NASDAQ:TTSH Tile Shop Q1 2023 Earnings Report $5.68 -0.07 (-1.15%) As of 09:55 AM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings History Tile Shop EPS ResultsActual EPS$0.06Consensus EPS N/ABeat/MissN/AOne Year Ago EPSN/ATile Shop Revenue ResultsActual Revenue$102.02 millionExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/ATile Shop Announcement DetailsQuarterQ1 2023Date5/4/2023TimeN/AConference Call DateThursday, May 4, 2023Conference Call Time9:00AM ETUpcoming EarningsTile Shop's Q1 2025 earnings is scheduled for Thursday, May 8, 2025, with a conference call scheduled at 9:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by Tile Shop Q1 2023 Earnings Call TranscriptProvided by QuartrMay 4, 2023 ShareLink copied to clipboard.There are 5 speakers on the call. Operator00:00:00Day and thank you for standing by. Welcome to the Q1 Tile Shop Holdings Incorporated Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will Speaker 100:00:13be a Q and A session. Operator00:00:27Please be advised today's conference call is being recorded. I would now like to hand the conference call over to your speaker today, Mark Davis, Vice President of Investor Relations and Chief Accounting Officer. Mark, please go ahead. Speaker 200:00:47Thank you. Good morning to everyone and welcome to the Tile Shop's 1st quarter earnings call. Joining me today are Cab Loma, our Chief Executive Officer and Carla Lunick, by our Chief Financial Officer. Certain statements made during the call today constitute forward looking statements made pursuant to and within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended. Such forward looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Speaker 200:01:21Those risks and uncertainties are described in our earnings press release issued issued earlier and in our filings with the SEC. The forward looking statements made today are as of the date of this call, and we do not undertake any obligation to update these forward looking statements. Today's call will also include certain non GAAP measurements. Please see our earnings release for a reconciliation of those non GAAP financial measures, which has been posted on our company website. With that, let me now turn the Speaker 300:01:48call over to Cat. Thanks, Mark. Good morning, everyone, and thank you for joining us today for an update on our business and our Q1 results. Comparable store sales during the first Quarter of 2023 were flat with 2022. During the quarter, macro headwinds continued to persist. Speaker 300:02:06Rising interest rates and slowing housing turnover Indicates that some homeowners are choosing to remodel their homes as opposed to moving. Many of our pros indicate they still have a healthy backlog of work. Nevertheless, we anticipate macro conditions will remain challenging over the next several quarters. Store teams continue to make progress against their retail excellence goals. Our pro sales mix, which includes sales to pros and pro referrals, was over 70% of our total sales during the Q1. Speaker 300:02:43Additionally, we've made progress improving adoption of best practices at a number of our stores that have underperformed in the past. While we're making progress in this area, we still have more work in front of us. Given the challenging macro environment, I've made the decision to delay opening a second new store in 2020 We're still on track to deliver strong performance on our new work commitments. During the Q1, we continue to execute our initiatives during the first We have identified a number of high quality products that we can source for lower price points from suppliers across the world. We believe that this effort combined with recent decreases in international freight rates, will help offset some of the inflationary price increases we have experienced over the last year. Speaker 300:03:26Additionally, we've seen an increase in clearance item sales following steps taken to improve visibility to clearance items on our website over the last quarter. Sales of our LVT products are gaining momentum. We formally launched our expanded line of LVT products across all of our stores during the Q4. We're excited about this addition to our assortment and believe it could become a meaningful part of our overall sales mix over time. As I've mentioned before, We started to test LVT in our stores last year given advancements in product quality and shifting consumer sentiment suggesting that our core higher end customer demographic started widely accepting LVT as a flooring alternative in their homes. Speaker 300:04:05The customer feedback we've received indicates we have a great assortment and competitive price points. With that, I'll now hand the call over to Carla. Speaker 400:04:16Thanks, Cabbie. Good morning, everyone. 1st quarter sales at comparable stores were flat with 2022. We did see lowered levels of traffic during the quarter that was offset by an increase in the ticket average. Our gross margin rate during the Q1 was 64.2%, which equates to a 30 basis point decrease from the 4th quarter. Speaker 400:04:37The sequential decrease in margin is due to continued increases in inventory costs. We value inventory at average cost and typically hold just under a year of inventory on hand. While average costs were still increasing as inventory receipts landed during the Q1, We expect costs will start to improve as international freight rates have come down and as lower priced products from our resourcing initiatives start to work their way into our assortment. At the same time, it's important to note that we have priced our LVT and back shelf products competitively and that these products carry a lower gross margin rate than our tile products. We anticipate the acceleration of LVT sales and continued growth of Back will create a headwind to our overall gross margin rate. Speaker 400:05:22However, we expect the incremental sales of these products will result in an increase of gross profit dollars and improve our leverage on fixed SG and A expenses. 1st quarter selling, general and administrative expenses decreased by $700,000 when compared to the Q1 of 2022. The decrease was largely attributed to a $1,100,000 decrease in variable compensation expenses, a $900,000 decrease in shipping and transportation expenses and a $700,000 decrease in depreciation expense. These decreases were partially offset by a $600,000 increase in wages due to headcount and pay increases, a $600,000 increase in software licenses and a $400,000 increase in operating supplies. Net income was $2,500,000 during the Q1 of 2023 and adjusted EBITDA was $10,300,000 Our adjusted EBITDA margin rate was 10.1%. Speaker 400:06:251st quarter earnings per share decreased by 0 point 0 $1 from $0.07 during the Q1 of 2022 to $0.06 during the Q1 of 2023. Turning our attention to the balance sheet. Our inventory decreased by $5,500,000 from the 4th quarter to $115,500,000 at the end of the first quarter. Also during the quarter, we generated $25,800,000 of operating cash flow. The majority of this cash was used to reduce our debt, which was $25,000,000 at the end of the quarter. Speaker 400:06:58With that, Cabbie and I are happy to take any questions. Operator00:07:04Thank you. At this time, we will conduct a question and answer. Our first question comes from Mark Smith from Lake Street. Speaker 100:07:38Yes. Hey, guys. Jacobs on for Mark this morning. Just looking, could you give us Any update, any additional details on the new store openings this year? Speaker 300:07:49Hey, Jacob. Yes, this is Cab. We're on track to open our new store here coming up in June, July depending on some scheduling. We did delay our 2nd new store just due to some of the macro headwinds we're experiencing at this point. The focus really is on the profitability of our business. Speaker 300:08:08And I thought it best to just push this at this time. So yes, I mean we're going to relocate another store to a better area that we feel is going to generate more income, but that's pretty much it. Speaker 100:08:24Okay. Maybe just kind of your balance sheet improvements are solid. How are you guys thinking about returning capital Cash to shareholders via buyback or? Speaker 400:08:39Good morning. This is Carla and thank you for your question. At this point, we are not planning on any Share buybacks or dividends at this point. I mean, it's always a consideration. We are constantly Looking and forecasting and trying to control our SG and A and improve our results. Speaker 400:09:03But at this time, we do not have any plans to do any major events such as that like we have in the past. Speaker 300:09:09Yes. On that note, Jacob, we're pretty pleased with our reduction in our debt In Q1, that we're proud of and we're going to continue to chip away at that, right? So that's My first goal is let's get debt free and then figure out how we're going to return shareholder value. So that's the goal right now. Let's just generate cash and get the debt down to 0 and then move forward. Speaker 100:09:34Okay, got it. That's helpful. Maybe just talk about the inflationary pressures. I know you had mentioned sea freight is coming down. But maybe could you just talk about kind of The different drivers of maybe the product costs and are you able to pass through any price increases? Speaker 300:09:54Sure. Yes. So we're pretty we're happy with the reduction in freight costs overall that we've been seeing in the past few months. And when you look at product costs, it outweighed a lot of the product costs over the last year. The ocean freight cost was Large in comparison to some of the overall product cost increase. Speaker 300:10:14So if that's coming down and some of our resourcing efforts getting us lower Cost product landing in our DCs, we feel that we're on track to start rebounding in our margin. We have a year's worth of inventory typically. So as we go through this inventory and this product starts to land, we're now hopefully on the upswing with margins. So it's It's still a battle. It's not just freight, it's everything else from the DCs to ops and the stores to even corporate marketing. Speaker 300:10:44Everything is a little bit more Expensive these days. So it's we have to be strategic and focused to make sure we're making the best decisions across the company at this point. But yes, Product cost has come down. We're starting to land that in our DCs. So we feel that we're going to rebound nicely.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallTile Shop Q1 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) Tile Shop Earnings HeadlinesShould Weakness in Tile Shop Holdings, Inc.'s (NASDAQ:TTSH) Stock Be Seen As A Sign That Market Will Correct The Share Price Given Decent Financials?April 25 at 11:55 AM | finance.yahoo.comThe Tile Shop Expands Collaboration With HGTV’s Alison Victoria, Bringing “City Chic” Style Off the Screen and Into Homes EverywhereApril 2, 2025 | markets.businessinsider.comTrump’s betrayal exposed Trump’s Final Reset Inside the shocking plot to re-engineer America’s financial system…and why you need to move your money now.April 28, 2025 | Porter & Company (Ad)There's Been No Shortage Of Growth Recently For Tile Shop Holdings' (NASDAQ:TTSH) Returns On CapitalMarch 29, 2025 | finance.yahoo.comThe Zacks Analyst Blog Highlights Bank of America, Accenture, ServiceNow, Tile Shop and Moving iMage TechnologiesMarch 13, 2025 | uk.finance.yahoo.comTile Shop Holdings, Inc. (NASDAQ:TTSH) Q4 2024 Earnings Call TranscriptFebruary 28, 2025 | msn.comSee More Tile Shop Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Tile Shop? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Tile Shop and other key companies, straight to your email. Email Address About Tile ShopTile Shop (NASDAQ:TTSH) operates as a specialty retailer of natural stone and man-made tiles, setting and maintenance materials, and related accessories in the United States. The company offers natural stone products, including marble, travertine, granite, quartz, sandstone, slate, and onyx tiles; and man-made products, comprises ceramic, porcelain, glass, cement, wood look, and metal and luxury vinyl tile. It also manufactures setting and maintenance materials, such as thinset, grout, and sealers; and accessories which includes installation tools, shower and bath shelves, drains, and related products. In addition, the company offers customers delivery service through third-party freight providers. It sells its products under the Superior Adhesives & Chemicals, Superior Tools & Supplies, Rush River, and Fired Earth brands. Tile Shop Holdings, Inc. was founded in 1985 and is headquartered in Plymouth, Minnesota.View Tile Shop ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Markets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings?Texas Instruments: Earnings Beat, Upbeat Guidance Fuel RecoveryMarket Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of Earnings Upcoming Earnings AstraZeneca (4/29/2025)Booking (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Regeneron Pharmaceuticals (4/29/2025)Starbucks (4/29/2025)American Tower (4/29/2025)América Móvil (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 5 speakers on the call. Operator00:00:00Day and thank you for standing by. Welcome to the Q1 Tile Shop Holdings Incorporated Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will Speaker 100:00:13be a Q and A session. Operator00:00:27Please be advised today's conference call is being recorded. I would now like to hand the conference call over to your speaker today, Mark Davis, Vice President of Investor Relations and Chief Accounting Officer. Mark, please go ahead. Speaker 200:00:47Thank you. Good morning to everyone and welcome to the Tile Shop's 1st quarter earnings call. Joining me today are Cab Loma, our Chief Executive Officer and Carla Lunick, by our Chief Financial Officer. Certain statements made during the call today constitute forward looking statements made pursuant to and within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended. Such forward looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Speaker 200:01:21Those risks and uncertainties are described in our earnings press release issued issued earlier and in our filings with the SEC. The forward looking statements made today are as of the date of this call, and we do not undertake any obligation to update these forward looking statements. Today's call will also include certain non GAAP measurements. Please see our earnings release for a reconciliation of those non GAAP financial measures, which has been posted on our company website. With that, let me now turn the Speaker 300:01:48call over to Cat. Thanks, Mark. Good morning, everyone, and thank you for joining us today for an update on our business and our Q1 results. Comparable store sales during the first Quarter of 2023 were flat with 2022. During the quarter, macro headwinds continued to persist. Speaker 300:02:06Rising interest rates and slowing housing turnover Indicates that some homeowners are choosing to remodel their homes as opposed to moving. Many of our pros indicate they still have a healthy backlog of work. Nevertheless, we anticipate macro conditions will remain challenging over the next several quarters. Store teams continue to make progress against their retail excellence goals. Our pro sales mix, which includes sales to pros and pro referrals, was over 70% of our total sales during the Q1. Speaker 300:02:43Additionally, we've made progress improving adoption of best practices at a number of our stores that have underperformed in the past. While we're making progress in this area, we still have more work in front of us. Given the challenging macro environment, I've made the decision to delay opening a second new store in 2020 We're still on track to deliver strong performance on our new work commitments. During the Q1, we continue to execute our initiatives during the first We have identified a number of high quality products that we can source for lower price points from suppliers across the world. We believe that this effort combined with recent decreases in international freight rates, will help offset some of the inflationary price increases we have experienced over the last year. Speaker 300:03:26Additionally, we've seen an increase in clearance item sales following steps taken to improve visibility to clearance items on our website over the last quarter. Sales of our LVT products are gaining momentum. We formally launched our expanded line of LVT products across all of our stores during the Q4. We're excited about this addition to our assortment and believe it could become a meaningful part of our overall sales mix over time. As I've mentioned before, We started to test LVT in our stores last year given advancements in product quality and shifting consumer sentiment suggesting that our core higher end customer demographic started widely accepting LVT as a flooring alternative in their homes. Speaker 300:04:05The customer feedback we've received indicates we have a great assortment and competitive price points. With that, I'll now hand the call over to Carla. Speaker 400:04:16Thanks, Cabbie. Good morning, everyone. 1st quarter sales at comparable stores were flat with 2022. We did see lowered levels of traffic during the quarter that was offset by an increase in the ticket average. Our gross margin rate during the Q1 was 64.2%, which equates to a 30 basis point decrease from the 4th quarter. Speaker 400:04:37The sequential decrease in margin is due to continued increases in inventory costs. We value inventory at average cost and typically hold just under a year of inventory on hand. While average costs were still increasing as inventory receipts landed during the Q1, We expect costs will start to improve as international freight rates have come down and as lower priced products from our resourcing initiatives start to work their way into our assortment. At the same time, it's important to note that we have priced our LVT and back shelf products competitively and that these products carry a lower gross margin rate than our tile products. We anticipate the acceleration of LVT sales and continued growth of Back will create a headwind to our overall gross margin rate. Speaker 400:05:22However, we expect the incremental sales of these products will result in an increase of gross profit dollars and improve our leverage on fixed SG and A expenses. 1st quarter selling, general and administrative expenses decreased by $700,000 when compared to the Q1 of 2022. The decrease was largely attributed to a $1,100,000 decrease in variable compensation expenses, a $900,000 decrease in shipping and transportation expenses and a $700,000 decrease in depreciation expense. These decreases were partially offset by a $600,000 increase in wages due to headcount and pay increases, a $600,000 increase in software licenses and a $400,000 increase in operating supplies. Net income was $2,500,000 during the Q1 of 2023 and adjusted EBITDA was $10,300,000 Our adjusted EBITDA margin rate was 10.1%. Speaker 400:06:251st quarter earnings per share decreased by 0 point 0 $1 from $0.07 during the Q1 of 2022 to $0.06 during the Q1 of 2023. Turning our attention to the balance sheet. Our inventory decreased by $5,500,000 from the 4th quarter to $115,500,000 at the end of the first quarter. Also during the quarter, we generated $25,800,000 of operating cash flow. The majority of this cash was used to reduce our debt, which was $25,000,000 at the end of the quarter. Speaker 400:06:58With that, Cabbie and I are happy to take any questions. Operator00:07:04Thank you. At this time, we will conduct a question and answer. Our first question comes from Mark Smith from Lake Street. Speaker 100:07:38Yes. Hey, guys. Jacobs on for Mark this morning. Just looking, could you give us Any update, any additional details on the new store openings this year? Speaker 300:07:49Hey, Jacob. Yes, this is Cab. We're on track to open our new store here coming up in June, July depending on some scheduling. We did delay our 2nd new store just due to some of the macro headwinds we're experiencing at this point. The focus really is on the profitability of our business. Speaker 300:08:08And I thought it best to just push this at this time. So yes, I mean we're going to relocate another store to a better area that we feel is going to generate more income, but that's pretty much it. Speaker 100:08:24Okay. Maybe just kind of your balance sheet improvements are solid. How are you guys thinking about returning capital Cash to shareholders via buyback or? Speaker 400:08:39Good morning. This is Carla and thank you for your question. At this point, we are not planning on any Share buybacks or dividends at this point. I mean, it's always a consideration. We are constantly Looking and forecasting and trying to control our SG and A and improve our results. Speaker 400:09:03But at this time, we do not have any plans to do any major events such as that like we have in the past. Speaker 300:09:09Yes. On that note, Jacob, we're pretty pleased with our reduction in our debt In Q1, that we're proud of and we're going to continue to chip away at that, right? So that's My first goal is let's get debt free and then figure out how we're going to return shareholder value. So that's the goal right now. Let's just generate cash and get the debt down to 0 and then move forward. Speaker 100:09:34Okay, got it. That's helpful. Maybe just talk about the inflationary pressures. I know you had mentioned sea freight is coming down. But maybe could you just talk about kind of The different drivers of maybe the product costs and are you able to pass through any price increases? Speaker 300:09:54Sure. Yes. So we're pretty we're happy with the reduction in freight costs overall that we've been seeing in the past few months. And when you look at product costs, it outweighed a lot of the product costs over the last year. The ocean freight cost was Large in comparison to some of the overall product cost increase. Speaker 300:10:14So if that's coming down and some of our resourcing efforts getting us lower Cost product landing in our DCs, we feel that we're on track to start rebounding in our margin. We have a year's worth of inventory typically. So as we go through this inventory and this product starts to land, we're now hopefully on the upswing with margins. So it's It's still a battle. It's not just freight, it's everything else from the DCs to ops and the stores to even corporate marketing. Speaker 300:10:44Everything is a little bit more Expensive these days. So it's we have to be strategic and focused to make sure we're making the best decisions across the company at this point. But yes, Product cost has come down. We're starting to land that in our DCs. So we feel that we're going to rebound nicely.Read morePowered by