Tile Shop(TTSH) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Overview This section summarizes The Tile Shop's Q2 2025 performance, highlighting key financial results and management's strategic insights Key Financial Highlights Q2 2025 saw declines in net sales, comparable store sales, net income, and Adjusted EBITDA, despite a strong cash position with no debt Second Quarter 2025 Key Financial Highlights | Metric | Q2 2025 | Q2 2024 | Change (%) | | :-------------------------------- | :------ | :------ | :--------- | | Net Sales | $88,260 | $91,384 | -3.4% | | Comparable Store Sales | -3.5% | -6.9% | - | | Gross Margin Rate | 64.4% | 66.0% | -1.6 pp | | Net Income | $392 | $1,219 | -67.8% | | Net Income per Diluted Share | $0.01 | $0.03 | -66.7% | | Adjusted EBITDA | $4,937 | $6,733 | -26.7% | | Adjusted EBITDA as % of Net Sales | 5.6% | 7.4% | -1.8 pp | | Number of Stores Open | 141 | 142 | -1 | - No debt outstanding and $27.8 million of cash at quarter-end[2] Management's Perspective CEO noted modest unit volume improvement from expanded product assortment, offset by lower-priced item demand and higher discounting, with low housing turnover impacting traffic and sales - Expanded assortment of entry-level, competitively priced products contributed to modest improvement in unit volumes[3] - Improvement in unit volumes was offset by increased demand for lower average selling price products and higher discounting[3] - Housing turnover remains near historic lows, continuing to pressure store traffic and comparable store sales[3] Detailed Financial Results This section analyzes the company's Q2 2025 financial performance, detailing net sales, gross profit, operating expenses, and net income Net Sales Net sales for Q2 2025 decreased by 3.4% year-over-year, with comparable store sales declining by 3.5%, primarily due to reduced customer traffic Net Sales Performance | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | YoY Change | | :------- | :-------------------- | :-------------------- | :--------- | | Net Sales | 88,260 | 91,384 | -3.4% | | Comparable Store Sales Decline | 3.5% | 6.9% | - | - Sales decreased at comparable stores primarily due to a decrease in traffic[5] Gross Profit Gross profit decreased by 5.8% in Q2 2025, with gross margin rate declining by 160 basis points to 64.4%, mainly due to higher discounting and increased product costs Gross Profit Performance | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | YoY Change | | :---------------- | :-------------------- | :-------------------- | :--------- | | Gross Profit | 56,841 | 60,331 | -5.8% | | Gross Margin Rate | 64.4% | 66.0% | -1.6 pp | - Decrease in gross margin rate was due to higher levels of discounting combined with increases in product costs[6] Selling, General and Administrative Expenses (SG&A) SG&A expenses decreased by 3.6% in Q2 2025, driven by reductions in asset impairment, distribution center closures, marketing, and depreciation, partially offset by a display supplies write-off SG&A Expenses | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | YoY Change | | :-------------------------------- | :-------------------- | :-------------------- | :--------- | | SG&A Expenses | 56,401 | 58,480 | -3.6% | - Decrease in SG&A primarily due to: $0.8 million decrease in asset impairment, $0.7 million reduction from New Jersey distribution center closure, $0.7 million decrease in marketing costs, and $0.4 million decrease in depreciation, partially offset by a $0.4 million write-off of display supplies[7] - Closed a distribution center in Spring Valley, WI, during Q2 2025, anticipating an annualized benefit of approximately $1.0 million. Also closed two stores at the end of their lease terms[8][9] Income from Operations Income from operations significantly declined for both the three and six months ended June 30, 2025, reflecting overall challenges in sales and gross profit Income from Operations | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | YoY Change | | :----------------------- | :-------------------- | :-------------------- | :--------- | | Income from Operations | 440 | 1,851 | -76.2% | | Income from Operations Margin Rate | 0.5% | 2.0% | -1.5 pp | Provision for Income Taxes The provision for income taxes decreased in Q2 2025, primarily due to lower pretax income and a reduced effective tax rate of 16.4% compared to 32.1% in the prior year Provision for Income Taxes | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | YoY Change | | :------------------------ | :-------------------- | :-------------------- | :--------- | | Provision for Income Taxes | 77 | 575 | -86.6% | | Effective Tax Rate | 16.4% | 32.1% | -15.7 pp | - Decrease in provision for income taxes was primarily due to a decrease in pretax income and the impact of permanent differences[10] Net Income and Earnings Per Share (EPS) Net income and diluted EPS experienced a significant decline in Q2 2025, reflecting the overall decrease in profitability for the quarter Net Income and EPS Performance | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | YoY Change | | :----------------------- | :-------------------- | :-------------------- | :--------- | | Net Income | 392 | 1,219 | -67.8% | | Net Income per Diluted Share | 0.01 | 0.03 | -66.7% | Capital Structure and Liquidity The company maintained a strong capital structure and liquidity position as of June 30, 2025, with no outstanding borrowings on its line of credit and an increase in cash and cash equivalents - No borrowings outstanding on its $75.0 million line of credit as of June 30, 2025[11] Cash and Cash Equivalents | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change | | :---------------------- | :---------------------------- | :------------------------------ | :----- | | Cash and Cash Equivalents | 27,758 | 20,957 | +$6,801 | Non-GAAP Financial Measures This section presents and explains the company's non-GAAP financial measures, including Adjusted EBITDA and Pretax Return on Capital Employed Adjusted EBITDA Adjusted EBITDA decreased significantly in Q2 2025 and for the six months ended June 30, 2025, reflecting operational challenges and reduced profitability Adjusted EBITDA Performance | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | YoY Change | | :--------------- | :-------------------- | :-------------------- | :--------- | | Adjusted EBITDA | 4,937 | 6,733 | -26.7% | | Adjusted EBITDA as % of Net Sales | 5.6% | 7.4% | -1.8 pp | Adjusted EBITDA (Six Months Ended) | Metric | 6 Months 2025 ($ thousands) | 6 Months 2024 ($ thousands) | YoY Change | | :--------------- | :-------------------------- | :-------------------------- | :--------- | | Adjusted EBITDA | 9,503 | 14,150 | -32.8% | | Adjusted EBITDA as % of Net Sales | 5.4% | 7.7% | -2.3 pp | Pretax Return on Capital Employed Pretax Return on Capital Employed declined substantially to 0.0% for the trailing twelve months ended Q2 2025, indicating reduced efficiency of capital utilization Pretax Return on Capital Employed | Metric | Trailing Twelve Months (June 30, 2025) | Trailing Twelve Months (June 30, 2024) | Change | | :------------------------------ | :------------------------------------- | :------------------------------------- | :----- | | Pretax Return on Capital Employed | 0.0% | 6.8% | -6.8 pp | Explanation of Non-GAAP Measures This section defines Adjusted EBITDA and Pretax Return on Capital Employed as non-GAAP measures, used by management and investors for trend analysis and performance comparison - Adjusted EBITDA is calculated by adjusting GAAP net income for interest, income taxes, depreciation and amortization, and stock-based compensation expense[16] - Pretax Return on Capital Employed is calculated as income from operations divided by capital employed (total assets less certain liabilities)[16] - These non-GAAP measures provide useful information for management and investors for trend analyses, budgeting, planning, and assessing capital allocation, but have limitations as they exclude significant GAAP expenses and income[17][18] Company Information and Disclosures This section provides essential company information, including investor communications, a company overview, and forward-looking statements Webcast and Conference Call The Tile Shop hosted a conference call and webcast on August 7, 2025, to discuss Q2 2025 results, with replay available on its Investor Relations page - Conference call and webcast for investors held on Thursday, August 7, 2025, at 9:00 a.m. Eastern Time[19] - Webcast replay available on the Company's Investor Relations page at www.tileshop.com[20](index=20&type=chunk) - The company uses investors.tileshop.com for disclosing material non-public information and complying with Regulation FD[21] About The Tile Shop Tile Shop Holdings, Inc. is a specialty retailer of natural stone, man-made, and luxury vinyl tiles, operating 141 stores across 31 states and D.C. as of June 30, 2025 - Specialty retailer of natural stone, man-made, and luxury vinyl tiles, setting and maintenance materials, and related accessories in the United States[22] - As of June 30, 2025, the Company had 141 stores in 31 states and the District of Columbia[22] - Member of industry associations including ASID, NAHB, NKBA, and NTCA[23] Forward-Looking Statements This section cautions that forward-looking statements are based on current beliefs and subject to risks and uncertainties that could cause actual results to differ materially - Includes 'forward looking statements' regarding strategic and operational plans and expected financial performance[24] - Statements are subject to risks and uncertainties that may cause actual results to differ materially[24] - The Company does not intend, and undertakes no duty, to update this information to reflect future events or circumstances, except as required by law[24] Consolidated Financial Statements This section presents the company's complete consolidated financial statements, including balance sheets, income statements, and cash flow statements Consolidated Balance Sheets The consolidated balance sheets present the company's financial position as of June 30, 2025, compared to December 31, 2024, showing an increase in total assets and total liabilities, while stockholders' equity also saw a slight increase Consolidated Balance Sheet Highlights | Metric ($ thousands) | June 30, 2025 | December 31, 2024 | | :--------------------- | :------------ | :---------------- | | Total Current Assets | 126,270 | 119,822 | | Total Assets | 324,110 | 319,603 | | Total Current Liabilities | 82,780 | 78,394 | | Total Liabilities | 200,233 | 196,691 | | Total Stockholders' Equity | 123,877 | 122,912 | Consolidated Statements of Income The consolidated statements of income detail the company's financial performance for the three and six months ended June 30, 2025, highlighting the year-over-year declines in net sales, gross profit, income from operations, and net income Consolidated Statements of Income (Three Months Ended June 30) | Metric ($ thousands) | 2025 | 2024 | | :----------------------- | :--- | :--- | | Net sales | 88,260 | 91,384 | | Cost of sales | 31,419 | 31,053 | | Gross profit | 56,841 | 60,331 | | Selling, general and administrative expenses | 56,401 | 58,480 | | Income from operations | 440 | 1,851 | | Income before income taxes | 469 | 1,794 | | Provision for income taxes | (77) | (575) | | Net income | 392 | 1,219 | | Diluted EPS | 0.01 | 0.03 | Consolidated Statements of Income (Six Months Ended June 30) | Metric ($ thousands) | 2025 | 2024 | | :----------------------- | :--- | :--- |\ | Net sales | 176,269 | 183,112 | | Cost of sales | 61,358 | 62,462 | | Gross profit | 114,911 | 120,650 | | Selling, general and administrative expenses | 114,288 | 116,516 | | Income from operations | 623 | 4,134 | | Income before income taxes | 670 | 3,911 | | Provision for income taxes | (106) | (1,003) | | Net income | 564 | 2,908 | | Diluted EPS | 0.01 | 0.07 | Rate Analysis The rate analysis provides a comparative view of key financial ratios for the three and six months ended June 30, 2025, showing declines in gross margin, income from operations margin, and Adjusted EBITDA margin rates Key Financial Rates (Three Months Ended June 30) | Metric | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Gross margin rate | 64.4% | 66.0% | | SG&A expense rate | 63.9% | 64.0% | | Income from operations margin rate | 0.5% | 2.0% | | Adjusted EBITDA margin rate | 5.6% | 7.4% | Key Financial Rates (Six Months Ended June 30) | Metric | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Gross margin rate | 65.2% | 65.9% | | SG&A expense rate | 64.8% | 63.6% | | Income from operations margin rate | 0.4% | 2.3% | | Adjusted EBITDA margin rate | 5.4% | 7.7% | Consolidated Statements of Cash Flows The consolidated statements of cash flows for the six months ended June 30, 2025, show a decrease in net cash provided by operating activities compared to the prior year, while net cash used in investing activities remained relatively stable and net cash used in financing activities decreased Consolidated Statements of Cash Flows (Six Months Ended June 30) | Cash Flow Activity ($ thousands) | 2025 | 2024 | | :------------------------------- | :--- | :--- | | Net cash provided by operating activities | 13,487 | 23,452 | | Net cash used in investing activities | (6,402) | (6,257) | | Net cash used in financing activities | (284) | (463) | | Net change in cash and cash equivalents | 6,801 | 16,721 | | Cash and cash equivalents end of period | 27,758 | 25,341 |