• The Tile Shop Reports Third Quarter 2022 Results

    ソース: Nasdaq GlobeNewswire / 03 11 2022 07:00:02   America/New_York

    MINNEAPOLIS, Nov. 03, 2022 (GLOBE NEWSWIRE) --

    Tile Shop Holdings, Inc. (Nasdaq: TTSH) (the “Company”), a specialty retailer of natural stone and man-made tiles, today announced results for its third quarter ended September 30, 2022.  

    Quarter Summary

    Net Sales Increased 5.3%
    Comparable Store Sales Increased 5.3%
    Gross Margin of 66.5%
    Net income of $3.8 Million; Adjusted EBITDA of $12.2 Million
    Diluted Earnings per Share of $0.08
    Share Repurchase Program Completed in October; 7.8 Million Shares Repurchased

    Management Commentary – Cabell Lolmaugh, CEO

    “Our sales of $97.2 million represent the sixth consecutive quarterly sales record for the respective quarter. We are generating good flow through of our topline which helped drive improvements in operating income and increase our return on capital employed to 16.8%. While the macro environment remains challenging, we have a number of initiatives underway to keep us positioned for continued growth as we head into 2023.”

                     
      Three Months Ended   Nine Months Ended
    (unaudited, dollars in thousands, except per September 30,   September 30,
    share data) 2022 2021 2022 2021
    Net sales $97,154  $92,240  $307,230  $280,517 
    Net sales growth(1)  5.3%  13.2%  9.5%  15.2%
    Comparable store sales growth(2)  5.3%  12.8%  9.5%  14.9%
    Gross margin rate  66.5%  68.2%  65.9%  69.0%
    Income from operations as a % of net sales  5.7%  3.4%  6.5%  6.3%
    Net income $3,823  $2,175  $14,250  $12,966 
    Net income per diluted share $0.08  $0.04  $0.28  $0.25 
    Adjusted EBITDA $12,223  $10,407  $40,645  $40,487 
    Adjusted EBITDA as a % of net sales  12.6%  11.3%  13.2%  14.4%
    Number of stores open at the end of period  143   143   143   143 

    (1) As compared to the prior year period.

    (2) The comparable store sales operating metric is the percentage change in sales of comparable stores period over period. A store is considered comparable on the first day of the 13th full month of operation. When a store is relocated, it is excluded from the comparable store sales calculation. Comparable store sales includes total charges to customers less any actual returns. The Company includes the change in allowance for anticipated sales returns applicable to comparable stores in the comparable store sales calculation.

    THIRD QUARTER 2022

    Net Sales
    Net sales for the third quarter of 2022 increased $4.9 million, or 5.3%, over the third quarter of 2021. Sales increased at comparable stores by 5.3% during the third quarter of 2022 compared to the third quarter of 2021, primarily due to an increase in average ticket driven by higher prices.

    Gross Profit
    Gross profit increased $1.7 million, or 2.6%, in the third quarter of 2022 compared to the third quarter of 2021. The gross margin rate was 66.5% and 68.2% during the third quarter of 2022 and 2021, respectively. The decrease in the gross margin rate was primarily due to an increase in the cost of our products driven by vendor cost increases and higher international freight rates, which were partially offset by an increase in our selling prices.

    Selling, General and Administrative Expenses
    Selling, general and administrative expenses decreased by $0.7 million, or 1.1%, from $59.8 million in the third quarter of 2021 to $59.1 million in the third quarter of 2022, due primarily to a $0.7 million asset impairment charge incurred during the third quarter of 2021 and no asset impairment charges in the third quarter of 2022. In addition, the Company recognized a $0.8 million benefit related to a lease incentive, which was mostly offset by a $0.7 million increase in pay and benefits expenses during the third quarter of 2022.

    Inventory
    Inventory increased by $11.5 million from $110.0 million at the end of the second quarter of 2022 to $121.5 million at the end of the third quarter of 2022. The higher inventory level is attributable to an increase in the cost of the products purchased from our suppliers as well as steps taken to accelerate certain purchases ahead of expected price increases by our suppliers.

    Capital Structure and Liquidity
    As of September 30, 2022, our cash balance was $12.4 million and our debt balance was $30.4 million.  The increase in our debt level during the quarter from $5.0 million at the end of the second quarter 2022 was primarily related to $15.5 million of share repurchases and an $11.5 million increase in inventory.

    On September 30, 2022, the Company and its operating subsidiary, The Tile Shop LLC, and certain subsidiaries of each entered into a Credit Agreement with JPMorgan Chase Bank, N.A. and the lenders party thereto, including Fifth Third Bank (the “Credit Agreement”).  The Credit Agreement provides the Company with a senior credit facility consisting of a $75.0 million revolving line of credit through September 30, 2027.  Borrowings outstanding as of September 30, 2022 were SOFR-based interest rate loans.  The SOFR-based interest rate was 4.54% on September 30, 2022. 

    Share Repurchase Plan
    On August 15, 2022, the Board of Directors approved a $30.0 million share repurchase plan. As of September 30, 2022, the Company had repurchased 4.1 million shares under this plan for $15.5 million, inclusive of brokerage commissions, or an average price of $3.80 per share. Subsequent to the end of the quarter, the Company completed the share repurchase program. In total, 7.8 million shares were repurchased for $30.2 million, inclusive of brokerage commissions, or an average price of $3.87 per share.

    NON-GAAP INFORMATION

    Adjusted EBITDA

    Adjusted EBITDA for the third quarter of 2022 was $12.2 million compared with $10.4 million for the third quarter of 2021. See the table below for a reconciliation of GAAP net income to Adjusted EBITDA.

     Three Months Ended        
    ($ in thousands, unaudited)September 30,         
     2022 % of net sales (1) 2021 % of net sales
    GAAP net income$3,823 3.9% $2,175 2.4%
    Interest expense 319 0.3   204 0.2 
    Provision for income taxes1,361 1.4   779 0.8 
    Depreciation and amortization 6,157 6.3   6,689 7.3 
    Stock-based compensation 563 0.6   560 0.6 
    Adjusted EBITDA$12,223 12.6% $10,407 11.3%
                
     Nine Months Ended        
    ($ in thousands, unaudited)September 30,         
     2022 % of net sales 2021 % of net sales (1)
    GAAP net income$14,250 4.6% $12,966 4.6%
    Interest expense 786 0.3   517 0.2 
    Provision for income taxes4,981 1.6   4,197 1.5 
    Depreciation and amortization 19,011 6.2   20,948 7.5 
    Stock-based compensation 1,617 0.5   1,859 0.7 
    Adjusted EBITDA$40,645 13.2% $40,487 14.4%

     

    (1) Amounts do not foot due to rounding.

    Pretax Return on Capital Employed

    Pretax Return on Capital Employed was 16.8% for the trailing twelve months as of the end of the third quarter in 2022 compared to 13.9% for the trailing twelve months as of the end of the third quarter in 2021. See the Pretax Return on Capital Employed calculation in the table below.

    ($ in thousands, unaudited)September 30,
     2022(1) 2021(1)
    Income from Operations (trailing twelve months)$22,947  $20,355 
          
    Total Assets 347,454   353,491 
    Less: Accounts payable (30,597)  (16,909)
    Less: Income tax payable (915)  (222)
    Less: Other accrued liabilities (41,534)  (40,322)
    Less: Lease liability (132,660)  (144,787)
    Less: Other long-term liabilities (4,756)  (4,511)
    Capital Employed$136,992  $146,740 
          
    Pretax Return on Capital Employed 16.8%   13.9% 

    (1) Income statement accounts represent the activity for the trailing twelve months ended as of each of the balance sheet dates. Balance sheet accounts represent the average account balance for the four quarters ended as of each of the balance sheet dates.

    Non-GAAP Financial Measures

    The Company calculates Adjusted EBITDA by taking net income calculated in accordance with GAAP, and adjusting for interest expense, income taxes, depreciation and amortization, and stock-based compensation expense. Adjusted EBITDA margin is equal to Adjusted EBITDA divided by net sales. The Company calculates Pretax Return on Capital Employed by taking income (loss) from operations divided by capital employed. Capital employed equals total assets less accounts payable, income taxes payable, other accrued liabilities, lease liability and other long-term liabilities. Other companies may calculate both Adjusted EBITDA and Pretax Return on Capital Employed differently, limiting the usefulness of these measures for comparative purposes.

    The Company believes that these non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to the Company’s financial condition and results of operations. Company management uses these non-GAAP measures to compare Company performance to that of prior periods for trend analyses, for purposes of determining management incentive compensation, for budgeting and planning purposes and for assessing the effectiveness of capital allocation over time. These measures are used in monthly financial reports prepared for management and the Board of Directors. The Company believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing the Company’s financial measures with other specialty retailers, many of which present similar non-GAAP financial measures to investors.

    Company management does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitations of these non-GAAP financial measures are that they exclude significant expenses and income that are required by GAAP to be recognized in the Company’s consolidated financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which expenses and income are excluded or included in determining these non-GAAP financial measures. In order to compensate for these limitations, management presents non-GAAP financial measures in connection with GAAP results. The Company urges investors to review the reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures and not to rely on any single financial measure to evaluate the business.        

    WEBCAST AND CONFERENCE CALL

    As announced on October 27, 2022, the Company will host a conference call via webcast for investors and other interested parties beginning at 9:00 a.m. Eastern Time on Thursday, November 3, 2022. The call will be hosted by Cabell Lolmaugh, CEO, Karla Lunan, CFO, and Mark Davis, Vice President of Investor Relations and Chief Accounting Officer.  

    To participate in the live call, please pre-register here. All registrants will receive dial-in information and a unique PIN. A webcast of the call can be accessed by visiting the Company’s Investor Relations page at www.tileshop.com. A webcast replay of the call will be available on the Company’s Investor Relations page at www.tileshop.com.

    The Company intends to use its website, investors.tileshop.com, as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD. Such disclosures will be included on the Company’s website under the heading News and Events. Accordingly, investors should monitor such portions of the Company’s website, in addition to following its press releases, Securities and Exchange Commission filings and public conference calls and webcasts.

    Contact:
    Investors and Media:
    Mark Davis
    investorrelations@tileshop.com

    ABOUT THE TILE SHOP

    Tile Shop Holdings, Inc. (Nasdaq: TTSH) is a leading specialty retailer of natural stone and man-made tiles, setting and maintenance materials, and related accessories in the United States. The Tile Shop offers a wide selection of high-quality products, exclusive designs, knowledgeable staff and exceptional customer service in an extensive showroom environment. The Tile Shop currently operates 143 stores in 31 states and the District of Columbia.

    The Tile Shop is a proud member of the American Society of Interior Designers (ASID), National Association of Homebuilders (NAHB), National Kitchen and Bath Association (NKBA), and the National Tile Contractors Association (NTCA). Visit www.tileshop.com. Join The Tile Shop (#thetileshop) on Facebook, Instagram, Pinterest and Twitter.

    FORWARD LOOKING STATEMENTS

    This press release includes “forward looking statements” within 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”, “expect”, “estimate”, “plan”, “outlook”, and “project” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward looking statements include any statements regarding the Company’s strategic and operational plan and expected financial performance. Forward looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward looking statements are based on information available at the time such statements are made and/or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward looking statements, including but not limited to unforeseen events that may affect the retail market or the performance of the Company’s stores. The Company does not intend, and undertakes no duty, to update this information to reflect future events or circumstances. Investors are referred to the most recent reports filed with the Securities and Exchange Commission by the Company.

    Tile Shop Holdings, Inc. and Subsidiaries      
    Condensed Consolidated Balance Sheets      
    (dollars in thousands, except share and per share data)      
           
      (Unaudited) (Audited)
      September 30, December 31,
      2022 2021
    Assets      
    Current assets:      
    Cash and cash equivalents $12,423  $9,358 
    Restricted cash  3,131   655 
    Receivables, net  4,104   3,202 
    Inventories  121,481   97,175 
    Income tax receivable  106   6,923 
    Other current assets, net  11,600   9,769 
    Total Current Assets  152,845   127,082 
    Property, plant and equipment, net  73,368   82,285 
    Right of use asset  116,103   123,101 
    Deferred tax assets  6,633   6,953 
    Long-term income tax receivable  9,060   - 
    Other assets  2,974   1,337 
    Total Assets $360,983  $340,758 
           
    Liabilities and Stockholders' Equity      
    Current liabilities:      
    Accounts payable $32,809  $30,884 
    Income tax payable  2,371   390 
    Current portion of lease liability  27,826   28,190 
    Other accrued liabilities  40,121   38,249 
    Total Current Liabilities  103,127   97,713 
    Long-term debt, net  30,400   5,000 
    Long-term lease liability, net  101,571   110,261 
    Other long-term liabilities  4,150   5,560 
    Total Liabilities  239,248   218,534 
           
    Stockholders’ Equity:      
    Common stock, par value $0.0001; authorized: 100,000,000 shares; issued and outstanding: 48,084,360 and 51,963,377 shares, respectively  5   5 
    Preferred stock, par value $0.0001; authorized: 10,000,000 shares; issued and outstanding: 0 shares  -   - 
    Additional paid-in capital  127,813   126,920 
    Accumulated deficit  (6,008)  (4,713)
    Accumulated other comprehensive (loss) income  (75)  12 
    Total Stockholders' Equity  121,735   122,224 
    Total Liabilities and Stockholders' Equity $360,983  $340,758 
           

    Tile Shop Holdings, Inc. and Subsidiaries
    Consolidated Statements of Operations
    ($ in thousands, except per share data)
    (Unaudited)

      Three Months Ended Nine Months Ended
      September 30, September 30,
      2022 2021 2022 2021
    Net sales $97,154  $92,240  $307,230  $280,517 
    Cost of sales  32,542   29,291   104,754   86,957 
    Gross profit  64,612   62,949   202,476   193,560 
    Selling, general and administrative expenses  59,109   59,791   182,459   175,880 
    Income from operations  5,503   3,158   20,017   17,680 
    Interest expense  (319)  (204)  (786)  (517)
    Income before income taxes  5,184   2,954   19,231   17,163 
    Provision for income taxes  (1,361)  (779)  (4,981)  (4,197)
    Net income  $3,823  $2,175  $14,250  $12,966 
                 
    Income per common share:            
    Basic $0.08  $0.04  $0.28  $0.26 
    Diluted $0.08  $0.04  $0.28  $0.25 
                 
    Weighted average shares outstanding:            
    Basic  50,423,923   50,545,761   50,674,870   50,305,455 
    Diluted  50,717,426   51,384,034   51,080,404   51,069,853 
                 

    Tile Shop Holdings, Inc. and Subsidiaries
    Rate Analysis
    (Unaudited)

      Three Months Ended Nine Months Ended
      September 30, September 30,
      2022 2021 2022 2021
    Gross margin rate 66.5% 68.2% 65.9% 69.0%
    SG&A expense rate 60.8% 64.8% 59.4% 62.7%
    Income from operations margin rate 5.7% 3.4% 6.5% 6.3%
    Adjusted EBITDA margin rate 12.6% 11.3% 13.2% 14.4%
                 

    Tile Shop Holdings, Inc. and Subsidiaries
    Consolidated Statements of Cash Flows
    ($ in thousands)
    (Unaudited)

      Nine Months Ended
      September 30,
      2022 2021
    Cash Flows From Operating Activities      
    Net income $14,250  $12,966 
    Adjustments to reconcile net income to net cash provided by operating activities:      
    Depreciation and amortization  19,011   20,948 
    Amortization of debt issuance costs  363   227 
    Loss on disposals of property, plant and equipment  -   14 
    Impairment charges  -   720 
    Non-cash lease expense  19,418   18,605 
    Stock based compensation  1,617   1,859 
    Deferred income taxes  320   (836)
    Changes in operating assets and liabilities:      
    Receivables, net  (902)  (356)
    Inventories  (24,305)  (2,401)
    Other current assets, net  (3,479)  1,051 
    Accounts payable  1,831   4,304 
    Income tax receivable / payable  (263)  (56)
    Accrued expenses and other liabilities  (20,676)  (12,655)
    Net cash provided by operating activities  7,185   44,390 
    Cash Flows From Investing Activities      
    Purchases of property, plant and equipment  (10,340)  (8,933)
    Net cash used in investing activities  (10,340)  (8,933)
    Cash Flows From Financing Activities      
    Payments of long-term debt and financing lease obligations  (45,000)  - 
    Advances on line of credit  70,400   - 
    Employee taxes paid for shares withheld  (724)  (821)
    Repurchases of common stock  (15,545)  - 
    Debt issuance costs  (360)  - 
    Net cash used in financing activities  8,771   (821)
    Effect of exchange rate changes on cash  (75)  11 
    Net change in cash, cash equivalents and restricted cash  5,541   34,647 
    Cash, cash equivalents and restricted cash beginning of period  10,013   10,272 
    Cash, cash equivalents and restricted cash end of period $15,554  $44,919 
           
    Cash and cash equivalents $12,423  $44,264 
    Restricted cash  3,131   655 
    Cash, cash equivalents and restricted cash end of period $15,554  $44,919 
           
    Supplemental disclosure of cash flow information      
    Purchases of property, plant and equipment included in accounts payable and accrued expenses $129  $237 
    Cash paid for interest  882   565 
    Cash paid for income taxes, net  4,922   5,088 

     

     


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