Core Insights - Escalade, Inc. reported a decline in net sales of 7.7% year-over-year for Q2 2024, totaling $62.5 million, attributed to softening consumer demand and inventory destocking [2][19] - The company experienced a decrease in operating income to $4.5 million from $6.3 million in the same quarter of 2023, and net income fell to $2.8 million, or $0.20 per diluted share, compared to $3.6 million, or $0.26 per diluted share, in Q2 2023 [2][36] - Gross margin for Q2 2024 was reported at 24.2%, a decline of 40 basis points from the previous year, primarily due to lower fixed cost absorption and increased customer program spending [3] Financial Performance - For the first half of 2024, net income was $4.6 million, or $0.33 per diluted share, compared to $2.7 million, or $0.20 per diluted share, for the same period in 2023 [19][36] - Total net sales for the first half of 2024 decreased by 3.9% year-over-year, again due to softening consumer demand and channel destocking [19] - Cash flow from operations increased nearly 60% year-over-year to $13.3 million in Q2 2024, supporting a reduction in outstanding debt [6][20] Debt and Dividends - Total debt at the end of Q2 2024 was $43.2 million, significantly reduced from $84.0 million at the end of Q2 2023 [4] - The company declared a quarterly dividend of $0.15 per share, payable on October 14, 2024 [5] Market Position and Strategy - Escalade's brands, including Stiga table tennis, Bear Archery, and Brunswick Billiards, showed solid demand, although overall retail sales were soft due to cautious inventory management by retail partners [7] - International sales grew by 15%, and owned e-commerce sales increased by 28%, indicating a shift in consumer purchasing behavior [7] - The company is focusing on operating discipline and balance sheet optimization to maximize shareholder value amid a cautious consumer spending outlook [6][24]

Company Overview - Escalade, Inc. is a leading manufacturer and distributor of sporting goods and indoor/outdoor recreational equipment, founded in 1922 and headquartered in Evansville, Indiana [2][7] - The company's mission is to connect family and friends, creating lasting memories through its products [2] - Escalade's brands include Brunswick Billiards®, STIGA®, Accudart®, RAVE Sports®, Victory Tailgate®, Onix®, Goalrilla™, Lifeline®, Woodplay®, and Bear® Archery, with products available online and at major retailers nationwide [2] Financial Results Announcement - Escalade will issue its second quarter 2024 financial results before the market opens on Thursday, July 25, 2024 [7] - A conference call is scheduled for the same day at 11:00 a.m. ET to review the financial results, discuss recent events, and conduct a Q&A session [5] Investor Relations - For participation in the live teleconference, domestic and international numbers are provided, along with replay options available until August 8, 2024 [2][4] - The conference ID for the teleconference is 10190860 [2]

Group 1 - General Motors will increase production of the Cadillac Escalade V-Series for the 2025 model year due to high demand for the current model [1][3][8] - The pricing for the 2025 models will be announced closer to the vehicle's launch, with current prices ranging from approximately $81,000 to over $152,000 for the V-Series [2][4] - The Escalade is a key vehicle for Cadillac and GM, being the flagship of the company's large SUV lineup and contributing significantly to market share in the full-size SUV segment [4][5] Group 2 - The 2025 Cadillac Escalade will feature design updates such as sleeker front lighting and a larger interior screen, aligning it with an upcoming all-electric version [5][6] - The gas-powered Escalade will continue to utilize two 6.2-liter V-8 engines, including a supercharged V-Series model with 682 horsepower and 653 foot-pounds of torque [5][6] - The new SUV will include advanced features like a 55-inch diagonal display, an executive package for the second row, and large 24-inch wheels [7]

Core Viewpoint - Escalade (NASDAQ:ESCA) has experienced significant fluctuations in share value, with recent improvements in efficiency and margins suggesting a potential recovery after a challenging year [1][5]. Financial Performance - The company faced revenue struggles throughout 2023 due to elevated interest rates and reduced demand for outdoor sports, although demand has shown signs of returning in the latest quarter [2][6]. - Gross margins improved by 560 basis points in the latest quarter, attributed to cost-cutting measures and inventory normalization [3][5]. - Return on Assets (ROA) and Return on Equity (ROE) have also improved, indicating better asset utilization and capital allocation by management [4]. Operational Efficiency - The company has made strides in efficiency, with improvements in profitability metrics as freight costs eased and inventory levels stabilized [5]. - The normalization of inventory levels is expected to support top-line growth moving forward, as clients have addressed previous oversupply issues [7]. Market Outlook - A year-over-year sales increase of less than 1% is noted, which, while minimal, may indicate a bottoming out of performance [6]. - The outdoor sports market is projected to grow at an 8.6% CAGR over the next eight years, which could benefit Escalade [7]. - The company is expected to ramp up production in response to increased demand, potentially enhancing margins further [8]. Valuation Insights - A conservative revenue growth model of 0% for FY24 is proposed, with a projected growth rate of 4% CAGR thereafter, reflecting cautious optimism [10]. - Gross margin estimates are slightly lower than previous quarters, with a forecast of 24.5% for 2024 [12]. - The intrinsic value of the company is estimated at approximately $15.38 per share, indicating it is trading at a discount to its fair value [16]. Future Expectations - The company is anticipated to benefit from seasonal increases in outdoor sports spending as summer approaches, with normalized inventory levels supporting growth [21]. - Continued focus on debt reduction, particularly variable interest debt, is crucial for maintaining financial health [20].

Financial Data and Key Metrics Changes - For Q1 2024, the company reported net income of $1.8 million or $0.13 per diluted share on net sales of $57.3 million, with gross margins improving to 25% from 19.4% in the prior year, a 560 basis point increase [8][16] - Total cash provided by operations was $7,000 for Q1 2024, down from $4.5 million in the prior year, primarily due to a seasonal increase in inventories and accounts receivable [9] Business Line Data and Key Metrics Changes - Sales in basketball, table tennis, outdoor games, and archery categories grew year-over-year, indicating a stabilization in consumer demand [4] - Direct-to-consumer sales increased by 28% year-over-year in Q1 2024, highlighting a key growth area for the company [17] Market Data and Key Metrics Changes - The company noted that retail partners successfully reduced their inventory levels coming into 2024, suggesting a healthier market environment for their products [16] Company Strategy and Development Direction - The company is focused on maximizing return on assets by optimizing its asset base and cost structure, aiming to enhance long-term profitability [4] - There is a commitment to prioritize the repayment of variable rate debt, with a net debt leverage of 2.0x EBITDA, within the target range of 1.5x to 2.5x [6][21] Management Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding consumer spending, noting that while it may be softer, their brands cater to a higher income segment that can maintain spending [5] - The company is actively working on resolving material weaknesses in internal controls over financial reporting and expects to conclude remediation efforts within the year [10] Other Important Information - Selling, general and administrative expenses increased by 4% year-over-year to $10.7 million, with SG&A as a percentage of net sales rising to 18.7% [20] - The company is in the process of divesting its Rosarito assets and has engaged with potential buyers [16][25] Q&A Session Summary Question: Update on supply chain and production in Mexico - Management confirmed that operations have been moved from Mexico to U.S.-based facilities and are in the process of selling the property, with several potential buyers engaged [25] Question: Future use of cash and free cash flow - The company will continue to focus on debt repayment, particularly of higher-cost variable rate debt, while remaining open to acquisition opportunities, balancing these against continued debt repayments [28]

Financial Performance - Net sales for the three months ended March 31, 2024, increased to $57,304 thousand, up from $56,931 thousand in the same period of 2023, representing a growth of 0.65%[10] - Operating income significantly improved to $3,060 thousand for Q1 2024, compared to only $149 thousand in Q1 2023, marking a substantial increase of 1,953.69%[10] - Net income for the three months ended March 31, 2024, was $1,775 thousand, a turnaround from a net loss of $952 thousand in the same period of 2023[10] - Basic and diluted earnings per share for Q1 2024 were both $0.13, compared to a loss of $0.07 per share in Q1 2023[10] Assets and Cash Flow - Total assets as of March 31, 2024, were $256,347 thousand, a decrease from $293,587 thousand as of March 31, 2023[27] - Cash and cash equivalents at the end of Q1 2024 were $283 thousand, down from $6,064 thousand at the end of Q1 2023[14] - The company reported a net cash provided by operating activities of $7 thousand for Q1 2024, a significant decline from $4,516 thousand in Q1 2023[14] Dividends - The company declared dividends of $0.15 per share for both Q1 2024 and Q1 2023[10] - The Company paid a quarterly dividend of $0.15 per common share, totaling approximately $2.1 million on January 12, 2024[28] Cost of Goods Sold and Inventory - The cost of products sold decreased to $42,950 thousand in Q1 2024 from $45,879 thousand in Q1 2023, reflecting a reduction of 6.36%[10] - Inventory levels as of March 31, 2024, totaled $95,991 thousand, an increase from $92,462 thousand as of December 31, 2023[21] Gross Sales and Adjustments - Total gross sales for the three months ended March 31, 2024, were $64.047 million, an increase from $62.973 million in the same period of 2023[37] - The Company recognized total gross-to-net sales adjustments of $6.743 million for the three months ended March 31, 2024, compared to $6.042 million in the same period of 2023[37] Debt and Credit Facilities - The Company has a senior revolving credit facility with a maximum availability of $85.0 million as of March 31, 2024[46] - As of March 31, 2024, the outstanding principal amount of the term loan was $31.0 million, and the total amount drawn under the Revolving Facility was $22.5 million[47] Lease Obligations - The weighted average remaining lease term for operating leases was 7.89 years as of March 31, 2024[40] - The Company recorded operating lease costs of $375,000 for the three months ended March 31, 2024, compared to $374,000 for the same period in 2023[40] - Future minimum lease payments under non-cancellable leases total $10,602,000 as of March 31, 2024[41] Litigation - The company is involved in litigation but does not expect any material adverse effects on its business or financial condition[42] - The company does not believe that existing litigation will have a material adverse effect on its business or financial condition[42] Stock-Based Compensation - The company recognized stock-based compensation expense of $429 thousand in Q1 2024, slightly down from $459 thousand in Q1 2023[25]

Financial Performance - Escalade reported net sales of $57.3 million for Q1 2024, a year-over-year increase of 0.7% compared to $56.9 million in Q1 2023[3] - EBITDA for Q1 2024 was $4.4 million, up $2.8 million from $1.6 million in Q1 2023[4] - Net income for Q1 2024 was $1.8 million, or $0.13 diluted earnings per share, compared to a net loss of $1.0 million, or $0.07 diluted loss per share, in Q1 2023[5] - Net income for Q1 2024 was $1,775,000, a significant improvement compared to a net loss of $952,000 in Q1 2023[21] - EBITDA for Q1 2024 reached $4,436,000, up from $1,563,000 in Q1 2023, indicating a year-over-year increase of 184%[21] Cost and Margin Improvements - Gross margin improved to 25.0%, an increase of 560 basis points from the prior year, driven by a favorable product mix and reduced inventory costs[4] - Management anticipates continued opportunities for margin improvement in 2024 despite a cautious outlook on consumer demand for discretionary recreational goods[8] Debt and Liabilities - Total debt decreased to $53.5 million from $95.2 million at the end of Q1 2023, reflecting inventory investments for the spring selling season[5] - Total liabilities decreased to $91,627,000 in Q1 2024 from $137,269,000 in Q1 2023, representing a reduction of 33.3%[19] - The company ended Q1 2024 with a net debt to trailing twelve-month EBITDA ratio of 2.0x, within the targeted range of 1.5x to 2.5x[8] - Long-term debt increased to $46,383,000 in Q1 2024 from $43,753,000 in Q4 2023, reflecting a rise of 6%[19] Assets and Equity - Total current assets increased to $151,497,000 in Q1 2024 from $146,831,000 in Q4 2023, reflecting a growth of 1.5%[19] - Cash and cash equivalents rose to $283,000 in Q1 2024, compared to $16,000 in Q4 2023, showing a substantial increase[19] - Total stockholders' equity remained stable at $164,720,000 in Q1 2024, compared to $164,579,000 in Q4 2023[19] Inventory and Payables - Inventories increased to $95,991,000 in Q1 2024 from $92,462,000 in Q4 2023, indicating a growth of 5.5%[19] - Trade accounts payable increased to $15,981,000 in Q1 2024 from $9,797,000 in Q4 2023, marking a rise of 62.8%[19] Dividends and Operations - Escalade announced a quarterly dividend of $0.15 per share, payable on July 15, 2024[6] - Escalade plans to divest its Mexico operations to drive efficiencies in fixed costs[8] Sales and Marketing - Direct-to-consumer website sales increased by 28% in Q1 2024, supported by effective marketing and new product development[8]

EVANSVILLE, Ind., April 23, 2024 /PRNewswire/ -- Escalade, Inc. (NASDAQ: ESCA, or the "Company"), a leading manufacturer and distributor of sporting goods and indoor/outdoor recreational equipment, today announced that it will issue first quarter 2024 results before the market opens on Thursday, April 25, 2024.A conference call will be held Thursday, April 25, 2024 at 11:00 a.m. ET to review the Company's financial results, discuss recent events and conduct a question-and-answer session.A webcast of the con ...

Financial Data and Key Metrics Changes - The company reported a net income of $2.9 million or $0.21 per diluted share on net sales of $65.5 million for the fourth quarter of 2023, with gross margins improving to 24.3% from 22.4% in the prior year period [23][24] - Total net sales for the full year 2023 were $263.6 million, a decrease of 16% compared to 2022, while total gross margin for the year was 23.4%, slightly down from 23.5% in 2022 [24][48] - Earnings before interest, taxes, depreciation, and amortization (EBITDA) increased by $0.6 million to $6.4 million in the fourth quarter of 2023 compared to $5.8 million in the prior year [12] Business Line Data and Key Metrics Changes - Sales in the fourth quarter declined by 9.2% year-over-year, with strong growth in basketball and indoor games categories, offset by softness in other categories [9] - Direct-to-consumer sales saw a significant increase, with non-licensed DTC sales up 39% in the fourth quarter compared to the prior year [9] Market Data and Key Metrics Changes - The company noted that retail inventories have declined meaningfully, positioning them for a solid start to 2024, with most retail inventories in good shape [9] - The competitive promotional environment varies by category, with some experiencing strong promotional activity while others remain stable [28] Company Strategy and Development Direction - The company remains committed to investing in innovative product development to build market-leading positions in key growth categories [10] - A focus on operational excellence, cost discipline, and a well-capitalized balance sheet is emphasized to navigate the transitional period for consumers [3][10] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding consumer spending and top-line sales, expecting consumer demand to remain relatively soft into 2024 [34] - The company is optimistic about margin enhancement opportunities, particularly as retail inventories normalize and consumer demand is expected to recover [36][22] Other Important Information - The company successfully reduced its total debt by $44 million during 2023, with a focus on repaying high-interest variable rate debt [5][10] - Material weaknesses in internal financial reporting controls were identified, but management assured that these did not impact the accuracy of financial statements [6][13] Q&A Session Summary Question: Retail inventory situation - Management indicated that retail inventories are balanced and in good shape, with some categories still having excess inventory [16][50] Question: Cost impact of financial controls - There will be higher audit costs and IT system costs, but these are not expected to significantly change the outlook [36] Question: Competitive promotional environment - The competitive promotional environment varies, with some categories experiencing strong promotions while others remain stable [39]

Customer Concentration - In 2023, one customer accounted for approximately 20% of the Company's revenues, while another customer accounted for about 11%[13]. - As of December 31, 2023, approximately 29% of total accounts receivable was with one customer, compared to 28% in 2022[14]. - The Company has two major customers, each accounting for over 10% of consolidated gross sales in the 2023 fiscal year, highlighting the risk of revenue loss if either customer is lost[39]. Workforce and Operations - Escalade's workforce decreased from 593 employees in 2022 to 479 employees in 2023, with a notable reduction in employees in Mexico from 90 to 10[25]. - As of December 31, 2023, the company ceased all manufacturing and distribution operations at its Rosarito, Mexico location, moving inventories to facilities in Olney, Illinois, and Evansville, Indiana[98]. - The company operates from multiple locations, including a 771,000 square foot facility in Evansville, Indiana, which is owned and used for distribution, sales, marketing, and engineering[98]. Financial Performance - Net sales for the Sporting Goods segment decreased by 16.0% in 2023, totaling $263.6 million compared to $313.8 million in 2022[120]. - Operating income for the Sporting Goods segment fell to $17.5 million in 2023, down from $25.9 million in 2022, representing a decrease of 32.2%[120]. - Net income for the Sporting Goods segment decreased by 45.6% in 2023, amounting to $8.8 million compared to $16.1 million in 2022[120]. - The overall gross margin decreased to 23.4% in 2023 from 23.5% in 2022, impacted by reduced inventory levels and increased handling costs[117]. - Selling, general and administrative expenses (SG&A) were $41.5 million in 2023, a decrease of 7.3% from $44.8 million in 2022, with SG&A as a percentage of sales rising to 15.7%[118]. - The effective tax rate for 2023 was 21.3%, slightly higher than the 20.5% rate in 2022, primarily due to state taxes[119]. - Net sales for 2023 were $263,566,000, a decrease of 16% compared to $313,757,000 in 2022[211]. - Cost of products sold decreased to $201,795,000 in 2023 from $240,118,000 in 2022, reflecting a reduction of 16%[211]. - Operating income for 2023 was $17,811,000, down 32% from $26,315,000 in 2022[211]. - Net income for 2023 was $9,829,000, a decline of 45% compared to $17,989,000 in 2022[211]. - Basic earnings per share decreased to $0.72 in 2023 from $1.33 in 2022, representing a decline of 46%[211]. - Total assets decreased to $253,005,000 in 2023 from $298,718,000 in 2022, a reduction of 15%[209]. - Total liabilities decreased significantly from $140,243,000 in 2022 to $88,426,000 in 2023, a decrease of 37%[209]. - Stockholders' equity increased to $164,579,000 in 2023 from $158,475,000 in 2022, an increase of 4%[209]. - Current assets decreased to $146,831,000 in 2023 from $188,198,000 in 2022, a decline of 22%[209]. - Long-term debt was reduced from $87,738,000 in 2022 to $43,753,000 in 2023, a decrease of 50%[209]. Supply Chain and Sourcing - The Company has increased sourcing from Brazil and Vietnam to mitigate supply chain disruptions[26]. - The Company relies on third-party suppliers for raw materials, and disruptions in supply could negatively impact sales and customer satisfaction[41]. - The Company has experienced increased shipping costs for products obtained from overseas due to a shortage of available shipping containers, which could impair operating results[44]. - The Company sources many products and raw materials from countries including Mexico, Brazil, China, and Vietnam, exposing it to unique international operational risks[58]. - U.S. tariffs on goods imported from China have increased costs, potentially leading to lower profitability if price increases cannot be offset[60]. - The Phase 1 trade agreement between the U.S. and China expired on December 31, 2021, with ongoing trade negotiations remaining uncertain[61]. Strategic Initiatives - The Company has made strategic acquisitions over the years, including the acquisition of Brunswick Billiards® in January 2022, enhancing its billiards portfolio[19]. - Escalade's business strategy focuses on investing in product innovation and developing strong brand names to differentiate its product line[20]. - The Company's growth strategy includes expanding its e-commerce business and making strategic acquisitions in the Sporting Goods sector[35]. Regulatory and Compliance - The Company believes it is in material compliance with all applicable regulations set by the Consumer Product Safety Commission[15]. - The Company is subject to various laws and regulations related to health, safety, and environmental protection, which could adversely affect its operations[72]. - Changes in accounting standards could materially affect how the Company records and reports its financial condition and results of operations[75]. - The Company identified material weaknesses in its internal control over financial reporting, which could lead to material misstatements in financial statements[66]. - The Company has not maintained effective internal control over financial reporting as of December 31, 2023, due to identified material weaknesses[199]. - The company’s internal control weaknesses include issues related to information technology general controls and the period end close process[203]. Risk Factors - The sporting goods market is highly competitive, with Escalade facing competition from larger companies with greater resources[29]. - The Company continues to face challenges in attracting and retaining skilled management and key personnel, which could adversely affect its business and financial condition[37]. - Cybersecurity threats are increasing, and any breach could result in significant financial, legal, and reputational damage to the Company[50]. - The company has not identified any significant cybersecurity risks stemming from known threats, but ongoing risks remain that could materially affect its business[92]. - The company is committed to continuously improving its cybersecurity posture through regular assessments, employee training, and engagement of third-party consultants[96]. - The company is exposed to risks from geopolitical instability, natural disasters, and public health crises, which could significantly impact its sales and profitability[85]. - The company faces uncertainties regarding the economic impact of potential future pandemics and public health crises, which could adversely affect its financial performance[87]. - The Company acknowledges that new risk factors may emerge in a rapidly changing environment, impacting its business and financial performance[88]. Capital and Liquidity - The Company's ability to expand its business is dependent on the availability of adequate capital, influenced by cash flow and access to equity and debt capital[36]. - The Company's quarterly cash dividend is currently $0.15 per common share, dependent on sufficient cash flow generation from operations[57]. - Total debt at the end of 2023 was $50.9 million, with maximum borrowings under revolving credit lines totaling $100.6 million[123]. - Management anticipates that cash generated from projected 2024 operations will be sufficient for its operational needs[132]. - The Company estimates capital expenditures for 2024 to be approximately $4.0 million[131]. - The Company has no material commitments for capital expenditures as of December 31, 2023[147]. Internal Controls and Auditing - The independent registered accounting firm for the company is FORVIS, LLP, with PCAOB ID number 686[174]. - The company has been audited by FORVIS, LLP since 1977, indicating a long-standing relationship with the auditor[195]. - The company’s financial statements were audited in accordance with PCAOB standards, and an unqualified opinion was expressed on those financial statements[200]. - The report on internal control over financial reporting was based on criteria established in the Internal Control – Integrated Framework (2013) issued by COSO[197]. - The Company plans to engage third-party resources to support internal control testing and remediation efforts[161].