Select Interior Concepts Earnings 2020-09-30

Select Interior Concepts Earnings 2020-09-30

SIC 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

ck1723866-10q_20200930.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _____________

Commission File Number: 001-38632

SELECT INTERIOR CONCEPTS, INC.

(Exact name of registrant as specified in its charter)

Delaware	47-4640296
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

400 Galleria Parkway, Suite 1760 Atlanta, Georgia	30339
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (888) 701-4737

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Class A Common Stock, par value $0.01 per share

SIC

The Nasdaq Stock Market LLC

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. Yes ☒ No ☐

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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.

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 ☐ No ☒

As of October 30, 2020, the registrant had 25,453,995 shares of Class A common stock, par value $0.01 per share, outstanding.

SELECT INTERIOR CONCEPTS, INC.

FORM 10-Q

For the Quarterly Period Ended September 30, 2020

Table of Contents

		Page No.
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets (Unaudited)	1
	Condensed Consolidated Statements of Operations (Unaudited)	2
	Condensed Consolidated Statements of Cash Flows (Unaudited)	3
	Consolidated Statements of Changes in Equity (Unaudited)	4
	Notes to Condensed Consolidated Financial Statements (Unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	36

PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	38
Signatures		39

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Select Interior Concepts, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share data)	September 30, 2020			December 31, 2019
Assets
Current assets
Cash	$	4,097		$	5,002
Accounts receivable, net of allowance for doubtful accounts of $701 and $849 at September 30, 2020 and December 31, 2019, respectively		68,144			63,419
Inventories		98,101			104,741
Prepaid expenses and other current assets		17,605			11,083
Income taxes receivable		3,080			2,184
Total current assets		191,027			186,429
Property and equipment, net of accumulated depreciation of $28,068 and $21,020 at September 30, 2020 and December 31, 2019, respectively		22,444			26,494
Deferred tax assets, net		10,222			10,550
Goodwill		99,789			99,789
Customer relationships, net of accumulated amortization of $55,217 and $48,251 at September 30, 2020 and December 31, 2019, respectively		65,023			71,989
Other intangible assets, net of accumulated amortization of $10,055 and $7,471 at September 30, 2020 and December 31, 2019, respectively		16,175			18,759
Other assets		5,384			6,265
Total assets	$	410,064		$	420,275
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$	49,616		$	42,734
Accrued expenses and other current liabilities		17,967			16,661
Customer deposits		10,407			8,627
Current portion of long-term debt, net of financing fees of $1,050 and $511 at September 30, 2020 and December 31, 2019, respectively		246			11,749
Current portion of capital lease obligations		2,586			2,395
Total current liabilities		80,822			82,166
Line of credit		9,670			21,871
Long-term debt, net of current portion and financing fees of $2,035 and $1,107 at September 30, 2020 and December 31, 2019, respectively		149,979			141,299
Long-term capital lease obligations		5,452			6,907
Other long-term liabilities		7,760			6,757
Total liabilities	$	253,683		$	259,000
Commitments and contingencies (see Note 11)
Stockholders' equity
Class A common stock, par value $0.01 per share; 100,000,000 shares authorized; 25,554,388 shares issued and 25,407,362 outstanding at September 30, 2020 and 25,139,542 shares issued and 25,106,402 outstanding at December 31, 2019		256			251
Treasury stock, 147,026 shares at September 30, 2020 and 33,140 shares at December 31, 2019, at cost		(1,182	)		(391	)
Additional paid-in capital		163,938			161,396
Retained earnings (accumulated deficit)		(6,631	)		19
Total stockholders' equity	$	156,381		$	161,275
Total liabilities and stockholders' equity	$	410,064		$	420,275

The accompanying notes are an integral part of these condensed consolidated financial statements.

Select Interior Concepts, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
(in thousands, except share data)	2020		2019			2020			2019
Revenues, net	$	150,050	$	159,395		$	409,869		$	454,657
Cost of revenues		111,460		117,057			309,886			329,418
Gross profit		38,590		42,338			99,983			125,239
Selling, general and administrative expenses		33,446		36,129			96,850			109,014
Income from operations		5,144		6,209			3,133			16,225
Other expense:
Interest expense		3,546		4,342			11,072			13,151
Other expense (income), net		412		(2,008	)		1,755			(2,728	)
Total other expense, net		3,958		2,334			12,827			10,423
Income (loss) before provision (benefit) for income taxes		1,186		3,875			(9,694	)		5,802
Provision (benefit) for income taxes		655		1,417			(3,045	)		2,055
Net income (loss)	$	531	$	2,458		$	(6,649	)	$	3,747
Earnings (loss) per share of common stock
Basic common stock	$	0.02	$	0.10		$	(0.26	)	$	0.15
Diluted common stock	$	0.02	$	0.10		$	(0.26	)	$	0.15
Weighted average shares outstanding
Basic common stock		25,383,379		25,051,068			25,301,709			25,366,170
Diluted common stock		25,762,741		25,189,339			25,301,709			25,463,814

The accompanying notes are an integral part of these condensed consolidated financial statements.

Select Interior Concepts, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

	Nine Months Ended September 30,
(in thousands)	2020			2019
Cash flows provided by operating activities
Net income (loss)	$	(6,649	)	$	3,747
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		17,164			18,729
Change in fair value of earn-out liabilities		—			(2,549	)
Equity-based compensation		1,679			4,496
Deferred expense from income taxes		328			—
Amortized interest on deferred debt issuance costs		838			458
Decrease in allowance for doubtful accounts		(166	)		(165	)
Gain (loss) on disposal of property and equipment, net		175			(139	)
Other		(213	)		—
Changes in operating assets and liabilities:
Accounts receivable		(4,559	)		(583	)
Inventories		6,585			(4,358	)
Prepaid expenses and other current assets		(7,200	)		(2,632	)
Other assets		(327	)		(109	)
Accounts payable		7,014			5,337
Accrued expenses and other current liabilities		2,172			(613	)
Income taxes receivable		(896	)		(2,634	)
Customer deposit		1,779			(793	)
Other long-term liabilities		2,209			2,114
Net cash provided by operating activities		19,933			20,306
Cash flows used in investing activities
Purchase of property and equipment		(2,757	)		(7,273	)
Proceeds from disposal of property and equipment		55			16
Acquisition of Intown Design, Inc.		—			(11,537	)
Escrow release payment related to acquisition of Greencraft Holdings, LLC		—			(3,000	)
Acquisition of Elegant Home Design, LLC (Indemnity payment in 2019)		—			(1,000	)
Net cash used in investing activities		(2,702	)		(22,794	)
Cash flows provided by (used in) financing activities
Payment of Greencraft Holdings, LLC earn-out liability		—			(5,794	)
Proceeds from ERP financing		376			2,118
Payments on line of credit, net		(12,275	)		(2,822	)
Proceeds from term loan		—			11,500
Term loan deferred issuance costs		(2,230	)		—
Purchase of treasury stock		(791	)		(235	)
Payments on notes payable and capital leases		(2,428	)		(1,407	)
Principal payments on long-term debt		(788	)		(1,589	)
Net cash provided by (used in) financing activities		(18,136	)		1,771
Net decrease in cash	$	(905	)	$	(717	)
Cash (and restricted cash in 2019), beginning of period		5,002			9,362
Cash, end of period	$	4,097		$	8,645
Supplemental disclosures of cash flow information
Cash paid for interest	$	10,165		$	12,507
Cash paid (refunded) for income taxes, net	$	(1,272	)	$	4,819
Supplemental disclosures of non-cash investing activities
Acquisition of equipment and vehicles with long-term debt and capital leases	$	596		$	6,444
Earn-out estimate for Intown Design, Inc.	$	—		$	2,010

The accompanying notes are an integral part of these condensed consolidated financial statements.

Select Interior Concepts, Inc. and Subsidiaries

Consolidated Statements of Changes in Equity (Unaudited)

(in thousands, except share data)	Class A Common Stock Shares			Class A Common Stock			Treasury Stock, at Cost			Total Additional Paid-in Capital		Total Retained Earnings (Accumulated Deficit)			Total
Balance as of December 31, 2018		25,682,669			257			—			156,601		(8,164	)		148,694
Equity-based compensation		—			—			—			558		—			558
Issuance of Class A common stock due to restricted stock vesting		138,555			—			—			—		—			—
Net income		—			—			—			—		127			127
Balance as of March 31, 2019		25,821,224		$	257		$	—		$	157,159	$	(8,037	)	$	149,379
Equity-based compensation		—			—			—			1,423		—			1,423
Issuance of Class A common stock due to restricted stock vesting		21,065			1			—			—		—			1
Repurchase of Class A common stock		—			—			(8	)		—		—			(8	)
Retirement of Class A common stock		(800,000	)		(8	)		8			—		—			—
Net income		—			—			—			—		1,162			1,162
Balance as of June 30, 2019		25,042,289		$	250		$	—		$	158,582	$	(6,875	)	$	151,957
Equity-based compensation		—			—			—			1,471		—			1,471
Issuance of Class A common stock due to restricted stock vesting		45,718

Price	13.36	EPS	0
Shares	25	P/E	178
MCap	340	P/FCF	17
Net Debt	147	EBIT	21
TEV	487	TEV/EBIT	23
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-09-30	Filed 2020-11-05
10-Q	2020-06-30	Filed 2020-08-06
10-Q	2020-03-31	Filed 2020-05-21
10-K	2019-12-31	Filed 2020-03-12
10-Q	2019-09-30	Filed 2019-11-05
10-Q	2019-06-30	Filed 2019-08-08
10-Q	2019-03-31	Filed 2019-05-10
10-K	2018-12-31	Filed 2019-03-15
10-Q	2018-09-30	Filed 2018-11-13
S-1	2018-07-09	Public Filing
10-Q	2018-06-30	Filed 2018-09-06

8-K	2020-11-05
8-K	2020-11-05	Earnings, Exhibits
8-K	2020-08-06	Earnings, Exhibits
8-K	2020-07-27	Officers, Exhibits
8-K	2020-06-30	Officers
8-K	2020-06-16
8-K	2020-06-09
8-K	2020-05-21
8-K	2020-05-05
8-K	2020-04-08
8-K	2020-03-16
8-K	2020-03-13
8-K	2020-03-12
8-K	2019-12-12
8-K	2019-11-21
8-K	2019-11-05
8-K	2019-08-19
8-K	2019-08-08
8-K	2019-07-12
8-K	2019-05-15
8-K	2019-05-13
8-K	2019-05-10
8-K	2019-03-20
8-K	2019-03-15
8-K	2019-03-01
8-K	2019-02-06
8-K	2018-12-31
8-K	2018-11-13
8-K	2018-11-13
8-K	2018-09-06
8-K	2018-08-31
8-K	2018-08-13

EX-10.1	ck1723866-ex101_13.htm
EX-10.2	ck1723866-ex102_14.htm
EX-10.3	ck1723866-ex103_15.htm
EX-31.1	ck1723866-ex311_9.htm
EX-31.2	ck1723866-ex312_8.htm
EX-32.1	ck1723866-ex321_10.htm
EX-32.2	ck1723866-ex322_7.htm

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company