Escalade(ESCA) - 2025 Q2 - Quarterly Results

Escalade Second Quarter 2025 Earnings Release Financial & Operational Highlights Escalade's Q2 2025 net sales decreased 13.1% to $54.3 million, yet gross margin improved to 24.7%, and total debt significantly reduced by 49.0% to $22.0 million Q2 2025 vs Q2 2024 Key Financial Metrics | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $54.3M | $62.5M | -13.1% | | Gross Margin | 24.7% | 24.2% | +50 bps | | Operating Income | $2.6M | $4.5M | -42.2% | | Net Income | $1.8M | $2.8M | -35.7% | | Diluted EPS | $0.13 | $0.20 | -35.0% | | EBITDA | $3.9M | $5.8M | -32.8% | - The decrease in net sales was primarily due to softer market demand and delayed customer shipments related to tariff volatility, partially offset by market share gains in the safety category[3] - The company significantly improved its financial position, reducing total debt by 49.0% YoY to $22.0 million. The net debt to trailing twelve-month EBITDA ratio improved from 1.7x to 0.5x[7][9] - Cash flow from operations remained strong at $13.3 million, consistent with the prior year, as reduced profitability was offset by cash generated from inventory rationalization initiatives[6] - A quarterly dividend of $0.15 per share was announced, payable on October 13, 2025, to shareholders of record on October 6, 2025[8] Management Commentary Management highlighted improved gross margin despite lower sales and tariff costs, attributing sales decline to cautious consumers and unfavorable weather, while focusing on supply chain efficiency and disciplined capital allocation - Despite a soft market, the company delivered year-over-year gross margin improvement, even after absorbing $1.6 million in tariff-related costs, thanks to a leaner cost structure[10] - Sales performance was negatively impacted by a cautious consumer demand environment, changing customer buying patterns, the strategic exit of select product categories, and unfavorable weather[10] - Future strategy involves collaborating with retail and supply partners to improve supply chain efficiency and implementing targeted price increases to mitigate ongoing tariff headwinds[10] - Capital allocation priorities include share repurchases ($0.8 million in Q2), debt reduction (down 49.0% YoY), returning capital to shareholders via dividends, and investing in product innovation[10] Financial Statements This section presents the unaudited consolidated financial statements for the three and six months ended June 30, 2025, and 2024, including Statements of Operations, Balance Sheets, and Statements of Cash Flows Consolidated Statements of Operations For Q2 2025, net sales decreased to $54.3 million, leading to a decline in operating income to $2.6 million and net income to $1.8 million, or $0.13 per diluted share Q2 Statement of Operations (in thousands) | Account | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net sales | $54,333 | $62,526 | | Cost of products sold | $40,896 | $47,415 | | Operating Income | $2,621 | $4,457 | | Net Income | $1,825 | $2,844 | | Diluted EPS | $0.13 | $0.20 | Six Months Statement of Operations (in thousands) | Account | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | | Net sales | $109,812 | $119,830 | | Operating Income | $6,273 | $7,517 | | Net Income | $4,444 | $4,619 | | Diluted EPS | $0.32 | $0.33 | Consolidated Balance Sheets As of June 30, 2025, total assets decreased to $218.3 million, driven by reduced inventories, while total liabilities significantly decreased to $50.0 million due to lower long-term debt, and cash increased to $10.4 million Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $10,422 | $362 | | Inventories | $72,672 | $86,571 | | TOTAL ASSETS | $218,339 | $243,066 | | Long‑term debt | $14,881 | $36,024 | | TOTAL LIABILITIES | $50,001 | $77,084 | | TOTAL STOCKHOLDERS' EQUITY | $168,338 | $165,982 | Consolidated Statements of Cash Flows For the first six months of 2025, operating cash flow increased to $17.1 million, while financing activities used $9.9 million, resulting in an improved cash position of $10.4 million Six Months Cash Flows (in thousands) | Activity | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $17,083 | $13,299 | | Net cash used in investing activities | ($976) | ($1,082) | | Net cash used in financing activities | ($9,879) | ($11,871) | | Net increase in cash and cash equivalents | $6,228 | $346 | | Cash and cash equivalents, end of period | $10,422 | $362 | Supplementary Information This section provides supplementary details including investor conference call information, a reconciliation of GAAP Net Income to non-GAAP EBITDA, a business description, and forward-looking statement disclaimers Reconciliation of GAAP Net Income to Non-GAAP EBITDA The company provides a reconciliation from GAAP Net Income to non-GAAP EBITDA, with Q2 2025 EBITDA at $3.9 million and six-month EBITDA at $8.9 million EBITDA Reconciliation (in thousands) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Income (GAAP) | $1,825 | $2,844 | $4,444 | $4,619 | | Interest expense | $213 | $730 | $457 | $1,465 | | Income tax expense | $634 | $886 | $1,454 | $1,439 | | Depreciation and amortization | $1,262 | $1,378 | $2,501 | $2,751 | | EBITDA (Non-GAAP) | $3,934 | $5,838 | $8,856 | $10,274 | Conference Call Information The company will host a conference call on Friday, August 1, 2025, at 11:00 a.m. ET to review its financial results, with dial-in and webcast details provided - A conference call to review financial results is scheduled for Friday, August 1, 2025, at 11:00 a.m. ET[11] - Webcast and presentation materials will be available in the Investor Relations section of Escalade's website, with specific dial-in and replay numbers for the teleconference[12] Forward-Looking Statements & Non-GAAP Disclosures This section contains standard legal disclaimers regarding forward-looking statements and explains the company's use of non-GAAP EBITDA as a supplementary financial measure - The company uses the non-GAAP financial measure EBITDA to facilitate comparisons of operating performance across periods and believes it provides useful information to investors[13] - The report contains forward-looking statements that are subject to numerous risks, including the company's ability to lessen the impact of tariffs, manage supply chain disruptions, and adapt to shifting consumer buying habits[16]