Dorel Reports Third Quarter 2023 Results

• Dorel Juvenile maintains quarter-over-quarter earnings improvement.
• Dorel Home posts sequential improvement in results despite challenging consumer environment.

MONTRÉAL, Nov. 03, 2023 (GLOBE NEWSWIRE) — Dorel Industries Inc. (TSX: DII.B, DII.A) today announced results for the third quarter and nine months ended September 30, 2023.

Third quarter revenue was US$359.7 million, down 3.9% from US$374.1 million last year. Reported and adjusted net loss¹ from continuing operations was US$10.4 million or US$0.32 per diluted share, compared to US$36.7 million or US$1.13 per diluted share last year. Adjusted net loss¹ from continuing operations was US$34.7 million or US$1.07 per diluted share last year.

Nine-month revenue from continuing operations was US$1.038 billion, a decrease of 15.6% compared to US$1.230 billion last year. Reported and adjusted net loss¹ from continuing operations year-to-date was US$58.6 million or US$1.80 per diluted share, compared to US$77.6 million or US$2.38 per diluted share last year. Adjusted net loss¹ from continuing operations was US$71.2 million or US$2.19 per diluted share last year. 

“We are pleased with the progress of our Dorel Juvenile segment as they delivered double-digit revenue growth and an impressive turnaround in earnings. We are clearly seeing our products winning and delivering market share gains in an industry that was down versus the prior year. Dorel Home revenues continued to grow, improving sequentially with positive indicators at brick-and-mortar. Given the challenges for consumer products companies overall, our two segments are navigating positively, though we recognize the need for further improvement. There is far less retailer inventory and our own inventory levels are at their lowest in two years. The vast majority of all the high-cost inventory from last year has been sold, contributing to improving margins throughout 2023,” stated Dorel President & CEO, Martin Schwartz.

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¹ This is a non-GAAP financial ratio or measure with no standardized meaning prescribed by IFRS and therefore is unlikely to be comparable to similar measures presented by other issuers. Refer to the section “Definition and reconciliation of non-GAAP financial ratios and measures” in this press release.

The third quarter maintained its quarter-over-quarter improvement. Revenue was US$206.0 million, an increase of US$19.3 million, or 10.3% versus 2022’s comparable period. Organic revenue¹ increased by 6.4% after removing the impact of varying foreign exchange rates year-over-year. The U.S. and European markets were primarily responsible for the growth, both posting double digit organic gains, slightly offset by sales shortfalls in Brazil and Chile. The 360 Pro Family line contributed to the revenue gains in Europe. Additional new Maxi-Cosi products were unveiled at the September Cologne, Germany juvenile products trade fair which resulted in a record number of orders for Dorel Juvenile. The segment continued to gain market share in its various geographies, despite a generally challenging environment where consumers remain selective with their spending and retailers are cautiously reordering. Nine-month revenue was US$617.7 million, down US$3.5 million or 0.6% from last year.

Reported and adjusted operating profit¹ for the quarter was US$3.2 million compared with last year’s reported and adjusted operating loss¹ of US$18.4 million and US$16.2 million respectively. The weaker Euro versus the U.S. dollar tempered the quarter’s operating profit more so than during the first half of the current year, although the impact was far less than last year when the U.S. dollar hit a 10 year high. Gross profit increased both year-over-year and quarter-over-quarter driven by lower input costs, improved pricing and favourable foreign exchange. Planned inventory reduction initiatives were also successful with the majority of the higher cost inventory now sold. Year-to-date reported and adjusted operating loss¹ was US$4.9 million compared to a reported and adjusted operating loss¹ of US$35.6 million and US$28.8 million respectively a year ago.

Revenue for the third quarter was US$153.7 million, down US$33.7 million, or 18.0% compared to the third quarter a year ago. However, on a sequential basis, revenue has increased for the third consecutive quarter. Despite an overall softness in the market, there are positive trends in the brick-and-mortar channel. The fall High Point Market was a success with Dorel Home’s customers enthusiastic about the new product introductions. Nine-month revenue was US$420.3 million, a decrease of US$188.4 million or 31.0%. 

Operating loss for the third quarter was US$3.6 million compared to US$8.0 million last year, an improvement of US$4.4 million. Gross margins increased versus prior year and are up over both the first and second quarters of this year. The improvement resulted partly from reductions in freight and material costs. Warehouse and distribution costs are also down. Inventory management resulted in a year-over-year reduction of US$54.7 million from last year and were down US$38.3 million from the fourth quarter of 2022. Nine-month operating loss was US$27.4 million, compared with US$0.2 million a year ago.

Other

Cash provided by operations was positive in the quarter and year-to-date totalled US$62.1 million with inventory reductions being the biggest contributor. A portion of this cash was used to reduce debt. In addition, Dorel continues discussions with prospective lenders on providing additional funding to further improve liquidity and fund future growth.

Outlook

“Our outlook at the end of the second quarter for continued quarter-over-quarter earnings improvement was valid for the third quarter and remains so going forward. At Dorel Juvenile, market share data confirms that we are gaining sales at the expense of the competition with our new, innovative product that is resonating well with consumers. While we are concerned by the economic environment in which we are operating, we remain focused on bringing winning products to the marketplace, partnering with our retail customers, and investing in e-commerce to ensure that the progress so far this year continues for the balance of 2023 and in to 2024,” commented Dorel President & CEO, Martin Schwartz.

“While the results at Dorel Home are less positive, sales are improving across the year, and we are narrowing our losses. We are operating in a challenging environment, slowing the pace of our turnaround, but we expect to deliver an operating profit as soon as the fourth quarter of this year, setting the table for a much better performance in 2024,” concluded Mr. Schwartz.

Conference Call

Dorel Industries Inc. will hold a conference call to discuss these results on Friday, November 3, 2023 at 1:00 P.M. Eastern Time. Interested parties can join the call by dialing 1-800-319-4610. The conference call can also be accessed via live webcast at http://www.dorel.com. If you are unable to call in at this time, you may access a recording of the meeting by calling 1-800-319-6413 and entering the passcode 0382 on your phone. This recording will be available on Friday, November 3, 2023 as of 4:30 PM until 11:59 PM on Friday, November 10, 2023.

Condensed consolidated interim financial statements as at September 30, 2023 will be available on the Company’s website, www.dorel.com, and will be available through the SEDAR website.

Profile

Dorel Industries Inc. (TSX: DII.B, DII.A) is a global organization, operating two distinct businesses in juvenile products and home products. Dorel’s strength lies in the diversity, innovation and quality of its products as well as the superiority of its brands. Dorel Juvenile’s powerfully branded products include global brands Maxi-Cosi, Safety 1st and Tiny Love, complemented by regional brands such as BebeConfort, Cosco, Mother’s Choice and Infanti. Dorel Home, with its comprehensive e-commerce platform, markets a wide assortment of domestically produced and imported furniture. Dorel has annual sales of US$1.6 billion and employs approximately 4,000 people in facilities located in twenty-two countries worldwide.

Caution Regarding Forward-Looking Statements

Certain statements included in this press release may constitute “forward-looking statements” within the meaning of applicable Canadian securities legislation. Except as may be required by Canadian securities laws, the Company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Forward-looking statements, by their very nature, are subject to numerous risks and uncertainties, including statements regarding the impact of the macro-economic environment, including inflationary pressures, changes in consumer spending, exchange rate fluctuations and increases in interest rates on the Company’s business, financial position and operations, and are based on several assumptions which give rise to the possibility that actual results could differ materially from the Company’s expectations expressed in or implied by such forward-looking statements and that the objectives, plans, strategic priorities and business outlook may not be achieved. As a result, the Company cannot guarantee that any forward-looking statement will materialize, or if any of them do, what benefits the Company will derive from them. Forward-looking statements are provided in this press release for the purpose of giving information about management’s current expectations and plans and allowing investors and others to get a better understanding of the Company’s operating environment. However, readers are cautioned that it may not be appropriate to use such forward-looking statements for any other purpose.

Forward-looking statements made in this press release are based on a number of assumptions that the Company believed were reasonable on the day it made the forward-looking statements. Factors that could cause actual results to differ materially from the Company’s expectations expressed in or implied by the forward-looking statements include:

• general economic and financial conditions, including those resulting from the current high inflationary environment;
• changes in applicable laws or regulations;
• changes in product costs and supply channels, including disruption of the Company’s supply chain resulting from the macro-economic environment;
• foreign currency fluctuations, including high levels of volatility in foreign currencies with respect to the US dollar reflecting uncertainties related to the macro-economic environment;
• customer and credit risk, including the concentration of revenues with a small number of customers;
• costs associated with product liability;
• changes in income tax legislation or the interpretation or application of those rules;
• the continued ability to develop products and support brand names;
• changes in the regulatory environment;
• outbreak of public health crises, such as the COVID-19 pandemic, that could adversely affect global economies and financial markets, resulting in an economic downturn which could be for a prolonged period of time and have a material adverse effect on the demand for the Company’s products and on its business, financial condition and results of operations;
• the effect of international conflicts on the Company’s sales, including the ongoing Russia-Ukraine war and the Israeli-Hamas war;
• continued access to capital resources, including compliance by the Company with all of the terms and conditions under its ABL facility, and the related costs of borrowing, all of which may be adversely impacted by the macro-economic environment;
• failures related to information technology systems;
• changes in assumptions in the valuation of goodwill and other intangible assets and any future decline in market capitalization;
• there being no certainty that the Company will declare any dividend in the future;
• increased exposure to cybersecurity risks as a result of remote work by the Company’s employees;
• the Company’s ability to protect its current and future technologies and products and to defend its intellectual property rights;
• potential damage to the Company’s reputation; and
• the effect of climate change on the Company.

These and other risk factors that could cause actual results to differ materially from expectations expressed in or implied by the forward-looking statements are discussed in the Company’s annual MD&A and Annual Information Form filed with the applicable Canadian securities regulatory authorities. The risk factors set out in the previously mentioned documents are expressly incorporated by reference herein in their entirety.

The Company cautions readers that the risks described above are not the only ones that could impact it. Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial may also have a material adverse effect on the Company’s business, financial condition, or results of operations. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

All figures in the tables below are in thousands of US $, except per share amounts.

Definition and Reconciliation of Non-GAAP Financial Ratios and Measures

Dorel presents in this press release certain non-GAAP financial ratios and measures, as described below. These non-GAAP financial ratios and measures do not have a standardized meaning prescribed by IFRS and therefore are unlikely to be comparable to similar measures presented by other issuers. These non-GAAP financial ratios and measures should not be considered in isolation or as a substitute for a measure prepared in accordance with IFRS. Contained within this press release are reconciliations of the non-GAAP financial ratios and measures to the most directly comparable financial measures calculated in accordance with IFRS.

Dorel believes that the non-GAAP financial ratios and measures used in this press release provide investors with additional information to analyze its results and to measure its financial performance by excluding the variation caused by certain items that Dorel believes do not reflect its core business performance and provides better comparability between the periods presented. Excluding these items does not imply they are necessarily non-recurring. The non-GAAP financial measures are also used by management to assess Dorel’s financial performance and to make operating and strategic decisions.

Adjustments to non-GAAP financial ratios and measures
As noted above, certain of our non-GAAP financial measures and ratios exclude the variation caused by certain adjustments that affect the comparability of Dorel’s financial results and could potentially distort the analysis of trends in its business performance. Adjustments which impact more than one non-GAAP financial ratio and measure are explained below.

Restructuring costs
Restructuring costs are comprised of costs directly related to significant exit activities, including the sale of manufacturing facilities, closure of businesses, reorganization, optimization, transformation, and consolidation to improve the competitive position of the Company in the marketplace and to reduce costs and bring efficiencies, and acquisition-related costs in connection with business acquisitions. Restructuring costs are included as an adjustment of adjusted gross profit, adjusted gross margin, adjusted operating profit (loss) from continuing operations, adjusted net income (loss) from continuing operations and adjusted diluted earnings (loss) per share from continuing operations. Restructuring costs were respectively US$2.3 million and US$6.8 million for the third quarter and nine months ended September 30, 2022 (none in 2023). Refer to the section “Restructuring costs – Continuing operations” in the MD&A for more details.

Impact of acquired businesses
The impact of acquired businesses is included as an adjustment of adjusted organic revenue growth (decline). Revenue from acquired businesses is adjusted during the first year of operation in order to get a better comparison of revenue from year-to-year. Revenue from acquired businesses were respectively US$5.6 million and US$18.8 million for the third quarter and nine months ended September 30, 2022 and were all related to the acquisition of Notio Living by Dorel Home.

Impact of the sale of divisions
The impact of the sale of divisions is included as an adjustment of adjusted organic revenue growth (decline). Revenue from the sale of divisions is adjusted during the year after the disposal in order to get a better comparison of revenue from year-to-year. Revenue from the sale of divisions was US$5.4 million for the nine months ended September 30, 2021 (none for the third quarter ended September 30, 2021) and was all related to the disposal of the manufacturing facility in Zhongshan, China by Dorel Juvenile.

Adjusted gross profit and adjusted gross margin
Adjusted gross profit is calculated as gross profit excluding the impact of restructuring costs. Adjusted gross margin is a non-GAAP ratio and is calculated as adjusted gross profit divided by revenue. Dorel uses adjusted gross profit and adjusted gross margin to measure its performance from one period to the next, without the variation caused by the impacts of the items described above. Dorel also uses adjusted gross profit and adjusted gross margin on a segment basis to measure its performance at the segment level. Dorel excludes this item because it affects the comparability of its financial results and could potentially distort the analysis of trends in its business performance. Certain investors and analysts use the adjusted gross profit and adjusted gross margin to measure the business performance of the Company as a whole and at the segment level from one period to the next, without the variation caused by the impact of the restructuring costs. Excluding this item does not imply it is necessarily non-recurring. These ratios and measures do not have any standardized meanings prescribed by IFRS and are therefore unlikely to be comparable to a similar measure presented by other companies.

There are no adjusted gross profit and adjusted gross margin for the third quarters and nine months ended September 30, 2023 and 2022.

Adjusted operating profit (loss) from continuing operations

Adjusted operating profit (loss) from continuing operations is calculated as operating profit (loss) from continuing operations excluding the impact of restructuring costs. Adjusted operating profit (loss) from continuing operations also excludes impairment loss on goodwill. Management uses adjusted operating profit (loss) from continuing operations to measure its performance from one period to the next, without the variation caused by the impacts of the items described above. Dorel also uses adjusted operating profit (loss) on a segment basis to measure its performance at the segment level. Dorel excludes these items because they affect the comparability of its financial results and could potentially distort the analysis of trends in its business performance. Certain investors and analysts use the adjusted operating profit (loss) from continuing operations to measure the business performance of the Company as a whole and at the segment level from one period to the next, without the variation caused by the impact of the restructuring costs and impairment loss on goodwill. Excluding these items does not imply they are necessarily non-recurring. This measure does not have any standardized meaning prescribed by IFRS and is therefore unlikely to be comparable to a similar measure presented by other companies.

Adjusted net income (loss) from continuing operations and adjusted diluted earnings (loss) per share from continuing operations
Adjusted net income (loss) from continuing operations is calculated as net income (loss) from continuing operations excluding the impact of restructuring costs and impairment loss on goodwill, as well as income taxes expense (recovery) relating to the adjustments above. Adjusted diluted earnings (loss) per share from continuing operations is a non-GAAP ratio and is calculated as adjusted net income (loss) from continuing operations divided by the weighted average number of diluted shares. Management uses adjusted net income (loss) from continuing operations and adjusted diluted earnings (loss) per share from continuing operations to measure its performance from one period to the next, without the variation caused by the impacts of the items described above. Dorel excludes these items because they affect the comparability of its financial results and could potentially distort the analysis of trends in its business performance. Certain investors and analysts use the adjusted net income (loss) from continuing operations and adjusted diluted earnings (loss) per share to measure the business performance of the Company from one period to the next. Excluding these items does not imply they are necessarily non-recurring. These measures do not have any standardized meanings prescribed by IFRS and are therefore unlikely to be comparable to a similar measure presented by other companies.

Organic revenue growth (decline) and adjusted organic revenue growth (decline)
Organic revenue growth (decline) is calculated as revenue growth (decline) compared to the previous period, excluding the impact of varying foreign exchange rates. Adjusted organic revenue growth (decline) is calculated as revenue growth (decline) compared to the previous period, excluding the impact of varying foreign exchange rates and the impact of the acquired businesses for the first year of operation and the sale of divisions. Management modified the calculation of the adjusted organic revenue growth (decline) to remove revenue from acquired businesses for the first year of operation in order to get a better comparison of revenue from year-to-year. Management uses organic revenue growth (decline) and adjusted organic revenue growth (decline) to measure its performance from one period to the next, without the variation caused by the impacts of the items described above. Dorel excludes these items because they affect the comparability of its financial results and could potentially distort the analysis of trends in its business performance. Certain investors and analysts use organic revenue growth (decline) and adjusted organic revenue growth (decline) to measure the business performance of the Company as a whole and at the segment level from one period to the next. Excluding these items does not imply they are necessarily non-recurring. These measures do not have any standardized meanings prescribed by IFRS and are therefore unlikely to be comparable to a similar measure presented by other companies.

CONTACTS:
Saint Victor Investments Inc
Rick Leckner
(514) 245-9232

Dorel Industries Inc.
Jeffrey Schwartz
(514) 934-3034