Tile Shop Holdings, Inc. (Nasdaq: TTS) (the “Company”), a specialty
retailer of natural stone and man-made tiles, setting and
maintenance materials, and related accessories, today announced
results for its first quarter ended March 31,
2019.
First Quarter Summary
Net Sales Decreased
4.6%Comparable Store Sales Decreased 4.2%
Gross Margin Increased to 71.2%Net Income
of $1.3 million; Adjusted EBITDA of $11.6
millionOpened 1 store in Q1Board
of Directors Approves $15 million Share Repurchase
ProgramDividend of $0.05 per Common Share
Declared
Management Commentary – Cabell Lolmaugh,
CEO“We implemented two significant new systems in January
to position our company for long-term growth. This included
our new ERP system on January 1 and our new website platform in
mid-January. The conversions to these new systems negatively
impacted our traffic, customer experience and sales during the
quarter primarily due to challenges with POS functionality, speed
and performance. First quarter traffic and sales were also
negatively impacted by poor weather conditions in the upper Midwest
and in the Northeast. Looking ahead to the remainder of the year,
we will focus on improving traffic and sales by featuring our
industry leading tile assortment, executing various retail
marketing strategies, and working to enhance the performance of our
ERP system and website platform.”
Repurchase ProgramOn April 29,
2019, the Board of Directors of the Company authorized a share
repurchase program (the “Share Repurchase Program” or “Program”),
pursuant to which the Company may, from time to time, purchase
shares of its common stock for an aggregate repurchase price not to
exceed $15,000,000. The Program will begin on May 2, 2019 and will
continue indefinitely until the full repurchase amount has been
utilized or the Board of Directors terminates the Program.
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|
|
|
|
|
Three Months Ended |
(unaudited,
amounts in thousands, except per |
|
March 31, |
share
data) |
|
2019 |
|
2018 |
Net sales |
|
$ |
86,908 |
|
|
$ |
91,134 |
|
Net sales
decline(1) |
|
|
(4.6 |
)% |
|
|
(1.1 |
)% |
Comparable store sales
decline(2) |
|
|
(4.2 |
)% |
|
|
(6.8 |
)% |
Gross margin rate |
|
|
71.2 |
% |
|
|
70.3 |
% |
Income from operations
as a % of net sales |
|
|
3.3 |
% |
|
|
6.7 |
% |
Net income |
|
$ |
1,320 |
|
|
$ |
4,011 |
|
Net income per diluted
share |
|
$ |
0.03 |
|
|
$ |
0.08 |
|
Adjusted EBITDA |
|
$ |
11,612 |
|
|
$ |
13,763 |
|
Adjusted EBITDA as a %
of net sales |
|
|
13.4 |
% |
|
|
15.1 |
% |
Number of stores open
at the end of period |
|
|
140 |
|
|
|
140 |
|
(1) As compared to the prior year
period.(2) Comparable store sales decline 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 decline calculation. Comparable store sales
decline amounts include total charges to customers less any actual
returns. Comparable store sales data reported by other companies
may be prepared on a different basis and therefore may not be
useful for purposes of comparing the Company’s results to those of
other businesses.
FIRST QUARTER 2019
Net SalesNet sales decreased
$4.2 million, or 4.6%, from $91.1 million in the first quarter of
2018 to $86.9 million in the first quarter of 2019. The decrease
was due to a $3.8 million decrease in net sales generated by
comparable stores. In addition, we had one less store in the comp
base during this quarter as compared to last year, which resulted
in a $0.4 million decrease in net sales. Comparable store sales
declines were 4.2% for the first quarter of 2019 and 6.8% for the
first quarter of 2018. The comparable store sales decline of 4.2%
was primarily due to lower customer traffic.
Gross ProfitGross profit
decreased $2.2 million, or 3.4%, from $64.0 million in the first
quarter of 2018 to $61.8 million in the first quarter of 2019. This
decrease was directly related to our revenue performance. The gross
margin rate was 71.2% for the first quarter of 2019 and 70.3% for
the first quarter of 2018. The 90 basis points of improvement in
the gross margin rate was primarily due to higher pricing on new
products available for sale.
Selling, General and Administrative
ExpensesSelling, general and administrative expenses
increased $1.0 million, or 1.8%, from $57.9 million in the first
quarter of 2018 to $58.9 million in the first quarter of
2019. Depreciation expense increased $1.0 million in the
first quarter of 2019 compared to the first quarter of 2018. First
quarter selling, general and administrative expenses also included
approximately $2.5 million of expense related to the implementation
of our new enterprise resource planning system. These increases in
expenses were partially offset by lower variable expenses of
approximately $1.0 million, a $0.8 million decrease in advertising
expenses and a $0.6 million decrease in transportation
expenses.
Income TaxIncome tax expense
was $0.6 million during the first quarter of 2019.
InventoryInventory increased
0.6% to $110.8 million from $110.1 million at the end of the fourth
quarter of 2018.
Long-Term DebtLong-term debt
decreased $3.0 million from $53.0 million in the fourth quarter of
2018 to $50.0 million in the first quarter of 2019. The decrease
was attributable to improved operating cash flow during the
quarter.
DIVIDENDThe Board of Directors
declared a quarterly dividend of $0.05 per common share.
The dividend is payable May 17, 2019 to shareholders of
record at the close of business on May 6, 2019.
NON-GAAP INFORMATION
Adjusted EBITDA
Adjusted EBITDA for the first quarter of 2019
was $11.6 million compared with $13.8 million for the first quarter
of 2018. See the table below for a reconciliation of GAAP net
income to Adjusted EBITDA.
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|
|
|
|
|
Three Months Ended |
($ in
thousands) |
|
March 31, |
|
|
2019 |
|
% of net sales(1) |
|
2018 |
|
% of net sales |
GAAP net income |
|
$ |
1,320 |
|
1.5 |
% |
|
$ |
4,011 |
|
4.4 |
% |
Interest expense |
|
|
978 |
|
1.1 |
|
|
|
554 |
|
0.6 |
|
Income taxes |
|
|
611 |
|
0.7 |
|
|
|
1,581 |
|
1.7 |
|
Depreciation and
amortization |
|
|
7,964 |
|
9.2 |
|
|
|
7,000 |
|
7.7 |
|
Stock-based
compensation |
|
|
739 |
|
0.8 |
|
|
|
617 |
|
0.7 |
|
Adjusted EBITDA |
|
$ |
11,612 |
|
13.4 |
% |
|
$ |
13,763 |
|
15.1 |
% |
(1) Amounts do not foot due to rounding.
Pretax Return on Capital
Employed
Pretax Return on Capital Employed was calculated
based on GAAP information. The Company believes this metric is
useful in assessing the effectiveness of its capital allocation
over time. Other companies may calculate Pretax Return on Capital
Employed differently, limiting the usefulness of the measure for
comparative purposes.
Pretax Return on Capital Employed was 6.7% for
the trailing twelve months as of the end of the first quarter 2019
compared to 9.4% for the trailing twelve months as of the end of
the first quarter 2018. See the Pretax Return on Capital Employed
calculation in the table below.
|
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|
|
|
|
|
|
|
|
|
|
|
($ in
thousands) |
|
March 31, |
|
|
2019(1) |
|
2018(1) |
Income from Operations
(trailing twelve months) |
|
$ |
13,347 |
|
|
$ |
16,324 |
|
|
|
|
|
|
|
|
Total Assets |
|
|
328,030 |
|
|
|
266,994 |
|
Less:
Accounts payable |
|
|
(29,242 |
) |
|
|
(22,020 |
) |
Less:
Income tax payable |
|
|
(116 |
) |
|
|
(150 |
) |
Less:
Other accrued liabilities |
|
|
(27,035 |
) |
|
|
(24,713 |
) |
Less:
Lease liability(2) |
|
|
(67,122 |
) |
|
|
(40,670 |
) |
Less:
Other long-term liabilities |
|
|
(3,937 |
) |
|
|
(4,895 |
) |
Capital Employed |
|
|
200,578 |
|
|
|
174,546 |
|
|
|
|
|
|
|
|
Pretax Return on
Capital Employed |
|
|
6.7 |
% |
|
|
9.4 |
% |
(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.(2) Represents the average lease liability and
deferred rent account balances for the four quarters ended as of
each of the balance sheet dates.
Internal Controls
While the Company is still completing its
assessment of the effectiveness of its internal controls over
financial reporting and disclosure controls and procedures as of
March 31, 2019, it expects to report two material weaknesses in
internal controls over financial reporting arising from the
enterprise resource planning system implementation (“ERP”) that
took place on January 1, 2019. The material weaknesses relate to
(1) the ineffective design and implementation of controls with
respect to the ERP system conversion and (2) the ineffective design
and implementation of IT general controls for information systems
that are relevant to the preparation of the financial statements.
As a result of the identification of the material weaknesses, the
Company has performed further analysis and completed additional
procedures intended to ensure its consolidated financial statements
for the quarter ending March 31, 2019 are prepared in accordance
with GAAP and are accurate.
While remediation efforts have begun, the
material weaknesses will not be considered remediated until the
applicable controls are designed appropriately and operate for a
sufficient period of time and the Company’s management has
concluded, through testing, that such controls are operating
effectively. The Company expects that the remediation of these
material weaknesses will be completed prior to the end of fiscal
2019.
Webcast and Conference Call
As announced on April 18, 2019, the Company will
host a conference call via live webcast for investors and other
interested parties beginning at 9:00 a.m. Eastern Time on Tuesday,
April 30, 2019. The call will be hosted by Cabell Lolmaugh,
CEO, Kirk Geadelmann, CFO, and Ken Cooper, Investor
Relations.
Participants may access the live webcast by
visiting the Company’s Investor Relations page at www.tileshop.com.
The call can also be accessed by dialing (844) 421-0597, or (716)
247-5787 for international participants. A webcast replay of the
call will be available on the Company’s Investor Relations page at
www.tileshop.com.
Additional details can be located at
www.tileshop.com under the Financial Information – SEC Filings
section of the Company’s Investor Relations page.
Contacts:Investors and
Media:Ken Cooper763-852-2950ken.cooper@tileshop.com
About The Tile Shop
The Tile Shop (Nasdaq:TTS) is a leading
specialty retailer of natural stone and man-made tiles, setting and
maintenance materials, and related accessories in the United
States. The Company offers a wide selection of high-quality
products, exclusive designs, knowledgeable staff and exceptional
customer service in an extensive showroom environment. Each store
is outfitted with full-room tiled displays which are enhanced by
the complimentary Design Studio, a collaborative platform to create
customized 3D design renderings to scale, allowing customers to
bring their design ideas to life. The Tile Shop currently operates
140 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. 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. Adjusted EBITDA margin is equal to
Adjusted EBITDA divided by net sales. The Company calculates pretax
return on capital employed by taking income from operations divided
by capital employed. Capital employed equals total assets less
accounts payable, income taxes payable, other accrued liabilities,
deferred rent, lease liability and other long-term liabilities.
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, and for budgeting and planning purposes. 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.
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 (including
the financial performance of new stores). 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 those 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 SEC by the
Company.
Tile Shop Holdings, Inc. and
SubsidiariesConsolidated Balance
Sheets($ in thousands, except share
data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
(Audited) |
|
|
March 31, |
|
December 31, |
|
|
2019 |
|
2018 |
Assets |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash
equivalents |
|
$ |
7,936 |
|
|
$ |
5,557 |
|
Restricted cash |
|
|
825 |
|
|
|
825 |
|
Receivables, net |
|
|
5,942 |
|
|
|
3,084 |
|
Inventories |
|
|
110,804 |
|
|
|
110,095 |
|
Income tax
receivable |
|
|
3,086 |
|
|
|
3,548 |
|
Other current assets,
net |
|
|
7,904 |
|
|
|
7,181 |
|
Total Current
Assets |
|
|
136,497 |
|
|
|
130,290 |
|
Property, plant and
equipment, net |
|
|
143,785 |
|
|
|
158,356 |
|
Right of use asset |
|
|
141,791 |
|
|
|
- |
|
Deferred tax
assets |
|
|
7,249 |
|
|
|
7,225 |
|
Other assets |
|
|
1,606 |
|
|
|
1,759 |
|
Total
Assets |
|
$ |
430,928 |
|
|
$ |
297,630 |
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity |
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
Accounts payable |
|
$ |
31,811 |
|
|
$ |
25,853 |
|
Income tax payable |
|
|
64 |
|
|
|
179 |
|
Current portion of
lease liability |
|
|
25,236 |
|
|
|
- |
|
Other accrued
liabilities |
|
|
28,727 |
|
|
|
24,484 |
|
Total Current
Liabilities |
|
|
85,838 |
|
|
|
50,516 |
|
Long-term debt,
net |
|
|
50,000 |
|
|
|
53,000 |
|
Long-term lease
liability |
|
|
138,550 |
|
|
|
- |
|
Capital lease
obligation, net |
|
|
398 |
|
|
|
436 |
|
Deferred rent |
|
|
- |
|
|
|
43,579 |
|
Other long-term
liabilities |
|
|
3,857 |
|
|
|
3,752 |
|
Total
Liabilities |
|
|
278,643 |
|
|
|
151,283 |
|
|
|
|
|
|
|
|
Stockholders’
Equity: |
|
|
|
|
|
|
Common stock, par value
$0.0001; authorized: 100,000,000 shares; issued and
outstanding: 52,901,733 and 52,707,879 shares,
respectively |
|
|
5 |
|
|
|
5 |
|
Preferred stock, par
value $0.0001; authorized: 10,000,000 shares; issued and
outstanding: 0 shares |
|
|
- |
|
|
|
- |
|
Additional
paid-in-capital |
|
|
170,306 |
|
|
|
172,255 |
|
Accumulated
deficit |
|
|
(17,997 |
) |
|
|
(25,857 |
) |
Accumulated other
comprehensive loss |
|
|
(29 |
) |
|
|
(56 |
) |
Total
Stockholders' Equity |
|
|
152,285 |
|
|
|
146,347 |
|
Total
Liabilities and Stockholders' Equity |
|
$ |
430,928 |
|
|
$ |
297,630 |
|
Tile Shop Holdings, Inc. and
SubsidiariesConsolidated Statements of
Operations($ in thousands, except share, and per
share data)(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
|
2019 |
|
|
2018 |
|
Net sales |
|
$ |
86,908 |
|
|
$ |
91,134 |
|
Cost of sales |
|
|
25,066 |
|
|
|
27,096 |
|
Gross profit |
|
|
61,842 |
|
|
|
64,038 |
|
Selling, general and
administrative expenses |
|
|
58,948 |
|
|
|
57,927 |
|
Income from
operations |
|
|
2,894 |
|
|
|
6,111 |
|
Interest expense |
|
|
(978 |
) |
|
|
(554 |
) |
Other income |
|
|
15 |
|
|
|
35 |
|
Income before income
taxes |
|
|
1,931 |
|
|
|
5,592 |
|
Provision for income
taxes |
|
|
(611 |
) |
|
|
(1,581 |
) |
Net
income |
|
$ |
1,320 |
|
|
$ |
4,011 |
|
|
|
|
|
|
|
|
Income per common
share: |
|
|
|
|
|
|
Basic |
|
$ |
0.03 |
|
|
$ |
0.08 |
|
Diluted |
|
$ |
0.03 |
|
|
$ |
0.08 |
|
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
Basic |
|
|
51,961,780 |
|
|
|
51,881,681 |
|
Diluted |
|
|
52,037,996 |
|
|
|
51,899,210 |
|
|
|
|
|
|
|
|
Dividends declared per
share |
|
$ |
0.05 |
|
|
$ |
0.05 |
|
Tile Shop Holdings, Inc. and
SubsidiariesRate
Analysis(Unaudited)
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
|
2019 |
|
2018 |
Gross margin rate |
|
71.2 |
% |
|
70.3 |
% |
SG&A expense
rate |
|
67.8 |
% |
|
63.6 |
% |
Income from operations
margin rate |
|
3.3 |
% |
|
6.7 |
% |
Adjusted EBITDA margin
rate |
|
13.4 |
% |
|
15.1 |
% |
Tile Shop Holdings, Inc. and
SubsidiariesConsolidated Statements of Cash
Flows($ in
thousands)(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
|
2019 |
|
|
2018 |
|
Cash Flows From
Operating Activities |
|
|
|
|
|
|
Net
income |
|
$ |
1,320 |
|
|
$ |
4,011 |
|
Adjustments to
reconcile net income to net cash provided by operating
activities: |
|
|
|
|
|
|
Depreciation & amortization |
|
|
7,964 |
|
|
|
7,000 |
|
Amortization of debt issuance costs |
|
|
149 |
|
|
|
167 |
|
Loss on
disposals of property, plant and equipment |
|
|
82 |
|
|
|
71 |
|
Change in
leases |
|
|
(448 |
) |
|
|
1,039 |
|
Stock
based compensation |
|
|
739 |
|
|
|
617 |
|
Deferred
income taxes |
|
|
64 |
|
|
|
426 |
|
Changes
in operating assets and liabilities: |
|
|
- |
|
|
|
|
Receivables |
|
|
(2,858 |
) |
|
|
(504 |
) |
Inventories |
|
|
(709 |
) |
|
|
(3,058 |
) |
Prepaid
expenses and other assets |
|
|
(806 |
) |
|
|
(1,771 |
) |
Accounts
payable |
|
|
8,429 |
|
|
|
(6,085 |
) |
Income
tax receivable / payable |
|
|
457 |
|
|
|
1,135 |
|
Accrued
expenses and other liabilities |
|
|
5,296 |
|
|
|
6,810 |
|
Net cash provided by operating activities |
|
|
19,679 |
|
|
|
9,858 |
|
Cash Flows From
Investing Activities |
|
|
|
|
|
|
Purchases
of property, plant and equipment |
|
|
(12,198 |
) |
|
|
(4,846 |
) |
Proceeds
from insurance |
|
|
610 |
|
|
|
- |
|
Net cash used in investing activities |
|
|
(11,588 |
) |
|
|
(4,846 |
) |
Cash Flows From
Financing Activities |
|
|
|
|
|
|
Payments
of long-term debt and capital lease obligations |
|
|
(18,054 |
) |
|
|
(16,904 |
) |
Advances
on line of credit |
|
|
15,000 |
|
|
|
15,000 |
|
Dividends
paid |
|
|
(2,606 |
) |
|
|
(2,600 |
) |
Employee
taxes paid for shares withheld |
|
|
(82 |
) |
|
|
- |
|
Net cash used in financing activities |
|
|
(5,742 |
) |
|
|
(4,504 |
) |
Effect of exchange rate
changes on cash |
|
|
30 |
|
|
|
3 |
|
Net change in cash |
|
|
2,379 |
|
|
|
511 |
|
Cash, cash equivalents
and restricted cash beginning of period |
|
|
6,382 |
|
|
|
7,476 |
|
Cash, cash
equivalents and restricted cash end of period |
|
$ |
8,761 |
|
|
$ |
7,987 |
|
|
|
|
|
|
|
|
Cash and cash
equivalents |
|
$ |
7,936 |
|
|
$ |
7,152 |
|
Restricted cash |
|
|
825 |
|
|
|
835 |
|
Cash, cash
equivalents and restricted cash end of period |
|
$ |
8,761 |
|
|
$ |
7,987 |
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information |
|
|
|
|
|
|
Purchases
of property, plant and equipment included in accounts payable and
accrued expenses |
|
$ |
1,478 |
|
|
$ |
1,895 |
|
Cash paid
for interest |
|
|
934 |
|
|
|
558 |
|
Cash paid
(received) for income taxes, net |
|
|
- |
|
|
|
1 |
|
Tile Shop (NASDAQ:TTS)
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From Jul 2024 to Aug 2024
Tile Shop (NASDAQ:TTS)
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From Aug 2023 to Aug 2024