Tile Shop(TTSH)

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Tile Shop(TTSH) - 2023 Q2 - Quarterly Report
2023-08-03 20:42
PART I. FINANCIAL INFORMATION This part presents the company's financial statements, management's discussion, market risk disclosures, and internal controls [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company's unaudited consolidated financial statements for H1 2023 show decreased assets and net income, but significantly improved operating cash flow [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased to **$325.4 million** by June 30, 2023, driven by reduced inventories and debt, while equity increased to **$116.6 million** Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 (unaudited) | December 31, 2022 (audited) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $14,592 | $5,948 | | Inventories | $106,862 | $120,952 | | Total Current Assets | $135,862 | $146,403 | | Total Assets | $325,439 | $345,822 | | **Liabilities & Equity** | | | | Total Current Liabilities | $85,526 | $83,291 | | Long-term debt | $20,000 | $45,400 | | Total Liabilities | $208,850 | $237,053 | | Total Stockholders' Equity | $116,589 | $108,769 | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) Net sales and net income declined in Q2 and H1 2023 compared to the prior year, with Q2 net income at **$5.1 million** Income Statement Summary (in thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | Six Months 2023 | Six Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $98,557 | $107,604 | $200,576 | $210,075 | | Gross profit | $63,302 | $71,018 | $128,840 | $137,863 | | Income from operations | $7,734 | $9,778 | $11,859 | $14,514 | | Net income | $5,079 | $6,914 | $7,591 | $10,427 | | Diluted EPS | $0.12 | $0.13 | $0.17 | $0.20 | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income for Q2 and H1 2023 decreased to **$5.0 million** and **$7.6 million** respectively, mirroring net income trends Comprehensive Income (in thousands) | Period | 2023 | 2022 | | :--- | :--- | :--- | | **Three Months Ended June 30** | | | | Net income | $5,079 | $6,914 | | Comprehensive income | $5,043 | $6,871 | | **Six Months Ended June 30** | | | | Net income | $7,591 | $10,427 | | Comprehensive income | $7,560 | $10,386 | [Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) Total stockholders' equity increased to **$116.6 million** by June 30, 2023, primarily due to net income and stock-based compensation - Total stockholders' equity rose to **$116,589 thousand** at June 30, 2023, up from **$108,769 thousand** at December 31, 2022[21](index=21&type=chunk) - The increase in equity during the first six months of 2023 was mainly due to **$7,591 thousand** in net income and **$706 thousand** in stock-based compensation[21](index=21&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow significantly increased to **$41.4 million** in H1 2023, primarily due to improved inventory management, supporting debt repayment Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $41,438 | $9,223 | | Net cash used in investing activities | ($8,076) | ($7,361) | | Net cash used in financing activities | ($25,846) | ($676) | | **Net change in cash** | **$7,488** | **$1,148** | - The significant increase in operating cash flow was largely driven by a **$14.1 million** decrease in inventory, compared to a **$12.9 million** increase in the prior year period[24](index=24&type=chunk) [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes detail accounting policies, revenue by product (man-made tiles **52%**), inventory levels, and the **$75.0 million** revolving credit facility - The company is a specialty retailer with **143 stores** in **31 states** and D.C. as of June 30, 2023, primarily serving consumers, contractors, designers, and home builders[28](index=28&type=chunk) Revenue by Product Category (Six Months Ended June 30) | Product Category | 2023 | 2022 | | :--- | :--- | :--- | | Man-made tiles | 52% | 50% | | Natural stone tiles | 23% | 25% | | Setting and maintenance materials | 15% | 16% | | Accessories | 8% | 7% | | Delivery service | 2% | 2% | - The company has a **$75.0 million** revolving line of credit, with **$20.0 million** outstanding and **$53.3 million** available for borrowing as of June 30, 2023[44](index=44&type=chunk)[48](index=48&type=chunk) The SOFR-based interest rate was **6.67%**[48](index=48&type=chunk) - During Q2 2023, the company recorded **$0.5 million** of impairment charges related to property, plant and equipment and right of use assets[59](index=59&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=15&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 2023 sales decline due to macroeconomic factors, reduced gross margin, lower SG&A, and strong operating cash flow [Results of Operations](index=17&type=section&id=Results%20of%20Operations) Q2 2023 net sales fell **8.4%** with comparable store sales down **8.0%**, while gross margin contracted to **64.2%** and SG&A decreased **9.3%** - Comparable store sales decreased by **8.0%** in Q2 2023 and **4.0%** in the first six months of 2023, primarily due to lower store traffic, partially offset by higher average ticket value[82](index=82&type=chunk)[93](index=93&type=chunk)[98](index=98&type=chunk) - The gross margin rate decreased to **64.2%** in Q2 2023 from **66.0%** in Q2 2022, mainly due to inflationary cost pressures on products, which were partially offset by increased selling prices[94](index=94&type=chunk)[99](index=99&type=chunk) - Q2 2023 SG&A expenses decreased by **$5.7 million (9.3%)** due to a **$3.0 million** drop in variable selling expenses, a **$1.1 million** decrease in transportation costs, and a **$0.9 million** reduction in depreciation[95](index=95&type=chunk) - Interest expense increased to **$0.7 million** in Q2 2023 from **$0.2 million** in Q2 2022, due to higher average borrowings and rising interest rates[96](index=96&type=chunk) [Non-GAAP Measures](index=19&type=section&id=Non-GAAP%20Measures) Adjusted EBITDA for Q2 2023 was **$13.6 million**, and the trailing twelve-month pretax return on capital employed was **13.8%** Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Metric | Q2 2023 | Q2 2022 | Six Months 2023 | Six Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Net income | $5,079 | $6,914 | $7,591 | $10,427 | | Interest expense | 668 | 201 | 1,466 | 467 | | Provision for income taxes | 1,987 | 2,663 | 2,802 | 3,620 | | Depreciation and amortization | 5,549 | 6,415 | 11,332 | 12,854 | | Stock based compensation | 301 | 562 | 706 | 1,054 | | **Adjusted EBITDA** | **$13,584** | **$16,755** | **$23,897** | **$28,422** | - Pretax return on capital employed for the trailing twelve months ended June 30, 2023 was **13.8%**, down from **15.0%** for the period ended June 30, 2022[107](index=107&type=chunk) [Liquidity and Capital Resources](index=20&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$14.6 million** cash and **$53.3 million** available credit, sufficient for future operations - As of June 30, 2023, the company had **$14.6 million** in cash and cash equivalents and **$53.3 million** available for borrowing under its credit facility[108](index=108&type=chunk)[111](index=111&type=chunk) - Capital expenditures totaled **$8.1 million** for the first six months of 2023, primarily for investments in a new store in Colorado, store remodels, and technology assets[113](index=113&type=chunk) - Net cash from operating activities increased to **$41.4 million** in H1 2023 from **$9.2 million** in H1 2022, mainly due to better inventory management[116](index=116&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=21&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes have occurred in the company's market risk exposures or management since the 2022 Annual Report on Form 10-K - There have been no material changes in primary risk exposures or management of market risks from those disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022[120](index=120&type=chunk) [Controls and Procedures](index=21&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2023[121](index=121&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2023, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[122](index=122&type=chunk) PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity transactions, and other disclosures, including beneficial ownership [Legal Proceedings](index=21&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine lawsuits, but management anticipates no material adverse effect on its financial condition - The company is party to routine lawsuits and claims, but management believes the outcomes will not have a material adverse effect on its financial condition[123](index=123&type=chunk)[124](index=124&type=chunk) [Risk Factors](index=22&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the company's 2022 Annual Report on Form 10-K - No material changes have occurred from the risk factors disclosed in the 2022 Form 10-K[125](index=125&type=chunk) [Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=22&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company withheld shares for tax obligations on vested restricted stock and did not conduct public share repurchases - The company withheld shares to satisfy tax withholding obligations on vested restricted stock grants and did not repurchase shares as part of a publicly announced plan or program[129](index=129&type=chunk) [Defaults Upon Senior Securities](index=22&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Not Applicable - Not Applicable[127](index=127&type=chunk) [Mine Safety Disclosures](index=22&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not Applicable - Not Applicable[128](index=128&type=chunk) [Other Information](index=23&type=section&id=Item%205.%20Other%20Information) No Rule 10b5-1 trading plan changes occurred, and the report lists beneficial ownership for major stockholders - No directors or executive officers adopted, modified, or terminated a Rule 10b5-1 trading plan during the quarter ended June 30, 2023[130](index=130&type=chunk) 5% Stockholders as of August 1, 2023 | Name of Beneficial Owner | Percent | | :--- | :--- | | Peter J. Jacullo III, Director | 18.9% | | Peter H. Kamin, Chairman of the Board | 15.6% | | Fund 1 Investments, LLC | 7.6% | | Savitr Capital LLC | 6.2% | | Monomoy | 5.7% | | Cannell Capital LLC | 5.5% | [Exhibits](index=25&type=section&id=Item%206.%20Exhibits) This section lists required exhibits, including CEO/CFO certifications and iXBRL financial statements - Key exhibits filed include CEO/CFO certifications under Sarbanes-Oxley Sections 302 and 906, and financial statements formatted in iXBRL[138](index=138&type=chunk)
Tile Shop(TTSH) - 2023 Q1 - Earnings Call Transcript
2023-05-06 21:08
Financial Data and Key Metrics Changes - Comparable store sales during Q1 2023 were flat compared to 2022 [4] - Gross margin rate for Q1 2023 was 64.2%, a decrease of 30 basis points from the previous quarter [8] - Net income for Q1 2023 was $2.5 million, with adjusted EBITDA at $10.3 million and an adjusted EBITDA margin rate of 10.1% [10] - Earnings per share decreased by $0.01 from $0.07 in Q1 2022 to $0.06 in Q1 2023 [10] - Inventory decreased by $5.5 million from the previous quarter, totaling $115.5 million at the end of Q1 [11] Business Line Data and Key Metrics Changes - Pro sales mix, which includes sales to professionals and referrals, accounted for over 70% of total sales in Q1 [5] - Sales of LVT (Luxury Vinyl Tile) products are gaining momentum, with an expanded line launched in Q4 2022 [6][7] - Clearance item sales increased due to improved visibility on the website [6] Market Data and Key Metrics Changes - The company faced macro headwinds such as rising interest rates and slowing housing turnover, impacting the overall industry [4][5] - Despite challenges, there is steady demand for remodeling projects as homeowners opt to remodel rather than move [4] Company Strategy and Development Direction - The company has decided to delay the opening of a second new store in 2023 due to the challenging macro environment [5] - Focus on improving retail excellence and adopting best practices in underperforming stores [5] - The company is sourcing high-quality products at lower price points to offset inflationary pressures [6] Management's Comments on Operating Environment and Future Outlook - Management anticipates that macro conditions will remain challenging over the next several quarters [5] - There is optimism regarding the reduction in freight costs and the potential for improved margins as lower-cost products are introduced [15][16] - The company aims to reduce debt and generate cash before considering returning capital to shareholders [13][14] Other Important Information - Selling, general, and administrative expenses decreased by $700,000 compared to Q1 2022, attributed to various cost reductions [9] - The company generated $25.8 million in operating cash flow during the quarter, primarily used to reduce debt [11] Q&A Session Summary Question: Update on new store openings this year - The company is on track to open a new store in June or July but has delayed the second new store due to macro headwinds [12] Question: Thoughts on returning capital to shareholders - Currently, there are no plans for share buybacks or dividends, with a focus on controlling SG&A and improving results [13] Question: Discussion on inflationary pressures and product costs - Management noted a reduction in freight costs and is optimistic about rebounding margins as lower-cost products are introduced [15][16]
Tile Shop(TTSH) - 2023 Q1 - Quarterly Report
2023-05-04 20:49
PART I. FINANCIAL INFORMATION This section presents the unaudited consolidated financial statements and management's analysis for Q1 2023 [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements and detailed notes for the period ended March 31, 2023 [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's assets, liabilities, and equity at specific points in time Key Balance Sheet Metrics | Metric | March 31, 2023 (unaudited) | December 31, 2022 (audited) | Change | | :-------------------------- | :-------------------------- | :-------------------------- | :----- | | Total Assets | $334,703 | $345,822 | (3.2%) | | Total Liabilities | $223,439 | $237,053 | (5.7%) | | Total Stockholders' Equity | $111,264 | $108,769 | 2.3% | | Cash and cash equivalents | $8,624 | $5,948 | 45.0% | | Inventories | $115,480 | $120,952 | (4.5%) | | Long-term debt | $25,000 | $45,400 | (44.9%)| [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) This section details the company's revenues, expenses, and net income over a specific period Key Operations Metrics | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :-------------------------- | :-------------------------------- | :-------------------------------- | :----- | | Net sales | $102,019 | $102,471 | (0.4%) | | Gross profit | $65,538 | $66,845 | (2.0%) | | Income from operations | $4,125 | $4,736 | (13.0%)| | Interest expense | $(798) | $(266) | 200.0% | | Net income | $2,512 | $3,513 | (28.5%)| | Basic EPS | $0.06 | $0.07 | (14.3%)| | Diluted EPS | $0.06 | $0.07 | (14.3%)| [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) This section presents net income and other comprehensive income items, reflecting total non-owner changes in equity Key Comprehensive Income Metrics | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :-------------------------- | :-------------------------------- | :-------------------------------- | :----- | | Net income | $2,512 | $3,513 | (28.5%)| | Currency translation adjustment | $5 | $3 | 66.7% | | Comprehensive income | $2,517 | $3,516 | (28.4%)| [Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) This section outlines changes in the company's equity accounts, including net income and stock-based compensation impacts Key Stockholders' Equity Changes | Metric | Balance at March 31, 2023 | Balance at December 31, 2022 | Change | | :-------------------------- | :------------------------ | :------------------------ | :----- | | Total Stockholders' Equity | $111,264 | $108,769 | 2.3% | | Accumulated deficit | $(16,668) | $(19,180) | (13.0%)| | Net income (Q1 2023) | $2,512 | N/A | N/A | - Stockholders' equity increased by **$2.5 million**, driven by net income and foreign currency translation adjustments, partially offset by tax withholdings related to stock-based compensation[18](index=18&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section reports the cash generated and used by operating, investing, and financing activities Key Cash Flow Activities | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :----- | | Net cash provided by operating activities | $25,822 | $7,634 | 238.2% | | Net cash used in investing activities | $(3,367) | $(2,933) | 14.8% | | Net cash used in financing activities | $(20,827) | $(607) | 3330.0%| | Net change in cash, cash equivalents and restricted cash | $1,631 | $4,097 | (60.2%)| - The significant increase in operating cash flow was primarily due to decreased inventory purchases and an income tax refund[105](index=105&type=chunk) [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section details accounting policies and significant financial disclosures supporting the consolidated financial statements - The notes clarify accounting policies and provide disaggregated financial data, including revenue by product category, inventory composition, and details on debt and lease obligations[23](index=23&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk) [Note 1: Background](index=8&type=section&id=Note%201%3A%20Background) This note provides background information on the company's business and the basis of financial statement preparation - Tile Shop Holdings, Inc. is a specialty retailer of natural stone and man-made tiles and related materials in the U.S., operating **142 stores** across **31 states** and the District of Columbia as of March 31, 2023[25](index=25&type=chunk) - The accompanying Consolidated Financial Statements are prepared in accordance with GAAP for interim financial information and Form 10-Q rules[26](index=26&type=chunk) [Note 2: Revenues](index=8&type=section&id=Note%202%3A%20Revenues) This note details the company's revenue recognition policies and disaggregated revenue by product category Revenue Share by Product Category | Product Category | Q1 2023 Revenue Share | Q1 2022 Revenue Share | | :------------------------ | :-------------------- | :-------------------- | | Man-made tiles | 52 % | 49 % | | Natural stone tiles | 23 % | 25 % | | Setting and maintenance materials | 15 % | 16 % | | Accessories | 8 % | 8 % | | Delivery service | 2 % | 2 % | - Revenue is recognized when control of goods or services is transferred to customers, which can be at order placement, pickup, or delivery[28](index=28&type=chunk)[29](index=29&type=chunk) - Customer deposits increased to **$14.1 million** as of March 31, 2023, from **$11.3 million** at December 31, 2022, with **$8.6 million** recognized as revenue during Q1 2023[31](index=31&type=chunk) [Note 3: Inventories](index=9&type=section&id=Note%203%3A%20Inventories) This note describes the company's inventory valuation methods and composition Inventory Composition | Inventory Type | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change | | :------------- | :---------------------------- | :------------------------------- | :----- | | Finished goods | $114,002 | $119,517 | (4.6%) | | Raw materials | $1,478 | $1,435 | 3.0% | | Total | $115,480 | $120,952 | (4.5%) | - Inventories are stated at the lower of cost (moving average) or net realizable value, primarily consisting of merchandise held for sale[34](index=34&type=chunk) - The provision for losses related to shrinkage and other amounts increased from **$0.7 million** at December 31, 2022, to **$0.8 million** at March 31, 2023[34](index=34&type=chunk) [Note 4: Income Taxes](index=9&type=section&id=Note%204%3A%20Income%20Taxes) This note explains the provision for income taxes and the effective tax rate for the reporting period Income Tax Provision and Rate | Metric | Q1 2023 (in thousands) | Q1 2022 (in thousands) | Change | | :---------------------- | :--------------------- | :--------------------- | :----- | | Provision for income taxes | $815 | $957 | (14.8%)| | Effective tax rate | 24.5% | 21.4% | 3.1 pp | - The decrease in the provision for income taxes was due to a decrease in pretax income, while the increase in the effective tax rate was largely due to a decrease in the tax benefit associated with employee equity award vestings[35](index=35&type=chunk) [Note 5: Earnings Per Share](index=10&type=section&id=Note%205%3A%20Earnings%20Per%20Share) This note outlines the calculation of basic and diluted earnings per share Earnings Per Share Details | Metric | Q1 2023 | Q1 2022 | Change | | :-------------------------------- | :------ | :------ | :----- | | Basic EPS | $0.06 | $0.07 | (14.3%)| | Diluted EPS | $0.06 | $0.07 | (14.3%)| | Weighted average shares outstanding - basic | 43,237,856 | 50,713,809 | (14.7%)| - Basic and diluted EPS are calculated by dividing net income by the weighted-average number of common shares outstanding, with diluted EPS considering dilutive potential shares[38](index=38&type=chunk) [Note 6: Other Accrued Liabilities](index=10&type=section&id=Note%206%3A%20Other%20Accrued%20Liabilities) This note details the composition and changes in other accrued liabilities Other Accrued Liabilities Breakdown | Liability Category | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change | | :------------------------ | :---------------------------- | :------------------------------- | :----- | | Customer deposits | $14,078 | $11,315 | 24.4% | | Sales returns reserve | $5,418 | $4,993 | 8.5% | | Accrued wages and salaries | $7,145 | $6,040 | 18.3% | | Payroll and sales taxes | $3,154 | $2,286 | 37.9% | | Total other accrued liabilities | $37,511 | $31,916 | 17.5% | - The increase in total other accrued liabilities was primarily driven by increases in customer deposits, sales returns reserve, accrued wages and salaries, and payroll and sales taxes[39](index=39&type=chunk) [Note 7: Long-term Debt](index=10&type=section&id=Note%207%3A%20Long-term%20Debt) This note provides information on the company's revolving line of credit and compliance with debt covenants - The company has a **$75.0 million** revolving line of credit through September 30, 2027, with **$25.0 million** outstanding and **$48.2 million** available for borrowing as of March 31, 2023[40](index=40&type=chunk)[42](index=42&type=chunk) - The SOFR-based interest rate on outstanding borrowings was **6.37%** on March 31, 2023[40](index=40&type=chunk) - The company was in compliance with all financial and other covenants of the Credit Agreement as of March 31, 2023[41](index=41&type=chunk) [Note 8: Leases](index=11&type=section&id=Note%208%3A%20Leases) This note details the company's lease arrangements, including right-of-use assets and lease liabilities Lease Metrics | Metric (in thousands) | March 31, 2023 | December 31, 2022 | Change | | :-------------------- | :------------- | :---------------- | :----- | | Right of use asset | $118,038 | $118,501 | (0.4%) | | Total lease liabilities | $130,142 | $131,219 | (0.8%) | Lease Metrics | Metric (in thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :----- | | Net lease cost | $12,528 | $12,206 | 2.6% | | Operating cash flows from operating leases | $9,472 | $9,350 | 1.3% | - The company leases retail stores, distribution space, and office space, with leases generally having initial terms of ten to fifteen years[45](index=45&type=chunk) [Note 9: Fair Value of Financial Instruments](index=11&type=section&id=Note%209%3A%20Fair%20Value%20of%20Financial%20Instruments) This note describes the fair value measurement of financial instruments and related impairment charges - Cash, cash equivalents, and restricted cash are measured at fair value using Level 1 inputs (unadjusted quoted prices in active markets)[53](index=53&type=chunk)[57](index=57&type=chunk) - A **$0.1 million** impairment charge was recorded in Q1 2023 for property, plant, and equipment, with fair value measured using Level 3 inputs (projected cash flows)[54](index=54&type=chunk) [Note 10: Equity Incentive Plans](index=12&type=section&id=Note%2010%3A%20Equity%20Incentive%20Plans) This note outlines the company's equity incentive plans and stock-based compensation expenses - The 2021 Omnibus Equity Compensation Plan has a maximum of **3,500,000 shares** available for awards[55](index=55&type=chunk) Stock-Based Compensation | Metric | Q1 2023 (in thousands) | Q1 2022 (in thousands) | | :-------------------------- | :--------------------- | :--------------------- | | Stock based compensation (restricted stock) | $405 | $492 | | Stock based compensation (stock options) | < $100 | < $100 | - As of March 31, 2023, there were **471,067 outstanding stock options** and **1,245,607 outstanding restricted common shares**[59](index=59&type=chunk)[61](index=61&type=chunk) [Note 11: New Markets Tax Credit](index=13&type=section&id=Note%2011%3A%20New%20Markets%20Tax%20Credit) This note explains the company's involvement in a New Markets Tax Credit financing transaction - The company is involved in a 2016 New Markets Tax Credit (NMTC) financing transaction related to a **$9.2 million** expansion of its facility in Durant, Oklahoma[62](index=62&type=chunk) - The company expects U.S. Bank to exercise a put option in December 2023, at the end of the seven-year recapture period[64](index=64&type=chunk) - The balance of the contribution liability for this arrangement was **$0.3 million** as of March 31, 2023[67](index=67&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=14&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes the company's financial condition and results of operations for Q1 2023, focusing on macro impacts, sales, and liquidity - The company's business is impacted by macro-economic factors including rising interest rates and slowing existing home turnover, contributing to a slowdown in demand for home improvement products[76](index=76&type=chunk) - Despite macro challenges, Q1 2023 revenues were in line with Q1 2022, with comparable store sales increasing by **0.1%** due to higher average ticket, partially offset by decreased traffic[76](index=76&type=chunk)[86](index=86&type=chunk) - The company generated **$25.8 million** of operating cash flow in Q1 2023, which was used to fund capital expenditures and reduce debt by **$20.4 million**[79](index=79&type=chunk) [Overview and Recent Trends](index=15&type=section&id=Overview%20and%20Recent%20Trends) This section provides an overview of the company's business and recent operational and financial trends - Tile Shop Holdings is a specialty retailer of natural stone and man-made tiles, setting and maintenance materials, and related accessories, operating **142 stores** in **31 states** and D.C[74](index=74&type=chunk) - Comparable store sales increased by **0.1%** in Q1 2023, driven by an increase in average ticket that was partially offset by a decrease in traffic[76](index=76&type=chunk) - The rate of gross margin decline tapered from a **200 basis point** decrease between Q3 and Q4 2022 to a **30 basis point** decline between Q4 2022 and Q1 2023[77](index=77&type=chunk) - Selling, general and administrative expenses decreased by **$0.7 million** in Q1 2023, primarily due to lower variable selling and transportation expenses[78](index=78&type=chunk) [Key Components of our Consolidated Statements of Operations](index=15&type=section&id=Key%20Components%20of%20our%20Consolidated%20Statements%20of%20Operations) This section defines key components of the consolidated statements of operations, including net sales and cost of sales - Net sales represent total charges to customers, net of returns, recognized when the customer takes control of merchandise or final delivery occurs, excluding sales taxes[80](index=80&type=chunk) - Comparable store sales growth is the percentage change in sales for stores operating for at least **13 full months**, excluding relocated stores[82](index=82&type=chunk) - Cost of sales primarily includes material costs, freight, customs and duties fees, storage and delivery of product, and costs associated with manufacturing setting and maintenance materials[83](index=83&type=chunk) [Results of Operations](index=16&type=section&id=Results%20of%20Operations) This section presents a detailed comparison of the company's operational results for Q1 2023 versus Q1 2022 Operations Results Summary | Metric | Q1 2023 ($ in thousands) | Q1 2022 ($ in thousands) | Change | | :-------------------------- | :----------------------- | :----------------------- | :----- | | Net sales | $102,019 | $102,471 | (0.4%) | | Gross profit | $65,538 | $66,845 | (2.0%) | | Gross margin rate | 64.2% | 65.2% | (1.0 pp)| | Selling, general and administrative expenses | $61,413 | $62,109 | (1.1%) | | Interest expense | $798 | $266 | 200.0% | | Net income | $2,512 | $3,513 | (28.5%)| - The decrease in gross margin rate was primarily due to inflationary cost pressure, partially offset by an increase in selling prices[87](index=87&type=chunk) - Interest expense increased significantly due to higher average borrowings outstanding on the line of credit and an increase in interest rates[89](index=89&type=chunk) [Non-GAAP Measures](index=17&type=section&id=Non-GAAP%20Measures) This section defines and presents the company's non-GAAP financial measures, including Adjusted EBITDA and Pretax Return on Capital Employed - Adjusted EBITDA is calculated by adjusting net income for interest expense, income taxes, depreciation and amortization, and stock-based compensation expense[91](index=91&type=chunk) Adjusted Non-GAAP Metrics | Metric | Q1 2023 ($ in thousands) | Q1 2022 ($ in thousands) | Change | | :-------------------------- | :----------------------- | :----------------------- | :----- | | Adjusted EBITDA | $10,313 | $11,667 | (11.6%)| | Adjusted EBITDA margin | 10.1% | 11.4% | (1.3 pp)| | Pretax Return on Capital Employed (trailing twelve months) | 15.2% | 13.1% | 2.1 pp | - Management uses these non-GAAP measures for trend analyses, incentive compensation, budgeting, planning, and assessing capital allocation effectiveness[92](index=92&type=chunk) [Liquidity and Capital Resources](index=18&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's sources of liquidity and its ability to fund operations and capital expenditures - Principal liquidity sources include **$8.6 million** of cash and cash equivalents at March 31, 2023, cash flow from operations, and a **$75.0 million** revolving line of credit[97](index=97&type=chunk)[98](index=98&type=chunk) - As of March 31, 2023, **$48.2 million** was available for borrowing on the revolving line of credit[100](index=100&type=chunk) - The company believes its cash flow from operations, existing cash, and available borrowings will be sufficient to fund operations and anticipated capital expenditures for at least the next twelve months[101](index=101&type=chunk) [Capital Expenditures](index=18&type=section&id=Capital%20Expenditures) This section details the company's capital expenditures and their primary uses during the reporting period Capital Expenditures Summary | Metric | Q1 2023 ($ in thousands) | Q1 2022 ($ in thousands) | Change | | :-------------------------- | :----------------------- | :----------------------- | :----- | | Capital expenditures | $3,367 | $2,933 | 14.8% | - Capital expenditures in Q1 2023 were primarily due to investments in store remodels, merchandising, distribution, and information technology assets[102](index=102&type=chunk) [Cash flows](index=19&type=section&id=Cash%20flows) This section analyzes the company's cash flows from operating, investing, and financing activities Cash Flow Summary | Metric | Q1 2023 ($ in thousands) | Q1 2022 ($ in thousands) | Change | | :-------------------------------- | :----------------------- | :----------------------- | :----- | | Net cash provided by operating activities | $25,822 | $7,634 | 238.2% | | Net cash used in investing activities | $(3,367) | $(2,933) | 14.8% | | Net cash used in financing activities | $(20,827) | $(607) | 3330.0%| - The increase in net cash provided by operating activities was primarily attributable to a decrease in inventory purchases and the collection of an income tax refund in 2023[105](index=105&type=chunk) - The significant increase in cash outflows from financing activities was primarily due to payments made to reduce the outstanding balance on the line of credit[107](index=107&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=19&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states no material changes in market risk exposures from the prior Annual Report on Form 10-K - No material changes in primary market risk exposures or management of market risks from the Annual Report on Form 10-K for the fiscal year ended December 31, 2022[109](index=109&type=chunk) [Item 4. Controls and Procedures](index=19&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms effective disclosure controls and reports no material changes in internal control over financial reporting [Disclosure Controls and Procedures](index=19&type=section&id=Disclosure%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures - The Chief Executive Officer and Chief Financial Officer evaluated and concluded that the company's disclosure controls and procedures were effective as of March 31, 2023[110](index=110&type=chunk) [Changes in Internal Control Over Financial Reporting](index=19&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section reports on any material changes in internal control over financial reporting during the quarter - There were no changes in internal control over financial reporting during the quarter ended March 31, 2023, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[111](index=111&type=chunk) PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, and other disclosures for the reporting period [Item 1. Legal Proceedings](index=19&type=section&id=Item%201.%20Legal%20Proceedings) This section indicates routine legal proceedings and claims, with no anticipated material adverse effect on financial results - The company is, from time to time, party to lawsuits, threatened lawsuits, disputes, and other claims arising in the normal course of business[112](index=112&type=chunk) - Management believes that the ultimate liability in connection with these matters is not expected to have a material adverse effect on the company's results of operations, financial position, or cash flows[113](index=113&type=chunk) [Item 1A. Risk Factors](index=20&type=section&id=Item%201A.%20Risk%20Factors) This section states no material changes from the risk factors previously disclosed in the Annual Report on Form 10-K - There have been no material changes from the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022[114](index=114&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=20&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details unregistered equity sales and share repurchases for tax obligations in Q1 2023 Share Repurchase Details | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :-------------------------- | :------------------------------- | :--------------------------- | | January 1, 2023 - March 31, 2023 | 263,864 | $1.61 | - The shares purchased were primarily due to the cancellation of forfeited restricted shares and shares withheld to satisfy tax withholding obligations related to stock-based compensation awards[119](index=119&type=chunk) - These repurchases were not part of a publicly announced plan or program[119](index=119&type=chunk) [Item 3. Defaults Upon Senior Securities](index=20&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company for the reporting period - Not Applicable[116](index=116&type=chunk) [Item 4. Mine Safety Disclosures](index=20&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company for the reporting period - Not Applicable[117](index=117&type=chunk) [Item 5. Other Information](index=20&type=section&id=Item%205.%20Other%20Information) This section provides information on beneficial ownership of the company's common stock, listing entities owning over 5% Beneficial Ownership | Name of Beneficial Owner | Number of Shares Beneficially Owned (as of May 1, 2023) | Percent | | :----------------------- | :------------------------------------------------------ | :------ | | Peter J. Jacullo III, Director | 8,392,568 | 18.8 % | | Peter H. Kamin, Chairman of the Board | 6,918,096 | 15.5 % | | Fund 1 Investments, LLC | 3,387,190 | 7.6 % | | Savitr Capital LLC | 2,770,535 | 6.2 % | | Monomoy | 2,531,462 | 5.7 % | | Cannell Capital LLC | 2,453,327 | 5.5 % | - Beneficial ownership is determined by SEC rules, generally meaning possession of sole or shared voting or investment power[119](index=119&type=chunk) [Item 6. Exhibits](index=23&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance, certifications, and iXBRL financials - Exhibits include the Certificate of Incorporation, By-Laws, various stock restriction agreements, CEO/CFO certifications (pursuant to Sarbanes Oxley Act), and financial statements formatted in iXBRL[126](index=126&type=chunk) [Signatures](index=24&type=section&id=Signatures) This section confirms the official signing and submission of the report by authorized executives - The report was duly signed on May 4, 2023, by Cabell H. Lolmaugh, Chief Executive Officer, and Karla Lunan, Chief Financial Officer[131](index=131&type=chunk)
Tile Shop(TTSH) - 2022 Q4 - Annual Report
2023-03-02 21:26
Part I [Business Overview](index=4&type=section&id=ITEM%201.%20BUSINESS) The company is a U.S. specialty retailer of natural stone and man-made tiles, operating 142 stores, with a strategic focus on employee investment, retail execution, supply chain, and assortment management - Tile Shop Holdings, Inc. is a specialty retailer of natural stone and man-made tiles, setting, and maintenance materials in the U.S.[10](index=10&type=chunk) - As of December 31, 2022, the company operated **142 stores** in 31 states and the District of Columbia[10](index=10&type=chunk) Key Financial Metrics | Metric | 2022 ($ million) | 2021 ($ million) | 2020 ($ million) | | :----- | :----- | :----- | :----- | | Net Sales | 394.7 | 370.7 | 325.1 | | Income from Operations | 22.6 | 20.6 | 6.4 | | Total Assets (as of Dec 31) | 345.8 | 340.8 | N/A | - The 2023 strategic plan focuses on 'People First' (employee investment), 'Focused Retail Execution' (store productivity), 'Supply Chain' (efficiency and transparency), and 'Assortment Management' (differentiated product range)[19](index=19&type=chunk)[20](index=20&type=chunk)[21](index=21&type=chunk) Product Category Sales Mix | Product Category | 2022 (%) | 2021 (%) | | :--------------- | :--- | :--- | | Man-made tiles | 51 | 48 | | Natural stone tiles | 25 | 28 | | Setting and maintenance materials | 15 | 14 | | Accessories | 7 | 8 | | Delivery service | 2 | 2 | Product Sourcing by Continent | Continent | 2022 (%) | 2021 (%) | | :-------- | :--- | :--- | | North America | 34 | 27 | | Europe | 37 | 37 | | Asia | 24 | 30 | | South America | 4 | 4 | | Africa | 1 | 2 | - As of December 31, 2022, the company had **1,387 employees**, with **1,233 full-time**, none unionized[39](index=39&type=chunk) [Risk Factors](index=8&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces diverse risks including intense competition, economic downturns, supply chain vulnerabilities, human capital challenges, regulatory compliance, cybersecurity threats, and stock ownership volatility - Intense competition in the highly fragmented retail tile industry, with low barriers to entry, could limit growth and profitability[52](index=52&type=chunk) - Economic factors such as inflation, housing market weakness, decreased consumer spending, and reduced access to third-party financing could adversely affect financial performance[61](index=61&type=chunk)[63](index=63&type=chunk) - Reliance on foreign suppliers increases risks related to long lead times, work stoppages, shipping delays, product quality, geopolitical instability, trade restrictions, tariffs, and currency exchange rates[84](index=84&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk) - Failure to protect the integrity and security of customer information from cyber-attacks or security incidents could disrupt business, harm reputation, and lead to litigation or penalties[102](index=102&type=chunk)[103](index=103&type=chunk) - Suspension of quarterly dividends and completion of stock repurchase programs mean appreciation in stock price may be the only method to realize a return on investment[109](index=109&type=chunk) [Unresolved Staff Comments](index=19&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) There are no unresolved staff comments from the SEC regarding the company's filings - There are no unresolved staff comments[114](index=114&type=chunk) [Properties](index=19&type=section&id=ITEM%202.%20PROPERTIES) As of December 31, 2022, the company operated **142 leased stores** and owned four regional distribution/manufacturing facilities, with its headquarters attached to a store - As of December 31, 2022, the company operated **142 leased stores** across 31 states and D.C., with an average size of **20,000 square feet**[115](index=115&type=chunk) - The company owns four regional facilities for distribution and manufacturing in Wisconsin, Michigan, Virginia, and Oklahoma[116](index=116&type=chunk) - A distribution facility in Dayton, New Jersey, is leased and measures **163,000 square feet**[116](index=116&type=chunk) [Legal Proceedings](index=19&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The company is involved in various legal proceedings, but management does not anticipate a material adverse effect on financial results from ultimate liabilities - The company is involved in various legal proceedings, but management does not expect the ultimate liability to have a material adverse effect on financial results[118](index=118&type=chunk) - Liabilities for probable and estimable losses from legal proceedings are recorded and adjusted quarterly[118](index=118&type=chunk) [Mine Safety Disclosures](index=20&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) The company has no disclosures related to mine safety - No mine safety disclosures are applicable[120](index=120&type=chunk) Part II [Market for Common Equity and Stockholder Matters](index=21&type=section&id=ITEM%205.%20MARKET%20FOR%20THE%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's common stock trades on Nasdaq, with **44.4 million shares** outstanding as of February 2023, and a **$30.0 million** share repurchase program completed in 2022 - The company's common stock is traded on Nasdaq under the symbol 'TTSH'[122](index=122&type=chunk) - As of February 27, 2023, there were approximately **391 holders of record** and **44,363,205 shares** of common stock outstanding[122](index=122&type=chunk)[123](index=123&type=chunk) Dividends Paid Per Share | Year | Dividend Per Share ($) | | :--- | :--------------------- | | 2021 | 0.65 (special cash dividend) | | 2022 | 0.00 | - A **$30.0 million** share repurchase program was approved in August 2022 and completed in October 2022, repurchasing **7.8 million shares** at an average price of **$3.87 per share**[126](index=126&type=chunk)[129](index=129&type=chunk) Stock Performance Comparison (Indexed to $100) | Date | Tile Shop Holdings, Inc. ($) | S&P SmallCap 600 ($) | Dow Jones U.S. Furnishings Index ($) | | :----------------- | :----------------------- | :--------------- | :------------------------------- | | Dec 31, 2017 | 100.00 | 100.00 | 100.00 | | Dec 31, 2018 | 58.81 | 90.25 | 56.57 | | Dec 31, 2019 | 18.79 | 109.07 | 76.64 | | Dec 31, 2020 | 47.82 | 119.51 | 78.00 | | Dec 31, 2021 | 80.37 | 149.71 | 101.31 | | Dec 31, 2022 | 49.37 | 123.63 | 67.57 | [Selected Financial Data](index=23&type=section&id=ITEM%206.%20SELECTED%20FINANCIAL%20DATA) This section presents a five-year summary of key financial data, highlighting trends in net sales, net income, debt, gross margin, and comparable store sales, with the impact of ASC 842 adoption Five-Year Selected Financial Data (in thousands, except per share data) | Metric (in thousands, except per share data) | 2022 | 2021 | 2020 | 2019 | 2018 | | :----------------------------------------- | :----- | :----- | :----- | :----- | :----- | | **Statement of Income Data** | | | | | | | Net sales | $394,702 | $370,700 | $325,057 | $340,351 | $357,254 | | Gross profit | $258,937 | $253,130 | $221,525 | $236,119 | $251,339 | | Income (loss) from operations | $22,609 | $20,610 | $6,376 | $(1,357) | $18,138 | | Net income (loss) | $15,703 | $14,774 | $6,031 | $(4,463) | $10,442 | | Earnings (loss) per share | $0.32 | $0.29 | $0.12 | $(0.09) | $0.20 | | **Balance Sheet Data (as of Dec 31)** | | | | | | | Cash and cash equivalents | $5,948 | $9,358 | $9,617 | $9,104 | $5,557 | | Inventories | $120,952 | $97,175 | $74,296 | $97,620 | $110,095 | | Total assets | $345,822 | $340,758 | $342,690 | $399,814 | $297,630 | | Total debt | $45,400 | $5,000 | $- | $63,000 | $53,000 | | Total stockholders' equity | $108,769 | $122,224 | $139,062 | $130,899 | $146,347 | | **Cash Flow Data** | | | | | | | Net cash provided by operating activities | $2,715 | $39,691 | $65,596 | $38,563 | $18,170 | | Net cash used in investing activities | $(14,027) | $(11,070) | $(1,968) | $(26,390) | $(34,143) | | Net cash provided by (used in) financing activities | $9,114 | $(28,902) | $(63,329) | $(8,622) | $14,931 | | **Other Selected Financial Data (unaudited)** | | | | | | | Dividends paid per share | $- | $0.65 | $- | $0.15 | $0.20 | | Adjusted EBITDA | $49,583 | $50,255 | $39,953 | $34,846 | $49,355 | | Adjusted EBITDA margin | 12.6 % | 13.6 % | 12.3 % | 10.2 % | 13.8 % | | Gross margin rate | 65.6 % | 68.3 % | 68.1 % | 69.4 % | 70.4 % | | Operating income (loss) margin | 5.7 % | 5.6 % | 2.0 % | (0.4)% | 5.1 % | | Comparable store sales (decline) growth | 6.5 % | 13.8 % | (5.6)% | (4.6)% | (0.6)% | | Stores open at end of period | 142 | 143 | 142 | 142 | 140 | - The company adopted Accounting Standards Codification ("ASC") 842 on January 1, 2019, requiring recognition of right-of-use assets and lease liabilities on the consolidated balance sheet[135](index=135&type=chunk) - Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures used by management and investors to evaluate financial performance and trends[136](index=136&type=chunk) [Management's Discussion and Analysis](index=25&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Net sales increased by **6.5%** to **$394.7 million** in 2022, while gross margin declined due to rising costs, and liquidity is supported by cash and a **$75.0 million** credit facility - Net sales increased **$24.0 million**, or **6.5%**, in 2022 compared to 2021, primarily due to an increase in average ticket size driven by higher selling prices[160](index=160&type=chunk) - The gross margin rate decreased from **68.3%** in 2021 to **65.6%** in 2022, primarily due to increased product costs outpacing selling price adjustments[161](index=161&type=chunk) - Selling, general and administrative expenses increased **$3.8 million**, or **1.6%**, in 2022, largely driven by an **$8.2 million** increase in wages and benefits, partially offset by a **$6.5 million** decrease in bonuses[162](index=162&type=chunk) - Inventory balance increased by **$23.8 million** to **$121.0 million** as of December 31, 2022, contributing to a **$40.4 million** increase in the debt balance[151](index=151&type=chunk) - As of December 31, 2022, **$45.4 million** was outstanding on the revolving line of credit, with **$28.3 million** available for borrowing[175](index=175&type=chunk) Consolidated Cash Flow Summary (in thousands) | Cash Flow Category | 2022 ($ thousands) | 2021 ($ thousands) | 2020 ($ thousands) | | :-------------------------------------- | :----- | :----- | :----- | | Net cash provided by operating activities | $2,715 | $39,691 | $65,596 | | Net cash used in investing activities | $(14,027) | $(11,070) | $(1,968) | | Net cash provided by (used in) financing activities | $9,114 | $(28,902) | $(63,329) | [Market Risk Disclosures](index=32&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is exposed to market risks including inflation, interest rate fluctuations, credit concentration, and foreign currency exchange, with a **1%** interest rate increase potentially decreasing pre-tax earnings by **$0.5 million** - Inflationary factors such as increases in the cost of products, freight, labor, and energy may adversely affect operating results if selling prices do not increase proportionally[200](index=200&type=chunk) - The company is exposed to interest rate risk through variable-rate borrowings under its SOFR-based credit facility; a **one percentage point** increase in interest rates would decrease pre-tax earnings and cash flow by approximately **$0.5 million**[201](index=201&type=chunk) - Credit concentration risk primarily consists of cash deposits at financial institutions, with amounts generally in excess of FDIC insurance limits[203](index=203&type=chunk) - Foreign currency exchange rate risk is not significant, primarily related to its China-based subsidiary and purchases in Chinese yuan (less than **15%** of total inventory purchases)[204](index=204&type=chunk) [Financial Statements and Supplementary Data](index=33&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) Consolidated financial statements and independent auditor reports are included as a separate section of this report, starting on page **36** - Consolidated financial statements and independent auditor reports are included as a separate section of this report, starting on page **36**[206](index=206&type=chunk) [Changes in Accountants and Disclosures](index=33&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) There have been no changes in or disagreements with accountants on accounting and financial disclosure - No changes in or disagreements with accountants on accounting and financial disclosure[207](index=207&type=chunk) [Controls and Procedures](index=34&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2022, with no material changes during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of December 31, 2022[208](index=208&type=chunk) - Management concluded that internal control over financial reporting was effective as of December 31, 2022, based on COSO criteria, with an unqualified opinion from Ernst & Young LLP[210](index=210&type=chunk)[211](index=211&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended December 31, 2022[212](index=212&type=chunk) - Control systems provide only reasonable assurance due to inherent limitations such as human error, circumvention, and management override[213](index=213&type=chunk) [Other Information](index=35&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) This section details beneficial ownership of common stock by major stockholders as of February 27, 2023, with Peter J. Jacullo III and Peter H. Kamin as the largest owners - Information on beneficial ownership of common stock by **5%** stockholders is provided as of February 27, 2023[215](index=215&type=chunk) Beneficial Ownership of Common Stock | Name of Beneficial Owner | Number of Shares Beneficially Owned | Percent (%) | | :----------------------- | :---------------------------------- | :------ | | Peter J. Jacullo III, Director | 8,392,568 | 18.9 | | Peter H. Kamin, Chairman of the Board | 6,918,096 | 15.6 | | Fund 1 Investments, LLC | 3,387,190 | 7.6 | | Savitr Capital LLC | 2,770,535 | 6.2 | | Monomoy | 2,531,463 | 5.7 | | Cannell Capital LLC | 2,453,327 | 5.5 | - Calculation of beneficial ownership is based on **44,363,205 shares** of common stock outstanding on February 27, 2023[217](index=217&type=chunk) [Foreign Jurisdictions Preventing Inspections](index=36&type=section&id=ITEM%209C.%20DISCLOSURE%20REGARDING%20FOREIGN%20JURISDICTIONS%20THAT%20PREVENT%20INSPECTIONS) This item is not applicable to the company - Not applicable[221](index=221&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=37&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) Information on directors, executive officers, and corporate governance is incorporated by reference from the Proxy Statement, and the company maintains a Code of Business Conduct and Ethics - Information on directors, executive officers, and corporate governance is incorporated by reference from the Proxy Statement[225](index=225&type=chunk) - The company has adopted a Code of Business Conduct and Ethics that applies to all officers, directors, and employees, available on its investor relations website[225](index=225&type=chunk) [Executive Compensation](index=37&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) Information regarding executive compensation is incorporated by reference from the company's definitive Proxy Statement - Information on executive compensation is incorporated by reference from the Proxy Statement[226](index=226&type=chunk) [Security Ownership and Equity Compensation Plans](index=37&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) This section details equity compensation plans as of December 31, 2022, including **558,067** securities issuable upon exercise and **3,864,901** available for future issuance Equity Compensation Plan Information (as of December 31, 2022) | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights ($) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | | :------------------------------------------ | :-------------------------------------------------------------------------- | :-------------------------------------------------------------------- | :------------------------------------------------------------------------------------------------------------------------------------ | | Equity compensation plans approved by stockholders | 558,067 | 11.22 | 3,864,901 | | Equity compensation plans not approved by stockholders | - | - | - | | **Total** | **558,067** | **11.22** | **3,864,901** | - All shares available for future issuance are under the 2021 Omnibus Equity Compensation Plan[229](index=229&type=chunk) [Related Transactions and Director Independence](index=38&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) Information on certain relationships, related transactions, and director independence is incorporated by reference from the Proxy Statement - Information on certain relationships, related transactions, and director independence is incorporated by reference from the Proxy Statement[233](index=233&type=chunk) [Principal Accountant Fees and Services](index=38&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) Information regarding principal accountant fees and services is incorporated by reference from the company's definitive Proxy Statement - Information on principal accountant fees and services is incorporated by reference from the Proxy Statement[231](index=231&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=39&type=section&id=ITEM%2015.%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists consolidated financial statements and an Exhibit Index as part of the report, with financial statements incorporated by reference starting on page **36** - Lists the consolidated financial statements (Balance Sheets, Statements of Operations, Comprehensive Income, Stockholders' Equity, Cash Flows, and Notes) as part of the report[235](index=235&type=chunk) - Includes an Exhibit Index immediately preceding the signature page of this Form 10-K[237](index=237&type=chunk) [Form 10-K Summary](index=39&type=section&id=ITEM%2016.%20FORM%2010-K%20SUMMARY) This item is not applicable to the company - Not applicable[238](index=238&type=chunk) [Signatures](index=65&type=section&id=SIGNATURES) The report is duly signed on behalf of Tile Shop Holdings, Inc. by its Chief Executive Officer, Cabell H. Lolmaugh, on March 2, 2023 - The report is signed by the Chief Executive Officer, Cabell H. Lolmaugh, on March 2, 2023[368](index=368&type=chunk) [Power of Attorney](index=66&type=section&id=POWER%20OF%20ATTORNEY) This section grants power of attorney to key officers to sign amendments to the Annual Report on Form 10-K, with various directors and officers signing the report - Grants power of attorney to Cabell H. Lolmaugh, Karla Lunan, and Mark B. Davis to sign amendments to this Annual Report on Form 10-K[370](index=370&type=chunk) - The report is signed by various directors and officers, including the Chief Executive Officer, Senior Vice President and Chief Financial Officer, and Vice President, Investor Relations, and Chief Accounting Officer[372](index=372&type=chunk)
Tile Shop(TTSH) - 2022 Q4 - Earnings Call Transcript
2023-03-02 20:37
Tile Shop Holdings, Inc. (NASDAQ:TTSH) Q4 2022 Earnings Conference Call March 2, 2023 9:00 AM ET Company Participants Mark Davis - Vice President of Investor Relations & Chief Accounting Officer Cab Lolmaugh - Chief Executive Officer Karla Lunan - Chief Financial Officer Conference Call Participants Mark Smith - Lake Street Operator Good day and thank you for standing by. Welcome to the Fourth Quarter 2022 Tile Shop Holdings Earnings Conference Call. [Operator Instructions] Please be advised that today's co ...
Tile Shop(TTSH) - 2022 Q3 - Earnings Call Transcript
2022-11-05 02:28
Tile Shop Holdings, Inc. (NASDAQ:TTSH) Q3 2022 Earnings Conference Call November 3, 2022 9:00 AM ET Company Participants Mark Davis - Vice President, Investor Relations & Chief Accounting Officer Cab Lolmaugh - Chief Executive Officer Karla Lunan - Chief Financial Officer Conference Call Participants Connor Jensen - Lake Street Dave Kanen - Kanen Wealth Management Operator Good day, and thank you for standing by. Welcome to the Q3 2022 Tile Shop Holdings Inc. Earnings Conference Call. At this time, all part ...
Tile Shop(TTSH) - 2022 Q2 - Earnings Call Transcript
2022-08-06 11:06
Financial Data and Key Metrics Changes - The company reported a record revenue of $107.6 million for the quarter, with a 12% increase in comparable store sales, primarily driven by an increase in average ticket prices despite a modest decrease in unit volumes [13][14] - Gross margin rate was 66%, down 310 basis points year-over-year but up 80 basis points sequentially from the first quarter, attributed to pricing actions and inflationary cost pressures [14] - Net income for the quarter was $6.9 million, with adjusted EBITDA at $16.8 million, resulting in an adjusted EBITDA margin of 15.6%, a decrease of 40 basis points year-over-year [18] Business Line Data and Key Metrics Changes - The pro sales mix exceeded 65% of total sales, indicating a strong focus on professional customers [10] - In-store execution metrics such as conversion rates and average ticket sizes showed improvement, contributing to overall sales performance [10] Market Data and Key Metrics Changes - The company is observing a slowdown in new orders and consumer traffic, attributed to rising interest rates and changing consumer spending patterns [7][24] - The company expects continued pressure on gross margins due to inflationary cost pressures and a conservative approach to future pricing actions [15] Company Strategy and Development Direction - The company is focused on enhancing employee engagement and training to address labor shortages, with initiatives to improve culture and career paths [8] - Supply chain initiatives have improved, with inventory levels normalized, but the company anticipates ongoing inflationary pressures affecting costs [11][19] - The company is exploring alternative sourcing options to mitigate cost increases and has plans to roll out new technology to improve customer interaction tracking [10][12] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the changing macroeconomic environment and its potential impact on home improvement spending, indicating a cautious outlook for the second half of 2022 [7][15] - Despite the challenges, management remains optimistic about the company's positioning for customers looking to remodel rather than purchase new homes [25] Other Important Information - The company has a cash balance of $10.5 million and bank debt of $5 million as of the end of the quarter [19] - The company plans to hold a national sales meeting to reinforce best practices and celebrate milestones, indicating a focus on team cohesion and motivation [9] Q&A Session Summary Question: Update on consumer behavior and spending - Management noted that while ticket averages remain solid, traffic has slowed, indicating a potential impact from the macro environment [23][24] Question: Impact of slowing housing trends - Management indicated that the company typically performs better than existing home sales, but is seeing a slowdown in orders, which aligns with housing market trends [25] Question: Performance of remodeled stores and capital growth plans - Management confirmed ongoing remodeling efforts with positive results and indicated discussions on capital allocation for business investments [26][27] Question: Inflation and gross margin outlook - Management acknowledged that while some costs are decreasing, the benefits will be realized in 2023, and current inventory is cycling through at higher costs [29][30] Question: New product introduction and market opportunity - Management expressed excitement about the introduction of luxury vinyl tile (LVT) and its potential market impact, noting positive early results [31][32] Question: Stock buyback and credit agreements - Management confirmed that the credit agreement allows for share repurchases as long as leverage ratios remain below a certain threshold [33][35]
Tile Shop(TTSH) - 2022 Q2 - Quarterly Report
2022-08-04 21:01
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________________________ FORM 10-Q _____________________________ (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from – to – Commission file number: 001-35629 _____________________________ TILE SHOP HOLDINGS, INC. (Ex ...
Tile Shop(TTSH) - 2022 Q1 - Quarterly Report
2022-05-06 20:12
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from – to – UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________________________ FORM 10-Q _____________________________ (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 OR Commission file number: 001-35629 _____________________________ TILE SHOP HOLDINGS, INC. (E ...
Tile Shop(TTSH) - 2022 Q1 - Earnings Call Transcript
2022-05-06 15:35
Financial Data and Key Metrics Changes - The company reported revenues exceeding $100 million for the first time in its history, setting a fourth consecutive quarterly sales record [5] - Comparable store sales increased by 10.7% in Q1 2022, primarily driven by an increase in average ticket prices due to recent pricing actions [17] - Gross margin was 65.2% during Q1 2022, with expectations of further pressure on gross margin in the near term [18] - Net income for Q1 2022 was $3.5 million, and adjusted EBITDA was $11.7 million, with an adjusted EBITDA margin of 11.4%, down 460 basis points from the previous year [24] Business Line Data and Key Metrics Changes - The professional customer channel accounted for over 60% of overall sales during the quarter, reflecting strong relationships cultivated by Pro Market Managers [8] - Online orders increased by over 30% year-over-year, although they still represent less than 5% of overall orders [11] Market Data and Key Metrics Changes - The company has seen improvements in supply chain levels, approaching pre-COVID levels, despite ongoing global supply chain disruptions [12] - Inflationary cost pressures remain a challenge, particularly in Europe, where natural gas prices have surged following geopolitical events [13] Company Strategy and Development Direction - The company is focused on enhancing in-store execution, improving digital commerce capabilities, and strengthening the professional customer channel [6][10][8] - Investments are being made in technology and inventory to navigate inflationary pressures and secure better pricing [15][46] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the volatility in the current environment and expects inflationary pressures to persist [14][26] - The company remains confident in its ability to manage challenges and is optimistic about future growth opportunities [27] Other Important Information - SG&A expenses increased by $4.8 million compared to Q1 2021, primarily due to staffing and marketing investments [19] - The company is actively pulling forward inventory purchases to mitigate anticipated price increases [25] Q&A Session Summary Question: Can you break down inflationary pressures from direct costs versus transportation costs? - Management indicated that inflation is more pronounced on the product side than transportation, but quantifying the exact split is challenging due to variability across suppliers [30][32] Question: What is the expected growth for e-commerce sales? - Management expressed optimism for e-commerce growth, aiming to exceed 5% of overall sales, with the Visualizer tool available for both online and in-store use [34] Question: What percentage of sales comes from professional customers? - Professional sales exceeded 60%, up from the 50s a year ago, with continued investment in this segment [35][38] Question: How is store traffic performing? - Store traffic has been declining, but ticket sizes are increasing due to pricing and unit increases [44] Question: What are the capital allocation priorities? - The focus is on enhancing store execution, inventory management, and technology investments, with new store openings likely postponed until 2023 [46][47]