Ethan Allen Interiors Inc. (“Ethan Allen” or the “Company”) (NYSE:
ETD) today reported its financial and operating results for the
fiscal 2023 third quarter ended March 31, 2023.
Farooq Kathwari, Ethan Allen’s Chairman,
President and CEO commented, “We are pleased with our third quarter
operating performance. We delivered consolidated net sales of
$186.3 million, gross margin of 59.9%, operating margin of 15.5%
and net income of $22.4 million. Our adjusted diluted earnings per
share of $0.86 remained strong. We continue to generate strong
operating cash flow and as of March 31, 2023, we had total cash and
investments of $156.2 million and no debt. Our retail written
orders surpassed pre-pandemic levels by 3.6%. We are also pleased
to announce that on April 25, 2023, our Board approved an increase
to our regular quarterly cash dividend to $0.36 per share, a 13%
increase, payable on May 25, 2023.”
Mr. Kathwari continued, “Last week we had a
grand reopening of our flagship design center located in Danbury,
CT, positioning us as a leading Interior Design Destination. Our
product programs continue to be enhanced under the umbrella of
Classics with a Modern Perspective. We also continue to strengthen
technology options for our interior designers to work with clients.
Over the next six months, the projection of most of our 172 design
centers in North America will be refreshed to reflect our Danbury,
CT design center.”
“We are confident in the investments that we are
making for the future, but recognize the need to remain cognizant
of the slower economic environment in which we are currently
operating in. We remain cautiously optimistic,” concluded Mr.
Kathwari.
FISCAL 2023
THIRD QUARTER HIGHLIGHTS*
- Consolidated net sales of $186.3
million decreased 5.7%
- Retail net sales of $150.9 million decreased 9.5%
- Wholesale net sales of $114.2
million decreased 5.7%
- Written order trends
- Retail segment written orders
increased 3.6% compared with the pre-pandemic third quarter of
fiscal 2019; down 12.3% compared with the third quarter of fiscal
2022
- Wholesale
segment written orders decreased 5.9% compared with the third
quarter of fiscal 2019; decreased 9.3% from a year ago
- Consolidated
gross margin decreased to 59.9%, down from 60.4% a year ago due to
a change in sales mix and lower delivered unit volume partially
offset by product pricing actions taken over the past 12 months,
disciplined promotional activity and lower input costs including
reduced inbound freight and raw material costs
- Operating margin
of 15.5%; adjusted operating margin of 15.2% compared with 15.8%
last year due to lower consolidated net sales, a gross margin
reduction and higher retail delivery costs partially offset by our
ability to maintain a disciplined approach to cost savings and
expense control; selling, general and administrative expenses
decreased 5.7% and equaled 44.7% of net sales in both periods
presented, as the Company carefully managed expenses in a declining
net sales environment
- Advertising
expenses were equal to 2.2% of net sales compared to 2.3% in the
prior year third quarter; continued to utilize various advertising
mediums including digital, direct mail, national television and
radio; disciplined promotional activity remained comparable to the
prior year
- Diluted EPS of
$0.87 compared with $0.97; adjusted diluted EPS of $0.86 decreased
7.5%
- Generated $33.4
million of cash from operating activities, up 93.2% over the prior
year
- Paid regular
quarterly cash dividends totaling $16.3 million
- Ended the
quarter with $156.2 million in cash and investments with no debt
outstanding
- Lowered
inventory levels to $151.7 million as of March 31, 2023, down $24.8
million from June 30, 2022
* See reconciliation of GAAP to adjusted key
financial measures in the back of this press release. Comparisons
are to the third quarter of fiscal 2022.
KEY FINANCIAL MEASURES*
(Unaudited) |
(In thousands,
except per share data) |
|
Three months ended |
Nine months ended |
|
March 31, |
|
March 31, |
|
|
|
2023 |
|
|
2022 |
|
% Change |
|
2023 |
|
|
2022 |
|
% Change |
Net sales |
$ |
186,316 |
|
$ |
197,659 |
|
(5.7 |
%) |
$ |
604,007 |
|
$ |
588,079 |
|
2.7 |
% |
Gross profit |
$ |
111,551 |
|
$ |
119,460 |
|
(6.6 |
%) |
$ |
365,187 |
|
$ |
350,921 |
|
4.1 |
% |
Gross margin |
|
59.9 |
% |
|
60.4 |
% |
|
|
60.5 |
% |
|
59.7 |
% |
|
GAAP operating income |
$ |
28,788 |
|
$ |
32,653 |
|
(11.8 |
%) |
$ |
105,507 |
|
$ |
96,305 |
|
9.6 |
% |
Adjusted operating income* |
$ |
28,318 |
|
$ |
31,302 |
|
(9.5 |
%) |
$ |
102,883 |
|
$ |
91,802 |
|
12.1 |
% |
GAAP operating margin |
|
15.5 |
% |
|
16.5 |
% |
|
|
17.5 |
% |
|
16.4 |
% |
|
Adjusted operating margin* |
|
15.2 |
% |
|
15.8 |
% |
|
|
17.0 |
% |
|
15.6 |
% |
|
GAAP net income |
$ |
22,356 |
|
$ |
24,714 |
|
(9.5 |
%) |
$ |
80,402 |
|
$ |
71,761 |
|
12.0 |
% |
Adjusted net income* |
$ |
22,005 |
|
$ |
23,702 |
|
(7.2 |
%) |
$ |
78,442 |
|
$ |
68,388 |
|
14.7 |
% |
Effective tax rate |
|
25.1 |
% |
|
24.2 |
% |
|
|
25.4 |
% |
|
25.4 |
% |
|
GAAP diluted EPS |
$ |
0.87 |
|
$ |
0.97 |
|
(10.3 |
%) |
$ |
3.14 |
|
$ |
2.81 |
|
11.7 |
% |
Adjusted diluted EPS* |
$ |
0.86 |
|
$ |
0.93 |
|
(7.5 |
%) |
$ |
3.07 |
|
$ |
2.68 |
|
14.6 |
% |
Cash flows from
operating activities |
$ |
33,419 |
|
$ |
17,300 |
|
93.2 |
% |
$ |
74,358 |
|
$ |
40,001 |
|
85.9 |
% |
* See reconciliation of GAAP to adjusted key
financial measures in the back of this press release
BALANCE SHEET
and CASH FLOW
Cash
and investments totaled $156.2 million at March
31, 2023, compared with $121.1 million at June 30, 2022. The
increase of $35.1 million during the fiscal year was primarily due
to $74.4 million in cash generated from operating activities and
$8.1 million in proceeds received from a sale-leaseback transaction
completed in August 2022 partially offset by $37.2 million in cash
dividends paid and capital expenditures of $10.7 million as the
Company continues to return capital to shareholders and reinvest
back into the business.
Cash
dividends paid were $37.2 million during the
nine months ended March 31, 2023, which included a special cash
dividend of $12.7 million, or $0.50 per share paid in August
2022.
Cash from operating activities
totaled $74.4 million during the first nine months of fiscal 2023,
an increase from $40.0 million in the prior year period due to a
reduction in inventory carrying levels and accounts receivable
combined with higher net income partially offset by a decline in
customer deposits.
Inventories, net decreased
to $151.7 million at March 31, 2023, compared with $176.5 million
at June 30, 2022, as the Company restores its operating inventory
levels to more historical norms as backlog declines. Inventory
balances continue to decrease as the Company seeks to reduce its
levels of inventory while also ensuring appropriate levels are
maintained to service its customer base.
Customer deposits from
written orders totaled $92.8 million at March 31, 2023, a decrease
of $28.3 million during the fiscal year as retail net shipments
outpaced written orders.
No
debt outstanding at March 31,
2023.
DIVIDENDS
On April 25, 2023, the Company’s Board of
Directors declared and increased the regular quarterly cash
dividend to $0.36 per share, payable on May 25, 2023, to
shareholders of record at the close of business on May 9, 2023.
Ethan Allen has a long history of returning capital to shareholders
and is pleased to increase its regular quarterly cash dividend by
13%, which highlights the Company’s strong balance sheet and
operating results. The Company has paid an annual cash dividend
every year since 1996 and increased its quarterly cash dividend
each of the past five years.
CONFERENCE CALL
Ethan Allen will host a conference call with
investors and analysts today, April 26, 2023, at 5:00 PM (Eastern
Time) to discuss these results. The conference call will be webcast
live from the Company’s Investor Relations website at
https://ir.ethanallen.com.
The following information is provided for those
who would like to participate in the conference call:
- U.S.
Participants:
877-705-2976
- International
Participants:
201-689-8798
- Meeting
Number:
13736909
For those unable to listen live, an archived
recording of the call will be made available on the Company’s
website referenced above for up to six months.
ABOUT ETHAN ALLEN
Ethan Allen Interiors Inc. (NYSE: ETD) is a
leading interior design company, manufacturer and retailer in the
home furnishings marketplace. The Company is a global luxury home
fashion brand that is vertically integrated from product design
through home delivery, which offers its customers stylish product
offerings, artisanal quality, and personalized service. The Company
provides complimentary interior design service to its clients and
sells a full range of home furnishings through a retail network of
design centers located throughout the United States and abroad as
well as online at ethanallen.com. Ethan Allen owns and operates ten
manufacturing facilities located in the United States, Mexico and
Honduras, including one sawmill, one rough mill and a lumberyard.
Approximately 75% of its products are manufactured or assembled in
these North American facilities.
For more information on Ethan Allen's products
and services, visit www.ethanallen.com.
Investor Relations Contact:
Matt McNultySenior Vice President, Chief Financial Officer and
TreasurerIR@ethanallen.com
ABOUT NON-GAAP
FINANCIAL MEASURES
This press release is intended to supplement,
rather than to supersede, the Company's consolidated financial
statements, which are prepared and presented in accordance with
U.S. generally accepted accounting principles (“GAAP”). In this
press release the Company has included financial measures that are
derived from the consolidated financial statements but are not
presented in accordance with GAAP. The Company uses non-GAAP
financial measures, including adjusted operating income and margin,
adjusted net income and adjusted diluted EPS (collectively
“non-GAAP financial measures”). The Company computes these non-GAAP
financial measures by adjusting the comparable GAAP measure to
remove the impact of certain charges and gains and the related tax
effect of these adjustments. Investors should consider these
non-GAAP financial measures in addition to, and not as a substitute
for, or superior to, the financial performance measures prepared in
accordance with GAAP. The Company uses these non-GAAP
financial measures for financial and operational decision making
and to evaluate period-to-period comparisons. The Company believes
that they provide useful information about operating results,
enhance the overall understanding of past financial performance and
prospects, and allow for greater transparency with respect to key
metrics used by management in its financial and operational
decision making. A reconciliation of these non-GAAP financial
measures to the most directly comparable financial measure reported
in accordance with GAAP is provided at the end of this press
release.
FORWARD-LOOKING STATEMENTS
This press release contains “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995, Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). Generally, forward-looking statements represent
management’s beliefs and assumptions concerning current
expectations, projections or trends relating to results of
operations, financial results, financial condition, strategic
objectives and plans, expenses, dividends, share repurchases,
liquidity, use of cash and cash requirements, investments, future
economic performance, business and industry and the effect of the
novel coronavirus (“COVID-19”) pandemic on the business operations
and financial results. Such forward-looking statements can be
identified by the fact that they do not relate strictly to
historical or current facts. These forward-looking statements
may include words such as “anticipate,” “estimate,” “expect,”
“project,” “plan,” “intend,” “believe,” “continue,” “may,” “will,”
“short-term,” “target,” “outlook,” “forecast,” “future,”
“strategy,” “opportunity,” “would,” “guidance,” “non-recurring,”
“one-time,” “unusual,” “should,” “likely,” “COVID-19 impact,” and
other words and terms of similar meaning in connection with any
discussion of the timing or nature of future operating or financial
performance or other events. The Company derives many of its
forward-looking statements from operating budgets and forecasts,
which are based upon many detailed assumptions. While the Company
believes that its assumptions are reasonable, it cautions that it
is very difficult to predict the impact of known factors and it is
impossible for the Company to anticipate all factors that could
affect actual results and matters that are identified as “short
term,” “non-recurring,” “unusual,” “one-time,” or other words and
terms of similar meaning may in fact recur in one or more future
financial reporting periods.
Forward-looking statements are subject to risks
and uncertainties that may cause actual results to differ
materially from those that are expected. Actual results could
differ materially from those anticipated in the forward-looking
statements due to a number of risks and uncertainties including,
but not limited to, the risks and uncertainties disclosed in Part
I, Item 1A. Risk Factors, in the Company’s 2022 Annual Report on
Form 10-K and other factors identified in its reports filed with
the Securities and Exchange Commission (the “SEC”), available on
the SEC's website at www.sec.gov.
All forward-looking statements attributable to
the Company, or persons acting on its behalf, are expressly
qualified in their entirety by these cautionary statements, as well
as other cautionary statements. A reader should evaluate all
forward-looking statements made in this press release in the
context of these risks and uncertainties. Given the risks and
uncertainties surrounding forward-looking statements, you should
not place undue reliance on these statements. Many of these factors
are beyond the Company’s ability to control or predict. The Company
is including this cautionary note to make applicable and take
advantage of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 for forward-looking statements. The
forward-looking statements included in this press release are made
only as of the date hereof. The Company undertakes no obligation to
publicly update or revise any forward-looking statement, whether as
a result of new information, future events or otherwise, except as
otherwise required by law.
Ethan Allen Interiors Inc. |
Condensed Consolidated Statements of
Comprehensive Income |
(Unaudited) |
(In thousands, except per share data) |
|
Three months ended March 31, |
Nine months ended March 31, |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Net sales |
$ |
186,316 |
|
$ |
197,659 |
|
$ |
604,007 |
|
$ |
588,079 |
|
Cost of sales |
|
74,765 |
|
|
78,199 |
|
|
238,820 |
|
|
237,158 |
|
Gross profit |
|
111,551 |
|
|
119,460 |
|
|
365,187 |
|
|
350,921 |
|
Selling, general and administrative expenses |
|
83,233 |
|
|
88,270 |
|
|
262,342 |
|
|
259,457 |
|
Restructuring and other impairment charges, net of gains |
|
(470 |
) |
|
(1,463 |
) |
|
(2,662 |
) |
|
(4,841 |
) |
Operating income |
|
28,788 |
|
|
32,653 |
|
|
105,507 |
|
|
96,305 |
|
Other income (expense), net |
|
1,071 |
|
|
(61 |
) |
|
2,263 |
|
|
(155 |
) |
Income before income taxes |
|
29,859 |
|
|
32,592 |
|
|
107,770 |
|
|
96,150 |
|
Income tax expense |
|
7,503 |
|
|
7,878 |
|
|
27,368 |
|
|
24,389 |
|
Net income |
$ |
22,356 |
|
$ |
24,714 |
|
$ |
80,402 |
|
$ |
71,761 |
|
|
|
|
|
|
Net income per diluted share |
$ |
0.87 |
|
$ |
0.97 |
|
$ |
3.14 |
|
$ |
2.81 |
|
Diluted weighted average common shares |
|
25,599 |
|
|
25,549 |
|
|
25,580 |
|
|
25,504 |
|
Ethan Allen Interiors
Inc. |
|
|
Condensed Consolidated
Balance Sheets |
|
|
(Unaudited) |
|
|
(In thousands) |
|
|
|
March 31, |
June 30, |
ASSETS |
|
2023 |
|
|
2022 |
|
Current assets |
|
|
Cash and cash equivalents |
$ |
61,031 |
|
$ |
109,919 |
|
Investments |
|
95,171 |
|
|
11,199 |
|
Accounts receivable, net |
|
15,817 |
|
|
17,019 |
|
Inventories, net |
|
151,655 |
|
|
176,504 |
|
Prepaid expenses and other
current assets |
|
28,275 |
|
|
32,108 |
|
Total current assets |
|
351,949 |
|
|
346,749 |
|
|
|
|
Property, plant and equipment,
net |
|
223,284 |
|
|
223,530 |
|
Goodwill |
|
25,388 |
|
|
25,388 |
|
Intangible assets |
|
19,740 |
|
|
19,740 |
|
Operating lease right-of-use
assets |
|
117,871 |
|
|
100,782 |
|
Deferred income taxes |
|
977 |
|
|
820 |
|
Other assets |
|
2,114 |
|
|
2,886 |
|
Total ASSETS |
$ |
741,323 |
|
$ |
719,895 |
|
|
|
|
LIABILITIES AND SHAREHOLDERS’
EQUITY |
|
|
Current liabilities |
|
|
Accounts payable and accrued
expenses |
$ |
28,043 |
|
$ |
37,370 |
|
Customer deposits |
|
92,772 |
|
|
121,080 |
|
Accrued compensation and
benefits |
|
20,952 |
|
|
22,700 |
|
Current operating lease
liabilities |
|
25,275 |
|
|
25,705 |
|
Other current liabilities |
|
7,314 |
|
|
8,788 |
|
Total current liabilities |
|
174,356 |
|
|
215,643 |
|
|
|
|
Operating lease liabilities,
long-term |
|
107,119 |
|
|
89,506 |
|
Deferred income taxes |
|
2,465 |
|
|
4,418 |
|
Other long-term liabilities |
|
4,190 |
|
|
3,005 |
|
Total LIABILITIES |
$ |
288,130 |
|
$ |
312,572 |
|
|
|
|
Shareholders’ equity |
|
|
Ethan Allen Interiors Inc. shareholders’ equity |
$ |
453,203 |
|
$ |
407,349 |
|
Noncontrolling interests |
|
(10 |
) |
|
(26 |
) |
Total shareholders’ equity |
$ |
453,193 |
|
$ |
407,323 |
|
Total LIABILITIES AND
SHAREHOLDERS’ EQUITY |
$ |
741,323 |
|
$ |
719,895 |
|
Reconciliation of
Non-GAAP
Financial Measures
To supplement the financial measures prepared in
accordance with GAAP, the Company uses non-GAAP financial measures,
including adjusted operating income and margin, adjusted net income
and adjusted diluted earnings per share. The reconciliations of
these non-GAAP financial measures to the most directly comparable
financial measures calculated and presented in accordance with GAAP
are shown in tables below.
These non-GAAP measures are derived from the
consolidated financial statements but are not presented in
accordance with GAAP. The Company believes these non-GAAP measures
provide a meaningful comparison of its results to others in its
industry and prior year results. Investors should consider
these non-GAAP financial measures in addition to, and not as a
substitute for, its financial performance measures prepared in
accordance with GAAP. Moreover, these non-GAAP financial
measures have limitations in that they do not reflect all the items
associated with the operations of the business as determined in
accordance with GAAP. Other companies may calculate similarly
titled non-GAAP financial measures differently than the Company
does, limiting the usefulness of those measures for comparative
purposes.
Despite the limitations of these non-GAAP
financial measures, the Company believes these adjusted financial
measures and the information they provide are useful in viewing its
performance using the same tools that management uses to assess
progress in achieving its goals. Adjusted measures may also
facilitate comparisons to historical performance.
The following tables below provide a
reconciliation of non-GAAP financial measures used in this release
to the most directly comparable GAAP financial measures.
(Unaudited) |
(In thousands, except per share
data) |
Three months ended |
|
|
Nine months ended |
|
|
March 31, |
|
|
March 31, |
|
|
|
2023 |
|
|
2022 |
|
% Change |
|
|
2023 |
|
|
2022 |
|
% Change |
Consolidated
Adjusted Operating Income / Operating Margin |
GAAP Operating income |
$ |
28,788 |
|
$ |
32,653 |
|
(11.8 |
%) |
|
$ |
105,507 |
|
$ |
96,305 |
|
9.6 |
% |
Adjustments (pre-tax)* |
|
(470 |
) |
|
(1,351 |
) |
|
|
|
(2,624 |
) |
|
(4,503 |
) |
|
Adjusted operating income* |
$ |
28,318 |
|
$ |
31,302 |
|
(9.5 |
%) |
|
$ |
102,883 |
|
$ |
91,802 |
|
12.1 |
% |
|
|
|
|
|
|
|
|
Consolidated Net sales |
$ |
186,316 |
|
$ |
197,659 |
|
(5.7 |
%) |
|
$ |
604,007 |
|
$ |
588,079 |
|
2.7 |
% |
GAAP Operating margin |
|
15.5 |
% |
|
16.5 |
% |
|
|
|
17.5 |
% |
|
16.4 |
% |
|
Adjusted operating margin* |
|
15.2 |
% |
|
15.8 |
% |
|
|
|
17.0 |
% |
|
15.6 |
% |
|
|
|
|
|
|
|
|
|
Consolidated
Adjusted Net Income / Adjusted Diluted EPS |
GAAP Net income |
$ |
22,356 |
|
$ |
24,714 |
|
(9.5 |
%) |
|
$ |
80,402 |
|
$ |
71,761 |
|
12.0 |
% |
Adjustments, net of tax* |
|
(351 |
) |
|
(1,012 |
) |
|
|
|
(1,960 |
) |
|
(3,373 |
) |
|
Adjusted net income |
$ |
22,005 |
|
$ |
23,702 |
|
(7.2 |
%) |
|
$ |
78,442 |
|
$ |
68,388 |
|
14.7 |
% |
Diluted weighted average common
shares |
|
25,599 |
|
|
25,549 |
|
|
|
|
25,580 |
|
|
25,504 |
|
|
GAAP Diluted EPS |
$ |
0.87 |
|
$ |
0.97 |
|
(10.3 |
%) |
|
$ |
3.14 |
|
$ |
2.81 |
|
11.7 |
% |
Adjusted diluted EPS* |
$ |
0.86 |
|
$ |
0.93 |
|
(7.5 |
%) |
|
$ |
3.07 |
|
$ |
2.68 |
|
14.6 |
% |
* Adjustments to
reported GAAP financial measures including operating income and
margin, net income and diluted EPS have been adjusted by the
following: |
|
|
|
|
|
(Unaudited) |
Three months ended |
Nine months ended |
(In thousands) |
March 31, |
March 31, |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Gain on sale-leaseback
transaction |
$ |
(655 |
) |
$ |
- |
|
$ |
(3,566 |
) |
$ |
- |
|
Gain on sales of property,
plant and equipment |
|
- |
|
|
(1,518 |
) |
|
- |
|
|
(5,431 |
) |
Severance and other
charges |
|
185 |
|
|
167 |
|
|
942 |
|
|
928 |
|
Adjustments to operating income |
$ |
(470 |
) |
$ |
(1,351 |
) |
$ |
(2,624 |
) |
$ |
(4,503 |
) |
Adjustments to income before income taxes |
$ |
(470 |
) |
$ |
(1,351 |
) |
$ |
(2,624 |
) |
$ |
(4,503 |
) |
Related income tax effects on
non-recurring items(1) |
|
119 |
|
|
339 |
|
|
664 |
|
|
1,130 |
|
Adjustments to net income |
$ |
(351 |
) |
$ |
(1,012 |
) |
$ |
(1,960 |
) |
$ |
(3,373 |
) |
(1) Calculated using the marginal tax rate for
each period presented.
Ethan Allen Interiors (NYSE:ETD)
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