1-800-FLOWERS.COM (FLWS) Q4 2015 earnings summary

Executive summary

• Harry & David acquisition transformed the portfolio; FY15 revenue reached $1.12B, with reported Adjusted EBITDA of $95.3M and Adjusted EPS of $0.51.

• Integration began in Jan. 2015; targeted $15M of cost synergies over three years, alongside cross-brand and mass-channel revenue opportunities.

Financial highlights

• FY15 net revenue was $1,121.5M, up 48.3% YoY; adjusted for the fire and deferred-revenue purchase accounting, pro forma revenue rose 50.8%.

• Gross profit was $487.2M, up 54.3%; gross margin increased 170 bps to 43.4%. Adjusted for the fire and purchase accounting, margin was 43.9%.

• Operating income was $37.6M vs. $23.7M; net income was $19.4M vs. $14.7M; diluted EPS was $0.30 vs. $0.22.

• Adjusted EBITDA excluding stock compensation was $95.3M reported and $80.5M pro forma; Adjusted EPS was $0.51 reported and $0.33 pro forma, including Harry & David's Q1 seasonal loss.

• Operating cash flow was $125.7M; capital expenditures were $32.6M, including technology investments and Cheryl's bakery expansion.

Outlook and guidance

• FY16 consolidated revenue growth guidance: 5%–7% from FY15 revenue of $1.12B; EBITDA growth ~10% and EPS growth above 20%, based on pro forma FY15 Adjusted EBITDA of $80.5M and Adjusted EPS of $0.33.

• FY16 Free Cash Flow expected at ~$35M; gross margin expected to improve through sourcing, supply-chain and manufacturing efficiencies.

• FY16 revenue growth expected across all three segments; the $15M Harry & David cost-synergy target spans three years.