Financial Data and Key Metrics Changes - The company reported record third-quarter sales of $92.2 million, marking the highest level of sales in its history for this quarter, driven by a 12.8% increase in comparable store sales [6][22] - Gross profit for the third quarter was $62.9 million, with a gross margin of 68.2%, reflecting a 30 basis point improvement year-over-year but a 90 basis point decline sequentially [24][25] - Net income increased to $2.2 million from $1.9 million in the same quarter of the previous year, while adjusted EBITDA decreased to $10.4 million from $11.1 million [29][30] Business Line Data and Key Metrics Changes - The company has seen strong demand for home improvement products, contributing to the increase in sales and average ticket size [22] - Online sales remain below 5% of total orders but are experiencing growth as the e-commerce platform evolves [10][22] Market Data and Key Metrics Changes - Customer deposits for future product deliveries remained elevated at $16.2 million, slightly down from $16.5 million in the previous quarter, indicating strong order bank maintenance [23] Company Strategy and Development Direction - The company is focusing on retail execution, enhancing the online customer experience, and managing supply chain challenges [8][9][11] - Plans for 2022 include no new store openings in the first half, with a focus on improving existing store performance and supply chain visibility [18][19] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing supply chain challenges and cost pressures but expressed confidence in their ability to manage these issues [14][15] - The company anticipates that sourcing challenges will persist into 2022 but remains optimistic about meeting customer needs [14][19] Other Important Information - The Board of Directors declared a special dividend of $0.65 per share, payable on December 3, reflecting the company's strong cash position [32] - The company ended the quarter with a cash balance of $44.3 million and no debt [31] Q&A Session Summary Question: Inquiry about gross margin recovery timeline - Management indicated that while they aim to return to historical gross margins above 70%, current global supply chain uncertainties make it difficult to provide a specific timeline [36][37] Question: Clarification on SG&A expenses - Management confirmed that the $700,000 asset impairment charge was not added back to adjusted EBITDA, impacting the reported numbers [38][39] Question: Discussion on special dividend versus store investment - Management explained that while they are returning capital to shareholders, they also plan to invest in store remodels and maintain cash for future growth opportunities [58][60] Question: E-commerce revenue contribution and future expectations - E-commerce currently accounts for less than 5% of total sales, but management is optimistic about its growth potential and plans to continue investing in this area [10][93] Question: Performance of luxury vinyl plank sales - Management reported positive sales results for luxury vinyl plank, indicating plans to continue monitoring and expanding this product line [100][101]

PART I. FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Net sales increased to $280.5 million and net income to $13.0 million for the nine months ended September 30, 2021, with total assets at $360.9 million [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to $360.9 million as of September 30, 2021, driven by higher cash and equity, while liabilities remained stable Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2021 (unaudited) | Dec 31, 2020 (audited) | Change | | :--- | :--- | :--- | :--- | | **Assets** | | | | | Cash and cash equivalents | $44,264 | $9,617 | +$34,647 | | Inventories | $76,697 | $74,296 | +$2,401 | | Total Current Assets | $141,611 | $104,654 | +$36,957 | | Total Assets | $360,864 | $342,690 | +$18,174 | | **Liabilities & Equity** | | | | | Total Current Liabilities | $88,475 | $76,804 | +$11,671 | | Total Liabilities | $207,786 | $203,628 | +$4,158 | | Accumulated deficit | ($6,521) | ($19,487) | +$12,966 | | Total Stockholders' Equity | $153,078 | $139,062 | +$14,016 | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) Net sales increased to $92.2 million in Q3 2021 and $280.5 million for the nine months, with net income surging to $13.0 million Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2021 | Q3 2020 | 9 Months 2021 | 9 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $92,240 | $81,492 | $280,517 | $243,501 | | Gross profit | $62,949 | $55,304 | $193,560 | $165,673 | | Income from operations | $3,158 | $2,901 | $17,680 | $3,701 | | Net income | $2,175 | $1,914 | $12,966 | $4,656 | | Diluted EPS | $0.04 | $0.04 | $0.25 | $0.09 | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income for Q3 2021 was $2.2 million, increasing to $13.0 million for the nine-month period ended September 30, 2021 Comprehensive Income (in thousands) | Period | 2021 | 2020 | | :--- | :--- | :--- | | **Three Months Ended Sep 30** | | | | Net income | $2,175 | $1,914 | | Comprehensive income | $2,175 | $1,949 | | **Nine Months Ended Sep 30** | | | | Net income | $12,966 | $4,656 | | Comprehensive income | $12,978 | $4,677 | [Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) Total stockholders' equity increased to $153.1 million by September 30, 2021, primarily due to $13.0 million in net income - The accumulated deficit decreased from **($19.5 million)** at the end of 2020 to **($6.5 million)** as of September 30, 2021, due to the **$13.0 million** in net income earned during the first nine months of 2021[21](index=21&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations was $44.4 million for the nine months ended September 30, 2021, with increased investing and decreased financing activities Cash Flow Summary (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $44,390 | $57,347 | | Net cash used in investing activities | ($8,933) | ($1,315) | | Net cash used in financing activities | ($821) | ($56,278) | | **Net change in cash** | **$34,647** | **($223)** | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail the company's tile retail business, COVID-19 supply chain risks, revenue composition, and a declared special dividend - The company operates **143 stores** in **31 states** and considers the ongoing COVID-19 pandemic an uncertainty that could materially impact future financial results, particularly through supply chain disruptions and labor supply[28](index=28&type=chunk)[31](index=31&type=chunk) Revenue Disaggregation by Product Category (Q3 2021 vs Q3 2020) | Product Category | Q3 2021 | Q3 2020 | | :--- | :--- | :--- | | Man-made tiles | 49% | 46% | | Natural stone tiles | 27% | 29% | | Setting and maintenance materials | 14% | 14% | | Accessories | 7% | 9% | | Delivery service | 3% | 2% | - As of September 30, 2021, the company had no borrowings outstanding on its **$100 million** revolving line of credit and had **$97.6 million** available for borrowing[49](index=49&type=chunk) - On November 4, 2021, the Board of Directors declared a special dividend of **$0.65 per share**, payable on December 3, 2021[82](index=82&type=chunk) - The company continues to purchase significant amounts of product from Nanyang and Tile Style, vendors associated with a former employee and relative of a former executive, with purchases totaling **$6.2 million** from Nanyang and **$2.1 million** from Tile Style in the first nine months of 2021[80](index=80&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Q3 sales increased 13.2% due to strong demand, improving gross margin, and rising SG&A expenses as operations normalized, while liquidity remains strong - The COVID-19 pandemic continues to impact the business through supply chain disruptions, including product shortages and cost inflation, leading the company to adjust pricing in response[91](index=91&type=chunk) - A special dividend of **$0.65 per share** was approved on November 2, 2021, and declared on November 4, 2021, to be paid on December 3, 2021[100](index=100&type=chunk) Comparable Store Sales Growth | Period | 2021 | 2020 | | :--- | :--- | :--- | | **Three months ended Sep 30** | 12.8% | (6.5)% | | **Nine months ended Sep 30** | 14.9% | (8.3)% | [Results of Operations](index=21&type=section&id=Results%20of%20Operations) Net sales increased 13.2% in Q3 2021 due to comparable store sales, with gross margin improving and SG&A expenses rising from normalized operations - The increase in Q3 2021 SG&A expenses of **$7.4 million** was largely due to the resumption of normal business operations, including a **$1.7 million** increase in staffing costs, a **$1.1 million** increase in variable compensation, and a **$0.7 million** asset impairment charge[110](index=110&type=chunk) - The gross margin rate for Q3 2021 increased to **68.2%** from **67.9%** in Q3 2020, driven by better pricing and improved customer delivery collection rates, which offset higher product costs[109](index=109&type=chunk) - For the nine months ended Sep 30, 2021, interest expense decreased to **$0.5 million** from **$1.6 million** in the prior year period, due to lower outstanding debt[116](index=116&type=chunk) [Non-GAAP Measures](index=23&type=section&id=Non-GAAP%20Measures) Adjusted EBITDA for Q3 2021 was $10.4 million, increasing to $40.5 million for the nine-month period, with pretax return on capital employed improving to 13.9% Adjusted EBITDA Reconciliation (in thousands) | Metric | Q3 2021 | Q3 2020 | 9 Months 2021 | 9 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net income | $2,175 | $1,914 | $12,966 | $4,656 | | Adjustments | $8,232 | $9,210 | $27,521 | $24,454 | | **Adjusted EBITDA** | **$10,407** | **$11,124** | **$40,487** | **$29,110** | - Pretax Return on Capital Employed for the trailing twelve months ending September 30, 2021 was **13.9%**, a significant improvement from **(0.4)%** for the same period ending in 2020[123](index=123&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with $44.3 million in cash and $97.6 million available credit, supporting increased capital expenditures for growth - As of September 30, 2021, the company had **$44.3 million** in cash and cash equivalents and **$97.6 million** available for borrowing on its revolving line of credit[124](index=124&type=chunk)[125](index=125&type=chunk) - Capital expenditures increased to **$8.9 million** for the nine months ended September 30, 2021, up from **$1.3 million** in the prior-year period, due to investments in one new store, one relocation, store remodels, and IT assets[128](index=128&type=chunk) - Working capital increased to **$53.1 million** at September 30, 2021, from **$27.9 million** at December 31, 2020, primarily due to the increase in cash and cash equivalents[134](index=134&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=26&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reported no material changes in its primary market risk exposures or the management of those risks since its Annual Report on Form 10-K for the fiscal year ended December 31, 2020 - There have been no material changes in the company's primary risk exposures or management of market risks from those disclosed in the 2020 Annual Report on Form 10-K[140](index=140&type=chunk) [Controls and Procedures](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were deemed ineffective as of September 30, 2021, due to ongoing material weaknesses from the 2019 ERP system implementation - Disclosure controls and procedures were deemed not effective as of September 30, 2021, due to two material weaknesses related to the 2019 ERP system implementation[141](index=141&type=chunk)[142](index=142&type=chunk) - The material weaknesses involve ineffective design of controls over the ERP implementation (data conversion, integrity, training) and ineffective IT general controls (user access, segregation of duties, change management)[142](index=142&type=chunk) - The company is continuing to take steps to remediate the material weaknesses, but they will not be considered fully remediated until the new controls have operated effectively for a sufficient period[142](index=142&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine legal proceedings, but management anticipates no material adverse effect on financial results or position - The company is involved in routine legal proceedings but believes their outcomes will not materially impact its financial condition[144](index=144&type=chunk)[145](index=145&type=chunk) [Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) A new risk factor highlights potential adverse impacts from federal COVID-19 vaccination or testing mandates on employee retention and hiring - A new risk factor has been identified concerning the OSHA regulation requiring COVID-19 vaccination or weekly testing for employees[147](index=147&type=chunk) - The company warns that this mandate could result in employee attrition and difficulty satisfying labor needs, which could adversely affect future revenues, costs, and profit margins[147](index=147&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=27&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q3 2021, the company acquired 27,943 shares through tax withholdings on vested restricted stock and repurchases under agreements - In Q3 2021, the company acquired **27,943 shares**, including withholding **15,311 shares** to satisfy tax obligations on vested restricted stock and repurchasing **12,632 shares** at par value under restricted stock agreements[148](index=148&type=chunk)[149](index=149&type=chunk) [Other Information](index=28&type=section&id=Item%205.%20Other%20Information) This section details beneficial ownership of common stock as of November 1, 2021, identifying five stockholders with over 5% ownership 5% Stockholders as of November 1, 2021 | Name of Beneficial Owner | Percent of Ownership | | :--- | :--- | | Peter J. Jacullo III, Director | 16.5% | | Peter H. Kamin, Chairman of the Board | 13.2% | | Cannell Capital LLC | 6.1% | | Savitr Capital LLC | 5.3% | | Philotimo Fund, LP and affiliates | 5.0% | [Exhibits](index=30&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, equity plans, and certifications [Signatures](index=31&type=section&id=Signatures) The report is duly signed and authorized by Cabell H. Lolmaugh, Chief Executive Officer, and Nancy DiMattia, Chief Financial Officer, on November 4, 2021

1 I NV E S T O R P R E S E NTAT I O N A u g u s t 2 0 2 1 C a b e l l L o l m a u g h C E O M a r k D a v i s V P I R & C A O Forward looking statements and non-GAAP information Forw ard Looking Statements These slides and accompanying oral presentation contain "forward looking statements" w ithin the meaning of the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as "anticipate", "believe", ...

Tile Shop Holdings, Inc. (NASDAQ:TTSH) Q2 2021 Results Conference Call August 5, 2021 9:00 AM ET Company Participants Mark Davis - VP of IR and Chief Accounting Officer Cabell Lolmaugh - President and CEO Nancy DiMattia - SVP and CFO Conference Call Participants Jeff Moore - Burr Oak Capital Jon Hollander - CAG David Kanen - Kanen Wealth Management Operator Good day, and thank you for standing by, and welcome to the Q2 2021 Tile Shop Holdings Conference Call. [Operator Instructions] Please be advised that t ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 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 _____________________________ _____________________________ FORM 10-Q _____________________________ (Mark One) TILE SHOP HOLDINGS, INC. (Ex ...

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, 2021 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. (E ...

Part I [Business](index=3&type=section&id=ITEM%201.%20BUSINESS) Tile Shop Holdings, Inc. is a specialty retailer of natural and man-made tiles, operating 142 stores with a focus on productivity and customer experience - The company operates as a specialty retailer with **142 stores** in **31 states** and the District of Columbia, with an average store size of approximately **20,000 square feet**[8](index=8&type=chunk) Financial Performance (2018-2020) | Year | Net Sales (in millions) | (Loss)/Income from Operations (in millions) | | :--- | :--- | :--- | | 2020 | $325.1 | $6.4 | | 2019 | $340.4 | $(1.4) | | 2018 | $357.3 | $18.1 | Net Sales by Product Category (2020 vs. 2019) | Product Category | 2020 (%) | 2019 (%) | | :--- | :--- | :--- | | Man-made tiles | 46 | 47 | | Natural stone tiles | 29 | 29 | | Setting and maintenance materials | 14 | 13 | | Accessories | 9 | 10 | | Delivery service | 2 | 1 | - The company's 2021 strategic plan focuses on improving in-store productivity, enhancing the online customer experience, and optimizing supply chain and assortment management[18](index=18&type=chunk)[19](index=19&type=chunk)[20](index=20&type=chunk) - As of December 31, 2020, the company had **1,149 employees**, with **1,097** being full-time, and none are represented by a union[35](index=35&type=chunk) [Risk Factors](index=7&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces material risks from the COVID-19 pandemic, intense competition, foreign supplier reliance, and un-remediated internal control weaknesses - The COVID-19 pandemic has materially and adversely affected business operations, sales, and supply chains, with store traffic and sales decreasing by approximately **50%** in early Q2 2020[48](index=48&type=chunk)[50](index=50&type=chunk) - Two material weaknesses in internal control over financial reporting, related to the 2019 ERP system conversion and IT general controls, were not remediated as of year-end 2020[74](index=74&type=chunk)[112](index=112&type=chunk) - The company faces significant competition from a fragmented market with low barriers to entry, including national home centers, specialty retailers, and online competitors[33](index=33&type=chunk)[56](index=56&type=chunk) - The company's common stock was voluntarily delisted from Nasdaq in November 2019 and now trades on the OTC Pink Market, with a relisting application submitted in March 2021[113](index=113&type=chunk) - A significant portion of products are sourced from foreign suppliers, with the top ten accounting for **52%** of tile purchases in 2020, exposing the company to various risks[30](index=30&type=chunk)[86](index=86&type=chunk) [Unresolved Staff Comments](index=19&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) The company reports that there are no unresolved staff comments - Not applicable[124](index=124&type=chunk) [Properties](index=19&type=section&id=ITEM%202.%20PROPERTIES) The company operates 142 leased stores across 31 states and owns four distribution and manufacturing facilities - The company operates **142 leased stores** with an average size of approximately **20,000 square feet**[125](index=125&type=chunk)[126](index=126&type=chunk) - The company owns **four distribution and manufacturing facilities** and leases one additional distribution facility[126](index=126&type=chunk) [Legal Proceedings](index=19&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The company is involved in various legal proceedings, including a significant derivative and class action lawsuit settled in 2020 for $12.0 million - A derivative and class action lawsuit filed in November 2019 was settled in October 2020, establishing a **$12.0 million** fund paid by the company's insurers[130](index=130&type=chunk) [Mine Safety Disclosures](index=20&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) The company reports no mine safety disclosures - None[131](index=131&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=21&type=section&id=ITEM%205.%20MARKET%20FOR%20THE%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's common stock trades on the OTC Pink Market after Nasdaq delisting, with dividends suspended and stock repurchases cancelled - The company's common stock was voluntarily delisted from Nasdaq in November 2019 and now trades on the OTC Pink Market under the symbol **"TTSH"**[133](index=133&type=chunk) - The quarterly cash dividend program was suspended and the stock repurchase program was cancelled in October 2019[117](index=117&type=chunk)[136](index=136&type=chunk) Quarterly Stock Price (OTC Pink Market, 2020) | Period | High ($) | Low ($) | | :--- | :--- | :--- | | Q1 2020 | 2.08 | 0.10 | | Q2 2020 | 1.74 | 0.55 | | Q3 2020 | 2.89 | 1.22 | | Q4 2020 | 4.73 | 2.75 | [Selected Financial Data](index=22&type=section&id=ITEM%206.%20SELECTED%20FINANCIAL%20DATA) This section presents a five-year summary of the company's financial data, including 2020 net sales of $325.1 million and net income of $6.0 million Selected Financial Data (2018-2020, in thousands) | Metric | 2020 ($) | 2019 ($) | 2018 ($) | | :--- | :--- | :--- | :--- | | Net sales | 325,057 | 340,351 | 357,254 | | Gross profit | 221,525 | 236,119 | 251,339 | | Income (loss) from operations | 6,376 | (1,357) | 18,138 | | Net income (loss) | 6,031 | (4,463) | 10,442 | | Total assets | 342,690 | 399,814 | 297,630 | | Total debt | 0 | 63,000 | 53,000 | | Net cash from operating activities | 65,596 | 38,563 | 18,170 | Reconciliation of Net Income (Loss) to Adjusted EBITDA (2018-2020, in thousands) | Line Item | 2020 ($) | 2019 ($) | 2018 ($) | | :--- | :--- | :--- | :--- | | Net income (loss) | 6,031 | (4,463) | 10,442 | | Interest expense | 1,874 | 3,792 | 2,690 | | (Benefit) provision for income taxes | (1,529) | (674) | 5,158 | | Depreciation & amortization | 31,336 | 33,546 | 28,396 | | Stock based compensation | 2,241 | 2,645 | 2,669 | | **Adjusted EBITDA** | **39,953** | **34,846** | **49,355** | - Comparable store sales declined by **5.6%** in 2020, following a **4.6%** decline in 2019[141](index=141&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) [Overview and COVID-19 Impact](index=25&type=section&id=Overview%20and%20COVID-19%20Impact) The COVID-19 pandemic significantly impacted 2020 operations, leading to cost-saving measures, full debt repayment, and a Nasdaq relisting application - In response to the pandemic, the company reduced SG&A expenses by cutting workforce, reducing store hours, and curtailing advertising[160](index=160&type=chunk) - The company deferred rent payments, resulting in a **$2.1 million** deferred rent balance as of December 31, 2020, and deferred **$2.7 million** in employer social security taxes[161](index=161&type=chunk)[162](index=162&type=chunk) - Cost-saving measures enabled the company to conserve cash and fully repay its outstanding debt in 2020[163](index=163&type=chunk) - On March 1, 2021, the Board authorized an application to relist the company's common stock on Nasdaq[166](index=166&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) For 2020, net sales decreased by 4.5% to $325.1 million, gross margin declined, and SG&A expenses decreased, leading to improved operating income Year-over-Year Performance Comparison (2020 vs. 2019) | Metric | 2020 (Millions) | 2019 (Millions) | Change (Millions) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $325.1 | $340.4 | $(15.3) | (4.5) | | Gross Profit | $221.5 | $236.1 | $(14.6) | (6.2) | | SG&A Expenses | $215.1 | $237.5 | $(22.3) | (9.4) | | Income (Loss) from Operations | $6.4 | $(1.4) | $7.7 | N/A | - The decrease in 2020 net sales was primarily due to a **5.6%** decrease in comparable store sales, driven by weaker store traffic from COVID-19[172](index=172&type=chunk) - The gross margin rate declined from **69.4%** in 2019 to **68.1%** in 2020, primarily due to a higher mix of freight delivery services and increased inventory write-downs[173](index=173&type=chunk) - The effective tax rate was **(34.0%)** in 2020, compared to **13.1%** in 2019, primarily due to the CARES Act allowing net operating loss carryback[177](index=177&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is supported by $9.6 million cash and a $100 million credit facility, with no outstanding debt and increased operating cash flow - As of December 31, 2020, the company had **$9.6 million** in cash and no outstanding borrowings on its revolving line of credit, with **$97.6 million** available[187](index=187&type=chunk)[190](index=190&type=chunk) Cash Flow Summary (2018-2020, in thousands) | Cash Flow Activity | 2020 ($) | 2019 ($) | 2018 ($) | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | 65,596 | 38,563 | 18,170 | | Net cash used in investing activities | (1,968) | (26,390) | (34,143) | | Net cash (used in) provided by financing activities | (63,329) | (8,622) | 14,931 | - Capital expenditures were significantly curtailed to **$2.0 million** in 2020, with **$12 million to $15 million** projected for 2021[194](index=194&type=chunk)[198](index=198&type=chunk) [Critical Accounting Policies and Estimates](index=32&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The company's critical accounting policies involve significant estimates for revenue recognition, inventory valuation, property impairment, and income taxes - Key estimates include the allowance for sales returns, which was **$5.0 million** as of December 31, 2020[202](index=202&type=chunk) - Inventory is valued at the lower of cost or net realizable value, with reserves for shrinkage and obsolescence totaling **$0.6 million** as of December 31, 2020[203](index=203&type=chunk) - Long-lived assets are evaluated for impairment, with a **$2.2 million** charge recorded in 2020 related to underperforming stores[205](index=205&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is exposed to market risks including inflation, interest rate risk from its credit facility, credit concentration, and foreign currency exchange - The company is exposed to interest rate risk via its credit facility, which uses variable rates including LIBOR, with its planned phase-out noted as a risk[216](index=216&type=chunk) - Foreign currency risk is present due to inventory purchases in Chinese yuan, representing less than **15%** of total inventory purchases in 2020[219](index=219&type=chunk) - The company does not currently engage in any interest rate or foreign currency exchange hedging activities[217](index=217&type=chunk)[220](index=220&type=chunk) [Financial Statements and Supplementary Data](index=34&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section includes the company's consolidated financial statements and auditor's reports, with an unqualified opinion on financials but an adverse opinion on internal controls - Ernst & Young LLP issued an unqualified opinion on the consolidated financial statements for the year ended December 31, 2020[398](index=398&type=chunk) - The auditor issued an adverse opinion on the company's internal control over financial reporting as of December 31, 2020, due to two identified material weaknesses[410](index=410&type=chunk)[411](index=411&type=chunk) - The material weaknesses relate to ineffective design and implementation of controls for the 2019 ERP system conversion and ineffective IT general controls[411](index=411&type=chunk) Consolidated Balance Sheet Highlights (As of Dec 31, 2020) | Account | Amount (in thousands) | | :--- | :--- | | Total Current Assets | $104,654 | | Total Assets | $342,690 | | Total Current Liabilities | $76,804 | | Total Liabilities | $203,628 | | Total Stockholders' Equity | $139,062 | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=34&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[222](index=222&type=chunk) [Controls and Procedures](index=34&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded disclosure controls were ineffective as of December 31, 2020, due to two un-remediated material weaknesses in internal control - Management concluded that disclosure controls and procedures were not effective as of December 31, 2020[224](index=224&type=chunk) - Two material weaknesses related to the 2019 ERP system implementation were not remediated in 2020, leading to an ineffective internal control environment[227](index=227&type=chunk) - The weaknesses include ineffective design and implementation of controls for the ERP system conversion and ineffective IT general controls (ITGCs)[229](index=229&type=chunk) - Ernst & Young, LLP, issued an adverse report on the company's internal control over financial reporting as of December 31, 2020[228](index=228&type=chunk) [Other Information](index=36&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) The company reports no other information - None[232](index=232&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=37&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) This section details the company's executive officers and Board of Directors, including committee compositions, independence, and the Code of Business Conduct - The Board of Directors is divided into three classes with staggered three-year terms[251](index=251&type=chunk) - The Board has three primary committees: Audit, Compensation, and Nominating and Corporate Governance, with all members determined independent under Nasdaq standards[261](index=261&type=chunk) - The Audit Committee, chaired by an audit committee financial expert, oversees financial reporting, internal controls, and the independent auditor[262](index=262&type=chunk)[264](index=264&type=chunk) - The company has adopted a Code of Business Conduct and Ethics, available on its investor relations website[259](index=259&type=chunk) [Executive Compensation](index=43&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) The executive compensation program aligns pay with strategy, with 2020 temporary salary reductions and a modified cash incentive plan based on EBITDA - In response to COVID-19, executive officers took temporary salary reductions in April 2020, including a **20%** CEO salary reduction, reinstated in July 2020[286](index=286&type=chunk)[287](index=287&type=chunk)[288](index=288&type=chunk) Summary Compensation Table for Fiscal 2020 (Named Executive Officers) | Name | Position | Salary ($) | Stock Awards ($) | Non-Equity Incentive Plan Comp ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | | Cabell Lolmaugh | CEO & President | 335,417 | 91,716 | 147,734 | 579,950 | | Nancy DiMattia | SVP & CFO | 239,583 | 22,929 | 105,524 | 374,775 | | Mark Davis | VP, Investor Relations & CAO | 176,593 | 11,465 | 61,555 | 254,028 | | Joseph Kinder | SVP, Supply Chain & Distribution | 208,917 | 45,858 | 73,613 | 333,611 | - The 2020 non-equity incentive plan was modified due to COVID-19, resulting in a **$0.9 million** bonus pool and an **84.4%** payout of target for executives[298](index=298&type=chunk)[299](index=299&type=chunk) - The CEO's annual total compensation to median employee compensation ratio was **11.77 to 1** for fiscal year 2020[339](index=339&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=56&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) This section details beneficial ownership of common stock, with executive officers and directors owning approximately 31.2% of outstanding shares - As of March 9, 2021, executive officers and directors as a group beneficially owned approximately **31.2%** of the company's outstanding common stock[363](index=363&type=chunk) Beneficial Ownership of 5% Stockholders | Name of Beneficial Owner | Percent of Ownership (%) | | :--- | :--- | | Peter J. Jacullo III, Director | 16.6 | | Peter H. Kamin, Chairman of the Board | 13.3 | | Robert A. Rucker | 9.8 | | B. Riley Financial, Inc. and affiliates | 8.5 | | Cannell Capital LLC | 6.1 | | Savitr Capital LLC | 5.4 | | Philotimo Fund, LP and affiliates | 5.0 | - As of December 31, 2020, **810,925 securities** remained available for future issuance under the company's equity compensation plans[371](index=371&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=59&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) The company discloses related party transactions with vendors Nanyang Helin Stone Co. Ltd and Tilestyling Co. Ltd, totaling $7.6 million in 2020 - The company has significant related party transactions with vendors Nanyang Helin Stone Co. Ltd and Tilestyling Co. Ltd, majority-owned by a former executive's brother-in-law[377](index=377&type=chunk) Payments to Related Party Vendor (Nanyang) | Year | Payments (in millions) | | :--- | :--- | | 2020 | $7.6 | | 2019 | $5.1 | - The Audit Committee reviewed and approved related party transactions, deeming them in the company's best interest due to quality, availability, and pricing[378](index=378&type=chunk) - The Board has determined that a majority of its directors are "independent" as defined by Nasdaq rules[375](index=375&type=chunk) [Principal Accountant Fees and Services](index=60&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) This section details fees paid to Ernst & Young LLP, totaling $637,800 in 2020, a decrease from 2019 primarily due to lower audit fees Accountant Fees (Ernst & Young LLP) | Fee Category | 2020 ($) | 2019 ($) | | :--- | :--- | :--- | | Audit Fees | 637,800 | 1,096,000 | | Audit-Related Fees | 0 | 0 | | Tax Fees | 0 | 0 | | All Other Fees | 0 | 61,000 | | **Total** | **637,800** | **1,157,000** | - All audit and non-audit services performed by the independent auditors were pre-approved by the Audit Committee[389](index=389&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=62&type=section&id=ITEM%2015.%20EXHIBITS%2C%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists the documents filed as part of the Form 10-K, including consolidated financial statements, schedules, and a comprehensive index of exhibits - This item lists the financial statements, schedules, and exhibits filed with the report, including the auditor's report and various material agreements[392](index=392&type=chunk)[394](index=394&type=chunk) [Form 10-K Summary](index=62&type=section&id=ITEM%2016.%20FORM%2010-K%20SUMMARY) The company indicates that a Form 10-K summary is not applicable - Not applicable[395](index=395&type=chunk)

Tile Shop Holdings, Inc. (NASDAQ:TTSH) Q4 2020 Earnings Conference Call March 11, 2021 9:00 AM ET Company Participants Mark Davis - Vice President of Investor Relations and Chief Accounting Officer Cabell Lolmaugh - President and Chief Executive Officer Nancy DiMattia - Senior Vice President and Chief Financial Officer Conference Call Participants David Kanen - Kanen Wealth Management Eric DeLamarter - Half Moon Capital Kunal Mehta - Montana Advisors John Helander - Chesapeake Advisory Operator Ladies and g ...

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 September 30, 2020 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 ...

Financial Data and Key Metrics Changes - Net sales for Q3 2020 were $81.5 million, a decrease of 5.2% year-over-year, with comparable store sales down 6.5% due to reduced traffic [15][16] - Gross profit was $55.3 million, reflecting a 6.5% decrease compared to the same quarter last year, with a gross margin of 67.9%, which is 90 basis points lower than Q3 2019 [16] - Net income for the quarter was $1.9 million, with fully diluted earnings per share at $0.04, and adjusted EBITDA was $11.1 million, representing a 400 basis point improvement in adjusted EBITDA margin to 13.7% [18] Business Line Data and Key Metrics Changes - The company focused on retail execution, setting goals for various metrics including discounting and sales productivity, with ongoing monitoring and training to improve performance [5] - The Pro loyalty program was highlighted as a key initiative to incentivize professional customers, which includes tile setters and contractors [6] Market Data and Key Metrics Changes - The company faced challenges due to COVID-19, which adversely impacted traffic and sales, particularly in the first quarter of 2020 [9][10] - Product shortages from supply chain disruptions contributed to lower sales levels in Q3 2020 compared to the previous year [15][16] Company Strategy and Development Direction - The company established three strategic priorities for 2020: focus on retail execution, enhance the Pro loyalty program, and disciplined expense management [5][7] - Efforts to reduce expenses led to a $7.4 million reduction in SG&A expenses in Q3 2020 compared to the same quarter last year [7][17] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the ongoing challenges from the COVID-19 pandemic, emphasizing safety as a top priority and the need for rigorous cleaning processes [12] - The company is committed to maintaining a conservative approach to expenses while navigating the pandemic's impact on operations [10][11] Other Important Information - The company ended Q3 2020 with 142 stores, an increase from 140 stores at the end of Q3 2019, although plans to open a new store in 2020 have been postponed to 2021 [18] - Inventory levels decreased by approximately $6.1 million from the second quarter, reflecting a strategic reduction in inventory [19] Q&A Session Summary Question: What are the company's plans regarding store openings? - The company has postponed the opening of a new store planned for 2020 to 2021 [18]