In a Separate Press Release Today, the Company Announced It Entered a Definitive Agreement to be Acquired by Bain Capital Private Equity and Bow Street LLC for $40.75 per Common Share
In Light of the Announcement, the Company Canceled Its Previously Scheduled Earnings Conference Call
Third Quarter Net Sales of $105.1 million
Third Quarter Earnings Per Diluted Share of $0.11
SEATTLE, Nov. 07, 2016 (GLOBE NEWSWIRE) -- Blue Nile, Inc. (Nasdaq:NILE), a leading online retailer of diamonds and fine jewelry, today reported financial results for its third quarter ended October 2, 2016.
Net sales decreased to $105.1 million for the third quarter ended October 2, 2016 compared to $109.9 million for the third quarter ended October 4, 2015. Operating income for the quarter totaled $1.8 million, representing an operating margin of 1.7% of net sales, compared to $3.0 million in operating income and 2.8% operating margin for the third quarter 2015. Net income totaled $1.3 million, or $0.11 per diluted share versus $2.0 million, or $0.17 per diluted share for the third quarter 2015.
Non-GAAP adjusted EBITDA for the quarter totaled $4.2 million compared to $5.3 million for the third quarter 2015. For the trailing twelve month period ended October 2, 2016, net cash provided by operating activities totaled $18.6 million compared to $14.7 million for the trailing twelve month period ended October 4, 2015. For the trailing twelve month period ended October 2, 2016, non-GAAP free cash flow totaled $13.3 million, as compared to $10.8 million for the trailing twelve month period ended October 4, 2015.
Highlights
- U.S. engagement net sales for the third quarter 2016 decreased 8.5% to $59.5 million, compared to $65.0 million for the third quarter 2015.
- U.S. non-engagement net sales for the third quarter 2016 increased 1.2% to $25.3 million, compared to $25.0 million for the third quarter 2015.
- International net sales for the third quarter 2016 were $20.3 million, compared to $19.9 million for the third quarter 2015, an increase of 1.8%. Excluding the impact from changes in foreign exchange rates, international net sales increased 4.2%.
- Gross profit for the third quarter 2016 totaled $20.6 million. As a percent of net sales, gross profit was 19.6% compared to 19.3% for the third quarter 2015.
- Selling, general and administrative expenses for the third quarter 2016 were $18.8 million, compared to $18.2 million in the third quarter 2015. Selling, general and administrative expenses included stock-based compensation expense of $1.0 million for the third quarter 2016 and $1.3 million for the third quarter 2015.
- Earnings per diluted share for the third quarter 2016 was $0.11 compared to $0.17 for the third quarter 2015. Earnings per diluted share included stock-based compensation expense of $0.05 for the third quarter 2016 and $0.07 for the third quarter 2015.
- At the end of the third quarter 2016, cash and cash equivalents totaled $40.6 million.
Forward-Looking Statements
This press release contains forward-looking statements that include risks and uncertainties, including, without limitation, all statements related to future financial and business performance, market opportunity and plans to grow our business. Words such as “expect,” “anticipate,” “believe,” “project,” “will” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based upon our current expectations. Forward-looking statements involve risks and uncertainties. Our actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, risks related to commodity prices, general economic conditions, consumer spending (particularly spending by high-end consumers), product assortment, our fluctuating operating results, currency fluctuations, seasonality in our business, our ability to acquire products on reasonable terms, our online business model, demand for our products, our ability to attract customers in a cost effective manner, the strength of our brand, competition, fraud, system interruptions, our ability to fulfill orders and other risks detailed in our filings with the Securities and Exchange Commission, including our quarterly reports on Form 10-Q and our Annual Report on Form 10-K for the year ended January 3, 2016. Additional information will also be set forth in our Quarterly Report on Form 10-Q for the quarter ended October 2, 2016, which we expect to file with the Securities and Exchange Commission on or before November 14, 2016. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. All forward-looking statements are qualified in their entirety by this cautionary statement, and Blue Nile undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date hereof.
Non-GAAP Financial Measures
To supplement Blue Nile’s consolidated financial statements presented in accordance with generally accepted accounting principles (“GAAP”), Blue Nile uses non-GAAP adjusted EBITDA and non-GAAP free cash flow as measures of certain components of financial performance. Blue Nile defines non-GAAP adjusted EBITDA as earnings before interest and other income, taxes, depreciation and amortization, adjusted to exclude the effects of stock-based compensation expense. Blue Nile defines non-GAAP free cash flow as net cash provided by (used in) operating activities less cash outflows for purchases of fixed assets, including internal-use software and website development. Blue Nile reports sales information in accordance with GAAP. Internally, management monitors its sales performance on a non-GAAP basis that eliminates the positive or negative effects that result from translating international sales into U.S. dollars (the “constant exchange rate basis”). Blue Nile’s management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors should also note that the non-GAAP financial measures used by Blue Nile may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as that of other companies. Whenever Blue Nile uses such non-GAAP financial measures, it provides a reconciliation of non-GAAP financial measures to the most closely applicable GAAP financial measures. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.
Blue Nile’s management believes that non-GAAP adjusted EBITDA and non-GAAP free cash flow, as defined, as well as international sales on a constant exchange rate basis provide meaningful supplemental information to the company and to investors. Blue Nile believes that both management and investors benefit from referring to these non-GAAP measures in assessing the performance of Blue Nile and when planning and forecasting future periods. Further, management believes that the inclusion of the non-GAAP adjusted EBITDA and non-GAAP free cash flow calculations provide consistency in Blue Nile’s financial reporting and comparability with similar companies in Blue Nile’s industry. Management believes the constant exchange rate measurement provides a more representative assessment of the sales performance and provides better comparability between reporting periods.
A reconciliation of non-GAAP adjusted EBITDA to net income is as follows (in thousands):
| Quarter ended | Quarter ended | ||||||||
| October 2, 2016 | October 4, 2015 | ||||||||
| Net income | $ | 1,293 | $ | 1,977 | |||||
| Income tax expense | 604 | 1,041 | |||||||
| Other (income) loss, net | (100 | ) | 21 | ||||||
| Depreciation and amortization | 1,354 | 940 | |||||||
| Stock-based compensation | 1,032 | 1,283 | |||||||
| Non-GAAP adjusted EBITDA | $ | 4,183 | $ | 5,262 | |||||
| Year to date ended | Year to date ended | ||||||||
| October 2, 2016 | October 4, 2015 | ||||||||
| Net income | $ | 4,500 | $ | 5,495 | |||||
| Income tax expense | 2,420 | 2,969 | |||||||
| Other income, net | (606 | ) | (76 | ) | |||||
| Depreciation and amortization | 3,732 | 2,771 | |||||||
| Stock-based compensation | 3,329 | 3,801 | |||||||
| Non-GAAP adjusted EBITDA | $ | 13,375 | $ | 14,960 | |||||
A reconciliation of differences of non-GAAP free cash flow from the comparable GAAP measure of net cash (used in) provided by operating activities is as follows (in thousands):
| Quarter ended | Quarter ended | |||||||
| October 2, 2016 | October 4, 2015 | |||||||
| Net cash provided by (used in) operating activities | $ | 3,957 | $ | (5,268 | ) | |||
| Purchases of fixed assets, including internal-use | ||||||||
| software and website development | (1,605 | ) | (988 | ) | ||||
| Non-GAAP free cash flow | $ | 2,352 | $ | (6,256 | ) | |||
| Twelve months ended | Twelve months ended | |||||||
| October 2, 2016 | October 4, 2015 | |||||||
| Net cash provided by operating activities | $ | 18,554 | $ | 14,727 | ||||
| Purchases of fixed assets, including internal-use | ||||||||
| software and website development | (5,291 | ) | (3,891 | ) | ||||
| Non-GAAP free cash flow | $ | 13,263 | $ | 10,836 | ||||
The non-GAAP free cash flow for the twelve months ended October 4, 2015 presented above includes financial information from the Company’s fiscal 2014 reporting period which included 53 weeks, with an additional week falling into the fourth quarter.
The following table reconciles year-over-year international net sales percentage (decreases) increases from the GAAP sales measures to the non-GAAP constant exchange rate basis:
| Quarter ended October 2, 2016 | Year over year growth | Effect of foreign exchange movements | Year over year growth on constant exchange rate basis | |||||||||||||
| International net sales | 1.8 | % | (2.4 | )% | 4.2 | % | ||||||||||
| Quarter ended October 4, 2015 | Year over year growth | Effect of foreign exchange movements | Year over year growth on constant exchange rate basis | |||||||||||||
| International net sales | (7.2 | )% | (10.2 | )% | 3.0 | % | ||||||||||
| Year to date ended October 2, 2016 | Year over year growth | Effect of foreign exchange movements | Year over year growth on constant exchange rate basis | ||||||||||||
| International net sales | 2.4 | % | (3.5 | )% | 5.9 | % | |||||||||
| Year to date ended October 4, 2015 | Year over year growth | Effect of foreign exchange movements | Year over year growth on constant exchange rate basis | ||||||||||||
| International net sales | 2.7 | % | (8.8 | )% | 11.5 | % | |||||||||
About Blue Nile, Inc.
Blue Nile, Inc. is the original online jeweler. The company offers a smarter way to buy engagement rings, wedding rings, and fine jewelry by providing in-depth educational materials and unique online tools that place consumers in control of the jewelry shopping process. Blue Nile has some of the highest quality standards in the industry and offers thousands of independently certified diamonds and fine jewelry at prices significantly below traditional retail. Blue Nile can be found online at www.bluenile.com. Blue Nile’s shares are traded on the Nasdaq Stock Market LLC under the symbol NILE.
| BLUE NILE, INC. | |||||||||||
| Condensed Consolidated Balance Sheets | |||||||||||
| (unaudited) | |||||||||||
| (in thousands) | |||||||||||
| October 2, 2016 | January 3, 2016 | October 4, 2015 | |||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 40,558 | $ | 86,542 | $ | 33,609 | |||||
| Trade accounts receivable | 2,094 | 3,339 | 4,006 | ||||||||
| Other accounts receivable, net | 1,577 | 706 | 930 | ||||||||
| Note receivable | 300 | 600 | 600 | ||||||||
| Inventories | 44,126 | 46,376 | 41,946 | ||||||||
| Prepaids and other current assets | 2,497 | 1,585 | 2,317 | ||||||||
| Total current assets | 91,152 | 139,148 | 83,408 | ||||||||
| Property and equipment, net | 11,669 | 10,530 | 10,795 | ||||||||
| Deferred income taxes(1) | 4,259 | 5,089 | 4,844 | ||||||||
| Other investments | 2,280 | 2,280 | 2,280 | ||||||||
| Other assets, net | 268 | 367 | 305 | ||||||||
| Total assets | $ | 109,628 | $ | 157,414 | $ | 101,632 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 77,882 | $ | 121,917 | $ | 76,328 | |||||
| Accrued liabilities | 8,750 | 12,336 | 8,816 | ||||||||
| Current portion of long-term financing obligation | 34 | 33 | 33 | ||||||||
| Current portion of deferred rent | 352 | 290 | 291 | ||||||||
| Total current liabilities | 87,018 | 134,576 | 85,468 | ||||||||
| Long-term financing obligation, less current portion | 430 | 455 | 464 | ||||||||
| Deferred rent, less current portion | 1,702 | 1,697 | 1,771 | ||||||||
| Unearned income | 1,530 | 1,988 | 2,141 | ||||||||
| Other long-term liabilities | 318 | 242 | 201 | ||||||||
| Commitments and contingencies | |||||||||||
| Stockholders’ equity: | |||||||||||
| Common stock | 22 | 22 | 22 | ||||||||
| Additional paid-in capital | 236,285 | 232,148 | 230,290 | ||||||||
| Accumulated other comprehensive loss | (227 | ) | (239 | ) | (211 | ) | |||||
| Retained earnings | 110,366 | 114,023 | 108,984 | ||||||||
| Treasury stock | (327,816 | ) | (327,498 | ) | (327,498 | ) | |||||
| Total stockholders’ equity | 18,630 | 18,456 | 11,587 | ||||||||
| Total liabilities and stockholders’ equity | $ | 109,628 | $ | 157,414 | $ | 101,632 | |||||
| (1) In November 2015, the FASB issued Accounting Standards Update No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which simplifies the presentation of deferred income taxes by requiring deferred tax assets and liabilities to be classified as noncurrent on the balance sheet. We early adopted this standard effective January 3, 2016 retrospectively and reclassified the current deferred income tax assets previously presented in the consolidated balance sheet as of October 4, 2015, to noncurrent deferred income tax assets. | |||||||||||
| BLUE NILE, INC. | ||||||||||||||||
| Condensed Consolidated Statements of Operations | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||
| Quarter ended | Year to date ended | |||||||||||||||
| October 2, 2016 | October 4, 2015 | October 2, 2016 | October 4, 2015 | |||||||||||||
| Net sales | $ | 105,110 | $ | 109,943 | $ | 321,937 | $ | 330,083 | ||||||||
| Cost of sales | 84,470 | 88,712 | 258,673 | 266,790 | ||||||||||||
| Gross profit | 20,640 | 21,231 | 63,264 | 63,293 | ||||||||||||
| Selling, general and administrative expenses | 18,843 | 18,192 | 56,950 | 54,905 | ||||||||||||
| Operating income | 1,797 | 3,039 | 6,314 | 8,388 | ||||||||||||
| Other income (loss), net: | ||||||||||||||||
| Interest income, net | 10 | 12 | 35 | 76 | ||||||||||||
| Other income (loss), net | 90 | (33 | ) | 571 | — | |||||||||||
| Total other income (loss), net | 100 | (21 | ) | 606 | 76 | |||||||||||
| Income before income taxes | 1,897 | 3,018 | 6,920 | 8,464 | ||||||||||||
| Income tax expense | 604 | 1,041 | 2,420 | 2,969 | ||||||||||||
| Net income | $ | 1,293 | $ | 1,977 | $ | 4,500 | $ | 5,495 | ||||||||
| Basic net income per share | $ | 0.11 | $ | 0.17 | $ | 0.39 | $ | 0.47 | ||||||||
| Diluted net income per share | $ | 0.11 | $ | 0.17 | $ | 0.38 | $ | 0.47 | ||||||||
| Shares used for computation (in thousands): | ||||||||||||||||
| Basic | 11,654 | 11,523 | 11,622 | 11,706 | ||||||||||||
| Diluted | 11,760 | 11,612 | 11,711 | 11,779 | ||||||||||||
| BLUE NILE, INC. | ||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| (unaudited) | ||||||||
| (in thousands) | ||||||||
| Year to date ended | ||||||||
| October 2, 2016 | October 4, 2015 | |||||||
| Operating activities: | ||||||||
| Net income | $ | 4,500 | $ | 5,495 | ||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 3,732 | 2,771 | ||||||
| Stock-based compensation | 3,359 | 3,831 | ||||||
| Deferred income taxes | 830 | (657 | ) | |||||
| Tax deficiency from share-based awards | (437 | ) | (597 | ) | ||||
| Excess tax benefit from share-based awards | (25 | ) | (29 | ) | ||||
| Changes in assets and liabilities: | ||||||||
| Receivables | 374 | (1,228 | ) | |||||
| Inventories | 2,250 | (278 | ) | |||||
| Prepaid expenses and other assets | (834 | ) | (755 | ) | ||||
| Accounts payable | (44,336 | ) | (52,344 | ) | ||||
| Accrued liabilities | (3,586 | ) | (3,176 | ) | ||||
| Unearned income | (458 | ) | 2,141 | |||||
| Deferred rent and other | 143 | (180 | ) | |||||
| Net cash used in operating activities | (34,488 | ) | (45,006 | ) | ||||
| Investing activities: | ||||||||
| Purchases of property and equipment | (4,476 | ) | (2,940 | ) | ||||
| Payments received on note receivable | 300 | 1,400 | ||||||
| Net cash used in investing activities | (4,176 | ) | (1,540 | ) | ||||
| Financing activities: | ||||||||
| Repurchase of common stock | (318 | ) | (10,780 | ) | ||||
| Proceeds from stock option exercises | 1,738 | 241 | ||||||
| Taxes paid for net share settlement of share-based awards | (630 | ) | (424 | ) | ||||
| Excess tax benefit from share-based awards | 25 | 29 | ||||||
| Principal payments under long-term financing obligation | (24 | ) | (24 | ) | ||||
| Cash dividends paid | (8,123 | ) | — | |||||
| Net cash used in financing activities | (7,332 | ) | (10,958 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | 12 | (73 | ) | |||||
| Net decrease in cash and cash equivalents | (45,984 | ) | (57,577 | ) | ||||
| Cash and cash equivalents, beginning of period | 86,542 | 91,186 | ||||||
| Cash and cash equivalents, end of period | $ | 40,558 | $ | 33,609 | ||||
| Year to date ended | ||||||||
| October 2, 2016 | October 4, 2015 | |||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for income taxes | $ | 4,033 | $ | 4,825 | ||||