Tile Shop Holdings, Inc. (Nasdaq: TTSH) (the “Company”), a
specialty retailer of natural stone, man-made and luxury vinyl
tiles, today announced results for its second quarter ended June
30, 2023.
Second Quarter Summary
Net Sales Decreased
8.4%Comparable Store Sales Decreased 8.0%
Gross Margin of 64.2%Net Income of $5.1
Million and Adjusted EBITDA of $13.6
MillionDiluted Earnings per Share of
$0.12$25.4 Million Reduction of Long-Term Debt
Year-to-Date
Management Commentary – Cabell Lolmaugh,
CEO
“The current macro-economic environment contributed to
challenges in our store traffic and comparable store sales during
the second quarter,” stated Cabell Lolmaugh, CEO. “At the same
time, gross margin was consistent with the previous quarter as
supplier costs for our products and ocean freight rates moderated.
We remain disciplined with respect to our cost structure and
working capital which helped us maintain strong operating cash flow
and payoff over half of our debt so far this year.”
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
(unaudited, dollars in thousands, except per |
|
June 30, |
|
June 30, |
share data) |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Net sales |
|
$ |
98,557 |
|
|
|
$ |
107,604 |
|
|
200,576 |
|
|
|
$ |
210,075 |
|
Net sales (decline) growth(1) |
|
|
(8.4 |
) |
% |
|
11.9 |
% |
|
(4.5 |
) |
% |
|
|
11.6 |
% |
Comparable store sales (decline) growth(2) |
|
|
(8.0 |
) |
% |
|
12.0 |
% |
|
(4.0 |
) |
% |
|
|
11.6 |
% |
Gross margin rate |
|
|
64.2 |
|
|
|
66.0 |
% |
|
64.2 |
|
% |
|
|
65.6 |
% |
Income from operations as a % of net sales |
|
|
7.8 |
|
% |
|
9.1 |
% |
|
5.9 |
|
% |
|
|
6.9 |
% |
Net income |
|
$ |
5,079 |
|
|
|
$ |
6,914 |
|
|
7,591 |
|
|
|
$ |
10,427 |
|
Net income per diluted share |
|
$ |
0.12 |
|
|
|
$ |
0.13 |
|
|
0.17 |
|
|
|
$ |
0.20 |
|
Adjusted EBITDA |
|
$ |
13,584 |
|
|
|
$ |
16,755 |
|
|
23,897 |
|
|
|
$ |
28,422 |
|
Adjusted EBITDA as a % of net sales |
|
|
13.8 |
|
% |
|
15.6 |
% |
|
11.9 |
|
% |
|
|
13.5 |
% |
Number of stores open at the end of period |
|
|
143 |
|
|
|
|
143 |
|
|
143 |
|
|
|
|
143 |
|
(1) |
As
compared to the prior year period. |
(2) |
The comparable store sales
operating metric is the percentage change in sales of comparable
stores period over period. A store is considered comparable on the
first day of the 13th full month of operation. When a store is
relocated, it is excluded from the comparable store sales
calculation. Comparable store sales includes total charges to
customers less any actual returns. The Company includes the change
in allowance for anticipated sales returns applicable to comparable
stores in the comparable store sales calculation. |
|
|
SECOND QUARTER 2023
Net SalesNet sales for the
second quarter of 2023 decreased $9.0 million, or 8.4%, compared
with the second quarter of 2022. Sales decreased at comparable
stores by 8.0% during the second quarter of 2023 compared to the
second quarter of 2022, primarily due to a decrease in traffic,
which was partially offset by an increase in average ticket
value.
Gross ProfitGross profit
decreased $7.7 million, or 10.9%, in the second quarter of
2023 compared to the second quarter of 2022. The gross margin rate
was 64.2% and 66.0% during the second quarter of 2023 and 2022,
respectively. The decrease in the gross margin rate was primarily
due to inflationary cost pressure which resulted in an increase in
the cost of products sold as compared to last year. These cost
increases were partially offset by an increase in our average
selling prices.
Selling, General and Administrative
ExpensesSelling, general and administrative expenses
decreased $5.7 million, or 9.3%, in the second quarter of 2023
compared to the second quarter of 2022. The decrease was due to a
$3.0 million decrease in variable selling expenses, a $1.1 million
decrease in transportation expenses as a result of improved
inventory availability across our distribution centers and a $0.9
million decrease in depreciation expense. These factors were
partially offset by a $0.5 million asset impairment charge recorded
during the second quarter of 2023.
Provision for Income TaxesThe
provision for income taxes for the second quarter of 2023 and 2022
was $2.0 million and $2.7 million, respectively. The decrease in
the provision for income tax was due to a decrease in pretax
income. Our effective tax rate was 28.1% and 27.8% in the second
quarter of 2023 and 2022, respectively.
Capital Structure and LiquiditySince the
beginning of the year, we have repaid $25.4 million of borrowings
on our line of credit, which reduced our debt balance to $20.0
million as of June 30, 2023. Cash and cash equivalents increased by
$8.6 million to $14.6 million on June 30, 2023.
Interest expense increased by $0.5 million from
$0.2 million during the second quarter of 2022 to $0.7 million
during the second quarter of 2023. The increase in interest expense
is due to an increase in average borrowings outstanding on our line
of credit as well as an increase in interest rates between the
second quarter of 2022 and the second quarter of 2023.
NON-GAAP INFORMATION
Adjusted EBITDA
Adjusted EBITDA for the second quarter of 2023
was $13.6 million compared with $16.8 million for the second
quarter of 2022. See the table below for a reconciliation of GAAP
net income to Adjusted EBITDA.
|
|
|
|
|
Three Months Ended |
($ in thousands,
unaudited) |
|
June 30, |
|
|
2023 |
|
% of net sales |
|
2022 |
|
% of net sales |
GAAP net income |
|
$ |
5,079 |
|
5.2 |
% |
|
$ |
6,914 |
|
6.4 |
% |
Interest expense |
|
|
668 |
|
0.7 |
|
|
|
201 |
|
0.2 |
|
Provision for income
taxes |
|
|
1,987 |
|
2.0 |
|
|
|
2,663 |
|
2.5 |
|
Depreciation and
amortization |
|
|
5,549 |
|
5.6 |
|
|
|
6,415 |
|
6.0 |
|
Stock-based compensation |
|
|
301 |
|
0.3 |
|
|
|
562 |
|
0.5 |
|
Adjusted EBITDA |
|
$ |
13,584 |
|
13.8 |
% |
|
$ |
16,755 |
|
15.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
($ in thousands,
unaudited) |
|
June 30, |
|
|
2023 |
|
% of net sales |
|
2022 |
|
% of net sales |
GAAP net income |
|
$ |
7,591 |
|
3.8 |
% |
|
$ |
10,427 |
|
5.0 |
% |
Interest expense |
|
|
1,466 |
|
0.7 |
|
|
|
467 |
|
0.2 |
|
Provision for income
taxes |
|
|
2,802 |
|
1.4 |
|
|
|
3,620 |
|
1.7 |
|
Depreciation and
amortization |
|
|
11,332 |
|
5.6 |
|
|
|
12,854 |
|
6.1 |
|
Stock-based compensation |
|
|
706 |
|
0.4 |
|
|
|
1,054 |
|
0.5 |
|
Adjusted EBITDA |
|
$ |
23,897 |
|
11.9 |
% |
|
$ |
28,422 |
|
13.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax Return on Capital
Employed
Pretax Return on Capital Employed was 13.8% for
the trailing twelve months as of the end of the second quarter of
2023 compared to 15.0% for the trailing twelve months as of the end
of the second quarter of 2022. See the Pretax Return on Capital
Employed calculation in the table below.
|
|
|
|
|
|
|
|
|
($
in thousands, unaudited) |
|
June 30, |
|
|
2023(1) |
|
2022(1) |
Income from Operations (trailing twelve months) |
|
$ |
19,954 |
|
|
|
$ |
20,602 |
|
|
|
|
|
|
|
|
|
|
|
Total
Assets |
|
|
341,737 |
|
|
|
|
347,424 |
|
|
Less: Accounts payable |
|
|
(26,566 |
) |
|
|
|
(27,257 |
) |
|
Less: Income tax payable |
|
|
(801 |
) |
|
|
|
(447 |
) |
|
Less: Other accrued liabilities |
|
|
(35,798 |
) |
|
|
|
(41,806 |
) |
|
Less: Lease liability |
|
|
(129,254 |
) |
|
|
|
(135,705 |
) |
|
Less: Other long-term liabilities |
|
|
(4,530 |
) |
|
|
|
(4,980 |
) |
|
Capital
Employed |
|
$ |
144,788 |
|
|
|
$ |
137,229 |
|
|
|
|
|
|
|
|
|
|
|
Pretax
Return on Capital Employed |
|
|
13.8 |
|
% |
15.0 |
|
% |
(1) |
Income statement accounts represent the activity for the trailing
twelve months ended as of each of the balance sheet dates. Balance
sheet accounts represent the average account balance for the
trailing four quarters ended as of each of the balance sheet
dates. |
|
|
Non-GAAP Financial Measures
The Company calculates Adjusted EBITDA by taking
net income calculated in accordance with GAAP, and adjusting for
interest expense, income taxes, depreciation and amortization, and
stock-based compensation expense. Adjusted EBITDA margin is equal
to Adjusted EBITDA divided by net sales. The Company calculates
Pretax Return on Capital Employed by taking income (loss) from
operations divided by capital employed. Capital employed equals
total assets less accounts payable, income taxes payable, other
accrued liabilities, lease liability and other long-term
liabilities. Other companies may calculate both Adjusted EBITDA and
Pretax Return on Capital Employed differently, limiting the
usefulness of these measures for comparative purposes.
The Company believes that these non-GAAP
measures of financial results provide useful information to
management and investors regarding certain financial and business
trends relating to the Company’s financial condition and results of
operations. Company management uses these non-GAAP measures to
compare Company performance to that of prior periods for trend
analyses, for purposes of determining management incentive
compensation, for budgeting and planning purposes and for assessing
the effectiveness of capital allocation over time. These measures
are used in monthly financial reports prepared for management and
the Board of Directors. The Company believes that the use of these
non-GAAP financial measures provides an additional tool for
investors to use in evaluating ongoing operating results and trends
and in comparing the Company’s financial measures with other
specialty retailers, many of which present similar non-GAAP
financial measures to investors.
The Company’s management does not consider these
non-GAAP measures in isolation or as an alternative to financial
measures determined in accordance with GAAP. The principal
limitations of these non-GAAP financial measures are that they
exclude significant expenses and income that are required by GAAP
to be recognized in the Company’s consolidated financial
statements. In addition, they are subject to inherent limitations
as they reflect the exercise of judgments by management about which
expenses and income are excluded or included in determining these
non-GAAP financial measures. In order to compensate for these
limitations, management presents non-GAAP financial measures in
connection with GAAP results. The Company urges investors to review
the reconciliation of these non-GAAP financial measures to the
comparable GAAP financial measures and not to rely on any single
financial measure to evaluate the business.
WEBCAST AND CONFERENCE CALL
As announced on July 27, 2023, the Company will
host a conference call via webcast for investors and other
interested parties beginning at 9:00 a.m. Eastern Time on Thursday,
August 3, 2023. The call will be hosted by Cabell Lolmaugh, CEO,
Karla Lunan, CFO, and Mark Davis, Vice President of Investor
Relations and Chief Accounting Officer.
To participate in the live call, please pre-register here. All
registrants will receive dial-in information and a unique PIN. A
webcast of the call can be accessed by visiting the Company’s
Investor Relations page at www.tileshop.com. A webcast replay of
the call will be available on the Company’s Investor Relations page
at www.tileshop.com.
The Company intends to use its website,
investors.tileshop.com, as a means of disclosing material
non-public information and for complying with its disclosure
obligations under Regulation FD. Such disclosures will be included
on the Company’s website under the heading News and Events.
Accordingly, investors should monitor such portions of the
Company’s website, in addition to following its press releases,
Securities and Exchange Commission filings and public conference
calls and webcasts.
Contact:Investors and
Media:Mark Davisinvestorrelations@tileshop.com
ABOUT THE TILE SHOP
Tile Shop Holdings, Inc. (Nasdaq: TTSH), is a
leading specialty retailer of natural stone, man-made and luxury
vinyl tiles, setting and maintenance materials, and related
accessories in the United States. The Tile Shop offers a wide
selection of high-quality products, exclusive designs,
knowledgeable staff and exceptional customer service in an
extensive showroom environment. The Tile Shop currently operates
143 stores in 31 states and the District of Columbia.
The Tile Shop is a proud member of the American
Society of Interior Designers (ASID), National Association of
Homebuilders (NAHB), National Kitchen and Bath Association (NKBA),
and the National Tile Contractors Association (NTCA). Visit
www.tileshop.com. Join The Tile Shop (#thetileshop) on Facebook,
Instagram, Pinterest and Twitter.
FORWARD LOOKING STATEMENTS
This press release includes “forward looking
statements” within the meaning of the “safe harbor” provisions of
the United States Private Securities Litigation Reform Act of 1995.
Forward looking statements may be identified by the use of words
such as “anticipate”, “believe”, “expect”, “estimate”, “plan”,
“outlook”, and “project” and other similar expressions that predict
or indicate future events or trends or that are not statements of
historical matters. These forward looking statements include any
statements regarding the Company’s strategic and operational plan
and expected financial performance. Forward looking statements
should not be read as a guarantee of future performance or results,
and will not necessarily be accurate indications of the times at,
or by, which such performance or results will be achieved. Forward
looking statements are based on information available at the time
such statements are made and/or management’s good faith belief as
of that time with respect to future events, and are subject to
risks and uncertainties that could cause actual performance or
results to differ materially from those expressed in or suggested
by the forward looking statements, including but not limited to
unforeseen events that may affect the retail market or the
performance of the Company’s stores. The Company does not intend,
and undertakes no duty, to update this information to reflect
future events or circumstances. Investors are referred to the most
recent reports filed with the Securities and Exchange Commission by
the Company.
Tile Shop Holdings, Inc. and
SubsidiariesConsolidated Balance
Sheets($ in thousands, except per share
data)
|
|
(Unaudited) |
|
(Audited) |
|
|
|
June 30, |
|
December 31, |
|
|
|
2023 |
|
2022 |
|
Assets |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
14,592 |
|
|
$ |
5,948 |
|
|
Restricted cash |
|
|
655 |
|
|
|
1,811 |
|
|
Receivables, net |
|
|
3,871 |
|
|
|
3,411 |
|
|
Inventories |
|
|
106,862 |
|
|
|
120,952 |
|
|
Income tax receivable |
|
|
875 |
|
|
|
3,859 |
|
|
Other current assets, net |
|
|
9,007 |
|
|
|
10,422 |
|
|
Total Current Assets |
|
|
135,862 |
|
|
|
146,403 |
|
|
Property, plant and equipment, net |
|
|
66,938 |
|
|
|
71,095 |
|
|
Right of use asset |
|
|
114,616 |
|
|
|
118,501 |
|
|
Deferred tax assets |
|
|
4,530 |
|
|
|
6,536 |
|
|
Other assets |
|
|
3,493 |
|
|
|
3,287 |
|
|
Total Assets |
|
$ |
325,439 |
|
|
$ |
345,822 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts payable |
|
$ |
24,385 |
|
|
$ |
23,506 |
|
|
Income tax payable |
|
|
85 |
|
|
|
3 |
|
|
Current portion of lease liability |
|
|
27,411 |
|
|
|
27,866 |
|
|
Other accrued liabilities |
|
|
33,645 |
|
|
|
31,916 |
|
|
Total Current Liabilities |
|
|
85,526 |
|
|
|
83,291 |
|
|
Long-term debt, net |
|
|
20,000 |
|
|
|
45,400 |
|
|
Long-term lease liability, net |
|
|
98,845 |
|
|
|
103,353 |
|
|
Other long-term liabilities |
|
|
4,479 |
|
|
|
5,009 |
|
|
Total Liabilities |
|
|
208,850 |
|
|
|
237,053 |
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity: |
|
|
|
|
|
|
|
Common stock, par value $0.0001; authorized: 100,000,000 shares;
issued and outstanding: 44,567,055 and 44,377,445 shares,
respectively |
|
|
4 |
|
|
|
4 |
|
|
Preferred stock, par value $0.0001; authorized: 10,000,000 shares;
issued and outstanding: 0 shares |
|
|
- |
|
|
|
- |
|
|
Additional paid-in capital |
|
|
128,257 |
|
|
|
127,997 |
|
|
Accumulated deficit |
|
|
(11,589 |
) |
|
|
(19,180 |
) |
|
Accumulated other comprehensive loss |
|
|
(83 |
) |
|
|
(52 |
) |
|
Total Stockholders' Equity |
|
|
116,589 |
|
|
|
108,769 |
|
|
Total Liabilities and Stockholders' Equity |
|
$ |
325,439 |
|
|
$ |
345,822 |
|
|
|
|
|
|
|
|
|
|
Tile Shop Holdings, Inc. and
SubsidiariesConsolidated Statements of
Income($ in thousands, except per share
data)(Unaudited)
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Net sales |
|
$ |
98,557 |
|
|
$ |
107,604 |
|
|
$ |
200,576 |
|
|
$ |
210,075 |
|
Cost of sales |
|
|
35,255 |
|
|
|
36,586 |
|
|
|
71,736 |
|
|
|
72,212 |
|
Gross profit |
|
|
63,302 |
|
|
|
71,018 |
|
|
|
128,840 |
|
|
|
137,863 |
|
Selling, general and administrative expenses |
|
|
55,568 |
|
|
|
61,240 |
|
|
|
116,981 |
|
|
|
123,349 |
|
Income from operations |
|
|
7,734 |
|
|
|
9,778 |
|
|
|
11,859 |
|
|
|
14,514 |
|
Interest expense |
|
|
(668 |
) |
|
|
(201 |
) |
|
|
(1,466 |
) |
|
|
(467 |
) |
Income before income taxes |
|
|
7,066 |
|
|
|
9,577 |
|
|
|
10,393 |
|
|
|
14,047 |
|
Provision for income taxes |
|
|
(1,987 |
) |
|
|
(2,663 |
) |
|
|
(2,802 |
) |
|
|
(3,620 |
) |
Net income |
|
$ |
5,079 |
|
|
$ |
6,914 |
|
|
$ |
7,591 |
|
|
$ |
10,427 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.12 |
|
|
$ |
0.14 |
|
|
$ |
0.18 |
|
|
$ |
0.21 |
|
Diluted |
|
$ |
0.12 |
|
|
$ |
0.13 |
|
|
$ |
0.17 |
|
|
$ |
0.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
43,363,374 |
|
|
|
50,890,063 |
|
|
|
43,300,962 |
|
|
|
50,802,423 |
|
Diluted |
|
|
43,508,221 |
|
|
|
51,253,543 |
|
|
|
43,465,235 |
|
|
|
51,214,607 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tile Shop Holdings, Inc. and
SubsidiariesRate
Analysis(Unaudited)
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Gross margin rate |
|
64.2 |
% |
|
66.0 |
% |
|
64.2 |
% |
|
65.6 |
% |
SG&A expense rate |
|
56.4 |
% |
|
56.9 |
% |
|
58.3 |
% |
|
58.7 |
% |
Income from operations margin rate |
|
7.8 |
% |
|
9.1 |
% |
|
5.9 |
% |
|
6.9 |
% |
Adjusted EBITDA margin rate |
|
13.8 |
% |
|
15.6 |
% |
|
11.9 |
% |
|
13.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Tile Shop Holdings, Inc. and
SubsidiariesConsolidated Statements of Cash
Flows($ in
thousands)(Unaudited)
|
|
Six Months Ended |
|
|
June 30, |
|
|
2023 |
|
2022 |
Cash Flows From Operating Activities |
|
|
|
|
|
|
Net income |
|
$ |
7,591 |
|
|
$ |
10,427 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
|
11,332 |
|
|
|
12,854 |
|
Amortization of debt issuance costs |
|
|
129 |
|
|
|
157 |
|
Loss on disposals of property, plant and equipment |
|
|
7 |
|
|
|
- |
|
Impairment charges |
|
|
618 |
|
|
|
- |
|
Non-cash lease expense |
|
|
13,016 |
|
|
|
13,016 |
|
Stock based compensation |
|
|
706 |
|
|
|
1,054 |
|
Deferred income taxes |
|
|
2,006 |
|
|
|
518 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Receivables, net |
|
|
(460 |
) |
|
|
(982 |
) |
Inventories |
|
|
14,090 |
|
|
|
(12,864 |
) |
Other current assets, net |
|
|
1,142 |
|
|
|
(378 |
) |
Accounts payable |
|
|
984 |
|
|
|
(806 |
) |
Income tax receivable / payable |
|
|
3,066 |
|
|
|
(1,733 |
) |
Accrued expenses and other liabilities |
|
|
(12,789 |
) |
|
|
(12,040 |
) |
Net cash provided by operating activities |
|
|
41,438 |
|
|
|
9,223 |
|
Cash Flows From Investing Activities |
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
|
(8,076 |
) |
|
|
(7,361 |
) |
Net cash used in investing activities |
|
|
(8,076 |
) |
|
|
(7,361 |
) |
Cash Flows From Financing Activities |
|
|
|
|
|
|
Payments of long-term debt |
|
|
(40,400 |
) |
|
|
(10,000 |
) |
Advances on line of credit |
|
|
15,000 |
|
|
|
10,000 |
|
Employee taxes paid for shares withheld |
|
|
(446 |
) |
|
|
(676 |
) |
Net cash used in financing activities |
|
|
(25,846 |
) |
|
|
(676 |
) |
Effect of exchange rate changes on cash |
|
|
(28 |
) |
|
|
(38 |
) |
Net change in cash, cash equivalents and restricted cash |
|
|
7,488 |
|
|
|
1,148 |
|
Cash, cash equivalents and restricted cash beginning of period |
|
|
7,759 |
|
|
|
10,013 |
|
Cash, cash equivalents and restricted cash end of
period |
|
$ |
15,247 |
|
|
$ |
11,161 |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
14,592 |
|
|
$ |
10,506 |
|
Restricted cash |
|
|
655 |
|
|
|
655 |
|
Cash, cash equivalents and restricted cash end of
period |
|
$ |
15,247 |
|
|
$ |
11,161 |
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow
information |
|
|
|
|
|
|
Purchases of property, plant and equipment included in accounts
payable and accrued expenses |
|
$ |
655 |
|
|
$ |
90 |
|
Cash paid for interest |
|
|
1,578 |
|
|
|
538 |
|
Cash (received) paid for income taxes, net |
|
|
(2,271 |
) |
|
|
4,836 |
|
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