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 taxes | 1,361 | 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 taxes | 4,981 | 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 | ||||||
