Performance Sports Group Ltd. reported revenues grew 31 percent in the fiscal fourth quarter ended May 31 thanks to 14 percent organic growth fueled by its hockey business and the addition of Easton Baseball/Softball business it acquired in April 2014.
The Exeter, NH-based company reported revenues reached a record $156.1 million in the period, an increase of 38 percent in currency-neutral (c-n) terms.
“Our fourth quarter and full year revenue results were record-setting and contributed to market share gains in all of the sports we serve,” said Kevin Davis, CEO of Performance Sports Group. “In fact, currency neutral hockey revenues grew 13 percent for the year, improving our estimated global equipment market share from 54 percent to 56 percent. Our Maverik Lacrosse revenues grew 28 percent in fiscal 2015, improving our estimated total equipment market share from 26 percent to 28 percent. Our baseball business, led by Easton, had a record-setting year driven by solid demand for the Mako family of products.”
Gross margins down 660 basis points
Adjusted Gross Profit in the fourth quarter increased 31 percent to $57.3 million compared to $43.8 million in the year-ago quarter. Including the impact of foreign currency, Adjusted Gross Profit was $47.5 million, up 8 percent. As a percentage of revenues, Adjusted Gross Profit decreased 210 basis points to 36.7 percent compared to 38.8 percent in the year-ago quarter. Including the impact of foreign currency, Adjusted Gross Profit margin was 32.2 percent, down 660 basis points. The decrease in reported Adjusted Gross Profit margin was primarily driven by the impact from foreign exchange and lower margins in Baseball/Softball due in part to higher freight and distribution costs as a result of the west coast port strike.
SG&A expenses in the fourth quarter increased 17 percent to $32.2 million compared to $27.5 million in the year-ago quarter, primarily due to the addition of Easton and higher sales and marketing costs. Including the impact of foreign currency, SG&A expenses increased 13 percent to $30.9 million. As a percentage of revenues and excluding acquisition-related charges, share-based payment expenses, costs related to a lacrosse helmet decertification and the impact of the BRG Sports intellectual property litigation settlement, reported SG&A expenses decreased 590 basis points to 17.0 percent compared to 22.9 percent in the year-ago quarter.
R&D expenses in the fourth quarter increased 22 percent to $6.6 million compared to $5.4 million in the year-ago quarter due to the continued focus on product development and the addition of Easton. Including the impact of foreign currency, R&D expenses increased 16 percent to $6.3 million. As a percentage of revenues, reported R&D expenses decreased 50 basis points to 4.3 percent compared to 4.8 percent in the year-ago quarter.
Exchange rates trim earnings
Adjusted EBITDA increased 34 percent to $28.7 million compared to $21.4 million in the year-ago quarter. Including the impact of foreign currency, Adjusted EBITDA was $19.8 million, down 7 percent.
Adjusted Net Income in the fourth quarter increased 46 percent to $15.0 million or $0.32 per diluted share, compared to $10.3 million or $0.27 per diluted share in the year-ago quarter. Excluding the $0.09 per diluted share gain from the BRG Sports intellectual property litigation settlement in the fourth quarter of fiscal 2014, Adjusted Net Income increased 114 percent, while Adjusted EPS increased 78 percent, demonstrating the continued power of the PSG brands and strong performance of the Company's operations teams. The impact of foreign exchange reduced Adjusted Net Income by approximately $0.13 per diluted share compared to the fourth quarter last year, resulting in reported Adjusted Net Income of $8.8 million or $0.19 per diluted share.
On May 31, 2015, reported working capital was $332.4 million compared to $324.8 million on May 31, 2014. Total debt was reduced by 21 percent to $410.8 million at May 31, 2015 compared to $522.8 million at May 31, 2014. The decrease reflects the approximate $119.5 million reduction of the Company's term loan facility in June 2014. Performance Sport Group's leverage ratio, as defined in the Company's credit agreements, stood at 4.29x as of May 31, 2015 compared to 4.78x one year ago. Excluding the impact of foreign exchange on the Company's fiscal 2015 EBITDA, the leverage ratio was 3.62.
Segment Review
Hockey revenues in the fourth quarter increased 17 percent (up 7 percent on a reported basis) to $98.4 million compared to the year-ago quarter, driven by the new VAPOR 1X skate, the new RE-AKT 100 helmet and strong under-protective sales due to the SUPREME launch and back-to-hockey 2015 orders. Hockey revenues in fiscal 2015 increased 13 percent (up 8 percent on a reported basis) to $437.6 million compared to fiscal 2014, driven by growth in all equipment categories and strong growth in apparel.
Hockey EBITDA in the fourth quarter increased 75 percent (up 18 percent on a reported basis) to $27.6 million compared to the year-ago quarter. Hockey EBITDA in fiscal 2015 increased 27 percent (virtually unchanged on a reported basis) to $85.1 million compared to fiscal 2014.
Baseball/Softball revenues in the fourth quarter increased substantially to $46.2 million from $17.8 million in the year-ago quarter due to the addition of Easton. Baseball/Softball revenues in fiscal 2015 increased significantly to $200.1 million compared to $24.5 million in fiscal 2014.
Baseball/Softball EBITDA in the fourth quarter was $1.7 million, an increase of $0.3 million compared to the year ago quarter. Baseball/Softball EBITDA in fiscal 2015 increased significantly to $35.7 million compared to $0.5 million in fiscal 2014.
Revenues in the Other Sports segment, which comprises lacrosse and soccer, increased 7 percent in the fourth quarter to $11.5 million. This was driven by a 9 percent increase in lacrosse, including growth in every equipment category of the MAVERIK brand, as well as growth from the CASCADE brand. Revenues in the Other Sports segment in fiscal 2015 increased 6 percent to $37.5 million compared to $35.5 million in fiscal 2014.
Other Sports EBITDA in the fourth quarter increased 26 percent to $1.4 million from $1.1 million in the year-ago period. Other Sports EBITDA in fiscal 2015 was $3.5 million compared to $3.4 million in fiscal 2014.
Volatile exchange rates trigger new guidance
Davis said that currency effects are hitting hardest at the company's hockey business, which represents nearly all the company's international revenue.
At Aug. 27 foreign exchange rates, PSG expects Adjusted Net Income in fiscal 2016 to fall in a range between $0.70 to $0.73 per share, primarily due to the impact of foreign exchange on our reported results in the first quarter. Absent the year-over-year impact of foreign exchange, Adjusted Net Income per share for fiscal 2016 is expected to be roughly flat compared to the $1.02 per share reported in fiscal 2015.
The company also provided additional details on its expectations for the current quarter.
The company currently expects Adjusted Net Income to fall in a range between $0.10 and $0.12 per share, which would equate to a decline of approximately 45 percent in currency-neutral terms. Davis attributed the decline to new hockey products launching in fiscal fourth quarter of 2015, a quarter earlier than last year, and the launch of only one bat family for Easton compared to last year's launch of both the Mako and Mako TORQ families.
“These disclosures are being provided as an exception to our policy of not providing earnings guidance and we currently do not expect to provide further earnings guidance for other quarters in fiscal 2016 or beyond,” Davis said.
| PERFORMANCE SPORTS GROUP LTD. | |||||||||||||||||||
| SEGMENT RESULTS (UNAUDITED) | |||||||||||||||||||
| (Expressed in millions of U.S. dollars) | |||||||||||||||||||
| Three Months Ended | Twelve Months Ended | ||||||||||||||||||
| May 31, 2015 |
May 31, 2014 |
May 31, 2015 |
May 31, 2014 |
May 31, 2013 |
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| Revenues: | |||||||||||||||||||
| Hockey | $ | 90.7 | $ | 84.4 | $ | 418.4 | $ | 386.2 | $ | 370.9 | |||||||||
| Baseball/Softball | 45.8 | 17.8 | 199.3 | 24.5 | 0.1 | ||||||||||||||
| Other Sports | 11.1 | 10.7 | 36.9 | 35.5 | |||||||||||||||
