Financial Data and Key Metrics Changes - Net sales for Q2 2022 were $299 million, a decrease of $2.4 million or 0.8% compared to Q2 2021, attributed to a 0.8% decrease in net merchandise sales and a 1.1% decrease in net service sales [23] - Adjusted operating income was $5.9 million, down from $16.9 million in the prior year, with an adjusted operating margin of 2%, a decrease of 360 basis points from Q2 2021 [26] - Adjusted earnings for Q2 2022 were $3.7 million, down $8.5 million compared to Q2 2021, resulting in adjusted earnings per diluted share of $0.13 compared to $0.41 in the prior year [27] Business Line Data and Key Metrics Changes - Comparable store sales decreased by 3.1% in Q2 2022 compared to Q2 2021, but increased by 6.9% on a three-year stack basis, indicating improvement from pre-COVID levels [24] - Sales to Pro customers showed double-digit growth, highlighting a successful strategy in targeting this segment [7] Market Data and Key Metrics Changes - The company reported a 22% decrease in transaction count compared to the same period in 2021, largely reflecting decreased sales to consumers [23] - The company has reduced its imports from China to 12%, down from 22% a year ago, indicating a shift towards a more diverse global sourcing strategy [11] Company Strategy and Development Direction - The company is focused on six strategic pillars to drive long-term growth, including growing sales to Pro customers, accelerating new store openings, and improving customer experience [20] - The company plans to open between 20 to 22 new stores in 2022, having already opened 13 in the first half of the year [15] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the consumer spending outlook due to inflation and rising interest rates, indicating potential challenges in achieving positive comparable store sales for the full year [12] - Despite near-term challenges, management remains optimistic about long-term trends in home remodeling and demand for hard surface flooring [13] Other Important Information - The company has a strong balance sheet with total liquidity of $187 million and has rebuilt inventory levels to $359 million [9][29] - Adjusted gross profit for Q2 2022 was $108 million, with an adjusted gross margin of 36.1%, down from 37.4% in Q2 2021, primarily due to higher material and transportation costs [25] Q&A Session Summary Question: What caused the sales outlook to lower? - Management noted headwinds in the consumer segment, particularly DIY, due to inflation and a shift in spending towards leisure and travel [34] Question: Is the sales outlook more forward-looking? - Management confirmed that the cautious outlook reflects external macroeconomic conditions rather than immediate trends [35] Question: How is market share performing? - Management expressed satisfaction with progress in the Pro business and noted that consumer headwinds have offset some benefits [38] Question: Will the strategy change if traction with high-service customers is insufficient? - Management stated that they will continue to invest in the high-service segment while not abandoning the DIY market [42] Question: Are gross margins in line with expectations? - Management indicated that while higher costs were anticipated, they were able to offset some through pricing and sourcing strategies [46] Question: Is there resistance to raising prices? - Management affirmed confidence in their competitive pricing position and noted that customers are not trading down despite inflation [48]

PART I – FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements and Supplementary Data](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20and%20Supplementary%20Data) Presents the unaudited condensed consolidated financial statements as of June 30, 2022, including key statements and explanatory notes Condensed Consolidated Balance Sheets Total assets grew to $641.3 million, driven by a $104.4 million inventory increase funded by cash reduction and new debt Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and Cash Equivalents | $5,032 | $85,189 | | Merchandise Inventories | $358,804 | $254,385 | | Total Current Assets | $389,790 | $359,828 | | **Total Assets** | **$641,260** | **$605,892** | | **Liabilities & Equity** | | | | Accounts Payable | $88,954 | $63,464 | | Credit Agreement | $15,000 | $0 | | Total Liabilities | $367,991 | $333,771 | | Total Stockholders' Equity | $273,269 | $272,121 | | **Total Liabilities and Stockholders' Equity** | **$641,260** | **$605,892** | Condensed Consolidated Statements of Income and Comprehensive Income Q2 2022 profitability declined sharply, with net income falling 77.2% to $2.7 million on slightly lower sales Q2 2022 vs Q2 2021 Income Statement (in thousands, except per share) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | | :--- | :--- | :--- | | Total Net Sales | $298,957 | $301,384 | | Gross Profit | $106,750 | $112,730 | | Operating Income | $4,663 | $16,614 | | Net Income | $2,736 | $11,989 | | Net Income per Share—Diluted | $0.09 | $0.41 | Six Months 2022 vs 2021 Income Statement (in thousands, except per share) | Metric | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Total Net Sales | $577,989 | $584,834 | | Gross Profit | $210,829 | $228,322 | | Operating Income | $9,717 | $29,720 | | Net Income | $6,773 | $22,611 | | Net Income per Share—Diluted | $0.23 | $0.77 | Condensed Consolidated Statements of Cash Flows Net cash used in operations was $76.0 million in H1 2022, a reversal from prior year, mainly due to a large inventory build-up Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net Cash (Used in) Provided by Operating Activities | $(75,982) | $53,334 | | Net Cash Used in Investing Activities | $(11,564) | $(7,378) | | Net Cash Provided by (Used in) Financing Activities | $7,389 | $(103,502) | | **Net Decrease in Cash and Cash Equivalents** | **$(80,157)** | **$(57,546)** | - The significant use of cash in operations was mainly due to a **$106.0 million investment in merchandise inventories**, compared to a $17.6 million source of cash from inventories in the prior year[17](index=17&type=chunk) Notes to Condensed Consolidated Financial Statements Notes detail the business model, accounting policies, share repurchases, credit facility, and significant legal contingencies - The company operates as a single segment, multi-channel specialty retailer of hard-surface flooring with **437 stores** in 47 U.S. states as of June 30, 2022[20](index=20&type=chunk) Sales Mix by Product Category (Six Months Ended June 30) | Product Category | 2022 % of Sales | 2021 % of Sales | | :--- | :--- | :--- | | Manufactured Products¹ | 48% | 46% | | Solid and Engineered Hardwood | 24% | 26% | | Moldings and Accessories | 15% | 15% | | Installation and Delivery Services | 13% | 13% | ¹Includes engineered vinyl plank, laminate, vinyl and tile. - In February 2022, the board authorized a **$50.0 million share repurchase program**; during Q2 2022, the company repurchased 571,332 shares for $7.0 million, with $43.0 million remaining[40](index=40&type=chunk) - The company has a **$200 million Revolving Credit Facility** maturing in April 2026; as of June 30, 2022, $15 million was outstanding, with $181.9 million available[46](index=46&type=chunk)[49](index=49&type=chunk) - The company is subject to various legal proceedings, including antidumping and countervailing duties (AD/CVD) on wood flooring from China, which resulted in a **$1.1 million liability in Q2 2022**[56](index=56&type=chunk)[78](index=78&type=chunk)[81](index=81&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Management analyzes Q2 2022 performance, highlighting decreased sales and margins due to cost pressures and softer consumer demand Second Quarter Financial Highlights Q2 2022 saw a 0.8% net sales decrease, a 3.1% comparable store sales decline, and significantly compressed margins Q2 2022 Key Performance Indicators | Metric | Q2 2022 | Change vs. Q2 2021 | | :--- | :--- | :--- | | Net Sales | $299.0M | -0.8% | | Comparable Store Sales | -3.1% | N/A | | Gross Margin | 35.7% | -170 bps | | Adjusted Gross Margin (non-GAAP) | 36.1% | -130 bps | | Operating Margin | 1.6% | -390 bps | | Adjusted Operating Margin (non-GAAP) | 2.0% | -360 bps | | Diluted EPS | $0.09 | -$0.32 | | Adjusted EPS (non-GAAP) | $0.13 | -$0.28 | Results of Operations Weaker consumer demand drove a 0.8% sales decline, while higher costs compressed gross margin and operating income - Net sales for Q2 2022 decreased 0.8% to $299.0 million, with **comparable store sales down 3.1%**, attributed to lower consumer spending partially offset by record sales to Pro customers[106](index=106&type=chunk)[107](index=107&type=chunk) - Gross margin for Q2 2022 **decreased by 170 basis points to 35.7%**, primarily due to a collective impact of more than 1,000 basis points from higher material and transportation costs[108](index=108&type=chunk) - SG&A expenses for Q2 2022 increased by $6.0 million to $102.1 million, driven by investments for long-term growth, higher advertising, and personnel costs[111](index=111&type=chunk) Liquidity, Capital Resources and Cash Flows Total liquidity stood at $187 million, with operating cash flow used for inventory build-up and capital expenditures - **Total liquidity was $187 million** as of June 30, 2022, consisting of $5.0 million in cash and $181.9 million in availability under the Revolving Loan[130](index=130&type=chunk) - Net cash used in operating activities was **$76.0 million** for the first six months of 2022, largely due to a $106.0 million increase in inventory purchases[130](index=130&type=chunk) - The company plans for **$23 million to $25 million in capital expenditures** for 2022, which includes opening 20 to 22 new stores[131](index=131&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) The company's primary market risk exposure is interest rate fluctuations on its variable-rate credit facility - The company is exposed to interest rate risk from its variable rate borrowings; with **$15 million outstanding**, a hypothetical 1% rate increase would increase annual interest expense by $150,000[139](index=139&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management confirms the effectiveness of disclosure controls and procedures with no material changes to internal controls during the quarter - Based on an evaluation as of the end of the quarter, the Chief Executive Officer and Chief Financial Officer concluded that the **Company's disclosure controls and procedures were effective**[140](index=140&type=chunk) - **No changes in internal control over financial reporting** occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[140](index=140&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings.) Information regarding legal proceedings is incorporated by reference from Note 7 in the condensed consolidated financial statements - Details on legal proceedings are provided in **Note 7** to the condensed consolidated financial statements[141](index=141&type=chunk) [Item 1A. Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors.) There are no new risk factors presented in this report, with reference made to the 2021 Annual Report on Form 10-K - The company directs investors to review the risk factors detailed in its **Form 10-K for the year ended December 31, 2021**[142](index=142&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) The company repurchased 571,332 shares for $7.0 million in Q2 2022, with $43.0 million remaining under the buyback program Share Repurchase Activity for Q2 2022 | Period | Total Shares Purchased | Average Price Paid per Share | Total Purchased in Program | Max Value Remaining in Program | | :--- | :--- | :--- | :--- | :--- | | April 2022 | 106,000 | $14.13 | 106,000 | $48,506,000 | | May 2022 | 465,000 | $11.83 | 571,000 | $43,000,000 | | June 2022 | 0 | N/A | 571,000 | $43,000,000 | | **Total** | **571,000** | **$12.25** | **571,000** | **$43,000,000** | [Item 3. Defaults Upon Senior Securities](index=46&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities.) None reported - None[145](index=145&type=chunk) [Item 4. Mine Safety Disclosures](index=46&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) None reported - None[145](index=145&type=chunk) [Item 5. Other Information](index=46&type=section&id=Item%205.%20Other%20Information.) None reported - None[145](index=145&type=chunk) [Item 6. Exhibits](index=46&type=section&id=Item%206.%20Exhibits.) Lists exhibits filed with the Form 10-Q, including compensation agreements and required officer certifications - Exhibits filed include Restricted Stock Unit and Award Agreements for non-employee directors, and **Sarbanes-Oxley Section 302 and 906 certifications**[148](index=148&type=chunk)

LL Flooring Holdings, Inc. (NYSE:LL) Q1 2022 Earnings Conference Call May 4, 2022 8:00 AM ET Company Participants Julie MacMedan - VP of IR Charles Tyson - CEO Nancy Walsh - CFO Conference Call Participants Laura Champine - Loop Capital Seth Basham - Wedbush Securities Operator Hello everyone. Welcome to the LL Flooring First Quarter 2022 Results Call. My name is Charlie and I'll be coordination the call today. [Operator Instructions]. I will now hand over to your host, Julie MacMedan, Vice President of Inv ...

LL Flooring Holdings, Inc. (NYSE:LL) Q4 2021 Results Earnings Conference Call February 23, 2022 8:00 AM ET Company Participants Julie MacMedan - Head of Investor Relations Charles Tyson - President and Chief Executive Officer Nancy Walsh - Chief Financial Officer Conference Call Participants Laura Champine - Loop Capital Seth Basham - Wedbush Securities Operator Good morning or good afternoon and welcome to the LL Flooring Fourth Quarter 2021 Results Conference Call. My name is Adam and I'll be your operato ...

Financial Data and Key Metrics Changes - In Q3 2021, net sales were $282.2 million, a decrease of $13.6 million or 4.6% compared to Q3 2020, primarily due to a 7.7% decrease in net merchandise sales, partially offset by a 19% increase in net service sales [30] - Adjusted gross profit was $105.2 million, with an adjusted gross margin of 37.3%, down from 39.7% in Q3 2020, reflecting higher transportation and material costs [31][32] - Adjusted earnings for Q3 2021 were $8.5 million, down $11.1 million from $19.6 million in Q3 2020, with adjusted earnings per diluted share of $0.29 compared to $0.67 in the prior year [35] Business Line Data and Key Metrics Changes - Sales to Pro customers saw double-digit growth, marking a record quarter for Pro sales, while installation service sales also increased significantly [10][29] - DIY sales faced challenges, leading to a decrease in total net sales and comparable sales for the quarter [29][14] - Net services sales, primarily from installation, were up double digits compared to the previous year, driven by increased consumer comfort with professional services [13] Market Data and Key Metrics Changes - Comparable store sales decreased by 4.5% year-over-year but increased by 6.4% on a two-year stack basis [31] - Digital sales through llflooring.com increased more than 100% on a two-year stack basis, indicating strong growth in online channels [16] Company Strategy and Development Direction - The company plans to accelerate growth by increasing the number of new store openings to 20-25 per year starting in 2022, enhancing omnichannel convenience [20][18] - Investments will focus on expanding Pro customer sales initiatives and improving the customer experience through digital enhancements and new product launches [9][10] - The company is diversifying its sourcing strategy to mitigate supply chain challenges and enhance product offerings [24][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in long-term demand for home improvement spending despite short-term challenges in the DIY segment [22] - The company anticipates continued supply chain constraints and elevated material costs into 2022, impacting inventory availability [23][38] - Management remains optimistic about the growth potential from Pro customer initiatives and the overall market positioning of LL Flooring [28] Other Important Information - The company repaid $101 million of outstanding debt in Q2 2021, maintaining a strong balance sheet with $232 million in liquidity as of September 30, 2021 [36] - The company is committed to enhancing its workforce through increased investments in training and career development to attract and retain talent [21] Q&A Session Summary Question: Regarding increased investment in SG&A expense, how much is for Pro sales staff versus general wage inflation? - Management indicated that significant investments are being made in Pro sales initiatives and expanding store acceleration, with a focus on hiring and retaining talent [42][44] Question: How do the company's sales compare to the overall market growth in floor coverings? - Management acknowledged challenges in estimating market growth but believes they are gaining market share in both Pro and installation segments [47][48] Question: Are Pro customers offered differentiated pricing that they can extend to their customers? - Management confirmed that Pro customers receive a differentiated pricing structure, allowing them to enhance profitability or offer referral pricing to their customers [51][52]

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements.](index=4&type=section&id=Item%201.%20Financial%20Statements.) This section presents LL Flooring's unaudited condensed consolidated financial statements for Q3 and nine months ended September 30, 2021, and related accounting notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of LL Flooring's financial position as of September 30, 2021, and December 31, 2020 | Metric | September 30, 2021 (in thousands) | December 31, 2020 (in thousands) | | :-------------------------------- | :-------------------------------- | :------------------------------- | | Cash and Cash Equivalents | $104,211 | $169,941 | | Merchandise Inventories | $224,998 | $244,409 | | Total Current Assets | $350,778 | $438,152 | | Total Assets | $599,835 | $674,348 | | Total Current Liabilities | $230,254 | $242,255 | | Credit Agreement | $0 | $101,000 | | Total Liabilities | $338,932 | $446,742 | | Total Stockholders' Equity | $260,903 | $227,606 | - Cash and cash equivalents decreased by **$65.73 million** from December 31, 2020, to September 30, 2021[8](index=8&type=chunk) - The company fully repaid its Credit Agreement balance of **$101 million** by September 30, 2021[9](index=9&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section details LL Flooring's financial performance for the three and nine months ended September 30, 2021 and 2020 | Metric (in thousands, except per share) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total Net Sales | $282,229 | $295,833 | $867,063 | $793,491 | | Gross Profit | $105,201 | $116,526 | $333,523 | $309,789 | | Operating Income | $12,036 | $23,152 | $41,756 | $37,920 | | Net Income | $8,779 | $15,503 | $31,390 | $30,377 | | Net Income per Common Share—Diluted | $0.30 | $0.53 | $1.06 | $1.04 | - Total Net Sales decreased by **4.6%** for the three months ended September 30, 2021, but increased by **9.3%** for the nine months ended September 30, 2021[11](index=11&type=chunk) - Net Income decreased by **43.4%** for the three months ended September 30, 2021, but increased by **3.3%** for the nine months ended September 30, 2021[11](index=11&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section outlines LL Flooring's comprehensive income for the three and nine months ended September 30, 2021 and 2020 | Metric (in thousands) | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net Income | $8,779 | $15,503 | $31,390 | $30,377 | | Foreign Currency Translation Adjustments | — | $247 | — | $519 | | Total Other Comprehensive Income | — | $247 | — | $519 | | Comprehensive Income | $8,779 | $15,750 | $31,390 | $30,896 | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section presents changes in LL Flooring's stockholders' equity for the nine months ended September 30, 2021 | Metric (in thousands) | September 30, 2021 | December 31, 2020 | | :-------------------- | :----------------- | :---------------- | | Total Stockholders' Equity | $260,903 | $227,606 | | Retained Earnings | $179,315 | $147,925 | | Treasury Stock, at cost | $(145,078) | $(142,977) | - Total Stockholders' Equity increased by **$33.297 million** from December 31, 2020, to September 30, 2021[10](index=10&type=chunk) - The company repurchased **89 shares** of common stock for **$2.101 million** during the nine months ended September 30, 2021[21](index=21&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes LL Flooring's cash inflows and outflows from operating, investing, and financing activities for the nine months ended September 30, 2021 and 2020 | Metric (in thousands) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :-------------------- | :----------------------------- | :----------------------------- | | Net Cash Provided by Operating Activities | $50,280 | $180,762 | | Net Cash Used in Investing Activities | $(12,218) | $(8,873) | | Net Cash (Used in) Provided by Financing Activities | $(103,792) | $18,494 | | Net (Decrease) Increase in Cash and Cash Equivalents | $(65,730) | $190,354 | | Cash and Cash Equivalents, End of Period | $104,211 | $199,347 | - Net cash provided by operating activities significantly decreased from **$180.762 million** in 2020 to **$50.280 million** in 2021[23](index=23&type=chunk) - Net cash used in financing activities was **$103.792 million** in 2021, primarily due to the repayment of **$101 million** on the Credit Agreement[23](index=23&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [Note 1. Basis of Presentation](index=11&type=section&id=Note%201.%20Basis%20of%20Presentation) This note describes the foundational principles and scope used in preparing the interim financial statements - LL Flooring operates as a multi-channel specialty retailer of hard-surface flooring and accessories, with **422 stores** across **47 U.S. states** as of September 30, 2021[26](index=26&type=chunk) - The company's products are available through stores, a customer relationship center, and its digital platform, LLFlooring.com[26](index=26&type=chunk) - Interim financial statements are prepared in accordance with Form 10-Q and U.S. GAAP, but do not include all information required for complete annual financial statements[27](index=27&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=11&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting principles and methods applied in the preparation of the financial statements [Fair Value of Financial Instruments](index=11&type=section&id=Fair%20Value%20of%20Financial%20Instruments) This sub-section explains the valuation methods for financial instruments - The carrying amounts of financial instruments like cash, accounts payable, and other liabilities approximate fair value due to their short-term nature[29](index=29&type=chunk) [Merchandise Inventories](index=11&type=section&id=Merchandise%20Inventories) This sub-section details the accounting policies for merchandise inventories, including valuation and tariff impacts - Merchandise inventories are valued at the lower of cost or net realizable value, using the weighted average cost method[30](index=30&type=chunk) - The company faces risks from international sourcing, including supply chain disruptions and COVID-19 impacts[30](index=30&type=chunk) - Tariff-related costs, including Section 301 tariffs on Chinese imports, are included in merchandise inventories, with strategies to mitigate tariffs including pricing adjustments and alternative sourcing[32](index=32&type=chunk) Section 301 Tariff Levels on Chinese Imports | Event | Timing | Section