, both of which are non-GAAP measurements. As such, management’s measure of profitability for these segments does not include the effect of corporate overhead, described above, depreciation and amortization, other income (net), and other items that we do not consider indicative of our core operating performance.
(b) Corporate expenses consist of the Company’s enterprise shared service cost centers, and include, among other items, Information Technology, Human Resources, Accounting and Finance, Legal, Executive and Customer Service Center functions, as well as Stock-based compensation. In order to leverage the Company’s infrastructure, these functions are operated under a centralized management platform, providing support services throughout the organization. The costs of these functions, other than those of the Customer Service Center, which are allocated directly to the above categories based upon usage, are included within corporate expenses as they are not directly allocable to a specific segment.
Net revenues
| Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||
| March 31, |
April 2, |
% |
March 31, |
April 2, |
% |
|||||||||||||||||||
| 2024 |
2023 |
Change |
2024 |
2023 |
Change |
|||||||||||||||||||
| (dollars in thousands) |
||||||||||||||||||||||||
| Net revenues: |
||||||||||||||||||||||||
| E-Commerce |
$ | 340,241 | $ | 357,801 | -4.9 | % | $ | 1,288,558 | $ | 1,387,133 | -7.1 | % | ||||||||||||
| Other |
39,164 | 59,765 | -34.5 | % | 181,951 | 231,914 | -21.5 | % | ||||||||||||||||
| Total net revenues |
$ | 379,405 | $ | 417,566 | -9.1 | % | $ | 1,470,509 | $ | 1,619,047 | -9.2 | % | ||||||||||||
Net revenues consist primarily of the selling price of the merchandise, service or outbound shipping charges, less discounts, returns and credits.
Net revenues decreased 9.1% and 9.2% during the three and nine months ended March 31, 2024, respectively, compared to the same periods of the prior year, due to lower order volume across all segments, reflecting a continuation of the trends that the Company had experienced throughout the prior fiscal year, as consumer discretionary income remains pressured, and consumers continue to moderate spending. Contributing to this decline was the prudent use of promotional offerings and advertising campaigns, which balance the long-term goals of the Company with strategies to improve gross margins and tightly control operating expenses during this challenging economic environment.
The Company acquired Things Remembered on January 10, 2023 and launched the brand on its e-commerce platform in April 2023. Things Remembered revenues were not significant during the three and nine months ended March 31, 2024.
| Three Months Ended |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer Floral & Gifts |
BloomNet |
Gourmet Foods & Gift Baskets |
Corporate and Eliminations |
Consolidated |
||||||||||||||||||||||||||||||||||||||||||||||||||||
| March 31, 2024 |
April 2, 2023 |
% Change |
March 31, 2024 |
April 2, 2023 |
% Change |
March 31, 2024 |
April 2, 2023 |
% Change |
March 31, 2024 |
April 2, 2023 |
March 31, 2024 |
April 2, 2023 |
% Change |
|||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net revenues |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| E-commerce |
$ | 218,590 | $ | 230,403 | -5.1 | % | $ | - | $ | - | - | % | $ | 121,651 | $ | 127,398 | -4.5 | % | $ | - | $ | - | $ | 340,241 | $ | 357,801 | -4.9 | % | ||||||||||||||||||||||||||||
| Other |
2,617 | 2,616 | 0.0 | % | 27,314 | 36,968 | -26.1 | % | 9,338 | 20,465 | -54.4 | % | (105 | ) | (284 | ) | 39,164 | 59,765 | -34.5 | % | ||||||||||||||||||||||||||||||||||||
| Total net revenues |
$ | 221,207 | $ | 233,019 | -5.1 | % | $ | 27,314 | $ | 36,968 | -26.1 | % | $ | 130,989 | $ | 147,863 | -11.4 | % | $ | (105 | ) | $ | (284 | ) | $ | 379,405 | $ | 417,566 | -9.1 | % | ||||||||||||||||||||||||||
| Other revenues detail |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Retail and other |
2,617 | 2,616 | 0.0 | % | - | - | - | 1,629 | 1,686 | -3.4 | % | - | - | 4,246 | 4,302 | -1.3 | % | |||||||||||||||||||||||||||||||||||||||
| Wholesale |
- | - | - | 12,364 | 14,695 | -15.9 | % | 7,709 | 18,779 | -58.9 | % | - | - | 20,073 | 33,474 | -40.0 | % | |||||||||||||||||||||||||||||||||||||||
| BloomNet services |
- | - | - | 14,950 | 22,273 | -32.9 | % | - | - | - | - | - | 14,950 | 22,273 | -32.9 | % | ||||||||||||||||||||||||||||||||||||||||
| Corporate |
- | - | - | - | - | - | - | - | - | 167 | 36 | 167 | 36 | 363.9 | % | |||||||||||||||||||||||||||||||||||||||||
| Eliminations |
- | - | - | - | - | - | - | - | - | (272 | ) | (320 | ) | (272 | ) | (320 | ) | 15.0 | % | |||||||||||||||||||||||||||||||||||||
| Total other revenues |
$ | 2,617 | $ | 2,616 | 0.0 | % | $ | 27,314 | $ | 36,968 | -26.1 | % | $ | 9,338 | $ | 20,465 | -54.4 | % | $ | (105 | ) | $ | (284 | ) | $ | 39,164 | $ | 59,765 | -34.5 | % | ||||||||||||||||||||||||||
| Nine Months Ended |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer Floral & Gifts |
BloomNet |
Gourmet Foods & Gift Baskets |
Corporate and Eliminations |
Consolidated |
||||||||||||||||||||||||||||||||||||||||||||||||||||
| March 31, 2024 |
April 2, 2023 |
% Change |
March 31, 2024 |
April 2, 2023 |
% Change |
March 31, 2024 |
April 2, 2023 |
% Change |
March 31, 2024 |
April 2, 2023 |
March 31, 2024 |
April 2, 2023 |
% Change |
|||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net revenues |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| E-commerce |
$ | 611,770 | $ | 665,866 | -8.1 | % | $ | - | $ | - | - | % | $ | 676,788 | $ | 721,267 | -6.2 | % | $ | - | $ | - | $ | 1,288,558 | $ | 1,387,133 | -7.1 | % | ||||||||||||||||||||||||||||
| Other |
6,466 | 6,382 | 1.3 | % | 83,420 | 103,187 | -19.2 | % | 92,273 | 123,255 | -25.1 | % | (208 | ) | (910 | ) | 181,951 | 231,914 | -21.5 | % | ||||||||||||||||||||||||||||||||||||
| Total net revenues |
$ | 618,236 | $ | 672,248 | -8.0 | % | $ | 83,420 | $ | 103,187 | -19.2 | % | $ | 769,061 | $ | 844,522 | -8.9 | % | $ | (208 | ) | $ | (910 | ) | $ | 1,470,509 | $ | 1,619,047 | -9.2 | % | ||||||||||||||||||||||||||
| Other revenues detail |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Retail and other |
6,466 | 6,382 | 1.3 | % | - | - | - | 7,859 | 7,907 | -0.6 | % | - | - | 14,325 | 14,289 | 0.3 | % | |||||||||||||||||||||||||||||||||||||||
| Wholesale |
- | - | - | 32,867 | 40,370 | -18.6 | % | 84,414 | 115,348 | -26.8 | % | - | - | 117,281 | 155,718 | -24.7 | % | |||||||||||||||||||||||||||||||||||||||
| BloomNet services |
- | - | - | 50,553 | 62,817 | -19.5 | % | - | - | - | - | - | 50,553 | 62,817 | -19.5 | % | ||||||||||||||||||||||||||||||||||||||||
| Corporate |
- | - | - | - | - | - | - | - | - | 716 | 152 | 716 | 152 | 371.1 | % | |||||||||||||||||||||||||||||||||||||||||
| Eliminations |
- | - | - | - | - | - | - | - | - | (924 | ) | (1,062 | ) | (924 | ) | (1,062 | ) | 13.0 | % | |||||||||||||||||||||||||||||||||||||
| Total other revenues |
$ | 6,466 | $ | 6,382 | 1.3 | % | $ | 83,420 | $ | 103,187 | -19.2 | % | $ | 92,273 | $ | 123,255 | -25.1 | % | $ | (208 | ) | $ | (910 | ) | $ | 181,951 | $ | 231,914 | -21.5 | % | ||||||||||||||||||||||||||
Revenue by sales channel:
E-commerce revenues (combined online and telephonic) decreased 4.9% and 7.1% during the three and nine months ended March 31, 2024, respectively, compared to the same periods of the prior year, primarily due to the decline in demand across all our segments as a result of the macro-economic conditions noted above. These external influences have negatively impacted consumer discretionary spending.
During the three and nine months ended March 31, 2024, the Company fulfilled approximately 4.3 million and 14.8 million orders through its e-commerce sales channel (online and telephonic sales), a decrease of 6.2% and 9.5%, respectively, compared to the same periods of the prior year. During the three and nine months ended March 31, 2024, average order value increased 1.4% and 2.7%, to $79.36 and $87.29, respectively, as a result of product mix trending into higher price point items, including bundles, and customer mix with more affluent consumers buying at a higher rate than less affluent. During the quarter ended March 31, 2024, the Company has introduced a wider selection of more modestly priced items to attract broader segments of our customer base to purchase. This did have some negative impact on our average order value.
Other revenues are comprised of the Company’s BloomNet segment, as well as the wholesale and retail channels of its Consumer Floral & Gifts and Gourmet Foods & Gift Baskets segments.
Other revenues during the three and nine months ended March 31, 2024, decreased 34.5% and 21.5%, respectively. compared to the same periods of the prior year, due to lower volumes in both wholesale and BloomNet services. The decrease in wholesale revenue was primarily due to certain retailers reducing their Easter orders in light of the consumer environment. The lower service revenues were due to lower shop-to-shop volumes.
Revenue by segment:
Consumer Floral & Gifts – this segment, which includes the operations of the 1-800-Flowers.com, PersonalizationMall, and Alice’s Table brands, and the Things Remembered brand, subsequent to its acquisition on January 10, 2023, derives revenue from the sale of consumer floral products and gifts through its e-commerce sales channels (telephonic and online sales), retail stores, and royalties from its franchise operations.
Net revenues within this segment decreased 5.1% and 8.0% during the three and nine months ended March 31, 2024, respectively, compared to the same periods of the prior year. The Consumer Floral & Gifts segment experienced an increase in volume trend driven by the Valentine's Day holiday, but due to continued economic pressure, the brands focused their efforts on improving gross margin and operating spend efficiency, in the face of softening demand.
During the three and nine months ended March 31, 2024, Consumer Floral & Gifts orders through its e-commerce sales channel (online and telephonic sales) decreased 5.6% and 10.2%, respectively, compared to the same periods of the prior year. This was partially offset by an increase in average order value of 0.5% and 2.3%, respectively, as a result of product mix into higher price point items, including bundles, and customer mix with more affluent consumers buying at a higher rate than less affluent. During the quarter ended March 31, 2024, the Company has introduced a wider selection of more modestly priced items to attract broader segments of our customer base to purchase. This did have some negative impact on our average order value in the quarter.
BloomNet - revenues in this segment are derived from membership fees, as well as product and service offerings.
Net revenues decreased 26.1% and 19.2% during the three and nine months ended March 31, 2024, respectively, compared to the same periods of the prior year. The net revenue decline was due to soft wholesale product revenues, as well as, lower services revenues, attributable to a decline in order volume processed through the network.
Gourmet Foods & Gift Baskets – this segment includes the operations of Harry & David, Wolferman’s, Cheryl’s Cookies, The Popcorn Factory, 1-800-Baskets/DesignPac, Shari’s Berries, and Vital Choice. Revenue is derived from the sale of gourmet fruits, cookies, baked gifts, premium chocolates and confections, gourmet popcorn, gift baskets, dipped berries, prime steaks, chops, and fish, through the Company’s e-commerce sales channels (telephonic and online sales) and company-owned and operated retail stores under the Harry & David and Cheryl’s brand names, as well as wholesale operations.
Net revenues within this segment decreased 11.4% and 8.9% during the three and nine months ended March 31, 2024, respectively, compared to the same periods of the prior year, as a result of lower e-commerce and wholesale revenues, primarily due to macro-economic weakness. As such, the brands focused their efforts on improving gross margin and operating spend efficiency in the face of softening demand.
During the three and nine months ended March 31, 2024, Gourmet Foods & Gift Baskets orders through its e-commerce sales channel (online and telephonic sales) decreased 7.3% and 8.7%, respectively, compared to the same periods of the prior year. This was partially offset by an increase in average order value of 3.0% and 2.8%, respectively, as a result of product mix trending into higher price point items, including bundles, and customer mix with more affluent consumers buying at a higher rate than less affluent.
Gross profit
| Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||
| March 31, |
April 2, |
% |
March 31, |
April 2, |
% |
|||||||||||||||||||
| 2024 |
2023 |
Change |
2024 |
2023 |
Change |
|||||||||||||||||||
| (dollars in thousands) |
||||||||||||||||||||||||
| Gross profit |
$ | 138,717 | $ | 140,440 | -1.2 | % | $ | 596,342 | $ | 609,664 | -2.2 | % | ||||||||||||
| Gross profit % |
36.6 | % | 33.6 | % | 40.6 | % | 37.7 | % | ||||||||||||||||
Gross profit consists of net revenues less cost of revenues, which is comprised primarily of florist fulfillment costs (fees paid directly to florists), the cost of floral and non-floral merchandise sold from inventory or through third parties, and associated costs, including inbound and outbound shipping charges. Additionally, cost of revenues includes labor and facility costs related to direct-to-consumer and wholesale production operations, as well as payments made to sending florists related to order volume referred through the Company’s BloomNet network.
Gross profit decreased 1.2% and 2.2% during the three and nine months ended March 31, 2024, respectively, compared to the same periods of the prior year, due to lower revenues as noted above, principally offset by a favorable gross profit percentage.
Gross profit percentage increased 300 and 290 basis points during the three and nine months ended March 31, 2024, respectively, compared to the same periods of the prior year, driven by lower florist fulfillment and rebate costs, as well as lower freight costs, a decline in certain commodity costs, reduced labor costs in our Gourmet Foods & Gift Baskets segment, and better inventory management.
Gross profit by segment follows:
Consumer Floral & Gifts segment - Gross profit decreased by 1.5% and 3.8% during the three and nine months ended March 31, 2024, respectively, compared to the same periods of the prior year, due to the impact of the lower revenues noted above, partially offset by favorable gross profit percentage attributable to lower florist fulfillment costs and lower freight costs in both the three and nine months ended March 31, 2024, and labor efficiencies for the nine months ended March 31, 2024.
BloomNet segment - Gross profit decreased by 21.0% and 9.5% during the three and nine months ended March 31, 2024, respectively, compared to the same periods of the prior year, due to the decrease in revenues noted above, partially offset by improved gross profit percentage. Gross profit percentage increased in comparison to the prior year primarily due to improvements in wholesale margins, lower freight costs and lower florist rebates due to lower volume.
Gourmet Foods & Gift Baskets segment – Gross profit increased by 7.7% and 0.1% during the three and nine months ended March 31, 2024, respectively, compared to the same periods of the prior year despite the revenue decrease noted above, as the brands delivered improved gross profit percentage. Gross profit percentage increased 530 and 350 basis points during the three and nine months ended March 31, 2024, respectively, compared to the same periods of the prior year. The increased gross profit percentage was attributable to lower freight costs, a decline in certain commodity prices, labor efficiencies, and better inventory management.
Marketing and sales expense
| Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||
| March 31, |
April 2, |
% |
March 31, |
April 2, |
% |
|||||||||||||||||||
| 2024 |
2023 |
Change |
2024 |
2023 |
Change |
|||||||||||||||||||
| (dollars in thousands) |
||||||||||||||||||||||||
| Marketing and sales |
$ | 105,828 | $ | 106,472 | -0.6 | % | $ | 376,903 | $ | 390,077 | -3.4 | % | ||||||||||||
| Percentage of net revenues |
27.9 | % | 25.5 | % | 25.6 | % | 24.1 | % | ||||||||||||||||
Marketing and sales expense consists primarily of advertising and promotional expenditures, catalog costs, online portal and search costs, retail store and fulfillment operations (other than costs included in cost of revenues) and customer service center expenses, as well as the operating expenses of the Company’s departments engaged in marketing, selling and merchandising activities.
Marketing and sales expense decreased 0.6% and 3.4% during the three and nine months ended March 31, 2024, respectively, compared to the same periods of the prior year, due to variable components associated with lower revenues, combined with planned reductions in advertising spend focused on driving profitable volume during a period when consumer discretionary purchases are under pressure.
Technology and development expense
| Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||
| March 31, |
April 2, |
% |
March 31, |
April 2, |
% |
|||||||||||||||||||
| 2024 |
2023 |
Change |
2024 |
2023 |
Change |
|||||||||||||||||||
| (dollars in thousands) |
||||||||||||||||||||||||
| Technology and development |
$ | 15,291 | $ | 14,837 | 3.1 | % | $ | 45,417 | $ | 44,529 | 2.0 | % | ||||||||||||
| Percentage of net revenues |
4.0 | % | 3.6 | % | 3.1 | % | 2.8 | % | ||||||||||||||||
Technology and development expense consists primarily of payroll and operating expenses of the Company’s information technology group, costs associated with its websites, including hosting, design, content development and maintenance and support costs related to the Company’s order entry, customer service, fulfillment, and database systems.
Technology and development expense increased by 3.1% and 2.0% during the three and nine-month periods ended March 31, 2024, compared to the same periods of the prior year, primarily due to higher maintenance and support for the Company's technology platform enhancements, partially offset by lower web hosting costs in the quarter ended March 31, 2024, and reduced labor and consulting costs for the nine months ended March 31, 2024.
General and administrative expense
| Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||
| March 31, |
April 2, |
% |
March 31, |
April 2, |
% |
|||||||||||||||||||
| 2024 |
2023 |
Change |
2024 |
2023 |
Change |
|||||||||||||||||||
| (dollars in thousands) |
||||||||||||||||||||||||
| General and administrative |
$ | 32,295 | $ | 25,922 | 24.6 | % | $ | 87,938 | $ | 81,075 | 8.5 | % | ||||||||||||
| Percentage of net revenues |
8.5 | % | 6.2 | % | 6.0 | % | 5.0 | % | ||||||||||||||||
General and administrative expense consists of payroll and other expenses in support of the Company’s executive, finance and accounting, legal, human resources and other administrative functions, as well as professional fees and other general corporate expenses.
General and administrative expenses increased 24.6% and 8.5% during the three and nine-month periods ended March 31, 2024, respectively, compared to the same period of the prior year, primarily due to increases in labor costs driven by changes in the value of the Company’s NQDC plan investments (offset in Other Income below), as well as a severance charge taken during the quarter ended March 31, 2024, related to an enterprise reduction in workforce, partially offset by favorable bad debt expense and lower insurance and professional fees.
Depreciation and amortization expense
| Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||
| March 31, |
April 2, |
% |
March 31, |
April 2, |
% |
|||||||||||||||||||
| 2024 |
2023 |
Change |
2024 |
2023 |
Change |
|||||||||||||||||||
| (dollars in thousands) |
||||||||||||||||||||||||
| Depreciation and amortization |
$ | 13,232 | $ | 13,267 | -0.3 | % | $ | 40,578 | $ | 40,276 | 0.7 | % | ||||||||||||
| Percentage of net revenues |
3.5 | % | 3.2 | % | 2.8 | % | 2.5 | % | ||||||||||||||||
Depreciation and amortization expense decreased 0.3% during the three months ended March 31, 2024 , compared to the same period of the prior year, due to the timing of certain assets becoming fully depreciated, offset in part by distribution facility automation projects and IT-related ecommerce/platform enhancements. Depreciation and amortization expense increased 0.7% during the nine months ended March 31, 2024 compared to the same period of the prior year, due to distribution facility automation projects and IT-related ecommerce/platform enhancements.
Goodwill and Intangible impairment
| Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||
| March 31, |
April 2, |
% |
March 31, |
April 2, |
% |
|||||||||||||||||||
| 2024 |
2023 |
Change |
2024 |
2023 |
Change |
|||||||||||||||||||
| (dollars in thousands) |
||||||||||||||||||||||||
| Goodwill and Intangible impairment |
$ | - | $ | 64,586 | -100.0 | % | $ | 19,762 | $ | 64,586 | -69.4 | % | ||||||||||||
During the quarter ended December 31, 2023, the Company recorded a non-cash impairment charge of $19.8 million related to its PersonalizationMall trademark, due to a decline in the actual and projected revenue, combined with a higher discount rate resulting from the higher interest rate environment. See Note 5 - Goodwill and Intangible Assets, Net, in Item 1 for further information.
During the quarter ended April 2, 2023, the Company recorded a non-cash impairment charge of $64.6 million related to its Gourmet Foods & Gift Baskets reporting unit. The Company fully impaired the related goodwill and partially impaired certain tradenames within the reporting unit.
Interest expense, net
| Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||
| March 31, |
April 2, |
% |
March 31, |
April 2, |
% |
|||||||||||||||||||
| 2024 |
2023 |
Change |
2024 |
2023 |
Change |
|||||||||||||||||||
| (dollars in thousands) |
||||||||||||||||||||||||
| Interest expense, net |
$ | 881 | $ | 1,712 | -48.5 | % | $ | 8,974 | $ | 8,676 | 3.4 | % | ||||||||||||
Interest expense, net consists primarily of interest expense and amortization of deferred financing costs attributable to the Company’s credit facility (See Note 7 - Debt, Net in Item 1 for details), net of income earned on the Company’s available cash balances.
Interest expense, net decreased 48.5% during the three months ended March 31, 2024 compared to the same period of the prior year, primarily due to interest earned on available cash balances, partially offset by higher interest rates on the Company's credit facility. Interest expense, net increased 3.4% during the nine months ended March 31, 2024, compared to the same period of the prior year, due to higher interest rates on the Company's credit facility, partially offset by favorable interest earned on available cash balances.
Other expense (income), net
| Three Months Ended |
Nine Months Ended |
|||||||||||||||||||||||
| March 31, |
April 2, |
% |
March 31, |
April 2, |
% |
|||||||||||||||||||
| 2024 |
2023 |
Change |
2024 |
2023 |
Change |
|||||||||||||||||||
| (dollars in thousands) |
||||||||||||||||||||||||
| Other (income) expense, net |
$ | (3,574 | ) | $ | 1,404 | 354.6 | % | $ | (5,836 | ) | $ | 2,474 | 335.9 | % | ||||||||||
Other (income) expense consists primarily of investment losses (gains) on the Company’s NQDC Plan investments.
Income Taxes
The Company recorded income tax benefit of $8.3 million and income tax expense of $7.8 million during the three and nine months ended March 31, 2024, respectively, compared to an income tax benefit of $16.8 million and income tax expense of $0.1 million, during the three and nine months ended April 2, 2023, respectively. The Company’s effective tax rate for the three and nine months ended March 31, 2024, was 33.0% and 34.7%, respectively, compared to 19.1% and -0.6% in the same periods of the prior year. The Company’s effective tax rate for fiscal 2024 and fiscal 2023 differed from the U.S. federal statutory rate of 21.0% primarily due to impairment charges within the respective periods, thus reducing the amount of income reflected in the Company’s estimated annual effective tax rate. Further impacting the effective tax rate for fiscal 2024 and fiscal 2023 were tax deficiencies (shortfalls) from stock-based compensation, state income taxes and non-deductible executive compensation, partially offset by tax credits.
Liquidity and Capital Resources
Liquidity and borrowings
The Company's principal sources of liquidity are cash on hand, cash flows generated from operations, and borrowings available under the Company’s credit agreement (see Note 7 - Debt, Net in Item 1 for details). At March 31, 2024, the Company had working capital of $186.4 million, including cash and cash equivalents of $184.0 million, compared to working capital of $152.9 million, including cash and cash equivalents of $126.8 million, at July 2, 2023.
Due to the seasonal nature of the Company’s business, and its continued expansion into non-floral products, the Thanksgiving through Christmas holiday season, which falls within the Company’s second fiscal quarter, is expected to generate over 40% of the Company’s annual revenues, and all of its earnings. Due to the number of major floral gifting occasions, including Mother’s Day, Valentine’s Day, Easter, and Administrative Professionals Week, revenues also have historically risen during the Company’s fiscal third and fourth quarters in comparison to its fiscal first quarter.
During the first two quarters of fiscal 2024, the Company borrowed under its revolving credit agreement to fund pre-holiday manufacturing and inventory procurement requirements, with borrowings peaking at $82.0 million in November 2023. Cash generated from operations during the Christmas holiday shopping season enabled the Company to repay the borrowings under the Revolver in December 2023. Based on current projected cash flows, the Company believes that available cash balances will be sufficient to provide for the Company’s operating needs through the remainder of fiscal 2024, at which time the Company would again expect to borrow against its Revolver to fund pre-holiday manufacturing and inventory purchases. The Company had no amounts outstanding under its Revolver as of March 31, 2024.
While we believe that our sources of funding will be sufficient to meet our anticipated operating cash needs for at least the next twelve months, any projections of future cash needs and cash flows are subject to substantial uncertainty. We continually evaluate, and will, from time to time, consider the acquisition of, or investment in, complementary businesses, products, services, capital infrastructure, and technologies, which might affect our liquidity requirements or cause us to require additional financing.
Cash Flows
Net cash provided by operating activities of $100.1 million, for the nine months ended March 31, 2024, was primarily attributable to the Company’s net income during the period, adjusted by non-cash charges related to the intangible impairment, depreciation and amortization, stock-based compensation and changes in deferred income taxes, combined with seasonal changes in net working capital, driven by a decrease in inventories.
Net cash used in investing activities of $26.5 million, for the nine months ended March 31, 2024, was attributable to capital expenditures primarily related to the Company's technology and automation initiatives.
Net cash used in financing activities of $16.4 million, for the nine months ended March 31, 2024, related primarily to net repayment of bank borrowings under the Company’s working capital line of credit and the repurchase of common stock.
Free Cash Flow
Free cash flow was $73.6 million for the nine months ended March 31, 2024, compared with free cash flow of $41.7 million for the nine months ended April 2, 2023, an increase of $31.9 million primarily driven by an increase in cash flows from operations. Refer to "Definitions of non-GAAP Financial Measures" for reconciliation of non-GAAP results to applicable GAAP results.
Stock Repurchase Program
See Item 2 in Part II below for details.
Contractual Obligations
At March 31, 2024, the Company’s contractual obligations consist of:
| ● |
Long-term debt obligations - payments due under the Company's credit agreement (see Note 7 - Debt, Net in Item 1 for details and payments due by period). |
| ● |
Operating lease obligations – payments due under the Company’s operating leases (see Note 12 - Leases in Item 1 for details and payments due by period for the long-term operating leases). |
| ● |
Purchase commitments - consisting primarily of inventory and IT-related equipment purchase orders and license agreements made in the ordinary course of business – see below for the contractual payments due by period. |
| Payments due by period |
||||||||||||||||||||||||||||
| (in thousands) |
||||||||||||||||||||||||||||
| Remaining |
||||||||||||||||||||||||||||
| Fiscal |
Fiscal |
Fiscal |
Fiscal |
Fiscal |
||||||||||||||||||||||||
| 2024 |
2025 |
2026 |
2027 |
2028 |
Thereafter |
Total |
||||||||||||||||||||||
| Purchase commitments |
$ | 54,971 | $ | 42,956 | $ | 5,039 | $ | 805 | $ | - | $ | - | $ | 103,771 | ||||||||||||||
Critical Accounting Estimates
As disclosed in the Company’s Annual Report on Form 10-K, for the fiscal year ended July 2, 2023, the discussion and analysis of the Company’s financial condition and results of operations are based upon the consolidated financial statements, which have been prepared in conformity with U.S. generally accepted accounting principles. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Management bases its estimates and assumptions on historical experience and on various other factors that are believed to be reasonable under the circumstances, and management evaluates its estimates and assumptions on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions. The Company’s most critical accounting policies relate to goodwill, other intangible assets and income taxes. There have been no significant changes to the assumptions and estimates related to the Company’s critical accounting policies since July 2, 2023.
Recently Issued Accounting Pronouncements
See Note 1 - Accounting Policies in Item 1 for details regarding the impact of accounting standards that were recently issued on our consolidated financial statements.
Forward Looking Information and Factors that May Affect Future Results
Our disclosure and analysis in this report contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent the Company’s current expectations or beliefs concerning future events and can generally be identified by the use of statements that include words such as “estimate,” “expects,” “project,” “believe,” “anticipate,” “intend,” “plan,” “foresee,” “forecast,” “likely,” “will,” “goal,” “target” or similar words or phrases. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of the Company’s control that could cause actual results to differ materially from the results expressed or implied in the forward-looking statements, including:
| ● |
the Company’s ability: |
| o |
to achieve revenue and profitability; |
|
| o |
to leverage its operating platform and reduce operating expenses; |
|
| o |
to manage the seasonality of its business; |
|
| o |
to cost effectively acquire and retain customers; |
|
| o |
to successfully integrate acquired businesses and assets; |
|
| o |
to reduce working capital requirements and capital expenditures; |
|
| o |
to mitigate the impact of supply chain cost and capacity constraints; |
|
| o |
to compete against existing and new competitors; |
|
| o |
to manage expenses associated with sales and marketing and necessary general and administrative and technology investments; and |
|
| o |
to address the effects of changes in accounting policies, practices, or assumptions, including changes that could potentially require future impairment charges; |
| ● |
the outcome of contingencies, including legal proceedings in the normal course of business; and |
| ● |
general consumer sentiment and economic conditions that may affect, among other things, the levels of discretionary customer purchases of the Company’s products and the costs of shipping and labor. |
We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of future results is subject to risks, uncertainties, and inaccurate assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from past results and those anticipated, estimated, or projected. Investors should bear this in mind as they consider forward-looking statements.
We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our Forms 10-Q, 8-K and 10-K reports to the Securities and Exchange Commission. Our Annual Report on Form 10-K for the fiscal year ended July 2, 2023 listed various important factors that could cause actual results to differ materially from expected and historic results. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. Readers can find them in Part I, Item 1A, of that filing under the heading “Cautionary Statements Under the Private Securities Litigation Reform Act of 1995”. We incorporate that section of that Form 10-K in this filing and investors should refer to it. In addition, please refer to any additional risk factors in Part II, Item 1A in this Form 10-Q.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from the effect of interest rate changes.
Interest Rate Risk
The Company’s exposure to market risk for changes in interest rates relates primarily to the Company’s investment of available cash balances and its long-term debt. The Company generally invests its cash and cash equivalents in investment grade corporate and U.S. government securities. Borrowings under the Company’s credit facility bear interest at a variable rate, plus an applicable margin, and therefore expose the Company to market risk for changes in interest rates. The effect of a 50 basis point increase in current interest rates on the Company’s interest expense would be approximately $0.2 and $0.8 million during the three and nine months ended March 31, 2024, respectively.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as of March 31, 2024. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have each concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2024.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the Company’s evaluation required by Rules 13a-15(d) or 15d-15(d) of the Securities Exchange Act of 1934 during the quarter ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, as specified above. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met.
Litigation
There are various claims, lawsuits, and pending actions against the Company and its subsidiaries incident to the operations of its businesses. It is the opinion of management, after consultation with counsel, that the final resolution of such claims, lawsuits and pending actions will not have a material adverse effect on the Company's consolidated financial position, results of operations or liquidity.
There were no material changes to the Company’s risk factors as discussed in Part 1, Item 1A-Risk Factors in the Company’s Annual Report on Form 10-K for the year ended July 2, 2023.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The Company has a stock repurchase plan through which purchases can be made from time to time in the open market and through privately negotiated transactions, subject to general market conditions. The repurchase program is financed utilizing available cash. On April 22, 2021, the Company’s Board of Directors authorized an increase to its stock repurchase plan of up to $40.0 million. In addition, on February 3, 2022, the Company’s Board of Directors authorized an increase to its stock repurchase plan of up to $40.0 million. As of March 31, 2024, $22.8 million remained authorized under the plan.
The following table sets forth, for the months indicated, the Company’s purchase of common stock during the first nine months of fiscal 2024, which includes the period July 3, 2023 through March 31, 2024:
| Total |
Dollar |
|||||||||||||||
| Number of |
Value of |
|||||||||||||||
| Shares |
Shares |
|||||||||||||||
| Purchased |
that May |
|||||||||||||||
| as Part of |
Yet Be |
|||||||||||||||
| Total |
Average |
Publicly |
Purchased |
|||||||||||||
| Number of |
Price |
Announced |
Under the |
|||||||||||||
| Shares |
Paid Per |
Plans or |
Plans or |
|||||||||||||
| Period |
Purchased |
Share (1) |
Programs |
Programs |
||||||||||||
| (in thousands, except average price paid per share) |
||||||||||||||||
| 07/03/23 – 07/30/23 |
- | $ | - | - | $ | 31,965 | ||||||||||
| 07/31/23 – 08/27/23 |
- | $ | - | - | $ | 31,965 | ||||||||||
| 08/28/23 – 10/01/23 |
10,483 | $ | 7.08 | 10,483 | $ | 31,890 | ||||||||||
| 10/02/23 – 10/29/23 |
- | $ | - | - | $ | 31,890 | ||||||||||
| 10/30/23 – 11/26/23 |
272,978 | $ | 8.56 | 272,978 | $ | 29,549 | ||||||||||
| 11/27/23 – 12/31/23 |
240,000 | $ | 9.85 | 240,000 | $ | 27,178 | ||||||||||
| 01/01/24 – 01/28/24 |
180,000 | $ | 10.38 | 180,000 | $ | 25,305 | ||||||||||
| 01/29/24 – 02/25/24 |
124,823 | $ | 10.10 | 124,823 | $ | 24,040 | ||||||||||
| 02/26/24 – 03/31/24 |
120,000 | $ | 10.42 | 120,000 | $ | 22,787 | ||||||||||
| Total |
948,284 | $ | 9.65 | 948,284 | ||||||||||||
| (1) |
Average price per share excludes commissions and other transaction fees. |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
| 31.1 |
|
| 31.2 |
|
| 32.1 |
|
| 101.INS |
Inline XBRL Instance Document |
| 101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL |
Inline XBRL Taxonomy Calculation Linkbase Document |
| 101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB |
Inline XBRL Taxonomy Extension Label Document |
| 101.PRE |
Inline XBRL Taxonomy Definition Presentation Document |
| 104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* Filed herewith.
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| 1-800-FLOWERS.COM, Inc. (Registrant) |
|
| Date: May 8, 2024 |
/s/ James F. McCann James F. McCann |
| Date: May 8, 2024 |
/s/ William E. Shea |