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Tile Shop(TTSH) - 2024 Q1 - Quarterly Results
Tile ShopTile Shop(US:TTSH)2024-05-09 11:30

Performance Summary and Management Commentary The Tile Shop reported a 10.1% net sales decline and 10.2% comparable store sales decrease in Q1 2024, while improving gross margin to 65.8% and generating $18.6 million in operating cash flow | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Sales | $91.7 million | $102.0 million | | Net Sales Decline | (10.1)% | (0.4)% | | Comparable Store Sales Decline | (10.2)% | 0.1% (growth) | | Gross Margin Rate | 65.8% | 64.2% | | Net Income | $1.7 million | $2.5 million | | Diluted EPS | $0.04 | $0.06 | | Adjusted EBITDA | $7.4 million | $10.3 million | - Management stated that continued softness in existing home sales led to lower store traffic, adversely impacting comparable store sales4 - The company highlighted strong operating cash flow generation of $18.6 million and an ending cash balance of $24.0 million with no long-term debt3 First Quarter 2024 Financial Performance The company's financial performance in Q1 2024 was characterized by a significant sales decline due to lower traffic, which was partially mitigated by an improved gross margin rate of 65.8% and a 5.5% reduction in SG&A expenses Net Sales Net sales for Q1 2024 decreased by 10.1% to $91.7 million from $102.0 million in Q1 2023, driven by a 10.2% decline in comparable store sales primarily due to decreased customer traffic | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Sales | $91.7 million | $102.0 million | | YoY Change | -10.1% | -0.4% | | Comparable Store Sales Change | -10.2% | +0.1% | - The decline in sales at comparable stores was principally due to a decrease in traffic6 Gross Profit Gross profit decreased by 8.0% to $60.3 million in Q1 2024, but the gross margin rate improved by 160 basis points to 65.8% due to lower international freight and product costs | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Gross Profit | $60.3 million | $65.5 million | | Gross Margin Rate | 65.8% | 64.2% | - The improvement in the gross margin rate was primarily attributed to lower levels of international freight and decreases in product costs7 Selling, General and Administrative Expenses Selling, general and administrative (SG&A) expenses decreased by 5.5% to $58.0 million in Q1 2024, primarily driven by reductions in variable costs and depreciation expense - SG&A expenses decreased by $3.4 million (5.5%) from $61.4 million in Q1 2023 to $58.0 million in Q1 20248 - The decrease was mainly due to a $2.9 million reduction in variable costs and a $1.0 million decrease in depreciation expense, partially offset by a $0.6 million increase in rent8 Provision for Income Taxes The provision for income taxes decreased to $0.4 million in Q1 2024 due to lower pretax income, with the effective tax rate falling to 20.2% primarily from increased tax benefits on employee equity awards | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Provision for Income Taxes | $0.4 million | $0.8 million | | Effective Tax Rate | 20.2% | 24.5% | - The decrease in the effective tax rate was largely due to an increase in the tax benefit associated with employee equity award vestings9 Capital Structure and Liquidity As of March 31, 2024, the company maintained a strong liquidity position with no outstanding borrowings on its $75.0 million line of credit and a substantial increase in cash to $24.0 million - The company had no borrowings outstanding on its $75.0 million line of credit as of March 31, 202410 - Cash and cash equivalents increased by $15.4 million, from $8.6 million on December 31, 2023, to $24.0 million on March 31, 202410 Non-GAAP Financial Measures The company's non-GAAP metrics showed a decline in profitability, with Adjusted EBITDA for Q1 2024 at $7.4 million and Pretax Return on Capital Employed for the trailing twelve months at 11.3% Adjusted EBITDA Reconciliation | ($ in millions) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | GAAP net income | $1.7 | $2.5 | | Interest expense | $0.2 | $0.8 | | Provision for income taxes | $0.4 | $0.8 | | Depreciation and amortization | $4.7 | $5.8 | | Stock-based compensation | $0.4 | $0.4 | | Adjusted EBITDA | $7.4 | $10.3 | Pretax Return on Capital Employed (TTM) | ($ in millions) | As of Mar 31, 2024 | As of Mar 31, 2023 | | :--- | :--- | :--- | | Income from Operations (TTM) | $14.3 | $22.0 | | Capital Employed | $126.6 | $145.1 | | Pretax Return on Capital Employed | 11.3% | 15.2% | Consolidated Financial Statements The consolidated financial statements detail the company's financial position and performance, showing total assets of $325.9 million, net income of $1.7 million, and $18.6 million in net cash from operating activities Consolidated Balance Sheets As of March 31, 2024, total assets increased to $325.9 million, driven by a rise in cash to $24.0 million, with total liabilities at $204.6 million and stockholders' equity at $121.3 million, and no long-term debt | ($ in millions) | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $24.0 | $8.6 | | Total Current Assets | $126.7 | $114.6 | | Total Assets | $325.9 | $316.7 | | Total Current Liabilities | $87.7 | $78.7 | | Long-term debt, net | $0 | $0 | | Total Liabilities | $204.6 | $197.0 | | Total Stockholders' Equity | $121.3 | $119.7 | Consolidated Statements of Income For Q1 2024, net sales were $91.7 million, resulting in income from operations of $2.3 million and net income of $1.7 million, or $0.04 per diluted share, compared to $2.5 million net income in Q1 2023 | ($ in millions, except per share) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net sales | $91.7 | $102.0 | | Gross profit | $60.3 | $65.5 | | Income from operations | $2.3 | $4.1 | | Net income | $1.7 | $2.5 | | Diluted EPS | $0.04 | $0.06 | Consolidated Statements of Cash Flows In Q1 2024, the company generated $18.6 million in net cash from operating activities, used $2.7 million in investing activities, and $0.5 million in financing activities, leading to a net cash increase of $15.4 million | ($ in millions) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $18.6 | $25.8 | | Net cash used in investing activities | ($2.7) | ($3.4) | | Net cash used in financing activities | ($0.5) | ($20.8) | | Net change in cash | $15.4 | $1.6 |