The Tile Shop Reports Fourth Quarter and Full-Year 2023 Results
- Sequential improvement in comparable store sales trends compared to the third quarter of 2023.
- Net sales decreased by 3.4% for the fourth quarter and 4.4% for the full year 2023.
- Gross margin was 64.7% for the fourth quarter and 64.4% for the full year 2023.
- Net income was $0.6 million for the fourth quarter and $10.1 million for the full year 2023.
- Adjusted EBITDA was $6.6 million for the fourth quarter and $38.8 million for the full year.
- Debt was fully paid off by the company at year-end 2023.
- Decrease in net sales and comparable store sales for both the fourth quarter and full-year 2023.
- Gross profit decreased by 3.2% for the fourth quarter and 6.1% for the full year 2023.
- Selling, general, and administrative expenses decreased by 1.3% for the fourth quarter but increased by 4.0% for the full year 2023.
- Provision for income taxes increased by 26.4% for the full year 2023.
- Decrease in Pretax Return on Capital Employed from 15.7% to 12.4% for the trailing twelve months as of the end of the fourth quarter of 2023.
Insights
Tile Shop Holdings' reported decrease in net sales and comparable store sales indicates a challenging retail environment, potentially driven by broader economic factors such as consumer spending shifts or increased competition. The marginal increase in gross margin suggests effective cost management strategies, such as negotiating lower prices with suppliers and benefiting from lower international freight rates. However, the overall decline in gross profit and net income year-over-year is a concern.
From a liquidity perspective, the elimination of debt is a positive sign, enhancing the company's financial stability and potentially improving its creditworthiness. The increase in cash and cash equivalents provides additional flexibility for operations and strategic initiatives. Investors may view these factors favorably, as they indicate sound financial management and a focus on maintaining a strong balance sheet.
The increase in the effective tax rate due to stock-based compensation and lower pretax income could be a point of interest for shareholders, as it impacts net income. Adjusted EBITDA, while down from the previous year, remains a critical metric for evaluating the company's operational efficiency and ability to generate cash flow from its core business operations.
The retail sector, particularly specialty retailers like Tile Shop Holdings, is sensitive to macroeconomic conditions and consumer trends. The reported decrease in traffic contributing to lower sales growth could be indicative of a wider trend in the home improvement industry or a shift in consumer preferences. The increase in average ticket value, however, suggests that while fewer customers are visiting, those who do are spending more, possibly due to an uptick in larger renovation projects or a shift towards higher-priced items.
With no new store openings reported, Tile Shop's strategy appears to be focused on maximizing the performance of existing stores rather than expansion. This conservative approach might be a response to the current market conditions and an effort to optimize capital allocation.
The retail landscape for home improvement and specialty products like tiles is often influenced by housing market trends, consumer confidence and discretionary spending. Tile Shop Holdings' results reflect the impact of these external factors on the company's performance. The slight improvement in gross margin rate in the fourth quarter compared to the same period in the previous year indicates successful cost mitigation efforts, despite the overall annual decrease in gross margin rate.
The company's focus on managing expenses and reducing inventory levels aligns with industry best practices for improving operational efficiency. However, the reported decrease in net sales growth could signal a need for strategic adjustments to address the evolving market demands and competition.
MINNEAPOLIS, Feb. 29, 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 fourth quarter and full-year ended December 31, 2023.
Fourth Quarter 2023 Summary
Net Sales Decreased
Comparable Store Sales Decreased
Gross Margin of
Net Income of
Diluted Earnings per Share of
Full-Year 2023 Summary
Net Sales Decreased
Comparable Store Sales Decreased
Gross Margin of
Net income of
Diluted Earnings per Share of
No Debt Outstanding at Year-End
Management Commentary – Cabell Lolmaugh, CEO
“We were pleased to see the sequential improvement in comparable store sales trends when compared to the third quarter of 2023. During the fourth quarter of 2023, we battled macro headwinds together with the typical seasonal slowdown in home remodel projects during the holidays. We are proud of the results we’ve delivered in 2023 by executing our strategy, managing expenses and reducing inventory levels. This helped us generate strong operating cash flows which made it possible to pay off our debt by year-end.”
| Three Months Ended | Full Year Ended | ||||||||||||||
| (unaudited, dollars in thousands, except per share data) | December 31, | December 31, | |||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Net sales | $ | 84,458 | $ | 87,473 | $ | 377,146 | $ | 394,702 | |||||||
| Net sales (decline) growth (1) | (3.4) | % | (3.0) | % | (4.4) | % | 6.5 | % | |||||||
| Comparable store sales (decline) growth (2) | (3.2) | % | (2.8) | )% | (4.1) | % | 6.5 | % | |||||||
| Gross margin rate | 64.7 | % | 64.5 | % | 64.4 | % | 65.6 | % | |||||||
| Income from operations as a % of net sales | 1.7 | % | 3.0 | % | 4.3 | % | 5.7 | % | |||||||
| Net income | $ | 636 | $ | 1,453 | $ | 10,071 | $ | 15,703 | |||||||
| Diluted net income per share | $ | 0.01 | $ | 0.03 | $ | 0.23 | $ | 0.32 | |||||||
| Adjusted EBITDA | $ | 6,625 | $ | 8,938 | $ | 38,779 | $ | 49,583 | |||||||
| Adjusted EBITDA as a % of net sales | 7.8 | % | 10.2 | % | 10.3 | % | 12.6 | % | |||||||
| Number of stores open at the end of period | 142 | 142 | 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. | |||||||||||||||
FOURTH QUARTER 2023
Net Sales
Net sales for the fourth quarter of 2023 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 fourth quarter of 2023 was
Capital Structure and Liquidity
During 2023, the Company repaid
NON-GAAP INFORMATION
Adjusted EBITDA
Adjusted EBITDA for the fourth quarter of 2023 was
| Three Months Ended | |||||||||||
| (unaudited, $ in thousands) | December 31, | ||||||||||
| 2023 | % of net sales(1) | 2022 | % of net sales | ||||||||
| Net income | $ | 636 | 0.8 | % | $ | 1,453 | 1.7 | % | |||
| Interest expense | 245 | 0.3 | % | 793 | 0.9 | % | |||||
| Provision for income taxes | 589 | 0.7 | % | 346 | 0.4 | % | |||||
| Depreciation & amortization | 4,835 | 5.7 | % | 6,131 | 7.0 | % | |||||
| Stock based compensation | 320 | 0.4 | % | 215 | 0.2 | % | |||||
| Adjusted EBITDA | $ | 6,625 | 7.8 | % | $ | 8,938 | 10.2 | % | |||
| Full Year Ended | |||||||||||
| (unaudited, $ in thousands) | December 31, | ||||||||||
| 2023 | % of net sales | 2022 | % of net sales | ||||||||
| Net income | $ | 10,071 | 2.7 | % | $ | 15,703 | 4.0 | % | |||
| Interest expense | 2,164 | 0.6 | % | 1,579 | 0.4 | % | |||||
| Provision for income taxes | 3,923 | 1.0 | % | 5,327 | 1.3 | % | |||||
| Depreciation & amortization | 21,229 | 5.6 | % | 25,142 | 6.4 | % | |||||
| Stock based compensation | 1,392 | 0.4 | % | 1,832 | 0.5 | % | |||||
| Adjusted EBITDA | $ | 38,779 | 10.3 | % | $ | 49,583 | 12.6 | % | |||
| (1) Amounts do not foot due to rounding. | |||||||||||
Pretax Return on Capital Employed
Pretax Return on Capital Employed was
| (unaudited, $ in thousands) | December 31, | |||||||
| 2023(1) | 2022(1) | |||||||
| Income from operations (trailing twelve months) | $ | 16,158 | $ | 22,609 | ||||
| Total Assets | 324,880 | 348,720 | ||||||
| Less: Accounts payable | (24,885 | ) | (28,752 | ) | ||||
| Less: Income tax payable | (519 | ) | (818 | ) | ||||
| Less: Other accrued liabilities | (32,728 | ) | (39,951 | ) | ||||
| Less: Lease liability | (131,840 | ) | (130,852 | ) | ||||
| Less: Other long-term liabilities | (4,585 | ) | (4,618 | ) | ||||
| Capital Employed | $ | 130,323 | $ | 143,729 | ||||
| Pretax Return on Capital Employed | 12.4 | % | 15.7 | % | ||||
| (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 uses several non-GAAP financial measures to manage its business including Adjusted EBITDA, adjusted EBITDA margin and pretax Return on Capital Employed (ROCE). Adjusted EBITDA is calculated by taking net income 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 ROCE 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 ROCE 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 February 22, 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, February 29, 2024. 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
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) | ||||||
| December 31, | December 31, | ||||||
| 2023 | 2022 | ||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 8,620 | $ | 5,948 | |||
| Restricted cash | - | 1,811 | |||||
| Receivables, net | 2,882 | 3,411 | |||||
| Inventories | 93,679 | 120,952 | |||||
| Income tax receivable | 129 | 3,859 | |||||
| Other current assets, net | 9,248 | 10,422 | |||||
| Total Current Assets | 114,558 | 146,403 | |||||
| Property, plant and equipment, net | 64,317 | 71,095 | |||||
| Right of use asset | 129,092 | 118,501 | |||||
| Deferred tax assets | 5,256 | 6,536 | |||||
| Other assets | 3,449 | 3,287 | |||||
| Total Assets | $ | 316,672 | $ | 345,822 | |||
| Liabilities and Stockholders' Equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 23,345 | $ | 23,506 | |||
| Income tax payable | 1,135 | 3 | |||||
| Current portion of lease liability | 27,265 | 27,866 | |||||
| Other accrued liabilities | 27,000 | 31,916 | |||||
| Total Current Liabilities | 78,745 | 83,291 | |||||
| Long-term debt, net | - | 45,400 | |||||
| Long-term lease liability, net | 112,697 | 103,353 | |||||
| Other long-term liabilities | 5,543 | 5,009 | |||||
| Total Liabilities | 196,985 | 237,053 | |||||
| Stockholders’ Equity: | |||||||
| Common stock, par value | 4 | 4 | |||||
| Preferred stock, par value | - | - | |||||
| Additional paid-in-capital | 128,861 | 127,997 | |||||
| Accumulated deficit | (9,109 | ) | (19,180 | ) | |||
| Accumulated other comprehensive loss | (69 | ) | (52 | ) | |||
| Total Stockholders' Equity | 119,687 | 108,769 | |||||
| Total Liabilities and Stockholders' Equity | $ | 316,672 | $ | 345,822 | |||
Tile Shop Holdings, Inc. and Subsidiaries
Consolidated Statements of Income
($ in thousands, except per share data)
(Unaudited)
| Three Months Ended | Twelve Months Ended, | ||||||||||||||
| December 31, | December 31, | ||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Net sales | $ | 84,458 | $ | 87,473 | $ | 377,146 | $ | 394,702 | |||||||
| Cost of sales | 29,800 | 31,011 | 134,085 | 135,765 | |||||||||||
| Gross profit | 54,658 | 56,462 | 243,061 | 258,937 | |||||||||||
| Selling, general and administrative expenses | 53,188 | 53,870 | 226,903 | 236,328 | |||||||||||
| Income from operations | 1,470 | 2,592 | 16,158 | 22,609 | |||||||||||
| Interest expense | (245 | ) | (793 | ) | (2,164 | ) | (1,579 | ) | |||||||
| Income before income taxes | 1,225 | 1,799 | 13,994 | 21,030 | |||||||||||
| Provision for income taxes | (589 | ) | (346 | ) | (3,923 | ) | (5,327 | ) | |||||||
| Net income | $ | 636 | $ | 1,453 | $ | 10,071 | $ | 15,703 | |||||||
| Earnings per common share: | |||||||||||||||
| Basic | $ | 0.01 | $ | 0.03 | $ | 0.23 | $ | 0.32 | |||||||
| Diluted | $ | 0.01 | $ | 0.03 | $ | 0.23 | $ | 0.32 | |||||||
| Weighted average shares outstanding: | |||||||||||||||
| Basic | 43,526,804 | 43,457,515 | 43,424,089 | 48,855,701 | |||||||||||
| Diluted | 43,775,573 | 43,832,426 | 43,620,790 | 49,247,047 | |||||||||||
Tile Shop Holdings, Inc. and Subsidiaries
Rate Analysis
(Unaudited)
| Three Months Ended | Twelve Months Ended | ||||||||||
| December 31, | December 31, | ||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||
| Gross margin rate | 64.7 | % | 64.5 | % | 64.4 | % | 65.6 | % | |||
| SG&A expense rate | 63.0 | % | 61.6 | % | 60.2 | % | 59.9 | % | |||
| Income from operations margin rate | 1.7 | % | 3.0 | % | 4.3 | % | 5.7 | % | |||
| Adjusted EBITDA margin rate | 7.8 | % | 10.2 | % | 10.3 | % | 12.6 | % | |||
Tile Shop Holdings, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
($ in thousands)
(Unaudited)
| Twelve Months Ended, | |||||||
| December 31, | |||||||
| 2023 | 2022 | ||||||
| Cash Flows From Operating Activities | |||||||
| Net income | $ | 10,071 | $ | 15,703 | |||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
| Depreciation & amortization | 21,229 | 25,142 | |||||
| Amortization of debt issuance costs | 257 | 427 | |||||
| Gain on disposals of property, plant and equipment | (13 | ) | - | ||||
| Impairment charges | 1,027 | 423 | |||||
| Non-cash lease expense | 25,844 | 25,779 | |||||
| Stock based compensation | 1,392 | 1,832 | |||||
| Deferred income taxes | 1,280 | 417 | |||||
| Changes in operating assets and liabilities: | |||||||
| Receivables | 528 | (209 | ) | ||||
| Inventories | 27,272 | (23,777 | ) | ||||
| Other current assets, net | 3,316 | (2,676 | ) | ||||
| Accounts payable | 123 | (8,057 | ) | ||||
| Income tax receivable / payable | 4,861 | 2,677 | |||||
| Accrued expenses and other liabilities | (35,127 | ) | (34,966 | ) | |||
| Net cash provided by operating activities | 62,060 | 2,715 | |||||
| Cash Flows From Investing Activities | |||||||
| Purchases of property, plant and equipment | (15,313 | ) | (14,027 | ) | |||
| Proceeds from the sale of property, plant and equipment | 58 | - | |||||
| Net cash used in investing activities | (15,255 | ) | (14,027 | ) | |||
| Cash Flows From Financing Activities | |||||||
| Payments of long-term debt and financing lease obligations | (65,400 | ) | (50,000 | ) | |||
| Advances on line of credit | 20,000 | 90,400 | |||||
| Proceeds from exercise of stock options | 4 | - | |||||
| Repurchases of common stock | - | (30,171 | ) | ||||
| Employee taxes paid for shares withheld | (532 | ) | (755 | ) | |||
| Debt issuance costs | - | (360 | ) | ||||
| Net cash (used in) provided by financing activities | (45,928 | ) | 9,114 | ||||
| Effect of exchange rate changes on cash | (16 | ) | (56 | ) | |||
| Net change in cash, cash equivalents and restricted cash | 861 | (2,254 | ) | ||||
| Cash, cash equivalents and restricted cash beginning of period | 7,759 | 10,013 | |||||
| Cash, cash equivalents and restricted cash end of period | $ | 8,620 | $ | 7,759 | |||
| Cash and cash equivalents | $ | 8,620 | $ | 5,948 | |||
| Restricted cash | - | 1,811 | |||||
| Cash, cash equivalents and restricted cash end of period | $ | 8,620 | $ | 7,759 | |||
| Supplemental disclosure of cash flow information | |||||||
| Purchases of property, plant and equipment included in accounts payable and accrued expenses | $ | 430 | $ | 714 | |||
| Cash paid for interest | 2,082 | 1,257 | |||||
| Cash (received) paid for income taxes, net of refunds | (2,218 | ) | 2,231 | ||||
FAQ
What was Tile Shop Holdings, Inc.'s (TTSH) net sales decline for the fourth quarter of 2023?
What was the gross margin for Tile Shop Holdings, Inc. in the full year 2023?
How much was Tile Shop Holdings, Inc.'s net income for the fourth quarter of 2023?
What was Tile Shop Holdings, Inc.'s Adjusted EBITDA for the full year 2023?
Did Tile Shop Holdings, Inc. have any debt outstanding at the end of the year 2023?
