2017 Jefferies Consumer Conference

Transcription

1 207 Jefferies Consumer Conference June 20, 207 Tom Taylor Chief Executive Officer

2 Forward-Looking Statements This presentation and the associated webcast contain forward-looking statements, including with respect to the Company s estimated net sales, comparable store sales growth, GAAP EPS, adjusted diluted EPS, diluted share count, adjusted EBITDA, warehouse format store count and new warehouse format stores for both the thirteen weeks ended 6/29/7 and all of fiscal 207 and with respect to the Company s estimated depreciation and amortization expenses, interest expense, tax rate and capital expenditures for fiscal 207. All statements other than statements of historical fact contained in this presentation, including statements regarding the Company s future operating results and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause the Company s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forwardlooking statements. In some cases, you can identify forward-looking statements by terms such as may, will, should, expects, intends, plans, anticipates, could, seeks, intends, target, projects, contemplates, believes, estimates, predicts, budget, potential, focused on or continue or the negative of these terms or other similar expressions. The forwardlooking statements in this presentation are only predictions. Although the Company believes that the expectations reflected in the forward-looking statements in this presentation are reasonable, the Company cannot guarantee future events, results, performance or achievements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements in this presentation or the associated webcast, including, without limitation, those factors described in Risk Factors, Special Note Regarding Forward-Looking Statements, Management s Discussion and Analysis of Financial Condition and Results of Operations, and Business sections and elsewhere in the Company s filings with the U.S. Securities and Exchange Commission ( SEC ). Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The forward-looking statements contained in this presentation or the associated webcast speak only as of the date hereof. New risks and uncertainties arise over time, and it is not possible for the Company to predict those events or how they may affect the Company. If a change to the events and circumstances reflected in the Company s forward-looking statements occurs, the Company s business, financial condition and operating results may vary materially from those expressed in the Company s forwardlooking statements. Except as required by applicable law, the Company does not plan to publicly update or revise any information in this presentation, including any forward-looking statements contained herein, whether as a result of any new information, future events or otherwise, including the Company s estimated net sales, comparable store sales growth, GAAP EPS, adjusted diluted EPS, diluted share count, adjusted diluted weighted average shares outstanding, adjusted EBITDA, warehouse format store count and new warehouse format stores for both the thirteen weeks ended 6/29/7 and all of fiscal 207 and with respect to the Company s estimated depreciation and amortization expenses, interest expense, tax rate and capital expenditures for fiscal 207. This presentation includes certain non-gaap financial measures, including adjusted diluted weighted average shares outstanding, adjusted net income, Adjusted diluted EPS, EBITDA and adjusted EBITDA. These non-gaap financial measures should be considered only as supplemental to, and not as superior to, financial measures prepared in accordance with accounting principles generally accepted in the United States ( GAAP ). Please refer to the slide labeled Non-GAAP Financial Measures, in the Appendix of this presentation for a reconciliation of the non-gaap financial measures included in this presentation to the most directly comparable financial measures prepared in accordance with GAAP.

3 Floor & Decor At a Glance Highly differentiated, multi-channel specialty retailer of hard surface flooring and accessories Broad, trend-right, in-stock assortment Everyday low price strategy Good / Better / Best merchandise selection Service oriented sales culture In-stock inventory One-stop shopping experience, with extensive service offering for the needs of all customers Eight consecutive years of double digit comparable store sales growth Decorative Accessories Diversified Product Breadth () Two Key Customer Segments (2) Accessories 6% Tile 3% 8% 2% Laminate / Luxury Vinyl Plank 9% Natural Stone 4% Wood Key Statistics Do It Yourself ( DIY ) 40% Current Store Count 72 (4) 206 Net Sales $,05 million 206 Comparable Store Sales Growth 9.4% 60% Pro Customer and Buy It Yourself ( BIY ) () Represents fiscal 206 sales by category. (2) Represents estimated sales by customer. (3) Please refer to the Appendix for a reconciliation of Adjusted EBITDA. (4) The store count used throughout this presentation excludes one 5,500 square foot design center in New Orleans, LA. 206 Adj. EBITDA (3) $08 million 2

4 Favorable Ongoing Category Tailwinds Hard Surface Retail Sales Growing () (in billions) $6.9 $4.7 $2.3 $0.2 Increasing Existing Home Sales in US (3) (mm households) Hard Surface Continued Market Shift Towards Hard Surface (2) 39% Hard Surface 5% 0.0 Jan-78 Jun-84 Dec-90 Jun-97 Dec-03 Jun-0 Dec-6 Rising Home Equity Values Nearing All-Time High (3) ($ in trillions) 5.0 $ % Soft Surface (Carpet) Sources: US Bureau of Economic Analysis, Federal Reserve Bank of St. Louis Economic Research. () Management and independent consultant estimates. (2) Catalina Floor Coverings Report. (3) Federal Reserve Bank of St. Louis Economic Research. 49% Soft Surface (Carpet) Jan-78 Oct-85 Jul-93 Apr-0 Dec-08 Oct-6 3

5 Sustained Robust Financial Performance Best in Class Comparable Store Sales Growth 8.4% 9.5% 9.8% 8.9% 2.9% 23.6% 26.8% 6.6%.4% Average: 6.4% 5.7% 7.0% 8.5% 6.3% 2.9% 0.4% 4.9% 22.4% 22.6% 9.3% 4.0% 2.8% Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q Q2 Q3 Q4 Q 202:.7% 203: 22.% 204: 5.8% 205: 3.5% 206: 9.4% 207 Net Sales ($mm) () Adjusted EBITDA ($mm) ()(2) $337 $444 $585 $772 $,05 $837 $,23 $33 $37 $5 $7 $08 $78 $ Q 206 Q Q 206 Q 207 Note: Comparable store sales begin on the first day of the 3 th month following the stores opening. () Excludes 53 rd week in 205. (2) Please refer to the Appendix for a reconciliation of Adjusted EBITDA. 4

6 Our Whitespace Potential is Significant Current Store Count: 72 Stores 400 () 2 2 Reno Sacramento Las Vegas 6 Los Angeles 3 Phoenix Tucson Salt Lake City 2 Denver San Antonio Distribution Center 6 Austin Chicago 6 2 New Jersey Columbus 2 Philadelphia 2 Washington DC Area Richmond Cincinnati Greensboro Nashville Knoxville Memphis 6 Atlanta Dallas/Ft. Worth Savannah 6 Houston Jacksonville New Orleans 2 Orlando Tampa 5 Ft. Myers 2 West Palm Beach 4 Miami (NY008LRP) 9769_.wor Potential We intend to grow our store base by ~20% annually over the next several years, with potential to grow to 400 stores nationwide in the next 5 years Note: Distribution centers average ~255,000 square feet. () Management commissioned third party study. 5

7 A Business Model and Value Proposition Like No Other Specialty Lumber Flooring Company Specialty Tile Flooring Company Home Improvement Centers Independent Stores Estimated Hard Surface Flooring Size per Store (sq. ft.) ~72,000 6,500 7,500 4,700 / 22,000 () 3,000 5,000 (2) Varies Stores ~4,400 Varies Flooring & Decorative Average SKUs per Store (3) Available, ,600 ~575 Varies In-Stock ~, ~335 Varies Tile: Stone: Wood: Various Categories Accessories: In-Stock Quantities High Low Low Product Dependent Variable Online only players are not able to compete effectively given size and weight of products, level of interaction, customer service and customization Sources: SEC filings, earnings transcripts, analyst research. () Per Company s Investor Conference presentation, June 207. (2) Based on management observations. (3) Does not include accessories and molding. 6

8 Our Global Supply Chain is a Competitive Advantage Elimination of agents and distributors creates most efficient conduit between manufacturer and end-user by sourcing directly Source from 80+ suppliers in over 8 countries; strong partnerships with vendors No supplier accounts for more than 0% of net sales Policies and procedures in place to address supplier compliance, including independent third party audits Regulatory Compliance: Focus on CARB, EPA, Lacey Act and Social Accountability Work with 3 rd party consultants for audits, testing and surveillance to ensure compliance and traceability Typical Hard Flooring Supply Chain Manufacturer Agent / Broker Importer Distributor Retailer Customer Added time / costs Typical F&D Supply Chain Manufacturer Direct Sourcing of Products Floor & Decor Customer Eliminates middleman; reduces time / costs Efficient supply chain allows F&D to offer low prices at attractive margins 7

9 Differentiated, Disciplined and Localized Merchandising Approach Broadest in-stock assortment Good, better and best price points Offer a wide range of styles to satisfy a broad customer base Combination of best-seller products and more unique, exclusive products Localized merchandising strategy utilized as a distinct competitive advantage Decorative Accessories Tile 290 SKUs 206 Sales Breakdown Accessories 6% Tile 8% 2% Laminate / Luxury Vinyl Plank 9% Natural Stone Broad Product Offering Wood 0 SKUs 3% 4% Wood Natural Stone 90 SKUs Vendor partnerships to apply new technologies and innovation Global sourcing Laminate / LVP 90 SKUs Decorative Accessories 85 SKUs Accessories,525 SKUs Note: Number of SKUs reflects in-stock average SKUs per store. Excludes opportunity buys and discontinued inventory. 8

10 We Bend Over Backwards for Our Pro Customer Highest Pro Customer Mix in the Industry () 60% 20% 40% ~35% ~35% Attractive customer base given: Loyalty Shop often High ticket purchases Refer customers Help increase brand awareness 40% 0% () (2) (3) (4) (5) Pro Buy It Yourself () Management commissioned third party study. (2) Investor Conference, March 207. (3) Investor Relations Presentation, August 206. (4) Investor Conference, June 207. (5) Management estimates based on equity analyst reports. 9

11 Experienced Management Consistently Delivers by Focusing on the Customer Management Team Decentralized Culture Name Title Year Joined F&D Prior Experience Every store led by a Chief Executive Tom Taylor Chief Executive Officer 202 Merchant ( CEM ) Commitment to training at all levels Vincent West Founder and Vice Chairman 2000 West Lumber Engaged with the communities we serve Trevor Lang EVP, Chief Financial Officer 20 Management team has ownership in the Lisa Laube EVP, Chief Merchandising Officer 202 business Brian Robbins EVP of Supply Chain 203 David Christopherson SVP, Secretary & General Counsel 203 0

12 We Have Multiple Channels for Growth Open Stores in New and Existing Markets Increase Comparable Store Sales Expand Connected Customer Experience Continue to Invest in the Pro Customer Enhance Margins through Increased Operating Leverage

13 Recent Financial Results and FY 207 Guidance First Quarter 207 Financial Results ($ in millions, except store and per share data) Three Months Ended 3/3/206 3/30/207 % Increase Warehouse format store count % Net sales $235 $ % Comparable store sales growth 22.4% 2.8% n/a Adjusted diluted EPS () $0.07 $ % Fiscal Year 207 Guidance Fiscal Year Ended 2/29/206 2/28/207 % Increase Warehouse format store count % Net sales $,05 $,285 - $,304 22% to 24% Comparable store sales growth 9.4% 8% to 0% n/a Adjusted diluted EPS () $0.45 $ $ % to 27% () Please refer to the Appendix for a reconciliation of Adjusted diluted EPS. 2

14 Compelling Investment Proposition for Floor & Decor Why Invest in Floor & Decor? Unparalleled Customer Value Proposition Long-Term Growth Targets Unit Growth (Annual) ~20% 2 Unique and Inspiring Shopping Environment 3 Differentiated Pro Customer Experience Store Potential ~400 stores 4 Decentralized Culture with Motivated Store-Level Team 5 Sophisticated Global Supply Chain Comparable Store Sales Growth (Annual) Mid-single digits 6 Proven Management Team 7 Multiple Growth Opportunities Net Income Growth (Annual) ~25% Note: These goals are forward-looking, are subject to significant business, economic, regulatory and competitive uncertainties and contingencies, many of which are beyond the control of the Company and its management, and are based upon assumptions with respect to future decisions, which are subject to change. Actual results will vary and those variations may be material. For discussion of some of the important factors that could cause these variations, please consult the Risk Factors section of the Company s final prospectus. Nothing in this presentation should be regarded as a representation by any person that these goals will be achieved, and the Company undertakes no duty to update its goals. 3

15 Appendix

16 Non-GAAP Financial Measures To supplement the Company's financial information presented in accordance with GAAP and aid understanding of the Company's business performance, the Company uses certain non-gaap financial measures (namely adjusted diluted weighted average shares outstanding, adjusted net income, Adjusted diluted EPS, EBITDA and adjusted EBITDA) to evaluate our operating and financial performance and to compare such performance to that of prior periods. We also use these non-gaap financial measures in making operational and financial decisions and in establishing operational goals. We believe that providing these non-gaap financial measures to investors, as a supplement to GAAP financial measures, helps investors to (i) evaluate our operating and financial performance and future prospects, (ii) compare financial results across accounting periods, (iii) better understand the long-term performance of our core business, (iv) to determine covenant compliance with respect to our credit facilities and (v) evaluate trends in our business, all consistent with how management and our board of directors evaluates such performance and movements. Under the SEC rules, non-gaap financial measures may be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. Adjusted diluted weighted average shares outstanding: We define adjusted diluted weighted average shares outstanding as the weighted average shares outstanding during the relevant period plus the weighted average impact of issuing 0. million shares in our IPO. We adjust diluted weighted average shares outstanding for the impact of the IPO as we believe it is useful to investors to better analyze the Company s ongoing core financial performance in the periods shown to reflect the higher share count associated with the IPO. Adjusted net income: We define adjusted net income as net income before costs related to the September 30, 206 refinancing (as described in the Company s final prospectus, dated April 26, 207 and filed with the SEC in accordance with Rule 424(b) of the Securities Act of 933 on April 28, 207) (the September 206 Refinancing ), the IPO, the Term Loan Repricing, legal settlement and loss on early extinguishment of debt and income tax expenses due to the adjustments for the September 206 Refinancing, the IPO, the Term Loan Repricing, legal settlement and loss on early extinguishment of debt. We adjust interest expense for the September 206 Refinancing because we believe that presenting the increased interest expense allows investors to better understand and analyze the Company s core financial performance in the periods shown, including the higher debt incurred as part of the September 206 Refinancing and associated higher interest in the thirteen weeks ended March 30, 207. We adjust for estimated lowered interest expense due to the IPO because we believe that presenting the decreased interest expense allows investors to better understand and analyze the Company s ongoing core financial performance in the periods shown with lower interest expense associated with our IPO. We adjust for estimated lowered interest expense due to the Term Loan Repricing because we believe that presenting the decreased interest expense allows investors to better understand and analyze the Company s ongoing core financial performance in the periods shown. We adjust for legal settlements and loss on early extinguishment of debt because we believe these are discrete and not a normal part of our business and removing them allows investors to better understand and analyze the Company s financial performance in the periods shown. We included the estimated income tax effect of the above mentioned adjustments when presenting adjusted net income because we believe that presenting the estimated income tax effect of adjustments allows investors to better understand and analyze the Company s core financial performance in the periods shown. Adjusted diluted EPS: We define adjusted diluted EPS as adjusted net income divided by adjusted diluted weighted average shares outstanding. EBITDA and Adjusted EBITDA: We define EBITDA as net income before interest, loss on early extinguishment of debt, taxes, depreciation and amortization. We define Adjusted EBITDA as net income before interest, loss on early extinguishment of debt, taxes, depreciation and amortization, adjusted to eliminate the impact of certain items that we do not consider indicative of our core operating performance. EBITDA and Adjusted EBITDA are key metrics used by management and our board of directors to assess our financial performance and enterprise value. We believe that EBITDA and Adjusted EBITDA are useful measures, as they eliminate certain expenses that are not indicative of our core operating performance and facilitate a comparison of our core operating performance on a consistent basis from period to period. We also use Adjusted EBITDA as a basis to determine covenant compliance with respect to our credit facilities, to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions, and to compare our performance against that of other peer companies using similar measures. EBITDA and Adjusted EBITDA are also used by analysts, investors and other interested parties as performance measures to evaluate companies in our industry. Use of these non-gaap measures may differ from similar measures reported by other companies. Each of these non-gaap measures has its limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of the Company's results as reported under GAAP. 5

17 Non-GAAP Financial Measures Guidance Reconciliation - Fiscal Year 207 (in millions) (unaudited) EBITDA and Adjusted EBITDA Fiscal Year Ended 2/28/207 2/29/206 Low End High End Actual Net income (GAAP): $49. $52. $43.0 Depreciation and amortization Interest expense Loss on early extinguishment of debt Income tax expense EBITDA Stock compensation expense Loss on asset disposal Legal settlement 0.5 IPO costs Adjusted EBITDA $37.9 $42.0 $08.4 6

18 Non-GAAP Financial Measures Guidance Reconciliation - Fiscal Year 207 (in millions, except per share data) (unaudited) Adjusted diluted weighted average shares outstanding Fiscal Year Ended 2/28/207 2/29/206 Low End High End Actual Diluted weighted average shares outstanding (GAAP) Adjustments for issuance of shares at IPO Adjusted diluted weighted average shares outstanding Note: Certain numbers may not sum due to rounding. Adjusted net income and Adjusted diluted EPS Fiscal Year Ended 2/28/207 2/29/206 Low End High End Actual Net income (GAAP): $49. $52. $43.0 Interest due to September 206 refinancing (8.8) Interest due to IPO Term Loan Repricing Legal settlement 0.5 Loss on early extinguishment of debt Tax impact of adjustments to net income (3.6) (3.6) (4.4) Adjusted net income $55.3 $58.3 $44.2 Adjusted weighted average shares outstanding Adjusted diluted EPS $0.54 $0.57 $0.45 7

19 Non-GAAP Financial Measures Reconciliation of GAAP to Non-GAAP Financial Measures (in thousands) (unaudited) EBITDA and Adjusted EBITDA Thirteen Weeks Ended 3/30/207 3/3/206 Net income as reported $,28 $7,0 Depreciation and amortization 7,768 5,337 Interest expense 5,44 2,486 Income tax expense 6,30 4,375 EBITDA 30,440 9,299 Stock compensation expense Loss on asset disposal 47 IPO costs 572 Adjusted EBITDA $ 3,897 $ 20,0 8

20 Non-GAAP Financial Measures Reconciliation of GAAP to Non-GAAP Financial Measures (in thousands, except per share data) (unaudited) Adjusted diluted weighted average shares outstanding Thirteen Weeks Ended 3/30/207 3/3/206 Diluted weighted average shares outstanding (GAAP) 88,645 86,669 Adjustments for issuance of shares at IPO 0,47 0,47 Adjusted diluted weighted average shares outstanding 98,792 96,86 Adjusted net income and Adjusted diluted EPS Thirteen Weeks Ended 3/30/207 3/3/206 Net income as reported $,28 $7,0 Interest due to September 206 refinancing (2,928) Interest due to IPO 2,730 2,730 Term Loan Repricing Tax impact of adjustments to net income (,9) (37) Adjusted net income $3,034 $7,6 Adjusted diluted weighted average shares outstanding 98,792 96,86 Adjusted diluted EPS $0.3 $0.07 9