SN Sharkninja Inc

Net Sales Increased 22.1% and Adjusted Net Sales Increased 19.7%

Net Income Declined 27.6% and Adjusted Net Income Grew 40.4%

Provides Fiscal Year 2023 Outlook

SharkNinja, Inc. (“SharkNinja” or the “Company”) (NYSE: SN), a global product design and technology company, today announced its financial results for the second quarter ended June 30, 2023.

Highlights for the Second Quarter 2023 as compared to the Second Quarter 2022

• Net sales increased 22.1% to $950.3 million and Adjusted net Sales increased 19.7%, both driven by strong sales of recently launched products in the outdoor cooking and beauty categories.
• Gross margin and Adjusted Gross Margin increased 430 and 370 basis points, respectively, as we benefited from cost tailwinds including inbound freight costs.
• Net income decreased 27.6% to $11.9 million. Adjusted Net Income increased 40.4% to $65.2 million.
• Adjusted EBITDA increased 40.0% to $113.6 million, or 12.5% of Adjusted Net Sales.

Mark Barrocas, Chief Executive Officer, commented, “We believe our strong performance in the second quarter as well as the first half of the year, highlighted by double-digit sales and EBITDA growth, demonstrates our ability to execute on our three-pillar growth strategy. We continue to increase market share in existing categories, pioneer new categories through innovation, and globalize our brand. These results build upon a proven track record of delivering profitable, organic growth through high performance products that address everyday consumer challenges.”

“Our recent debut as a public company in the US was an important milestone for us. However, we believe we are only just getting started. We are committed to creating long-term shareholder value through continued diversification across categories, channels, and geographies as we strive to capture additional share of our large global addressable market.”

Three Months Ended June 30, 2023

Net sales increased 22.1% to $950.3 million, compared to $778.2 million during the same period last year. Adjusted Net Sales increased 19.7% to $905.6 million, compared to $756.4 million during the same period last year, or 19.8% on a constant currency basis. The increase in net sales and Adjusted Net Sales resulted primarily from strong sales of recently launched products in the outdoor cooking and beauty categories.

• Cleaning Appliances net sales increased by $2.6 million, or 0.6%, to $413.8 million, compared to $411.2 million in the prior year quarter, driven by growth in the multi-floorcare sub-category and by new product innovation. This increase was partially offset by softness in the North America market, specifically in corded vacuums as consumers shifted towards cordless.
• Cooking and Beverage Appliances net sales increased by $139.0 million, or 68.1%, to $343.1 million, compared to $204.0 million in the prior year quarter. This increase was driven by growth in Europe, specifically in the United Kingdom, where we further strengthened our leading market position. Our global growth was also supported by the full quarter of sales of our outdoor grill that launched in the second half of 2022, which continues to perform well across the US and European markets.
• Food Preparation Appliances net sales increased by $5.7 million, or 4.1%, to $143.4 million, compared to $137.7 million in the prior year quarter driven by strong sales from our ice cream makers.
• Other net sales increased by $24.8 million, or 98.3%, to $50.0 million, compared to $25.3 million in the prior year quarter. This increase was driven by continued strength of the Shark FlexStyle, our new product launch in the beauty category at the end of 2022.

Gross profit increased 36.2% to $396.9 million, or 41.8% of net sales, compared to $291.5 million, or 37.5% of net sales, in the second quarter of 2022. Adjusted Gross Profit increased 30.7% to $393.6 million, or 43.5% of Adjusted Net Sales, compared to $301.1 million, or 39.8% of Adjusted Net Sales in the second quarter of 2022. The increase in gross margin and Adjusted Gross Margin of 430 and 370 basis points, respectively, was primarily driven by cost tailwinds, including lower average inbound freight on major shipping lanes. We also drove strong sales through our higher margin direct-to-consumer (“DTC”) channel, particularly in the beauty category.

Research and development expenses increased 13.0% to $61.0 million, or 6.4% of net sales, compared to $54.0 million, or 6.9% of net sales, in the prior year quarter. Increased headcount to support new product categories and new market expansion was the primary driver of the year-over-year increase in research and development expense.

Sales and marketing expenses increased 42.1% to $208.3 million, or 21.9% of net sales, compared to $146.6 million, or 18.8% of net sales, in the second quarter of 2022. The increase was primarily attributable to $27.0 million in higher advertising-related expenses to support our launch into new markets and new sub-categories, a $14.9 million increase in fulfillment expenses to support our sales growth, and a $9.0 million increase in personnel-related expenses driven by additional increased headcount to support the overall growth in the business and new market expansion.

General and administrative expenses increased 31.5% to $72.0 million, or 7.6% of net sales, compared to $54.7 million, or 7.0% of net sales in the prior year quarter. Included in general and administrative expenses in the second quarter of 2023 is $16.6 million of costs related to the separation and distribution from JS Global.

Operating income increased 54.1% to $55.6 million, or 5.9% of net sales, compared to $36.1 million, or 4.8% of net sales, during the prior year quarter. Adjusted Operating Income increased 39.3% to $88.7 million, or 9.8% of Adjusted Net Sales, compared to $63.6 million, or 8.4% of Adjusted Net Sales, in the second quarter of 2022.

Net income decreased 27.6% to $11.9 million, or 1.3% of net sales, compared to $16.5 million, or 2.1% of net sales, in the prior year quarter. Net income per diluted share decreased 27.6% to $0.09, compared to $0.12 in the prior year quarter.

Adjusted Net Income increased 40.4% to $65.2 million, or 7.2% of Adjusted Net Sales, compared to $46.4 million, or 6.1% of Adjusted Net Sales, in the prior year quarter. Adjusted Net Income per diluted share increased 40.4% to $0.47, compared to $0.33 in the prior year quarter.

Adjusted EBITDA increased 40.0% to $113.6 million, or 12.5% of Adjusted Net Sales, compared to $81.2 million, or 10.7% of Adjusted Net Sales in the prior year quarter.

Six Months Ended June 30, 2023

Net sales increased 13.7% to $1,805.6 million, compared to $1,587.8 million during the same period last year. Adjusted Net Sales increased 12.6% to $1,741.2 million, compared to $1,546.0 million during the same period last year, or 14.2% on a constant currency-basis. The increase in net sales and Adjusted Net Sales resulted primarily from strong sales of recently launched products in the outdoor cooking and beauty categories.

• Cleaning Appliances net sales decreased by $19.5 million, or 2.3%, to $828.7 million, compared to $848.2 million during the same period last year driven by softness in the North America market, specifically in corded vacuums as consumers shifted towards cordless. This sales decline was partially offset by growth in the multi-floorcare sub-category driven by new product innovation.
• Cooking and Beverage Appliances net sales increased by $163.6 million, or 37.5%, to $599.7 million, compared to $436.1 million during the same period last year. This increase was driven by growth in Europe, specifically in the United Kingdom where we strengthened our leading market position, partially offset by modest declines in North America. Our global growth was further supported by the full six months of sales of our outdoor grill that launched in the second half of 2022, which continues to perform well across the US and European markets.
• Food Preparation Appliances net sales decreased by $4.9 million, or 1.9%, to $261.2 million, compared to $266.2 million during the same period last year driven by strong sales from our ice cream makers.
• Other net sales increased by $78.6 million, or 210.6%, to $116.0 million, compared to $37.3 million during the same period last year. This increase was primarily a result of strong sales of our new product launch in the beauty category, the Shark FlexStyle, at the end of 2022.

Gross profit increased 23.9% to $797.5 million, or 44.2% of net sales, compared to $643.4 million, or 40.5% of net sales, in the same period last year. Adjusted Gross Profit increased 21.2% to $800.4 million, or 46.0% of Adjusted Net Sales, compared to $660.4 million, or 42.7% of Adjusted Net Sales. The increase in gross margin and Adjusted Gross Margin of 370 and 330 basis points, respectively, was primarily driven by cost tailwinds, including lower average inbound freight on major shipping lanes. We also drove strong sales through our higher margin DTC channel, specifically in the beauty category.

Research and development expenses increased 13.0% to $119.7 million, or 6.6% of net sales, compared to $106.0 million, or 6.7% of net sales during the same period last year. This increase was primarily attributable to an increase of $8.3 million in personnel-related expenses driven by increased headcount to support new product categories and new market expansion and an increase of $2.7 million in depreciation and amortization expenses.

Sales and marketing expenses increased 32.4% to $360.4 million, or 20.0% of net sales, compared to $272.2 million, or 17.1% of net sales during the same period last year. This increase was primarily attributable to an increase of $37.1 million in advertising-related expenses to support our launch into new markets and new sub-categories, an increase of $21.3 million in fulfillment expenses to support increased sales, an increase of $13.1 million in personnel-related expenses driven by increased headcount to support the overall growth in the business and new market expansion, an increase of $4.3 million in professional services related to third-party consulting fees and an increase of $3.2 million in depreciation and amortization expenses.

General and administrative expenses increased 30.3% to $139.0 million, or 7.7% of net sales, compared to $106.7 million, or 6.7% of net sales during the same period last year. Included in general and administrative expenses in 2023 is $35.1 million of costs related to the separation and distribution from JS Global.

Operating income increased 12.5% to $178.3 million, or 9.9% of net sales, compared to $158.5 million, or 10.0% of net sales, during the same period last year. Adjusted Operating Income increased 20.1% to $248.0 million, or 14.2% of Adjusted Net Sales, compared to $206.5 million, or 13.4% of Adjusted Net Sales, during the same period last year.

Net income decreased 6.0% to $99.0 million, or 5.5% of net sales, compared to $105.4 million, or 6.6% of net sales, during the same period last year. Net income per diluted share decreased 6.0% to $0.71, compared to $0.76 in the prior year period.

Adjusted Net Income increased 18.3% to $184.2 million, or 10.6% of Adjusted Net Sales, compared to $155.7 million, or 10.1% of Adjusted Net Sales in the prior year period. Adjusted Net Income per diluted share increased 18.3% to $1.33, compared to $1.12 in the prior year period.

Adjusted EBITDA increased 21.3% to $291.6 million, or 16.7% of Adjusted Net Sales, compared to $240.4 million, or 15.6% of Adjusted Net Sales in the prior year period.

Balance Sheet and Cash Flow Highlights

Cash and cash equivalents increased to $256.4 million, compared to $192.9 million as of December 31, 2022.

Inventories decreased 2.0% to $537.7 million, compared to $548.6 million as of December 31, 2022.

Total debt, excluding unamortized deferred financing costs, was $400.0 million, compared to $437.5 million as of December 31, 2022. In July 2023, we entered into a new credit facility to replace our existing term loan and revolving credit agreement. The new credit facility provides for a $810.0 million term loan and a $500.0 million revolving credit facility.

Fiscal 2023 Outlook

For fiscal year 2023, SharkNinja expects:

• Net sales to increase 9% to 11% and Adjusted Net Sales to increase between 10% and 12% compared to the prior year.
• Adjusted Net Income per diluted share between $2.85 and $3.02, reflecting a 20% to 27% increase compared to the prior year.
• Adjusted EBITDA between $650 million and $680 million, reflecting a 25% to 31% increase compared to the prior year.
• A GAAP effective tax rate of approximately 35% to 36%, inclusive of approximately 10 to 11 percentage points of impact related to withholding taxes and non-deductible costs associated with the separation and distribution from JS Global.
• Diluted weighted average shares outstanding of approximately 139.3 million.
• Capital expenditures of $120 million to $140 million primarily to support investments in new product launches and technology.

Conference Call Details

A conference call to discuss the second quarter 2023 financial results is scheduled for today, August 24, 2023, at 8:00 a.m. Eastern Time. A live audio webcast of the conference call will be available online at http://ir. sharkninja.com. Investors and analysts interested in participating in the live call are invited to dial 1-877-407-4018 or 1-201-689-8471. The webcast will be archived and available for replay.

About SharkNinja, Inc.

SharkNinja is a diversified, global product design and technology company that creates 5-star rated lifestyle solutions through innovative products for consumers around the world. The Company seeks to leverage its global, agile and cross-functional engineering know-how, product development and manufacturing expertise along with solutions-driven marketing to increase the efficiency, convenience and enjoyment of consumers’ daily tasks and improve everyday lives. Powered by two trusted, global brands, Shark and Ninja, the Company has a proven track record of bringing disruptive products to market, and developing one consumer solution after another has allowed SharkNinja to enter multiple product categories, driving significant growth and market share gains. The Company’s products are sold at key retailers, online and offline, and through distributors around the world. For more information, please visit ir.sharkninja.com.

Forward-looking statements

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our current views with respect to, among other things, future events and our future business, financial condition, results of operations and prospects and Fiscal 2023 outlook. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would” and “outlook,” or the negative version of those words or phrases or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not statements of historical fact, and are based on current expectations, estimates and projections about our industry as well as certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, which you should consider and read carefully, including but not limited to:

• our ability to maintain and strengthen our brands to generate and maintain ongoing demand for our products;
• our ability to commercialize a continuing stream of new products and line extensions that create demand;
• our ability to effectively manage our future growth;
• general economic conditions and the level of discretionary consumer spending;
• our ability to expand into additional consumer markets;
• our ability to maintain product quality and product performance at an acceptable cost;
• our ability to compete with existing and new competitors in our markets;
• problems with, or loss of, our supply chain or suppliers, or an inability to obtain raw materials;
• the risks associated with doing business globally;
• inflation, changes in the cost or availability of raw materials, energy, transportation and other necessary supplies and services;
• our ability to hire, integrate and retain highly skilled personnel;
• our ability to maintain, protect and enhance our intellectual property;
• our ability to securely maintain consumer and other third-party data;
• our ability to comply with ongoing regulatory requirements;
• the increased expenses associated with being a public company;
• our status as a “controlled company” within the meaning of the rules of NYSE; and
• our ability to achieve some or all of the anticipated benefits of the separation.

This list of factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this press release. We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this press release, and our future levels of activity and performance, may not occur and actual results could differ materially and adversely from those described or implied in the forward-looking statements. As a result, you should not regard any of these forward-looking statements as a representation or warranty by us or any other person or place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. In addition, statements that contain “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this press release. While we believe that this information provides a reasonable basis for these statements, this information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements. We qualify all of our forward-looking statements by the cautionary statements contained in this press release.

SHARKNINJA GLOBAL SPV, LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(unaudited)

 

 

As of

 

 

 

June 30, 2023

 

 

December 31, 2022

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

256,379

 

 

$

192,890

 

Restricted cash

 

 

23,207

 

 

 

25,880

 

Accounts receivable, net

 

 

922,290

 

 

 

766,503

 

Inventories

 

 

537,676

 

 

 

548,588

 

Prepaid expenses and other current assets

 

 

96,790

 

 

 

181,831

 

Total current assets

 

 

1,836,342

 

 

 

1,715,692

 

Property and equipment, net

 

 

143,178

 

 

 

137,341

 

Operating lease right-of-use assets

 

 

68,883

 

 

 

67,321

 

Intangible assets, net

 

 

485,196

 

 

 

492,709

 

Goodwill

 

 

839,753

 

 

 

840,148

 

Deferred tax assets, noncurrent

 

 

4,047

 

 

 

6,291

 

Other assets, noncurrent

 

 

44,038

 

 

 

35,389

 

Total assets

 

$

3,421,437

 

 

$

3,294,891

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

371,391

 

 

$

328,122

 

Accrued expenses and other current liabilities

 

 

638,955

 

 

 

552,023

 

Tax payable

 

 

151

 

 

 

1,581

 

Current portion of long-term debt

 

 

99,503

 

 

 

86,972

 

Total current liabilities

 

 

1,110,000

 

 

 

968,698

 

Long-term debt

 

 

299,529

 

 

 

349,169

 

Operating lease liabilities, noncurrent

 

 

65,292

 

 

 

61,779

 

Deferred tax liabilities, noncurrent

 

 

52,362

 

 

 

60,976

 

Other liabilities, noncurrent

 

 

27,744

 

 

 

25,980

 

Total liabilities

 

 

1,554,927

 

 

 

1,466,602

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

Ordinary shares, $0.20 par value per share, 250,000 shares authorized, 50,000 shares issued and outstanding as of June 30, 2023 and December 31, 2022

 

 

10

 

 

 

10

 

Additional paid-in capital

 

 

941,210

 

 

 

941,210

 

Retained earnings

 

 

935,487

 

 

 

896,738

 

Accumulated other comprehensive loss

 

 

(10,197

)

 

 

(9,669

)

Total shareholders’ equity

 

 

1,866,510

 

 

 

1,828,289

 

Total liabilities and shareholders’ equity

 

$

3,421,437

 

 

$

3,294,891

 

SHARKNINJA GLOBAL SPV, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share and per share data)

(unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net sales(1)

 

$

950,312

 

 

$

778,197

 

 

$

1,805,594

 

 

$

1,587,823

 

Cost of sales

 

 

553,391

 

 

 

486,730

 

 

 

1,008,130

 

 

 

944,430

 

Gross profit

 

 

396,921

 

 

 

291,467

 

 

 

797,464

 

 

 

643,393

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

61,014

 

 

 

54,016

 

 

 

119,739

 

 

 

105,987

 

Sales and marketing

 

 

208,316

 

 

 

146,641

 

 

 

360,436

 

 

 

272,182

 

General and administrative

 

 

71,959

 

 

 

54,711

 

 

 

139,027

 

 

 

106,736

 

Total operating expenses

 

 

341,289

 

 

 

255,368

 

 

 

619,202

 

 

 

484,905

 

Operating income

 

 

55,632

 

 

 

36,099

 

 

 

178,262

 

 

 

158,488

 

Interest expense, net

 

 

(7,031

)

 

 

(6,078

)

 

 

(15,520

)

 

 

(10,082

)

Other expense, net

 

 

(32,670

)

 

 

(6,965

)

 

 

(35,450

)

 

 

(10,874

)

Income before income taxes

 

 

15,931

 

 

 

23,056

 

 

 

127,292

 

 

 

137,532

 

Provision for income taxes

 

 

3,995

 

 

 

6,561

 

 

 

28,260

 

 

 

32,126

 

Net income

 

$

11,936

 

 

$

16,495

 

 

$

99,032

 

 

$

105,406

 

Net income per share, basic and diluted

 

$

0.09

 

 

$

0.12

 

 

$

0.71

 

 

$

0.76

 

Weighted-average number of shares used in computing net income per share, basic and diluted(2)

 

 

138,982,872

 

 

 

138,982,872

 

 

 

138,982,872

 

 

 

138,982,872

 

(1) Net sales in our product categories were as follows:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

($ in thousands)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Cleaning Appliances

 

$

413,797

 

 

$

411,227

 

 

$

828,667

 

 

$

848,187

 

Cooking and Beverage Appliances

 

343,050

 

 

204,028

 

 

599,732

 

 

436,131

 

Food Preparation Appliances

 

143,376

 

 

137,687

 

 

261,224

 

 

266,166

 

Other

 

50,089

 

 

25,255

 

 

115,971

 

 

37,339

 

Total net sales

 

$

950,312

 

 

$

778,197

 

 

$

1,805,594

 

 

$

1,587,823

 

(2) The number of shares transferred in the separation and distribution from JS Global were used as the denominator in calculating net income per share.

SHARKNINJA GLOBAL SPV, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

99,032

 

 

$

105,406

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

51,795

 

 

 

40,165

 

Share-based compensation

 

 

3,165

 

 

 

4,446

 

Provision for credit losses

 

 

1,218

 

 

 

947

 

Non-cash lease expense

 

 

6,383

 

 

 

8,478

 

Amortization of debt discount

 

 

392

 

 

 

430

 

Deferred income taxes, net

 

 

(5,864

)

 

 

(8,025

)

Loss from equity method investment

 

 

—

 

 

 

360

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(143,549

)

 

 

261,056

 

Inventories

 

 

16,008

 

 

 

(113,391

)

Prepaid expenses and other assets

 

 

78,613

 

 

 

(85,286

)

Accounts payable

 

 

33,605

 

 

 

(80,872

)

Tax payable

 

 

(1,326

)

 

 

(4,886

)

Operating lease liabilities

 

 

(10,165

)

 

 

(7,665

)

Accrued expenses and other liabilities

 

 

71,078

 

 

 

(135,237

)

Net cash provided by (used in) operating activities

 

 

200,385

 

 

 

(14,074

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(46,273

)

 

 

(32,687

)

Purchase of intangible asset

 

 

(1,120

)

 

 

(2,799

)

Capitalized internal-use software development

 

 

(123

)

 

 

(2,519

)

Investment in equity method investment

 

 

—

 

 

 

(360

)

Other investing activities, net

 

 

(300

)

 

 

(300

)

Net cash used in investing activities

 

 

(47,816

)

 

 

(38,665

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of debt, net of issuance cost

 

 

—

 

 

 

200,000

 

Repayment of debt

 

 

(37,501

)

 

 

(130,000

)

Intercompany note to Parent

 

 

—

 

 

 

(41,286

)

Distribution paid to Parent

 

 

(60,283

)

 

 

(45,438

)

Recharge from Parent for share-based compensation

 

 

—

 

 

 

(15,300

)

Net cash used in financing activities

 

 

(97,784

)

 

 

(32,024

)

Effect of exchange rates changes on cash

 

 

6,031

 

 

 

(7,656

)

Net increase (decrease) in cash, cash equivalents, and restricted cash

 

 

60,816

 

 

 

(92,419

)

Cash, cash equivalents, and restricted cash at beginning of period

 

 

218,770

 

 

 

240,597

 

Cash, cash equivalents, and restricted cash at end of period

 

$

279,586

 

 

$

148,178

 

Non-GAAP Financial Measures

In addition to the measures presented in our consolidated financial statements, we regularly review other financial measures, defined as non-GAAP financial measures by the SEC, to evaluate our business, measure our performance, identify trends, prepare financial forecasts, and make strategic decisions.

The key non-GAAP financial measures we consider are Adjusted Net Sales, Adjusted Gross Profit, Adjusted Gross Margin, Adjusted Operating Income, Adjusted Net Income, Adjusted Net Income Per Share, Adjusted EBITDA, Adjusted EBITDA Margin, and Adjusted Net Sales growth on a constant currency basis. These non-GAAP financial measures are used by both management and our Board, together with comparable GAAP information, in evaluating our current performance and planning our future business activities. These non-GAAP financial measures provide supplemental information regarding our operating performance on a non-GAAP basis that excludes certain gains, losses and charges of a non-cash nature or which occur relatively infrequently and/or which management considers to be unrelated to our core operations and excludes the financial results from our former Japanese subsidiary, SharkNinja Co., Ltd., and our Asia Pacific Region and Greater China distribution channels, both of which were transferred to JS Global Lifestyle Company Limited (“JS Global”) concurrently with the separation (the “Divestitures”), as well as the cost of sales from inventory markups that were eliminated as a result of transitioning certain product procurement functions from a subsidiary of JS Global to SharkNinja concurrently with the separation (the “Product Procurement Adjustment”). Management believes that tracking and presenting these non-GAAP financial measures provides management and the investment community with valuable insight into our ongoing core operations, our ability to generate cash and the underlying business trends that are affecting our performance. We believe that these non-GAAP measures, when used in conjunction with our GAAP financial information, also allow investors to better evaluate our financial performance in comparison to other periods and to other companies in our industry and to better understand and interpret the results of the ongoing business following the separation and distribution. These non-GAAP financial measures should not be viewed as a substitute for our financial results calculated in accordance with GAAP and you are cautioned that other companies may define these non-GAAP financial measures differently.

SharkNinja does not provide a reconciliation of forward-looking Adjusted Net Income and Adjusted EBITDA to GAAP net income because such reconciliations are not available without unreasonable efforts. The is due to the inherent difficulty in forecasting with reasonable certainty certain amount that are necessary for such reconciliation, including, in particular, the realized and unrealized foreign currency gains or losses reported within other expense. For the same reasons, we are unable to forecast with reasonable certainty all deductions and additions needed in order to provide forward-looking GAAP net income at this time. The amount of these deductions and additions may be material, and, therefore, could result in forward-looking GAAP net income being materially different or less than forward-looking Adjusted Net Income and Adjusted EBITDA. See “Forward-looking statements” above.

We define Adjusted Net Sales as net sales as adjusted to exclude certain items that we do not consider indicative of our ongoing operating performance following the separation, including net sales from our Divestitures. We believe that Adjusted Net Sales is an appropriate measure of our performance because it eliminates the impact of our Divestitures that do not relate to the ongoing performance of our business.

The following table reconciles Adjusted Net Sales to the most comparable GAAP measure, net sales, for the periods presented:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

($ in thousands, except %)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net sales

 

$

950,312

 

 

$

778,197

 

 

$

1,805,594

 

 

$

1,587,823

 

Divested subsidiary adjustment(1)

 

 

(44,700

)

 

 

(21,790

)

 

 

(64,349

)

 

 

(41,870

)

Adjusted Net Sales

 

$

905,612

 

 

$

756,407

 

 

$

1,741,245

 

 

$

1,545,953

 

(1)

 

Adjusted for net sales of $22.2 million and $14.1 million from SharkNinja Co., Ltd. (“SNJP”) for the three months ended June 30, 2023 and 2022, respectively; $22.5 million and $7.7 million from the APAC distribution channels for the three months ended June 30, 2023 and 2022, respectively; $37.2 million and $28.1 million from SNJP for the six months ended June 30, 2023 and 2022, respectively; and $27.2 million and $13.8 million from the APAC distribution channels for the six months ended June 30, 2023 and 2022, respectively, as if such Divestitures occurred on January 1, 2022.

We define Adjusted Gross Profit as gross profit as adjusted to exclude certain items that we do not consider indicative of our ongoing operating performance following the separation, including the net sales and cost of sales from our Divestitures and the cost of sales from the Product Procurement Adjustment. We define Adjusted Gross Margin as Adjusted Gross Profit divided by Adjusted Net Sales. We believe that Adjusted Gross Profit and Adjusted Gross Margin are appropriate measures of our operating performance because each eliminates the impact our Divestitures and certain other adjustments that do not relate to the ongoing performance of our business.

The following table reconciles Adjusted Gross Profit and Adjusted Gross Margin to the most comparable GAAP measure, gross profit and gross margin, respectively, for the periods presented:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

($ in thousands, except %)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net sales

 

$

950,312

 

 

$

778,197

 

 

$

1,805,594

 

 

$

1,587,823

 

Cost of sales

 

 

(553,391

)

 

 

(486,730

)

 

 

(1,008,130

)

 

 

(944,430

)

Gross profit

 

 

396,921

 

 

 

291,467

 

 

 

797,464

 

 

 

643,393

 

Gross margin %

 

 

41.8

%

 

 

37.5

%

 

 

44.2

%

 

 

40.5

%

Divested subsidiary net sales adjustment(1)

 

 

(44,700

)

 

 

(21,790

)

 

 

(64,349

)

 

 

(41,870

)

Divested subsidiary cost of sales adjustment(2)

 

 

24,460

 

 

 

13,991

 

 

 

37,487

 

 

 

25,936

 

Product Procurement Adjustment(3)

 

 

16,923

 

 

 

17,471

 

 

 

29,794

 

 

 

32,890

 

Adjusted Gross Profit

 

$

393,604

 

 

$

301,139

 

 

$

800,396

 

 

$

660,349

 

Adjusted Net Sales

 

$

905,612

 

 

$

756,407

 

 

$

1,741,245

 

 

$

1,545,953

 

Adjusted Gross Margin

 

 

43.5

%

 

 

39.8

%

 

 

46.0

%

 

 

42.7

%

(1)

 

Adjusted for net sales of $22.2 million and $14.1 million from SNJP for the three months ended June 30, 2023 and 2022, respectively; $22.5 million and $7.7 million from the APAC distribution channels for the three months ended June 30, 2023 and 2022, respectively; $37.2 million and $28.1 million from SNJP for the six months ended June 30, 2023 and 2022, respectively; and $27.2 million and $13.8 million from the APAC distribution channels for the six months ended June 30, 2023 and 2022, respectively, as if such Divestitures occurred on January 1, 2022.

(2)

 

Adjusted for cost of sales of $10.4 million and $8.0 million from SNJP for the three months ended June 30, 2023 and 2022, respectively; $14.1 million and $6.0 million from the APAC distribution channels for the three months ended June 30, 2023 and 2022, respectively; $19.7 million and $15.3 million from SNJP for the six months ended June 30, 2023 and 2022, respectively; and $17.8 million and $10.6 million from the APAC distribution channels for the six months ended June 30, 2023 and 2022, respectively, as if such Divestitures occurred on January 1, 2022.

(3)

 

Represents cost of sales of $16.9 million and $17.5 million for the three months ended June 30, 2023 and 2022, respectively, and $29.8 million and $32.9 million for the six months ended June 30, 2023 and 2022, respectively, related to the Product Procurement Adjustment. As a result of the separation, we intend to purchase 100% of our inventory from one of our subsidiaries, SharkNinja (Hong Kong) Company Limited (“SNHK”), and will no longer purchase inventory from a purchasing office wholly owned by JS Global. Thus, the markup on all inventory purchased subsequent to the separation will be completely eliminated in consolidation.

We define Adjusted Operating Income as operating income excluding (i) share-based compensation, (ii) certain litigation costs, (iii) amortization of certain acquired intangible assets, (iv) certain separation and distribution costs and (v) certain items that we do not consider indicative of our ongoing operating performance following the separation, including operating income from our Divestitures and cost of sales from our Product Procurement Adjustment.

The following table reconciles Adjusted Operating Income to the most comparable GAAP measure, operating income, for the periods presented:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

($ in thousands)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Operating income

 

$

55,632

 

 

$

36,099

 

 

$

178,262

 

 

$

158,488

 

Share-based compensation(1)

 

 

2,317

 

 

 

1,876

 

 

 

3,165

 

 

 

4,446

 

Litigation costs(2)

 

 

461

 

 

 

3,844

 

 

 

635

 

 

 

4,005

 

Amortization of acquired intangible assets(3)

 

 

4,897

 

 

 

4,897

 

 

 

9,794

 

 

 

9,794

 

Separation and distribution related costs(4)

 

 

16,625

 

 

 

–

 

 

 

35,093

 

 

 

–

 

Product Procurement Adjustment(5)

 

 

16,923

 

 

 

17,471

 

 

 

29,794

 

 

 

32,890

 

Divested subsidiary operating income adjustment(6)

 

 

(8,190

)

 

 

(546

)

 

 

(8,743

)

 

 

(3,143

)

Adjusted Operating Income

 

$

88,665

 

 

$

63,641

 

 

$

248,000

 

 

$

206,480

 

(1)

Represents non-cash expense related to restricted stock unit awards issued from JS Global’s equity incentive plans.

(2)

Represents litigation costs incurred for iRobot Corporation’s (“iRobot”) patent infringement claims and false advertising claims against us.

(3)

Represents amortization of acquired intangible assets that we do not consider normal recurring operating expenses, as the intangible assets relate to JS Global’s acquisition of our business. We exclude amortization charges for these acquisition-related intangible assets for purposes of calculated Adjusted Net Income, although revenue is generated, in part, by these intangible assets, to eliminate the impact of these non-cash charges that are significantly impacted by the timing and valuation of JS Global’s acquisition of our business, as well as the inherent subjective nature of purchase price allocations.

(4)

Represents certain costs incurred related to the separation and distribution from JS Global.

(5)

Represents cost of sales of $16.9 million and $17.5 million for the three months ended June 30, 2023 and 2022, respectively, and $29.8 million and $32.9 million for the six months ended June 30, 2023 and 2022, respectively, related to the Product Procurement Adjustment. As a result of the separation, we intend to purchase 100% of our inventory from one of our subsidiaries, SNHK, and will no longer purchase inventory from a purchasing office wholly owned by JS Global. Thus, the markup on all inventory purchased subsequent to the separation will be completely eliminated in consolidation.

(6)

Adjusted for operating income of $0.9 million and $(0.8) million from SNJP for the three months ended June 30, 2023 and 2022, respectively; $7.3 million and $1.3 million from the APAC distribution channels for the three months ended June 30, 2023 and 2022, respectively; $0.7 million from SNJP for the six months ended June 30, 2023 and 2022, respectively; and $8.0 million and $2.4 million from the APAC distribution channels for the six months ended June 30, 2023 and 2022, respectively, as if the Divestitures occurred on January 1, 2022.

We define Adjusted Net Income as net income excluding (i) share-based compensation, (ii) certain litigation costs, (iii) foreign currency gains and losses, net (iv) amortization of certain acquired intangible assets, (v) certain separation and distribution costs, (vi) certain items that we do not consider indicative of our ongoing operating performance following the separation, including net income from our Divestitures and cost of sales from our Product Procurement Adjustment and (vii) the tax impact of the adjusted items.

Adjusted Net Income Per Share is defined as Adjusted Net Income divided by the diluted weighted average number of ordinary shares.

The following table reconciles Adjusted Net Income and Adjusted Net Income Per Share to the most comparable GAAP measures, net income and net income per share, diluted, respectively, for the periods presented:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

($ in thousands, except share and per share amounts)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income

 

$

11,936

 

 

$

16,495

 

 

$

99,032

 

 

$

105,406

 

Share-based compensation(1)

 

 

2,317

 

 

 

1,876

 

 

 

3,165

 

 

 

4,446

 

Litigation costs(2)

 

 

461

 

 

 

3,844

 

 

 

635

 

 

 

4,005

 

Foreign currency losses, net(3)

 

 

35,468

 

 

 

7,902

 

 

 

39,617

 

 

 

12,622

 

Amortization of acquired intangible assets(4)

 

 

4,897

 

 

 

4,897

 

 

 

9,794

 

 

 

9,794

 

Separation and distribution related costs(5)

 

 

16,625

 

 

 

–

 

 

 

35,093

 

 

 

–

Product Procurement Adjustment(6)

 

 

16,923

 

 

 

17,471

 

 

 

29,794

 

 

 

32,890

 

Tax impact of adjusting items(7)

 

 

(16,872

)

 

 

(7,918

)

 

 

(25,982

)

 

 

(14,027

)

Divested subsidiary net income adjustment(8)

 

 

(6,585

)

 

 

1,865

 

 

 

(6,980

)

 

 

576

 

Adjusted Net Income

 

$

65,170

 

 

$

46,432

 

 

$

184,168

 

 

$

155,712

 

Net income per share, diluted

 

$

0.09

 

 

$

0.12

 

 

$

0.71

 

 

$

0.76

 

Adjusted Net Income Per Share

 

$

0.47

 

 

$

0.33

 

 

$

1.33

 

 

$

1.12

 

Diluted weighted-average number of shares used in computing net income per share and Adjusted Net Income Per Share(9)

 

 

138,982,872

 

 

 

138,982,872

 

 

 

138,982,872

 

 

 

138,982,872

 

(1)

Represents non-cash expense related to restricted stock unit awards issued from JS Global’s equity incentive plans.

(2)

Represents litigation costs incurred for iRobot’s patent infringement claims and false advertising claims against us.

(3)

Represents foreign currency transaction gains and losses recognized from the remeasurement of transactions that were not denominated in the local functional currency, including gains and losses related to foreign currency derivatives not designated as hedging instruments. The total net (loss) gain recognized on our derivative instruments related to forward contracts outstanding not designated as hedging instruments included in the total of foreign currency losses, net, was $(27.5) million and $2.1 million for the three months ended June 30, 2023 and 2022, respectively, and $(25.7) million and $2.1 million for the six months ended June 30, 2023 and 2022, respectively.

(4)

Represents amortization of acquired intangible assets that we do not consider normal recurring operating expenses, as the intangible assets relate to JS Global’s acquisition of our business. We exclude amortization charges for these acquisition-related intangible assets for purposes of calculated Adjusted Net Income, although revenue is generated, in part, by these intangible assets, to eliminate the impact of these non-cash charges that are significantly impacted by the timing and valuation of JS Global’s acquisition of our business, as well as the inherent subjective nature of purchase price allocations.

(5)

Represents certain costs incurred related to the separation and distribution from JS Global.

(6)

Represents cost of sales of $16.9 million and $17.5 million for the three months ended June 30, 2023 and 2022, respectively, and $29.8 million and $32.9 million for the six months ended June 30, 2023 and 2022, respectively, related to the Product Procurement Adjustment. As a result of the separation, we intend to purchase 100% of our inventory from one of our subsidiaries, SNHK, and will no longer purchase inventory from a purchasing office wholly owned by JS Global. Thus, the markup on all inventory purchased subsequent to the separation will be completely eliminated in consolidation.

(7)

Represents the income tax effects of the adjustments included in the reconciliation of net income to Adjusted Net Income determined using the tax rate of 22.0%, which approximates our effective tax rate, excluding the divested subsidiary net income adjustment described in footnote (8).

(8)

Adjusted for net income (loss) of $0.8 million and $(2.9) million from SNJP for the three months ended June 30, 2023 and 2022, respectively; $5.7 million and $1.0 million from the APAC distribution channels for the three months ended June 30, 2023 and 2022, respectively; $0.7 million and $(2.5) million from SNJP for the six months ended June 30, 2023 and 2022, respectively; and $6.3 million and $1.9 million from the APAC distribution channels for the six months ended June 30, 2023 and 2022, respectively, as if the Divestitures occurred on January 1, 2022.

(9)

In calculating net income per share and Adjusted Net Income Per Share, the Company has used the number of shares transferred in the separation and distribution for the denominator.

We define EBITDA as net income excluding: (i) interest expense, net, (ii) provision for income taxes and (iii) depreciation and amortization. We define Adjusted EBITDA as EBITDA excluding (i) share-based compensation cost, (ii) certain litigation costs, (iii) foreign currency gains and losses, net, (iv) certain separation and distribution costs and (v) certain items that we do not consider indicative of our ongoing operating performance following the separation, including net income from our Divestitures and cost of sales from our Product Procurement Adjustment. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by Adjusted Net Sales. We believe EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are appropriate measures because they facilitate a comparison of our operating performance on a consistent basis from period to period that, when viewed in combination with our results according to GAAP, we believe provide a more complete understanding of the factors and trends affecting our business than GAAP measures alone.

The following table reconciles EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin to the most comparable GAAP measure, net income, for the periods presented:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

($ in thousands, except %)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income

 

$

11,936

 

 

$

16,495

 

 

$

99,032

 

 

$

105,406

 

Interest expense, net

 

 

7,031

 

 

 

6,078

 

 

 

15,520

 

 

 

10,082

 

Provision for income taxes

 

 

3,995

 

 

 

6,561

 

 

 

28,260

 

 

 

32,126

 

Depreciation and amortization

 

 

29,038

 

 

 

19,961

 

 

 

51,792

 

 

 

40,165

 

EBITDA

 

$

52,000

 

 

$

49,095

 

 

$

194,604

 

 

$

187,779

 

Share-Based compensation(1)

 

 

2,317

 

 

 

1,876

 

 

 

3,165

 

 

 

4,446

 

Litigation costs(2)

 

 

461

 

 

 

3,844

 

 

 

635

 

 

 

4,005

 

Foreign currency losses, net(3)

 

 

35,468

 

 

 

7,902

 

 

 

39,617

 

 

 

12,622

 

Separation and distribution related costs(4)

 

 

16,625

 

 

 

–

 

 

 

35,093

 

 

 

–

 

Product Procurement Adjustment(5)

 

 

16,923

 

 

 

17,471

 

 

 

29,794

 

 

 

32,890

 

Divested subsidiary Adjusted EBITDA adjustment(6)

 

 

(10,187

)

 

 

978

 

 

 

(11,285

)

 

 

(1,341

)

Adjusted EBITDA

 

$

113,607

 

 

$

81,166

 

 

$

291,623

 

 

$

240,401

 

Adjusted Net Sales

 

$

905,612

 

 

$

756,407

 

 

$

1,741,245

 

 

$

1,545,953

 

Adjusted EBITDA Margin

 

 

12.5

%

 

 

10.7

%

 

 

16.7

%

 

 

15.6

%

(1)

Represents non-cash expense related to restricted stock unit awards issued from JS Global’s equity incentive plans.

(2)

Represents litigation costs incurred for iRobot’s patent infringement claims and false advertising claims against us.

(3)

Represents foreign currency transaction gains and losses recognized from the remeasurement of transactions that were not denominated in the local functional currency, including gains and losses related to foreign currency derivatives not designated as hedging instruments. The total net (loss) gain recognized on our derivative instruments related to forward contracts outstanding not designated as hedging instruments included in the total of foreign currency losses, net, was $(27.5) million and $2.1 million for the three months ended June 30, 2023 and 2022, respectively, and $(25.7) million and $2.1 million for the six months ended June 30, 2023 and 2022, respectively.

(4)

Represents certain costs incurred related to the separation and distribution from JS Global.

(5)

Represents cost of sales of $16.9 million and $17.5 million for the three months ended June 30, 2023 and 2022, respectively, and $29.8 million and $32.9 million for the six months ended June 30, 2023 and 2022, respectively, related to the Product Procurement Adjustment. As a result of the separation, we intend to purchase 100% of our inventory from one of our subsidiaries, SNHK, and will no longer purchase inventory from a purchasing office wholly owned by JS Global. Thus, the markup on all inventory purchased subsequent to the separation will be completely eliminated in consolidation.

(6)

Adjusted for Adjusted EBITDA of $2.9 million and $(2.3) million from SNJP for the three months ended June 30, 2023 and 2022, respectively; and $7.3 million and $1.3 million from the APAC distribution channels for the three months ended June 30, 2023 and 2022, respectively; $3.2 million and $(1.1) million from SNJP for the six months ended June 30, 2023 and 2022, respectively; and $8.0 million and $2.4 million from the APAC distribution channels for the six months ended June 30, 2023 and 2022, respectively, as if the Divestitures occurred on January 1, 2022. The divested subsidiary Adjusted EBITDA adjustment represents net (loss) income from our Divestitures excluding interest expense, income tax expense, depreciation and amortization expense and foreign currency gains and losses recorded at the subsidiary level.

We refer to growth rates in Adjusted Net Sales on a constant currency basis so that results can be viewed without the impact of fluctuations in foreign currency exchange rates. These amounts are calculated by translating current year results at prior year average exchange rates. We believe elimination of the foreign currency translation impact provides useful information in understanding and evaluating trends in our operating results.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230824928906/en/

Investor Relations: Arvind Bhatia, CFA VP, Investor Relations IR@sharkninja.com

Anna Kate Heller ICR SharkNinja@icrinc.com

Media Relations: Sarah McKinney VP, Corporate Communications PR@sharkninja.com