First Quarter Highlighted by Industry Recognition and Focused Execution

Company Raises Financial Outlook for 2023

CHARLOTTE, N.C., May 09, 2023 (GLOBE NEWSWIRE) -- Snap One Holdings Corp. (Nasdaq: SNPO) (“Snap One,” the “Company,” “we,” or “our”), a provider of smart living products, services, and software to professional integrators, reported financial results for the fiscal first quarter ended March 31, 2023.

Fiscal First Quarter 2023 and Recent Operational Highlights

• Continued investment to maintain a clear leadership position in the professionally installed smart living industry
  • Awarded 14 2023 CE Pro ‘Quest for Quality’ awards across 22 categories included in its survey of professional integrators, reflecting the Company’s service excellence
• Delivered on new product innovation and enhanced software platform capabilities
  • Launched exciting new solutions across outdoor audio and lighting, control, surveillance, and networking
  • Received two ‘Mark of Excellence’ awards at the 2023 Consumer Electronics Show
• Expanded local branch presence with the opening of a Fort Myers, FL location, bringing the total number to 41 North American branches at the end of the quarter

Management Commentary
“Our team navigated an uncertain environment, including channel inventory destocking headwinds, and delivered improved bottom-line results, highlighting the resiliency of our business model and the integrator partners we serve,” said Snap One CEO John Heyman. “We remain focused on executing controllable strategies to grow our share of wallet with existing integrator partners and to drive expanded profitability. During the period, we took several meaningful steps in support of this plan including launching numerous exciting new products, opening an additional domestic branch, completing a strategic sales team optimization, and executing targeted marketing programs. We have also driven significant contribution margin rate expansion due to the cumulative impact of our price adjustments enacted in response to supply chain and input cost inflation, which has begun to ease. We remain on track with our operating margin expansion plan for the year.”

Fiscal First Quarter 2023 Financial Results
Results compare 2023 fiscal first quarter end (March 31, 2023) to 2022 fiscal first quarter end (April 1, 2022) unless otherwise indicated. The Company’s fiscal first quarter in both years reflects a 13-week period. Results are presented on an as reported basis, unless otherwise indicated.

• Net sales decreased 9.2% to $252.0 million from $277.4 million in the comparable year-ago period, primarily attributable to channel inventory destocking headwinds.
• Selling, general and administrative (SG&A) expenses increased 8.4% to $93.8 million (37.2% of net sales) from $86.5 million (31.2% of net sales) in the comparable year-ago period. As a percentage of net sales, SG&A increased due to a lower net sales base in the period compared to the year-ago period as well as due to increases in fair value adjustment to contingent value rights, equity-based compensation, and severance cost.
• Net loss increased to $14.5 million (-5.8% of net sales) compared to net loss of $2.3 million (-0.8% of net sales) in the comparable year-ago period.
• Contribution margin, a non-GAAP measurement of operating performance reconciled below, increased 1.1% to $106.2 million (42.1% of net sales) from $105.1 million (37.9% of net sales) in the comparable year-ago period.
• Adjusted EBITDA, a non-GAAP measurement of operating performance reconciled below, decreased 3.9% to $22.7 million (9.0% of net sales) compared to $23.6 million (8.5% of net sales) in the comparable year-ago period.
• Adjusted net income, a non-GAAP measurement of operating performance reconciled below, decreased to $3.4 million (1.3% of net sales) from $10.7 million (3.9% of net sales) in the comparable year-ago period.
• Net cash used in operating activities totaled $2.6 million, compared to net cash used in operating activities of $23.0 million in the comparable year-ago period.
• As of March 31, 2023, cash and cash equivalents were $34.5 million, compared to $21.1 million at the end of fiscal year 2022.
• Free cash flow, a non-GAAP measurement of operating performance reconciled below, totaled $(11.8) million, compared to $(26.3) million in the comparable year-ago period.
  
  

Stock Repurchase Program
As of March 31, 2023, Snap One had repurchased 296,467 shares of its common stock for an aggregate amount of $3.1 million pursuant to the Company’s $25 million stock repurchase program authorization through the end of 2023.

Fiscal 2023 Financial Outlook
“Our full year 2023 outlook remains solid as we seek to move past the channel inventory destocking headwind, drive operating margin expansion, and enhance our liquidity position,” Heyman continued. “We are maintaining a pragmatic view of topline performance given the persistent macroeconomic uncertainty and channel inventory destocking headwind in the short-term. However, our recent performance provides us with improved visibility into our profitability outlook.”

“With these factors in mind, we are tightening our full-year net sales and increasing our full-year adjusted EBITDA guidance ranges from our previously published outlook. We now expect our net sales in fiscal year ending December 29, 2023 to range between $1.06 billion and $1.09 billion. For fiscal 2023, we expect adjusted EBITDA¹ to range between $110 million and $118 million which represents a 20 basis point improvement in adjusted EBITDA margin relative to our prior guidance. Overall, we remain confident in our 2023 outlook and the long-term opportunity for Snap One.”

Supplemental Earnings Presentation
The Company has posted a supplemental earnings presentation accompanying its fiscal first quarter 2023 results to the Events & Presentations section of its Investor Relations website, which can be found at investors.snapone.com.

Conference Call
Snap One management will hold a conference call today, May 9, 2023 at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time) to discuss these results.

Company CEO John Heyman and CFO Mike Carlet will host the call, followed by a question-and-answer period.

Registration Link: Click here to register

Please register online at least 10 minutes prior to the start time. If you have any difficulty with registration or connecting to the conference call, please contact Gateway Investor Relations at 949-574-3860.

The conference call will be broadcast live and available for replay here and via the Investor Relations section of Snap One's website.

About Snap One
As a leading distributor of smart living technology, Snap One empowers its vast network of professional integrators to deliver entertainment, connectivity, automation, and security solutions to residential and commercial end users worldwide. Snap One distributes an expansive portfolio of proprietary and third-party products through its intuitive online portal and local branch network, blending the benefits of e-commerce with the convenience of same-day pickup. The Company provides software, award-winning support, and digital workflow tools to help its integrator partners build thriving and profitable businesses. Additional information about Snap One can be found at snapone.com.

Snap One intends to use its website as a means of disclosing material, non-public information and for complying with its disclosure obligations under Regulation FD. Such disclosures will be included in the Investor Relations section of the Snap One website at investors.snapone.com. Accordingly, investors should monitor such portion of the website, in addition to following the Company’s press releases, Securities and Exchange Commission (“SEC”) filings and public conference calls and webcasts.

Non-GAAP Financial Measures
In addition to the financial measures prepared in accordance with generally accepted accounting principles in the United States (“GAAP”), this press release contains certain non-GAAP financial measures, including contribution margin, adjusted EBITDA, adjusted net income, and free cash flow. A non-GAAP financial measure is generally defined as a numerical measure of a company’s financial or operating performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with GAAP. We use the following non-GAAP measures to help us monitor the performance of our business, measure our performance, identify trends affecting our business and assist us in making strategic decisions:

Contribution margin, which is defined as net sales less cost of sales, exclusive of depreciation and amortization, divided by net sales.

Adjusted EBITDA, which is defined as net loss, plus interest expense, income tax benefit, depreciation and amortization, other expense (income), net further adjusted to exclude equity-based compensation, acquisition- and integration-related costs and certain other non-recurring, non-core, infrequent or unusual charges as set forth in the reconciliation in this section below.

Adjusted net income, which is defined as net loss plus amortization further adjusted to exclude equity-based compensation, acquisition- and integration-related costs, IPO cost, expense related to interest rate cap and certain non-recurring, non-core, infrequent or unusual charges, including the estimated tax impacts of these adjustments as set forth in the reconciliation in this section below.

Free cash flow, which is defined as net cash (used in) provided by operating activities less capital expenditures (which consist of purchases of property and equipment as well as purchases of information technology, software development and leasehold improvements).

Contribution margin, adjusted EBITDA, adjusted net income and free cash flow are key measures used by management to understand and evaluate our financial performance, trends and generate future operating plans, make strategic decisions regarding the allocation of capital, and analyze investments in initiatives that are focused on cultivating new markets for our products and services. We believe contribution margin, adjusted EBITDA, adjusted net income and free cash flow are useful measurements for analysts, investors, and other interested parties to evaluate companies in our markets as they help identify underlying trends that could otherwise be masked by certain expenses that we do not consider indicative of our ongoing performance.

Contribution margin, adjusted EBITDA, adjusted net income and free cash flow have limitations as analytical tools. These measures are not calculated in accordance with GAAP and should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. In addition, contribution margin, adjusted EBITDA, adjusted net income and free cash flow may not be comparable to similarly titled metrics of other companies due to differences among the methods of calculation.

Cautionary Statements Concerning Forward-Looking Statements
Certain statements contained in this press release constitute forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, as amended, which reflect our current views with respect to, among other things, our operations, earnings and financial performance, including our guidance for 2023. You can identify these forward-looking statements by the use of words such as “outlook,” “indicator,” “believes,” “project,” “forecast,” “targets,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “scheduled,” “estimates,” “anticipates” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. We believe these factors include but are not limited to the risks related to our business and industry, risks related to our products, risks related to our manufacturing and supply chain, risks related to our distribution channels, risks related to laws and regulations, risks related to cybersecurity and privacy, risks related to intellectual property, risks related to our international operations, risks related to our indebtedness, risks related to interest rate and exchange rate volatility, risks related to our financial statements, risks related to our common stock, and other risks as described under the section entitled “Risk Factors” in our latest Annual Report on Form 10-K filed with the SEC, as such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report and in our other periodic filings. The forward-looking statements speak only as of the date of this report, and, except as required by law, we undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

Contacts

Media:

Danielle Karr
Director, Public Relations & Events
Danielle.Karr@SnapOne.com

Investors:

Tom Colton and Matt Glover
Gateway Investor Relations
949-574-3860
IR@SnapOne.com

-Financial Tables to Follow-

Snap One Holdings Corp. and Subsidiaries
Condensed Consolidated Statements of Operations
(unaudited, in thousands, except per share amounts)

Snap One Holdings Corp. and Subsidiaries
Condensed Consolidated Balance Sheets
(unaudited, in thousands, except par value)

Snap One Holdings Corp. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)

Snap One Holdings Corp. and Subsidiaries
Reconciliation of Net Loss to Adjusted EBITDA
(unaudited, in thousands)

Snap One Holdings Corp. and Subsidiaries
Reconciliation of Net Loss to Adjusted Net Income
(unaudited, in thousands)

(a)   Represents costs directly associated with acquisitions and acquisition-related integration activities. These costs also include certain restructuring costs (e.g., severance) and other third-party transaction advisory fees associated with planned and completed acquisitions.
(b)   Represents non-recurring expense related to payments to certain pre-IPO owners in lieu of their participation in the Tax Receivable Agreement (“TRA”). Management does not believe such costs are indicative of our ongoing operations as they are one-time awards specific to the establishment of the TRA.
(c)   Represents costs associated with the implementation of enterprise resource planning systems, customer resource management systems, and business intelligence systems as part of our initiative to modernize our IT infrastructure.
(d)   Represents an adjustment related to the fair value of deferred revenue related to the Control4 acquisition.
(e)   Represents noncash gains and losses recorded from fair value adjustments related to contingent value right (“CVR”) liabilities. Fair value adjustments related to CVR liabilities represent potential obligations to the prior sellers in conjunction with the acquisition of the Company by investment funds managed by Hellman & Friedman, LLC (“H&F”) in August 2017.
(f)   Represents expenses incurred related to deferred payments to employees associated with historical acquisitions. The deferred payments are cash retention awards for key personnel from the acquired companies and are expected to be paid to employees through 2023. Management does not believe such costs are indicative of our ongoing operations as they are one-time awards specific to acquisitions and are incremental to our typical compensation costs incurred and we do not expect such costs to be reflective of future increases in base compensation expense.
(g)   Severance cost associated with various restructuring actions such as warehouse relocation, departmental reorganization and focused reduction in workforce.
(h)   Represents professional service fees associated with the preparation for Sarbanes-Oxley (“SOX”) compliance, the implementation of new accounting standards and accounting for non-recurring transactions.
(i)   Represents non-recurring expenses related to consulting, restructuring, and other expenses which management believes are not representative of our operating performance.
(j)   Represents the tax impacts with respect to each adjustment noted above after taking into account the impact of permanent differences using the statutory tax rate related to the applicable federal and foreign jurisdictions and the blended state tax rate.

Snap One Holdings Corp. and Subsidiaries
Contribution Margin
(unaudited, in thousands)

(a)   Cost of sales for the three months ended March 31, 2023 and April 1, 2022, excludes depreciation and amortization of $15,202 and $14,889, respectively.

Snap One Holdings Corp. and Subsidiaries
Free Cash Flow
(unaudited, in thousands)

Snap One Holdings Corp. and Subsidiaries
Revenue by Geography
(unaudited, in thousands)

(a)   Domestic integrators is defined as professional “do-it-for-me” integrator customers who transact with Snap One through a traditional integrator channel in the United States, excluding the impact of revenue earned by our Access Networks enterprise grade network solution business, a recently acquired business.
(b)   Domestic other is defined as Access Networks revenue and revenue generated through managed transactions with non-integrator customers, such as national accounts.
(c)   International consists of all integrators and distributors who transact with Snap One outside of the United States.

Snap One Holdings Corp. and Subsidiaries
Revenue by Product Type
(unaudited, in thousands)

(a)   Proprietary products consist of products and services internally developed by Snap One and sold under one of Snap One’s proprietary brands.
(b)   Third-party products consist of products that Snap One distributes but to which Snap One does not own the intellectual property.

¹ We have not reconciled the forward-looking adjusted EBITDA guidance included above to the most directly comparable GAAP measure because this cannot be done without unreasonable effort due to the variability and low visibility with respect to certain costs, the most significant of which are incentive compensation (including stock-based compensation), transaction-related expenses, and certain fair value measurements, which are potential adjustments to future earnings. We expect the variability of these items to have a potentially unpredictable, and a potentially significant, impact on our future GAAP financial results.