Market Overview

Canada Goose Reports Results for First Quarter Fiscal Year 2019

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First Quarter Fiscal 2019 Highlights (in millions of Canadian
dollars):

  • Total revenue increased by 58.5% to $44.7m
  • Net loss was $(18.7)m, or $(0.17) per basic and diluted share
  • Adjusted EBITDA was $(13.5)m, compared to $(13.6)m
  • Adjusted net loss was $(17.1)m, or $(0.16) per basic and diluted
    share

Adjusted EBITDA, Adjusted net loss and Adjusted net loss per basic
and diluted share are non-IFRS financial measures. See "Note Regarding
Non-IFRS Financial Measures".

Canada Goose Holdings Inc. ("Canada Goose" or the "Company") (NYSE:GOOS,
TSX:GOOS) today announced financial results for its first quarter ended
June 30, 2018. The Company's Management's Discussion and Analysis and
Unaudited Condensed Consolidated Interim Financial Statements for the
three month period ended June 30, 2018 will be filed on SEDAR at www.sedar.com,
the EDGAR section of the U.S. Securities and Exchange Commission website
at www.sec.gov
and posted on the Company's website at investor.canadagoose.com.

"Our strong start to the year, in our smallest fiscal quarter, is a
great leading indicator. Our products and our brand continue to resonate
with people around the world, and our direct-to-consumer channel was a
standout performer in the quarter. Productivity across our retail store
network in this off-peak period was exceptional, reducing the loss
impact of our strategic growth investments and giving us a favorable
tailwind for the rest of the year," stated Dani Reiss, President & Chief
Executive Officer.

First Quarter Fiscal 2019 Results (in Canadian dollars, compared to
First Quarter Fiscal 2018):

  • Total revenue increased by 58.5% to $44.7m from $28.2m.
  • Direct-to-consumer ("DTC") revenue increased to $23.2m from $8.3m. The
    increase was primarily due to the strong performance of all existing
    and new retail stores, with particularly significant contributions
    from well-established locations. E-commerce also had a positive impact
    on the quarter.
  • Wholesale revenue increased to $21.5m from $19.9m, driven by higher
    order volumes from existing retail partners.
  • Gross profit increased to $28.6m, a gross margin of 64.0%, compared to
    $13.2m, a gross margin of 46.8%. The increase in gross margin was
    attributable to a greater proportion of DTC revenue and to a lesser
    degree, wholesale gross margin expansion.
  • DTC gross profit was $17.7m, a gross margin of 76.3%, compared to
    $6.2m, a gross margin of 74.7%. The increase in gross margin was
    primarily driven by product mix and partially offset by unfavorable
    foreign exchange fluctuations.
  • Wholesale gross profit was $10.9m, a gross margin of 50.7%, compared
    to $7.0m, a gross margin of 35.2%. The increase in gross margin was
    primarily attributable to a different wholesale mix in the quarter
    compared to the same quarter last year. Favorable foreign exchange
    fluctuations between the purchase of raw materials and the sale of
    product also contributed to lower unit costs, and inventory provision
    movements were lower in the current period.
  • Operating loss was $(19.9)m, compared to a loss of $(14.8)m. The
    increase in operating loss was driven by higher unallocated corporate
    expenses in a seasonally small quarter, partially offset by larger
    operating income contributions from both channels.
  • Unallocated corporate expenses were $25.9m, compared to $13.4m. The
    increase was due to SG&A growth investments including marketing,
    corporate headcount and IT, as well as higher professional fees and
    other costs relating to public company compliance.
  • Unallocated depreciation and amortization was $3.4m, compared to
    $2.2m, driven by the retail store opening program.
  • DTC operating income was $6.5m, an operating margin of 28.0%, compared
    to an operating loss of $(0.3)m. The shift to a positive operating
    margin was driven by strong retail store productivity, as well as
    channel gross margin expansion and a lower level of pre-opening costs.
  • Wholesale operating income was $2.9m, an operating margin of 13.5%,
    compared to $1.1m, an operating margin of 5.5%. The increase in
    operating margin was driven by an increase in channel gross margin,
    partially offset by higher channel SG&A as a percentage of sales, due
    to additions to headcount and costs for sales and operations support.
  • Net loss was $(18.7)m, or $(0.17) per basic and diluted share,
    compared to a net loss of $(12.1)m, or $(0.11) per basic and diluted
    share.
  • Adjusted EBITDA(1) was $(13.5)m compared to $(13.6)m.
  • Adjusted net loss(1) was $(17.1)m, or $(0.16) per basic and
    diluted share, compared to an adjusted net loss of $(13.3)m, or
    $(0.12) per basic and diluted share.

(1) See "Note Regarding Non-IFRS Financial Measures".

Fiscal 2019 Outlook

The Company reiterates the following outlook for fiscal 2019:

  • Annual revenue growth of at least 20%
  • Adjusted EBITDA margin expansion of at least 50 basis points
  • Annual growth in adjusted net income per diluted share of at least 25%

The fiscal 2019 outlook above and key assumptions underlying such
outlook were originally provided on June 15, 2018, in the press release
announcing the Company's Results for Fiscal Year 2018 under the heading
"Fiscal 2019 and Long-Term Outlook". Within the meaning of applicable
securities laws, this outlook constitutes forward-looking information.
Actual results could vary materially as a result of numerous factors,
including certain risk factors, many of which are beyond the Company's
control. See "Cautionary Note Regarding Forward-Looking Statements".

Conference Call Information

A conference call to discuss first quarter fiscal 2019 results is
scheduled for today, August 9, 2018, at 9:00 a.m. Eastern Time. Dani
Reiss, President and Chief Executive Officer and Jonathan Sinclair, EVP
and Chief Financial Officer, will host the conference call. Those
interested in participating in the call are invited to dial (844)
579-6824 or (763) 488-9145 if calling internationally. Please dial in
approximately 10 minutes prior to the start of the call and reference
Conference ID 8573118 when prompted. A live audio webcast of the
conference call will be available online at http://investor.canadagoose.com.

About Canada Goose

Founded in a small warehouse in Toronto, Canada in 1957, Canada Goose
has grown into one of the world's leading makers of performance luxury
apparel. Every collection is informed by the rugged demands of the
Arctic and inspired by relentless innovation and uncompromised
craftsmanship. From Antarctic research facilities and the Canadian High
Arctic, to the streets of New York, London, Milan, Paris, and Tokyo,
people are proud to wear Canada Goose products. Employing more than
2,900 people worldwide, Canada Goose is a recognized leader for its Made
in Canada commitment, and is a long-time partner of Polar Bears
International. Visit canadagoose.com for more information.

Non-IFRS Financial Measures

This press release includes references to adjusted net loss, EBITDA,
adjusted EBITDA, adjusted EBITDA margin, and adjusted net loss per basic
and diluted share. The Company presents these measures because its
management uses these as supplemental measures in assessing its
operating performance, and believes they are helpful to investors,
securities analysts and other interested parties, in evaluating the
Company's performance. The measures referenced above are not
measurements of financial performance under IFRS and they should not be
considered as alternatives to measures of performance derived in
accordance with IFRS. In addition, these measures should not be
construed as an inference that the Company's future results will be
unaffected by unusual or non-recurring items. These measures have
limitations as analytical tools, and you should not consider such
measures either in isolation or as substitutes for analyzing the
Company's results as reported under IFRS. The Company's definitions and
calculations of these measures are not necessarily comparable to other
similarly titled measures used by other companies. These non-IFRS
financial measures are defined and reconciled to the most comparable
IFRS measures in the tables at the end of this press release.

A reconciliation of projected adjusted EBITDA and adjusted net income,
which are forward-looking measures that are not prepared in accordance
with IFRS, to the most directly comparable IFRS financial measures, is
not provided because we are unable to provide such reconciliation
without unreasonable effort. The inability to provide a quantitative
reconciliation is due to the uncertainty and inherent difficulty
predicting the occurrence, the financial impact and the periods in which
the components of the applicable IFRS measures and non-IFRS adjustments
may be recognized. The IFRS measures may include the impact of such
items as non-cash share-based compensation, revaluation of the carrying
value of our indebtedness, amortization of intangible assets and the tax
effect of such items, in addition to other items we have historically
excluded from adjusted EBITDA and adjusted net income. We expect to
continue to exclude these items in future disclosures of these non-IFRS
measures and may also exclude other similar items that may arise in the
future (collectively, "non-IFRS adjustments"). The decisions and events
that typically lead to the recognition of non-IFRS adjustments are
inherently unpredictable as to if or when they may occur. As such, for
our fiscal 2019 outlook, we have not included estimates for these items
and are unable to address the probable significance of the unavailable
information, which could be material to future results.

Cautionary Note Regarding Forward-Looking Statements

The foregoing financial information as at and for the three months ended
June 30, 2018 are unaudited and subject to quarter-end and year-end
adjustments in connection with the completion of our customary financial
closing procedures. Such changes could be material.

This press release includes forward-looking statements. These
forward-looking statements generally can be identified by the use of
words such as "anticipate," "expect," "plan," "could," "may," "will,"
"believe," "estimate," "forecast," "goal," "project," and other words of
similar meaning. Each forward-looking statement contained in this press
release is subject to risks and uncertainties that could cause actual
results to differ materially from those expressed or implied by such
statement. Applicable risks and uncertainties include, among others, our
expectations regarding industry trends, our business plan and growth
strategies, our expectations regarding seasonal trends, our ability to
implement our growth strategies, our ability to keep pace with changing
consumer preferences, our ability to maintain the strength of our brand
and protect our intellectual property, as well as the risks identified
under the heading "Risk Factors" in our Annual Report on Form 20-F for
the fiscal year ended March 31, 2018, and filed with the Securities and
Exchange Commission ("SEC"), and the securities commissions or similar
securities regulatory authorities in each of the provinces and
territories of Canada ("Canadian securities regulatory authorities"), as
well as the other information we file with the SEC and Canadian
securities regulatory authorities. We caution investors not to rely on
the forward-looking statements contained in this press release when
making an investment decision in our securities. You are encouraged to
read our filings with the SEC, available at www.sec.gov,
and our filings with Canadian securities regulatory authorities
available at www.sedar.com
for a discussion of these and other risks and uncertainties. The
forward-looking statements in this press release speak only as of the
date of this release, and we undertake no obligation to update or revise
any of these statements. Our business is subject to substantial risks
and uncertainties, including those referenced above. Investors,
potential investors, and others should give careful consideration to
these risks and uncertainties.

 

Condensed Consolidated Interim Statements of Loss and
Comprehensive Loss

(unaudited)

(in millions of Canadian dollars, except share and per share
amounts)

 
Three months ended
June 30
2018   2017
$ $
Revenue 44.7 28.2
Cost of sales 16.1   15.0  
Gross profit 28.6 13.2
Gross margin 64.0 % 46.8 %
Selling, general and administrative expenses 45.1 25.8
SG&A expenses as % of revenue 100.9 % 91.5 %
Depreciation and amortization 3.4   2.2  
Operating loss (19.9 ) (14.8 )
Operating loss as % revenue (44.5 )% (52.5 )%
Net interest and other finance costs 3.1   3.1  
Loss before income taxes (23.0 ) (17.9 )
Income tax recovery (4.3 ) (5.8 )
Effective tax rate 18.7 % 32.4 %
Net loss (18.7 ) (12.1 )
Other comprehensive (loss) income (0.3 ) 0.1  
Comprehensive loss (19.0 ) (12.0 )
Earnings (loss) per share
Basic and diluted $ (0.17 ) $ (0.11 )
Weighted average number of shares outstanding
Basic 108,660,494 106,500,498
Other data: (1)
Adjusted net loss (17.1 ) (13.3 )
Adjusted net loss per basic and diluted share $ (0.16 ) $ (0.12 )
EBITDA (15.5 ) (11.7 )
Adjusted EBITDA (13.5 ) (13.6 )
 

(1) , Adjusted net loss,adjusted net loss per basic and diluted
share, EBITDA, and adjusted EBITDA are non-IFRS financial measures.
See
"Reconciliation of Non-IFRS Financial Measures" for a
description of these measures and a reconciliation to the nearest IFRS
measure.

     
Condensed Consolidated Interim Statements of Financial Position
(unaudited)
As at June 30, 2018 and 2017 and March 31, 2018

(in millions of Canadian dollars)

 
June 30 June 30 March 31
2018   2017   2018
Assets $ $ $
Current assets
Cash 14.6 13.1 95.3
Trade receivables 12.4 8.5 11.9
Inventories 239.5 177.0 165.4
Income taxes receivable 8.0 5.6 5.1
Other current assets 32.4     12.4     23.3
Total current assets 306.9 216.6 301.0
 
Deferred income taxes 10.5 10.1 3.0
Property, plant and equipment 64.2 40.4 60.2
Intangible assets 140.1 131.7 136.8
Other long-term assets 4.5

-

2.1
Goodwill 45.3     45.3     45.3
Total assets 571.5     444.1     548.4
 
Liabilities
Current liabilities
Accounts payable and accrued liabilities 90.0 47.4 109.6
Provisions 4.3 4.7 6.3
Income taxes payable 0.3    

-

    17.7
Total current liabilities 94.6 52.1 133.6
 
Provisions 10.5 9.4 10.8
Deferred income taxes 12.5 11.2 13.3
Revolving facility 76.9 97.3

-

Term loan 140.4 136.6 137.1
Other long-term liabilities 10.8     3.1     10.0
Total liabilities 345.7 309.7 304.8
 
Shareholders' equity 225.8     134.4     243.6
Total liabilities and shareholders' equity 571.5     444.1     548.4
 
   
Condensed Consolidated Interim Statements of Cash Flows
(unaudited)
For the three months ended June 30

(in millions of Canadian dollars)

 
2018 2017
$ $
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (18.7 ) (12.1 )
Items not affecting cash
Depreciation and amortization 4.4 3.1
Income tax recovery (4.3 ) (5.8 )
Interest expense 3.0 3.0
Unrealized foreign exchange gain (1.2 ) (3.3 )
Share-based compensation 0.4   0.2  
(16.4 ) (14.9 )
Changes in non-cash operating items (111.6 ) (61.3 )
Income taxes paid (24.3 ) (1.3 )
Interest paid (2.2 ) (2.5 )
Net cash used in operating activities (154.5 ) (80.0 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (2.1 ) (5.6 )
Investment in intangible assets (2.8 ) (1.3 )
Business combination

-

  (0.3 )
Net cash used in investing activities (4.9 ) (7.2 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on revolving facility 78.5 90.5
Exercise of stock options 0.8   0.1  
Net cash from financing activities 79.3   90.6  
Effects of foreign currency exchange rate changes on cash (0.6 )

-

(Decrease) increase in cash (80.7 ) 3.4
Cash, beginning of period 95.3   9.7  
Cash, end of period 14.6   13.1  
 
 
Reconciliation of Non-IFRS Measures
 

The tables below reconcile net income to EBITDA, adjusted EBITDA,
and adjusted net loss for the periods presented:

 
CAD $ millions Three months ended
(unaudited) June 30
2018   2017
Net loss (18.7 )   (12.1 )
Add (deduct) the impact of:
Income tax recovery (4.3 ) (5.8 )
Net interest and other finance costs 3.1 3.1
Depreciation and amortization 4.4     3.1  
EBITDA (15.5 ) (11.7 )
Add (deduct) the impact of:
Transaction costs (a) 1.2 1.3
Unrealized foreign exchange loss (gain) on Term Loan Facility (b) 0.4 (3.8 )
Share-based compensation (c) 0.2 0.1
Pre-store-opening costs (d) 0.2     0.5  
Adjusted EBITDA (13.5 )   (13.6 )
 
 
CAD $ millions Three months ended
(unaudited) June 30
2018   2017
Net loss (18.7 ) (12.1 )
Add (deduct) the impact of:
Transaction costs (a) 1.2 1.3
Unrealized foreign exchange loss (gain) on Term Loan Facility (b) 0.4 (3.8 )
Share-based compensation (c) 0.2 0.1
Pre-store-opening costs (d) 0.2 0.5
Amortization on intangible assets acquired by Bain Capital (e)

-

    0.5  
Total adjustments 2.0 (1.4 )
Tax effect of adjustments (0.4 )   0.2  
Adjusted net loss (17.1 )   (13.3 )
 
(a)   In connection with the Secondary Offerings in June 2018 and July
2017, we incurred expenses related to professional fees, consulting,
legal, and accounting that would otherwise not have been incurred.
These fees are reflected in the table above, and do not reflect
expected future operating expenses after completion of these
activities.
 
(b) Represents non-cash unrealized gains and losses on the translation
of the Term Loan Facility from USD to CAD, net of the effect of
derivative transactions entered into to hedge a portion of the
exposure to foreign currency exchange risk.
 
(c) Represents non-cash share-based compensation expense on stock
options issued prior to the IPO under our pre-IPO option plan.
 
(d) Represents non-cash lease amortization charges during pre-opening
periods for new store leases.
 
(e) In connection with Bain Capital's purchase of a 70% equity interest
in our business on December 9, 2013, we recognized an intangible
asset for customer lists in the amount of $8.7 million, which had a
useful life of four years and was fully amortized in the third
quarter of fiscal 2018.

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