At Home Group Inc. Announces First Quarter Fiscal 2022 Financial Results

• Net sales of $537.1 million and a comparable store sales increase of 187.3%
• EPS of $0.81 and adjusted EPS¹ of $0.87
• Files preliminary proxy in connection with pending transaction and issues separate press release outlining financial projections through fiscal 2026

At Home Group Inc. (NYSE: HOME), the home décor superstore, today announced its financial results for the first quarter ended May 1, 2021.

For the Thirteen Weeks Ended May 1, 2021

• The Company opened nine and closed two stores in the first quarter of fiscal 2022, ending the quarter with 226 stores in 40 states. The Company opened a net eight stores since the first quarter of fiscal 2021, representing a 3.7% increase.
• Net sales increased 182.9% to $537.1 million from $189.8 million in the first quarter of fiscal 2021.
• Comparable store sales increased 187.3% driven by strong demand, including approximately $45 million of estimated sales benefit attributable to stimulus payments not expected to recur in future quarters and the continued execution of our strategic initiatives. Reported comparable store sales in the first and second quarters of fiscal 2021 were (46.5%) and 42.3% respectively. Adjusting for the calendar shift as a result of the 53rd week in fiscal year 2021, comparable store sales in the first and second quarters of fiscal 2021 would have been approximately 300 basis points lower and 800 basis points higher, respectively, largely due to the impact of temporary store closures during those periods related to the COVID-19 pandemic.
• Gross profit was $200.3 million compared to $16.4 million in the first quarter of fiscal 2021. Gross margin was 37.3% compared to 8.6% in the prior year period primarily due to occupancy, depreciation, freight and distribution center expense leverage as a result of increased net sales and, to a lesser extent, product margin expansion. The Company continues to expect increased freight costs to significantly impact gross margin in the second half of fiscal 2022.
• Selling, general and administrative expenses (“SG&A”) increased 63.3% to $108.5 million from $66.5 million in the first quarter of fiscal 2021. As a percentage of net sales, SG&A decreased to 20.2% from 35.0% in the prior year period primarily due to expense leverage as a result of increased sales.
• Operating income was $89.4 million compared to a loss of $(372.1) million in the first quarter of fiscal 2021 that included a non-cash goodwill impairment charge of $319.7 million. Adjusted operating income¹ increased to $90.0 million from a loss of $(52.3) million in the prior year period. Adjusted operating margin¹ increased to 16.8% from (27.6)% driven by the gross margin and SG&A factors described above.
• Interest expense increased to $8.1 million from $7.0 million in the first quarter of fiscal 2021 primarily due to interest incurred on our 8.750% senior secured notes and $35.0 million term loan tranche (the “FILO Loans”), and partially offset by interest avoided by the repayment of our term loan and no borrowings outstanding under our revolving credit facility (the “ABL Facility”).
• Income tax expense was $19.7 million, and our effective tax rate was 25.9%. In the first quarter of fiscal 2021, income tax benefit was $20.1 million, and our effective tax rate was 5.3%.
• Net income was $56.3 million compared to a loss of $(358.9) million in the first quarter of fiscal 2021. Adjusted Net Income¹ was $60.7 million compared to a loss of $(39.2) million in the prior year period.
• EPS was $0.81 compared to $(5.60) in the first quarter of fiscal 2021 and adjusted EPS¹ was $0.87 compared to $(0.61) in the prior year period.
• Adjusted EBITDA¹ was $110.6 million compared to $(14.6) million in the first quarter of fiscal 2021.

Balance Sheet Highlights as of May 1, 2021

• The Company had $150.5 million of cash and no borrowings outstanding under the ABL Facility compared to $43.6 million of cash and $342.0 million of borrowings as of April 25, 2020. Borrowing availability under the ABL Facility was $325.2 million, inclusive of $35.0 million of minimum required availability.
• Net inventories decreased 9.3% to $369.0 million from $407.0 million as of April 25, 2020.
• Long-term debt was $308.6 million compared to $334.2 million as of April 25, 2020. On April 30, 2021, the Company repaid in full the FILO Loans for $34.6 million, including a $2.0 million prepayment premium, which resulted in a $5.3 million loss on extinguishment of debt.

Subsequent Events

On May 6, 2021, the Company announced it has entered into a definitive agreement to be acquired by funds affiliated with Hellman & Friedman LLC (“the transaction”). Under the terms of the agreement, At Home stockholders will receive $36.00 per share in cash. The parties currently expect the transaction to be completed in the third quarter of calendar year 2021, subject to the satisfaction of customary closing conditions, including the approval of At Home’s stockholders and expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The transaction is not subject to a financing condition. Upon completion of the transaction, At Home will become a privately-held company and At Home’s shares will no longer trade on The New York Stock Exchange.

Outlook and At Home Preliminary Proxy Filing Regarding Pending Transaction

Given the pending transaction and the continued uncertainty related to COVID-19, the Company is not providing formal guidance at this time.

In a separate press release issued today, At Home announced the filing of its preliminary proxy materials with the Securities and Exchange Commission in connection with the transaction. Among other things, the preliminary proxy and press release include the Company’s financial projections through fiscal 2026.

The press release and corresponding filing are available on the Company’s investor relations page at investor.athome.com.

Conference Call

Due to the pending transaction, the Company will not host a conference call to review the first quarter fiscal 2022 financial results.

Terminology

We define certain terms used in this release as follows:

“Adjusted EBITDA” means net income (loss) before net interest expense, income tax provision (benefit) and depreciation and amortization, adjusted for the impact of certain other items as defined in our debt agreements, including certain legal settlements and consulting and other professional fees, stock-based compensation expense, impairment charges, loss on extinguishment of debt, (gain) loss on sale-leaseback, non-cash rent and other adjustments.

“Adjusted Net Income” means net income (loss), adjusted for impairment charges, (gain) loss on sale-leaseback, loss on extinguishment of debt, payroll tax expenses and the income tax associated with initial public offering non-cash stock-based compensation expense (the “IPO Grant”) and other adjustments.

“Adjusted operating income” means operating income (loss), adjusted for impairment charges, (gain) loss on sale-leaseback, payroll tax expenses associated with IPO Grant stock option exercises and other adjustments.

“Adjusted operating margin” means adjusted operating income (loss) divided by net sales.

“Adjusted SG&A” means selling, general and administrative expenses adjusted for certain expenses, including payroll tax expenses associated with IPO Grant stock option exercises and other adjustments.

“Comparable store sales” means, for any reporting period, the change in period-over-period net sales for the comparable store base. A store is included in the comparable store sales calculation on the first day of the sixteenth full fiscal month following the store's opening, which is when we believe comparability is achieved. When a store is being relocated or remodeled, we exclude sales from that store in the calculation of comparable store sales until the first day of the sixteenth full fiscal month after it reopens. Sales resulting from our omnichannel initiatives occur at the store level and are included in the calculation of comparable store sales.

“EPS” means diluted earnings (loss) per share.

“GAAP” means accounting principles generally accepted in the United States.

“Leverage ratio” means Net Debt divided by Adjusted EBITDA for the trailing twelve months.

“Net Debt” includes long-term debt, borrowing under the ABL revolving credit facility, and current portion of long-term debt and financing obligations, less unamortized deferred debt issuance cost and cash and cash equivalents. Net Debt excludes operating lease liabilities recognized in accordance with ASC 842 Leases.

“Adjusted EPS” means Adjusted Net Income divided by diluted weighted average shares outstanding.

“Store-level Adjusted EBITDA” means Adjusted EBITDA, adjusted further to exclude the impact of costs associated with new store openings and certain corporate overhead expenses that we do not consider in our evaluation of the ongoing operating performance of our stores from period to period.

Additional Information and Where to Find It

This communication may be deemed to be solicitation material in respect of the proposed acquisition of the Company by an affiliate of Hellman & Friedman LLC. In connection with the proposed merger, the Company will file with the Securities and Exchange Commission (“SEC”) and furnish to its stockholders a proxy statement and other relevant documents. STOCKHOLDERS OF THE COMPANY ARE ADVISED TO READ THE PROXY STATEMENT WHEN IT BECOMES AVAILABLE (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS THERETO) BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. Investors may obtain a free copy of the proxy statement (when it becomes available) and other relevant documents filed by the Company with the SEC at the SEC’s Web site at http://www.sec.gov. The proxy statement and such other documents once filed by the Company with the SEC may also be obtained for free from the Investor Relations section of the Company’s web site (http://investor.athome.com/) or by directing a request to: the Company, 1600 East Plano Parkway, Plano, Texas, 75074, Attention: Investor Relations. Copies of documents filed by the Company with the SEC may also be obtained for free at the SEC’s Web site at http://www.sec.gov.

Participants in the Solicitation

The Company and its officers and directors may be deemed to be participants in the solicitation of proxies from the stockholders of the Company in connection with the proposed merger. Information about the Company’s executive officers and directors is set forth in the Company’s Annual Report on Form 10-K, which was filed by the Company with the SEC on March 24, 2021, and the proxy statement for the Company’s 2021 annual meeting of stockholders, which was filed with the SEC by the Company on May 4, 2021. Investors may obtain more detailed information regarding the direct and indirect interests of the Company and its executive officers and directors in the proposed merger by reading the preliminary and definitive proxy statement regarding the proposed merger when each such document is filed with the SEC. When available, you may obtain free copies of these documents as described in the preceding paragraph.

Forward-Looking Statements

This release contains forward-looking statements made pursuant to and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You can generally identify forward-looking statements by our use of forward-looking terminology such as "anticipate", "are confident", "assume", "believe", "continue", "could", "estimate", "expect", "intend", “look ahead”, "look forward", "may", "might", "on track", "outlook", "plan", "potential", "predict", "reaffirm", "seek", "should", "trend", “will”, or “vision” or the negative thereof or comparable terminology regarding future events or conditions. In particular, forward-looking statements in this release include, without limitation, statements about our financial and operating performance, cash flows, liquidity, financial condition, inventory, the markets in which we operate, expected new store openings, our real estate strategy, the impact of the COVID-19 pandemic, growth targets, potential growth opportunities, market share, competition, the impact of expected stock option exercises and future capital expenditures, estimates of expenses we may incur in connection with equity incentive awards to management, customer and macroeconomic trends, expectations regarding the closing of the merger and other statements regarding our expectations, beliefs, plans, strategies, objectives, prospects, assumptions, or future events or performance.

Such forward-looking statements are based on our current beliefs and expectations, which we believe are reasonable. However, forward-looking statements are subject to significant known and unknown risks and uncertainties that may cause actual results, performance or achievements in future periods to differ materially from those assumed, projected or contemplated in the forward-looking statements, including, but not limited to, the following factors: the ongoing global COVID-19 pandemic and related challenges, risks and uncertainties, including historical and potential future measures taken by governmental and regulatory authorities (such as requiring store closures), which have significantly disrupted our business, employees, customers and global supply chain, and for a period of time, adversely impacted our financial condition (including resulting in goodwill impairment) and financial performance, and which disruption and adverse impacts may continue in the future; the recent and ongoing direct and indirect adverse impacts of the global COVID-19 pandemic to the global economy and retail industry; the eventual timing and duration of economic stabilization and recovery from the COVID-19 pandemic; general economic conditions in the United States and globally, including consumer confidence and spending, and any changes to current favorable macroeconomic trends of strong home sales, nesting and de-urbanization (which were enhanced and accelerated due to COVID-19, and may not continue upon a successful vaccine rollout in significant numbers that impacts consumer behavior); our indebtedness and our ability to increase future leverage, as well as limitations on future sources of liquidity, including debt covenant compliance; our ability to implement our growth strategy of opening new stores, which was suspended for fiscal 2021 (with the exception of stores that were at or near completion) and, while ramping significantly, will be limited in the near term; our ability to effectively obtain, manage and allocate inventory, and satisfy changing consumer preferences; increasing freight and transportation costs (including the adverse effects of international equipment shortages and shipping delays) and increasing commodity prices; reliance on third-party vendors for a significant portion of our merchandise, including supply chain disruption matters and international trade regulations (including tariffs) that have, and may continue to, adversely impact many international vendors; the loss or disruption to operating our distribution network; significant competition in the fragmented home décor industry, including increasing e-commerce; the implementation and execution of our At Home 2.0 and omnichannel strategies and related investments; natural disasters and other adverse impacts on regions in the United States where we have significant operations; our success in obtaining favorable lease terms and of our sale-leaseback strategy; our reliance on the continuing growth and utility of our loyalty program; our ability to attract, develop and retain employee talent and to manage labor costs; the disproportionate impact of our seasonal sales activity to our overall results; risks related to the loss or disruption of our information systems and data and our ability to prevent or mitigate breaches of our information security and the compromise of sensitive and confidential data; our ability to comply with privacy and other laws and regulations, including those associated with entering new markets; the possibility that we may be unable to obtain required stockholder approval or that other conditions to closing the proposed merger with Hellman & Friedman LLC may not be satisfied, such that the proposed merger will not close or that the closing may be delayed; general economic conditions; the proposed merger may involve unexpected costs, liabilities or delays; risks that the transaction disrupts our current plans and operations; the outcome of any legal proceedings related to the proposed merger; the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; and the significant volatility of the trading price of our common stock.

Additional information about these and other factors that may cause actual results, performance or achievements in future periods to differ materially from those assumed, projected or contemplated in the forward-looking statements may be found in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended January 30, 2021 and subsequent reports we file with the Securities and Exchange Commission, including our Quarterly Reports on Form 10-Q. You are cautioned not to place undue reliance on the forward-looking statements included herein, which speak only as of the date hereof or the date otherwise specified herein. Except as required by law, we do not undertake any obligation to update or revise any forward-looking statements for any reason, whether as a result of new information, future events or otherwise.

About At Home Group Inc.

At Home (NYSE:HOME), the home decor superstore, offers over 50,000 on-trend home products to fit any budget or style, from furniture, mirrors, rugs, art and housewares to tabletop, patio and seasonal decor. At Home is headquartered in Plano, Texas, and currently operates 226 stores in 40 states. For more information, please visit us online at investor.athome.com.

-Financial Tables to Follow-

Non-GAAP Measures

Certain financial measures presented in this release, such as leverage ratio, Net Debt, Adjusted EBITDA, adjusted SG&A, adjusted operating income, adjusted operating margin, Adjusted Net Income, adjusted EPS and Store-level Adjusted EBITDA (collectively, “non-GAAP financial measures”), are not presented in accordance with GAAP.

These non-GAAP financial measures are used by our management and our board of directors to assess our financial performance. We present leverage ratio and Net Debt because we believe that investors find these metrics useful in evaluating our overall liquidity. Adjusted EBITDA is frequently used by analysts, investors and other interested parties to evaluate companies in our industry. In addition to covenant compliance, we use Adjusted EBITDA to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions and to compare our performance against that of other peer companies using similar measures. We use Store-level Adjusted EBITDA as a supplemental measure to evaluate the performance and profitability of each of our stores, individually and in the aggregate, especially given the level of investments we have made in our home office and infrastructure over the past eight years to support future growth. We also believe that Store-level Adjusted EBITDA is a useful measure in evaluating our operating performance because it removes the impact of general and administrative expenses, which are not incurred at the store level, and the costs of opening new stores, which are non-recurring at the store level, and thereby enables the comparability of the operating performance of our stores during the period. We use Store-level Adjusted EBITDA information to benchmark our performance versus competitors. Store-level Adjusted EBITDA should not be used as a substitute for consolidated measures of profitability of performance because it does not reflect corporate overhead expenses that are necessary to allow us to effectively operate our stores and generate Store-level Adjusted EBITDA. We present adjusted SG&A, adjusted operating income, adjusted operating margin, Adjusted Net Income and adjusted EPS because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance.

You are encouraged to evaluate these non-GAAP financial measures and the reasons we consider them appropriate for supplemental analysis. In evaluating our non-GAAP financial measures, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in our presentation of non-GAAP financial measures. Our presentation of non-GAAP financial measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. There can be no assurance that we will not modify the presentation of our non-GAAP financial measures in the future, and any such modification may be material. In addition, our non-GAAP financial measures may not be comparable to similarly titled measures used by other companies in our industry or across different industries.

AT HOME GROUP INC.

Supplemental Information - Reconciliation of GAAP to Non-GAAP Financial Measures

(in thousands, except margin, share, per share and ratio data)

The tables below reconcile the non-GAAP financial measures of adjusted SG&A, adjusted operating income, Adjusted Net Income, adjusted EPS, Adjusted EBITDA, Store-level Adjusted EBITDA, Net Debt and leverage ratio to their most directly comparable GAAP financial measures.

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