Select Interior Concepts Earnings 2020-06-30

Select Interior Concepts Earnings 2020-06-30

SIC 10Q Quarterly Report

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

ck1723866-10q_20200630.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 June 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 July 31, 2020, the registrant had 25,368,031 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 June 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)	June 30, 2020			December 31, 2019
Assets
Current assets
Cash	$	2,936		$	5,002
Accounts receivable, net of allowance for doubtful accounts of $520 and $849 at June 30, 2020 and December 31, 2019, respectively		58,201			63,419
Inventories		99,743			104,741
Prepaid expenses and other current assets		14,608			11,083
Income taxes receivable		5,134			2,184
Total current assets		180,622			186,429
Property and equipment, net of accumulated depreciation of $25,812 and $21,020 at June 30, 2020 and December 31, 2019, respectively		24,453			26,494
Deferred tax assets, net		10,222			10,550
Goodwill		99,789			99,789
Customer relationships, net of accumulated amortization of $52,895 and $48,251 at June 30, 2020 and December 31, 2019, respectively		67,345			71,989
Other intangible assets, net of accumulated amortization of $9,194 and $7,471 at June 30, 2020 and December 31, 2019, respectively		17,036			18,759
Other assets		5,295			6,265
Total assets	$	404,762		$	420,275
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$	49,118		$	42,734
Accrued expenses and other current liabilities		15,328			16,661
Customer deposits		10,674			8,627
Current portion of long-term debt, net of financing fees of $1,050 and $511 at June 30, 2020 and December 31, 2019, respectively		360			11,749
Current portion of capital lease obligations		2,618			2,395
Total current liabilities		78,098			82,166
Line of credit		9,319			21,871
Long-term debt, net of current portion and financing fees of $2,354 and $1,107 at June 30, 2020 and December 31, 2019, respectively		149,951			141,299
Long-term capital lease obligations		6,179			6,907
Other long-term liabilities		6,404			6,757
Total liabilities	$	249,951		$	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; 25,500,849 shares issued and 25,368,031 outstanding at June 30, 2020 and 25,139,542 shares issued and 25,106,402 outstanding at December 31, 2019		255			251
Treasury stock, 132,818 shares at June 30, 2020 and 33,140 shares at December 31, 2019, at cost		(1,095	)		(391	)
Additional paid-in capital		162,813			161,396
Retained earnings (accumulated deficit)		(7,162	)		19
Total stockholders' equity	$	154,811		$	161,275
Total liabilities and stockholders' equity	$	404,762		$	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 June 30,					For the Six Months Ended June 30,
(in thousands, except share data)	2020			2019		2020			2019
Revenues, net	$	125,442		$	158,342	$	259,820		$	295,262
Cost of revenues		94,742			114,174		198,427			212,361
Gross profit		30,700			44,168		61,393			82,901
Selling, general and administrative expenses		30,737			37,418		63,403			72,885
Income (loss) from operations		(37	)		6,750		(2,010	)		10,016
Other expense:
Interest expense		3,632			4,480		7,527			8,809
Other expense (income), net		(34	)		995		1,343			(720	)
Total other expense, net		3,598			5,475		8,870			8,089
Income (loss) before provision (benefit) for income taxes		(3,635	)		1,275		(10,880	)		1,927
Provision (benefit) for income taxes		(456	)		113		(3,699	)		638
Net income (loss)	$	(3,179	)	$	1,162	$	(7,181	)	$	1,289
Earnings (loss) per share of common stock
Basic common stock	$	(0.13	)	$	0.05	$	(0.28	)	$	0.05
Diluted common stock	$	(0.13	)	$	0.05	$	(0.28	)	$	0.05
Weighted average shares outstanding
Basic common stock		25,328,649			25,289,041		25,260,425			25,526,332
Diluted common stock		25,328,649			25,383,843		25,260,425			25,603,663

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

Select Interior Concepts, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

	Six Months Ended June 30,
(in thousands)	2020			2019
Cash flows provided by operating activities
Net income (loss)	$	(7,181	)	$	1,289
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		11,367			12,681
Change in fair value of earn-out liabilities		—			(563	)
Equity-based compensation		554			1,982
Deferred expense from income taxes		328			—
Amortized interest on deferred debt issuance costs		494			305
Decrease in allowance for doubtful accounts		(343	)		(128	)
Gain on disposal of property and equipment, net		(5	)		(77	)
Other		(44	)		—
Changes in operating assets and liabilities:
Accounts receivable		5,531			(4,989	)
Inventories		4,998			(4,987	)
Prepaid expenses and other current assets		(3,882	)		(2,276	)
Other assets		(322	)		(144	)
Accounts payable		6,499			8,565
Accrued expenses and other current liabilities		(467	)		986
Income taxes receivable		(2,950	)		(3,479	)
Customer deposit		2,047			(361	)
Other long-term liabilities		936			—
Net cash provided by operating activities		17,560			8,804
Cash flows used in investing activities
Purchase of property and equipment		(2,436	)		(3,475	)
Proceeds from disposal of property and equipment		22			11
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		(2,414	)		(19,001	)
Cash flows provided by (used in) financing activities
Payment of Greencraft Holdings, LLC earn-out liability		—			(5,794	)
Proceeds from ERP financing		376			—
Payments on line of credit, net		(12,601	)		(839	)
Proceeds from term loan		—			11,500
Term loan deferred issuance costs		(2,231	)		—
Purchase of treasury stock		(704	)		(8	)
Payments on notes payable and capital leases		(1,527	)		(793	)
Principal payments on long-term debt		(525	)		(1,326	)
Net cash provided by (used in) financing activities		(17,212	)		2,740
Net decrease in cash	$	(2,066	)	$	(7,457	)
Cash (and restricted cash in 2019), beginning of period		5,002			9,362
Cash, end of period	$	2,936		$	1,905
Supplemental disclosures of cash flow information
Cash paid for interest	$	7,018		$	8,265
Cash paid for income taxes	$	211		$	4,227
Supplemental disclosures of non-cash investing activities
Acquisition of equipment and vehicles with long-term debt and capital leases	$	596		$	1,325
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

Balance as of December 31, 2019		25,139,542			251			(391	)		161,396			19			161,275
Equity-based compensation		—			—			—			(669	)		—

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	2020-06-30	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	2020-08-06	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_16.htm
EX-31.1	ck1723866-ex311_12.htm
EX-31.2	ck1723866-ex312_8.htm
EX-32.1	ck1723866-ex321_9.htm
EX-32.2	ck1723866-ex322_13.htm

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company