Coastal Reports Record Q3, 2012 Revenue of $50.3 Million
9/13/2012 4:15 PM EST
Coastal Contacts Inc
Quarterly report
Coastal Reports Record Q3, 2012 Revenue of $50.3 Million
VANCOUVER, British Columbia, 2012-09-13 22:15 CEST (GLOBE NEWSWIRE) -- Coastal
Contacts Inc. ("Coastal.com" or "Coastal" or "the Company") (TSX:COA)
(Stockholm:COA) one of the largest online retailers of vision care products in
the world, today announced its financial results for the third fiscal quarter
ended July 31, 2012.
During the third quarter of fiscal 2012 Coastal Contacts generated record
revenues of $50.3 million dollars.
Mr. Roger Hardy, Coastal's Founder and CEO, commented, "We continued to make
significant progress in Coastal's key strategic areas throughout the third
quarter.
Our core contact lens business continued its stable and predictable growth,
generating strong operating margins greater than 10% on a consolidated basis,
which the Company is using to fund growth in the large and attractive glasses
category. Contact lens revenues grew 3% during the third quarter and 5% for the
first nine months of fiscal 2012.
Our glasses category grew to $45.4 million in the twelve months ended July 31,
2012 compared to $34.3 million in the preceding twelve months, an increase of
32%.
Our early stage online glasses business in the United States experienced a
revenue increase of 71% while glasses units grew 77% during the third quarter,
as a result of our strategy to drive customer adoption. We are encouraged by
our growth and remain committed to building out the online eyewear segment in
the U.S. Replicating the successful Canadian business model in this large and
highly attractive market remains a key focus and we plan to continue investment
spending in the coming quarters in order to further accelerate our growth and
market penetration.
Our glasses business in Canada showed average order size increases of 60% when
compared with the same period in 2011, as a result of product and marketing
investments designed to serve a growing return customer base in this now well
established and profitable business.
Improvements to our glasses offering on our North American sites under the
"Real Style, Real Value" theme is enriching our customer experience and
improving retention rates by offering greater selection and style.
We focused our investments on the core North American glasses market, where we
anticipate building a leadership position. We are taking a similar focused
approach in Europe as we shift investments from multiple markets to those where
Coastal has leadership positions.
Our investments in in-house manufacturing, inventory, processing systems and
customer service are creating significant barriers that we believe result in a
customer experience which will propel Coastal forward in the coming quarters.
We closely monitor NPS (Net Promoter Scores) to gain metric driven feedback on
how we are viewed by our customers. We view NPS scores as one of the leading
indicators of future sales and believe our industry leading customer experience
will differentiate Coastal from our competitors."
Some highlights of the quarter:
-- Record third quarter sales of $50.3 million
-- Total order volume was approximately 584,000
-- Total glasses shipped was approximately 248,000 units
-- Glasses shipped into U.S. market increased 77% to 126,000 units,
representing 51% of total glasses units shipped in the quarter
-- Total glasses sales in the quarter were $11.5 million with gross profit
margins of 48%
-- Total contact lens sales increased 3% to $38.8 million with gross profit
margins of 41%
-- Coastal grew its base of vision corrected customers by 27% to approximately
4.1 million compared to 3.3 million, year over year
-- Coastal's in-house designer brands of eyewear comprised 70% of total
glasses units shipped
-- Initiated investment in a second production line to manufacture free form
progressive lenses in-house to address growing demand and market
opportunity
Year to date highlights include:
-- Total pairs of glasses shipped were 706,000, an increase of 27 %
-- Overall revenues increased 8 % to $145 million
-- Glasses revenues grew 20 % to $34 million
-- Contact lens revenues grew 5 % to $111 million
-- Adjusted EBITDA was $1.8 million compared to $0.9 million
Mr. Hardy commented, "It's been an exciting year so far at Coastal as we
shipped approximately 1.7 million orders during the first nine months of fiscal
2012. Our approach is becoming even more focused on specific markets which are
attractive for a variety of strategic reasons. Our investments in building the
industry's best customer experience is designed to cause our customers to
advocate on our behalf, sharing our unbeatable combination of value, quality,
selection and speed.
It is an exciting time at Coastal and we look forward to reporting continued
progress in the coming quarters."
Key financial metrics for the third quarter of 2012 compared to the same period
in 2011:
-- Gross profit was $21.4 million or 43% of sales, compared to $21.1 million
or 43% of sales
-- Fulfillment expenses remained constant at 10% of sales
-- Selling and Marketing expenses decreased to $12.2 million or 24% of sales
compared with $12.6 or 25% of sales
-- General and Administration expenses were $5.2 million or 10% of sales
compared with $5.2 or 11% of sales
-- Adjusted EBITDA was ($0.1) million, compared to ($0.4) million
-- Loss for the period was $1.9 million or $0.07 per share, compared to a loss
of $1.5 million or $0.06 per share (earnings per share for the period were
calculated based on the number of outstanding shares after the one new for
two old share consolidation that was effected September 5, 2012)
-- Non-cash share-based compensation remained steady at $0.2 million for the
quarter
-- Cash and cash equivalents of $15.4 million at the end of the quarter
Subsequent to the end of the third fiscal quarter, Coastal announced a share
consolidation effective September 5, 2012. The consolidation was made on the
basis of two pre-consolidation common shares for each one post-consolidation
common share. Shareholders of the Company authorized the Consolidation at the
Company's Annual and Special Meeting of Shareholders held on April 20, 2012.
Company shares trade under the symbol "COA" and new CUSIP number 19044R207.
The Consolidation reduces the number of outstanding common shares of the
Company from approximately 56.7 million to approximately 28.4 million.
COASTAL CONTACTS INC.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (unaudited)
(Stated in Thousands of Canadian Dollars)
July 31, October 31,
2012 2011
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ASSETS
Current assets
Cash and cash equivalents $ 15,403 $ 16,864
Trade and other receivables 8,059 6,013
Inventory 21,510 26,228
Prepaid expenses 3,391 3,125
Income tax receivable -- 79
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Total current assets 48,363 52,309
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Non-current assets
Deferred tax asset 85 97
Property, equipment and leasehold improvements 8,844 8,960
Intangible assets 10,928 10,882
Goodwill 8,177 8,518
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Total non-current assets 28,034 28,457
------------------------------------------------------------------------------
TOTAL ASSETS $ 76,397 $ 80,766
==============================================================================
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables $ 33,107 $ 36,098
Provisions 1,063 1,057
Income taxes payable 519 --
Finance lease obligation 2,252 2,646
Operating line of credit 3,799 --
Other current liabilities 252 280
------------------------------------------------------------------------------
Total current liabilities 40,992 40,081
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Non-current liabilities
Other long-term liabilities 723 859
Finance lease obligation 490 1,911
Long-term operating line of credit -- 1,500
Deferred tax liability 2,992 3,306
------------------------------------------------------------------------------
Total non-current liabilities 4,205 7,576
------------------------------------------------------------------------------
Total liabilities 45,197 47,657
==============================================================================
Equity
Share capital
Authorized:
Unlimited common shares without par value
Unlimited Class A preferred shares without par value
Issued and outstanding:
28,355,745 common shares [2011- 28,110,579] 41,368 40,667
Share-based payments reserve 3,468 2,934
Accumulated other comprehensive earnings (loss) (473) 372
Deficit (13,163) (10,864)
------------------------------------------------------------------------------
Total Equity 31,200 33,109
==============================================================================
TOTAL LIABILITIES AND EQUITY $ 76,397 $ 80,766
==============================================================================
COASTAL CONTACTS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (unaudited)
(Stated in Thousands of Canadian Dollars, except per share amounts)
Three months ended Nine months ended July
July 31 31
-----------------------------------------------
Notes 2012 2011 2012 2011
--------------------------------------------------------------------------------
Sales $ 50,324 $ 49,589 $ 145,385 $ 134,036
Cost of sales 28,898 28,482 84,130 77,291
================================================================================
Gross profit 21,426 21,107 61,255 56,745
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Fulfillment 5,090 4,666 13,964 13,066
Selling and marketing 12,180 12,582 33,483 31,978
General and administration 5,227 5,221 14,919 15,757
--------------------------------------------------------------------------------
Results from operating (1,071) (1,362) (1,111) (4,056)
activities
Financing costs (income) 848 (261) 917 (119)
--------------------------------------------------------------------------------
Loss before income taxes (1,919) (1,101) (2,028) (3,937)
Income tax expense (recovery) - (43) 406 527 643
current
Income tax recovery - deferred (15) (22) (256) (781)
--------------------------------------------------------------------------------
Net income tax expense (58) 384 271 (138)
(recovery)
--------------------------------------------------------------------------------
Net loss for the period (1,861) (1,485) (2,299) (3,799)
---------------------------------
Other comprehensive loss
Foreign currency translation (33) (624) (845) (125)
differences
--------------------------------------------------------------------------------
Total comprehensive loss for the $ (1,894) $ (2,109) $ (3,144) $ (3,924)
period
================================================================================
Basic and diluted loss per share $ (0.07) $ (0.06) $ (0.08) $ (0.14)
================================================================================
Weighted average number of 28,335,556 27,704,882 28,226,417 27,663,191
common shares outstanding -
basic and diluted
================================================================================
Coastal Contacts will host a conference call to review the financial results
and Company operations on Thursday, September 13, 2012 at 4:30pm ET.
Participating in the call will be Roger Hardy, Founder and CEO, Gary Collins,
President and Nick Bozikis, CFO.
To attend the call, participants may dial:
North American Toll Free 1-888-892-3255
Sweden 46 852 503 436
A replay of the call will be available for 7 days. To access the replay
listeners may dial:
Local/International 1-800-937-6305
Passcode 561271
The following selected financial information is qualified in its entirety by,
and should be read in conjunction with our audited consolidated financial
statements for the fiscal year ended October 31, 2011 and accompanying notes
and Management's Discussion and Analysis which may be viewed on SEDAR at
www.sedar.com.
Coastal's risks and uncertainties are discussed in detail in the Company's
Annual Information Form dated December 14, 2011, which is also available on
SEDAR.
Adjusted EBITDA as referenced in this news release is a Non-IFRS measure and is
defined as earnings before interest, taxes, depreciation and amortization,
share based compensation and restructuring charges. See "Supplemental Non-IFRS
Measures" herein.
The following table provides a reconciliation of net income to Adjusted EBITDA:
For the three months For the nine months
ended July 31, ended July 31,
------------------------------------------
($000's) 2012 2011 2012 2011
------------------------------------------------------------------------
Net loss (1,861) (1,485) (2,299) (3,799)
Depreciation and amortization 752 757 2,190 2,006
Interest expense, net 98 75 329 210
Income tax expense (recovery) (58) 384 271 (138)
Share-based payments expense 171 240 747 600
Foreign exchange (gain) loss 750 (336) 588 (330)
Management change costs -- -- -- 2,335
------------------------------------------------------------------------
Adjusted EBITDA (148) (375) 1,826 884
========================================================================
Transition to International Financial Reporting Standards
Coastal adopted IFRS for the 2012 fiscal year as required by the CICA
Accounting Standards Board. The financial statements, including the fiscal 2011
comparative figures are prepared in accordance with IFRS and IAS 34, Interim
Financial Reporting. Reconciliations prepared in accordance with IFRS 1,
First-time Adoption of International Financial Reporting Standards are provided
in note 12 of the unaudited condensed consolidated interim financial
statements. The transition to IFRS did not result in a material impact on the
Coastal's business functions or activities.
Supplemental Non-IFRS Measures
Adjusted EBITDA is a non-IFRS measure that does not have any standardized
meaning prescribed by IFRS and is therefore unlikely to be comparable to
similar measures presented by other companies. Adjusted EBITDA should be
considered in addition to, and not as a substitute for, net earnings, cash
flows and other measures of financial performance and liquidity reported in
accordance with IFRS.
Adjusted EBITDA is a measure we believe is useful in assessing performance and
highlighting trends on an overall basis. Adjusted EBITDA differs from the most
comparable IFRS measure, net earnings, primarily because it does not include
interest, income taxes, amortization, depreciation, restructuring cost and
share-based compensation expense.
New orders, reorders, shipped orders and active customers are non-IFRS measures
that do not have a standardized meaning prescribed by IFRS and are therefore
unlikely to be comparable to similar measures presented by other companies. New
orders are orders shipped to new customers, net of returns. Reorders are orders
shipped to returning customers, net of returns.
About Coastal Contacts Inc.:
Coastal Contacts, Inc. is one of the largest online retailers of vision care
products in the world. Coastal empowers customers to easily browse, try on and
buy eyewear—saving time, money and sanity. With every pair of qualifying frames
purchased, Coastal donates a pair to someone in need through its Change the
View project. Founded in 2000, Coastal designs, produces and distributes the
largest selection of glasses and contact lenses on the Internet, including a
unique combination of designer glasses, contact lenses, sunglasses, and vision
care accessories. Coastal serves customers in more than 150 countries through
the Coastal Contacts family of websites including: Coastal.com,
ClearlyContacts.ca, Lensway.com, Lensway.co.uk, Lensway.se, Lensway.com.br,
ClearlyContacts.com.au, ClearlyContacts.co.nz, Contactsan.com, and
Coastallens.com.
Cautionary Note Regarding Forward-Looking Information and Statements
Certain of the statements and information contained in this news release which
are not current statements or historical facts constitute "forward-looking
information" within the meaning of applicable Canadian Securities laws and
"forward-looking statements" within the meaning of the United States Private
Securities Litigation Reform Act of 1995. Forward-looking information and
statements are typically identified by use of the words "may", "would",
"could", "will", "intend", "plan", "anticipate", "believe", "estimate",
"expect", "goal", "target", "should", "likely", "potential", "continue",
"project", "forecast", "prospects", and similar expressions.
Forward-looking information and statements are based on the then-current
expectations, beliefs, assumptions, estimates and forecasts about our business
and the industry and markets in which we operate. Forward-looking information
and statements are not guarantees of future performance and involve risks,
uncertainties and assumptions which are difficult to predict.
Persons reading this news release are cautioned that forward-looking
information and statements are only predictions, and that our actual future
results or performance may be materially different due to a number of factors.
These factors include, but are not limited to: changes in the market; potential
downturns in economic conditions; our ability to implement our business
strategies; competition from traditional and online retailers; limited
suppliers; limited availability of inventory; inventory risk; disruption in our
distribution facilities; mergers and acquisitions; foreign currency exchange
rate fluctuations; regulatory requirements; demand for contact lenses, glasses
and related vision care products; the risk that we will not be successful in
defending against litigation; dependence on the internet; and other factors
referred to under the section entitled "Risk Factors" in our most recently
filed Annual Information Form, dated December 14, 2011. These risks, as well
as others, could cause actual results and events to vary significantly.
Accordingly, readers should not place undue reliance on forward-looking
information and statements, which are qualified in their entirety by this
cautionary note.
The forward-looking information and statements contained herein are made as of
the date of this news release and we expressly disclaim any intent or
obligation to update such information or statements except as required by
applicable law.
For Further Information:
Terry Vanderkruyk
Vice President, Corporate Development
Coastal Contacts Inc.
604.676.4498
or
Liolios Group Inc.
Scott Liolios or Cody Slach
Tel 949.574.3860