MINNEAPOLIS, Aug. 03, 2023 (GLOBE NEWSWIRE) -- Tile Shop Holdings, Inc. ( 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 Million
Diluted 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 Sales
Net 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 Profit
Gross 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 Expenses
Selling, 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 Taxes
The 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 Liquidity
Since 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 sales2022% of net salesGAAP 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 sales2022% of net salesGAAP 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 %
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 Davis
[email protected]
ABOUT THE TILE SHOP
Tile Shop Holdings, Inc. ( 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 Subsidiaries
Consolidated Balance Sheets
($ in thousands, except per share data)
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 $345,822
Tile Shop Holdings, Inc. and Subsidiaries
Consolidated Statements of Income($ 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 $0.20 Weighted average shares outstanding: Basic 43,363,374 50,890,063 43,300,962 50,802,423 Diluted 43,508,221 51,253,543 43,465,235 51,214,607
Tile Shop Holdings, Inc. and Subsidiaries
Rate Analysis
(Unaudited)
Tile Shop Holdings, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
($ in thousands)
(Unaudited)
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
