The Tile Shop Reports First Quarter 2024 Results
Tile Shop Holdings, Inc. reported a decrease in net sales and comparable store sales by 10.1% and 10.2% respectively for the first quarter of 2024. Despite challenges in existing home sales affecting traffic, the company saw an improvement in gross margin rate, generated strong cash flow, and controlled costs. The company had net income of $1.7 million, adjusted EBITDA of $7.4 million, diluted EPS of $0.04, and ending cash balance of $24.0 million with no long-term debt.
Improvement in gross margin rate to 65.8% due to lower international freight and product costs.
Strong operating cash flow with cash provided by operating activities of $18.6 million.
No long-term debt and an ending cash balance of $24.0 million as of March 31, 2024.
Decrease in net sales and comparable store sales by 10.1% and 10.2% respectively in the first quarter of 2024.
Net income decline to $1.7 million and adjusted EBITDA decrease to $7.4 million compared to the first quarter of 2023.
Insights
The Tile Shop's Q1 2024 performance indicates a contraction, with a 10.1% drop in net sales and a 10.2% decline in comparable store sales. Nonetheless, the company witnessed an increase in gross margin to 65.8%, reflecting more efficient cost management, possibly due to a decrease in international freight and product costs. The improvement in gross margin amidst declining sales is notable, as it implies that the company is effectively managing its cost of goods sold.
On the liquidity front, Tile Shop appears to be in a sound position with an ending cash balance of $24 million and no long-term debt, which is reassuring. However, investors should be cautious as the Adjusted EBITDA dropped from $10.3 million to $7.4 million, which may suggest a tightening of operational efficiency or reduced ability to generate earnings before interest, taxes, depreciation and amortization. This could potentially indicate underlying issues in the company's core operations that need to be addressed.
Tile Shop's report indicates potential challenges within the sector, particularly in light of the CEO's commentary on the 'softness in existing home sales' affecting store traffic. It's necessary to assess whether this trend is specific to Tile Shop or indicative of a broader industry slowdown, which could have implications for retail investors interested in the home improvement sector.
Furthermore, a key metric for investors to note is the reported Pretax Return on Capital Employed (ROCE), which has decreased from 15.2% to 11.3%. ROCE is a important indicator of the profitability and efficiency with which a company's capital is utilized and a decline can often be perceived negatively by the market.
MINNEAPOLIS, May 09, 2024 (GLOBE NEWSWIRE) -- 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 first quarter ended March 31, 2024.
First Quarter 2024 Summary
Net Sales Decreased
Comparable Store Sales Decreased
Gross Margin of
Net Income of
Diluted Earnings per Share of
Cash Provided by Operating Activities of
Ending Cash Balance of
Management Commentary – Cabell Lolmaugh, CEO
“Continued softness in existing home sales contributed to lower levels of traffic in our stores and had an adverse impact on our comparable store sales during the first quarter of 2024. Despite these challenges, we saw an improvement in our gross margin rate and were able to generate strong operating cash flow. Additionally, we were able to make significant inroads executing our key strategies and controlling costs.”
| Three Months Ended | |||||||||
| (unaudited, dollars in thousands, except per | March 31, | ||||||||
| share data) | 2024 | 2023 | |||||||
| Net sales | $ | 91,728 | $ | 102,019 | |||||
| Net sales decline(1) | (10.1 | ) | % | (0.4 | ) | % | |||
| Comparable store sales (decline) growth(2) | (10.2 | ) | % | 0.1 | % | ||||
| Gross margin rate | 65.8 | % | 64.2 | % | |||||
| Income from operations as a % of net sales | 2.5 | % | 4.0 | % | |||||
| Net income | $ | 1,689 | $ | 2,512 | |||||
| Net income per diluted share | $ | 0.04 | $ | 0.06 | |||||
| Adjusted EBITDA | $ | 7,417 | $ | 10,313 | |||||
| Adjusted EBITDA as a % of net sales | 8.1 | % | 10.1 | % | |||||
| Number of stores open at the end of period | 142 | 142 | |||||||
(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.
FIRST QUARTER 2024
Net Sales
Net sales for the first quarter of 2024 decreased
Gross Profit
Gross profit decreased
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased
Provision for Income Taxes
The provision for income taxes for the first quarter of 2024 and 2023 was
Capital Structure and Liquidity
As of March 31, 2024 the Company had no borrowings outstanding on its
NON-GAAP INFORMATION
Adjusted EBITDA
Adjusted EBITDA for the first quarter of 2024 was
| Three Months Ended | |||||||||||
| ($ in thousands, unaudited) | March 31, | ||||||||||
| 2024 | % of net sales | 2023 | % of net sales(1) | ||||||||
| GAAP net income | $ | 1,689 | 1.8 | % | $ | 2,512 | 2.5 | % | |||
| Interest expense | 166 | 0.2 | 798 | 0.8 | |||||||
| Provision for income taxes | 428 | 0.5 | 815 | 0.8 | |||||||
| Depreciation and amortization | 4,742 | 5.2 | 5,783 | 5.7 | |||||||
| Stock-based compensation | 392 | 0.4 | 405 | 0.4 | |||||||
| Adjusted EBITDA | $ | 7,417 | 8.1 | % | $ | 10,313 | 10.1 | % | |||
(1) Amounts do not foot due to rounding.
Pretax Return on Capital Employed
Pretax Return on Capital Employed was
| ($ in thousands, unaudited) | March 31, | ||||||||
| 2024(1) | 2023(1) | ||||||||
| Income from Operations (trailing twelve months) | $ | 14,316 | $ | 21,998 | |||||
| Total Assets | 322,685 | 346,695 | |||||||
| Less: Accounts payable | (24,560 | ) | (28,002 | ) | |||||
| Less: Income tax payable | (652 | ) | (850 | ) | |||||
| Less: Other accrued liabilities | (31,865 | ) | (37,696 | ) | |||||
| Less: Lease liability | (134,303 | ) | (130,385 | ) | |||||
| Less: Other long-term liabilities | (4,720 | ) | (4,623 | ) | |||||
| Capital Employed | $ | 126,585 | $ | 145,139 | |||||
| Pretax Return on Capital Employed | 11.3 | % | 15.2 | % | |||||
(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 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.
Company 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 May 2, 2024, 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, May 9, 2024. The call will be hosted by Cabell Lolmaugh, CEO, Mark Davis, CFO, and Ken Cooper, Investor Relations.
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
Chief Financial Officer
investorrelations@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 142 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)
| (Unaudited) | (Audited) | |||||||
| March 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 24,027 | $ | 8,620 | ||||
| Receivables, net | 3,935 | 2,882 | ||||||
| Inventories | 88,835 | 93,679 | ||||||
| Income tax receivable | 127 | 129 | ||||||
| Other current assets, net | 9,744 | 9,248 | ||||||
| Total Current Assets | 126,668 | 114,558 | ||||||
| Property, plant and equipment, net | 62,372 | 64,317 | ||||||
| Right of use asset | 128,976 | 129,092 | ||||||
| Deferred tax assets | 4,971 | 5,256 | ||||||
| Other assets | 2,935 | 3,449 | ||||||
| Total Assets | $ | 325,922 | $ | 316,672 | ||||
| Liabilities and Stockholders' Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 24,263 | $ | 23,345 | ||||
| Income tax payable | 1,275 | 1,135 | ||||||
| Current portion of lease liability | 28,084 | 27,265 | ||||||
| Other accrued liabilities | 34,061 | 27,000 | ||||||
| Total Current Liabilities | 87,683 | 78,745 | ||||||
| Long-term debt, net | - | - | ||||||
| Long-term lease liability, net | 111,911 | 112,697 | ||||||
| Other long-term liabilities | 5,024 | 5,543 | ||||||
| Total Liabilities | 204,618 | 196,985 | ||||||
| Stockholders’ Equity: | ||||||||
| Common stock, par value | 4 | 4 | ||||||
| Preferred stock, par value | - | - | ||||||
| Additional paid-in capital | 128,798 | 128,861 | ||||||
| Accumulated deficit | (7,420 | ) | (9,109 | ) | ||||
| Accumulated other comprehensive loss | (78 | ) | (69 | ) | ||||
| Total Stockholders' Equity | 121,304 | 119,687 | ||||||
| Total Liabilities and Stockholders' Equity | $ | 325,922 | $ | 316,672 | ||||
Tile Shop Holdings, Inc. and Subsidiaries
Consolidated Statements of Income
($ in thousands, except per share data)
(Unaudited)
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| Net sales | $ | 91,728 | $ | 102,019 | ||||
| Cost of sales | 31,409 | 36,481 | ||||||
| Gross profit | 60,319 | 65,538 | ||||||
| Selling, general and administrative expenses | 58,036 | 61,413 | ||||||
| Income from operations | 2,283 | 4,125 | ||||||
| Interest expense | (166 | ) | (798 | ) | ||||
| Income before income taxes | 2,117 | 3,327 | ||||||
| Provision for income taxes | (428 | ) | (815 | ) | ||||
| Net income | $ | 1,689 | $ | 2,512 | ||||
| Income per common share: | ||||||||
| Basic | $ | 0.04 | $ | 0.06 | ||||
| Diluted | $ | 0.04 | $ | 0.06 | ||||
| Weighted average shares outstanding: | ||||||||
| Basic | 43,570,745 | 43,237,856 | ||||||
| Diluted | 43,717,347 | 43,509,993 | ||||||
Tile Shop Holdings, Inc. and Subsidiaries
Rate Analysis
(Unaudited)
| Three Months Ended | ||||||
| March 31, | ||||||
| 2024 | 2023 | |||||
| Gross margin rate | 65.8 | % | 64.2 | % | ||
| SG&A expense rate | 63.3 | % | 60.2 | % | ||
| Income from operations margin rate | 2.5 | % | 4.0 | % | ||
| Adjusted EBITDA margin rate | 8.1 | % | 10.1 | % | ||
Tile Shop Holdings, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
($ in thousands)
(Unaudited)
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash Flows From Operating Activities | ||||||||
| Net income | $ | 1,689 | $ | 2,512 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 4,742 | 5,783 | ||||||
| Amortization of debt issuance costs | 18 | 64 | ||||||
| Loss on disposals of property, plant and equipment | 40 | 7 | ||||||
| Impairment charges | - | 112 | ||||||
| Non-cash lease expense | 6,703 | 6,385 | ||||||
| Stock based compensation | 392 | 405 | ||||||
| Deferred income taxes | 285 | 593 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Receivables, net | (1,053 | ) | (412 | ) | ||||
| Inventories | 4,845 | 5,472 | ||||||
| Other current assets, net | (1 | ) | 89 | |||||
| Accounts payable | 800 | 2,125 | ||||||
| Income tax receivable / payable | 142 | 4,503 | ||||||
| Accrued expenses and other liabilities | (13 | ) | (1,816 | ) | ||||
| Net cash provided by operating activities | 18,589 | 25,822 | ||||||
| Cash Flows From Investing Activities | ||||||||
| Purchases of property, plant and equipment | (2,719 | ) | (3,367 | ) | ||||
| Net cash used in investing activities | (2,719 | ) | (3,367 | ) | ||||
| Cash Flows From Financing Activities | ||||||||
| Payments of long-term debt | (10,000 | ) | (30,400 | ) | ||||
| Advances on line of credit | 10,000 | 10,000 | ||||||
| Employee taxes paid for shares withheld | (455 | ) | (427 | ) | ||||
| Net cash used in financing activities | (455 | ) | (20,827 | ) | ||||
| Effect of exchange rate changes on cash | (8 | ) | 3 | |||||
| Net change in cash, cash equivalents and restricted cash | 15,407 | 1,631 | ||||||
| Cash, cash equivalents and restricted cash beginning of period | 8,620 | 7,759 | ||||||
| Cash, cash equivalents and restricted cash end of period | $ | 24,027 | $ | 9,390 | ||||
| Cash and cash equivalents | $ | 24,027 | $ | 8,624 | ||||
| Restricted cash | - | 766 | ||||||
| Cash, cash equivalents and restricted cash end of period | $ | 24,027 | $ | 9,390 | ||||
| Supplemental disclosure of cash flow information | ||||||||
| Purchases of property, plant and equipment included in accounts payable and accrued expenses | $ | 548 | $ | 646 | ||||
| Cash paid for interest | 127 | 958 | ||||||
| Cash paid (received) for income taxes, net | - | (4,280 | ) | |||||
FAQ
<p>What were Tile Shop Holdings, Inc.'s first quarter 2024 net sales results?</p>
Tile Shop Holdings, Inc. reported a 10.1% decrease in net sales for the first quarter of 2024 compared to the same period in 2023.
<p>What was the gross margin rate for Tile Shop Holdings, Inc. in the first quarter of 2024?</p>
Tile Shop Holdings, Inc. achieved a gross margin rate of 65.8% in the first quarter of 2024, a 160 basis point increase from the previous year.
<p>Did Tile Shop Holdings, Inc. have any long-term debt as of March 31, 2024?</p>
As of March 31, 2024, Tile Shop Holdings, Inc. had no long-term debt and an ending cash balance of $24.0 million.
