Tile Shop (TTSH) 7 Aug 232023 Q2 Earnings call transcript

Good day. And thank you for standing by. Welcome to the Second Quarter 2023 Tile Shop Holdings, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. there a presentation, session. speakers' the will question-and-answer be After [Operator Instructions]. that Please is today's being advised recorded. call conference be

I would President now over and to like Accounting to hand speaker Chief Mark the today, Davis, Vice Officer. of Relations your Investor conference call

welcome morning quarter Shop's and call. the Tile Thank you. everyone to Good to second earnings

our today Officer. Lolmaugh, Officer, Karla Chief me Joining Cab Lunan, and Executive are our Financial Chief

earnings the and Safe call press are issued in made constitute materially update the and The forward-looking and Such of filings these forward-looking date to, and from during SEC. any release Harbor that pursuant uncertainties with the of, the statements. amended. not today risks our call, cause Securities this unknown to Act differ within the statements subject statements Reform meaning we as actual and of Certain such made do the as are known Litigation of our undertake results Private made provisions uncertainties statements could of and today forward-looking to risks earlier XXXX to both in Those statements are statements. described forward-looking obligation

which reconciliation non-GAAP those call for also release see non-GAAP on a company been also Today's our will financial earnings Please measurements. posted certain include measures, our has of website.

turn With Cab. that, over call now let me to the

on Good Mark. and business our our update us morning, second an Thanks, everyone. results. for And joining thank for today quarter you

stores, and our rising levels the rates lower these how Over in contributed industry. quarter, shared impacted second comparable slowing turnover traffic the the challenges have of negatively sales. last quarters, several challenges our In interest housing store presented for I've which to

better we measures us in that to anticipate we term, will to persist headwinds. been implementing near these macro have allow While the navigate headwinds

customers who instance, considering for remodeling we're providing a as are customers to improve retail different taking well options reach financing. as For project, our potential to steps

to customers. Additionally, professional we expand continue our with relationships

either is sales the we have grow of of pros nearly our still introduction second a LVT line referred or XX% untapped our of of to continue the given products. sold believe mix of quarter, to end of We the especially directly recent to by sales, potential As our one customer. expanded pro our professional

our we're saw addition growth orders we traction have from in in advertising as with an initiatives. In which the by online in improvement from stemming business, shopping seeing e-commerce conversion also pro our experience. an digital to continued sequential QX, to was as fueled well We rates investment e-commerce made enhancements

this period room significant XX% we to online The second improvement I'm and quarter we've area. over when for the encouraged the in e-commerce increase growth the e-commerce by orders seen in year the compared continue to this in believe conversion orders during helped same grow last year. by have

our assortment. to Turning our attention

of the best long and competitive been have company, the continue. We now launch expect lines. that our expanded LVT augmented recent assortment a I industry's to advantage our with continue to of products, tile This has of

to experience, maintain able trend Our quarter, store progress rates we our make bring continue ticket to retail macro despite which challenging strong against excellence buying helped Average positive energy were customers' teams continue to conditions. our conversion the to prices goals. us this and

mix meaningful believe of quarter over to the this since month launch closed also strongest continue of and has portion LVT our a into orders our grow our We with time. potential to the category sales

for continue in store our in which store our market. XXXX additional relocate area. quarter in growth distribution year. opening in store look to Colorado mentioned open one opportunities We're We still in only existing track June, be XXXX is I will fifth Springs of This were on Colorado the our pleased to new to within this last store and our

now call the hand I'll Karla. to over that, With

everyone. morning, Good Cabby. Thanks,

quarter second sales an increase quarter store stores value. by traffic Second at offset X% was The partially to in the comparable decrease ticket store levels by sales and lower in comparable of last average from due year. decreased

Our gross XXX gross last increase points the products the XX.X%, rate margin rate last The implemented due last during the year. of margin margin cost to year. line partially second offset to but basis in quarter, reported lower we compared in was quarter the increases the same price is gross which that was over is quarter in decrease an with our by

margin half the in international is XXXX, believe with in well our given pricing initiatives. company of the source improvement rates during we quality to gross products freight combined ahead, second an positioned see better opportunities at Looking connection resourcing to in decrease the with

time, have carry than a we rate products and At and lower it's competitively these LVT our shelf our that the same margin priced products. that tile important back gross to products note

We over LVT on sales growth in anticipate back pressure overall and margin rate time. will continued increases gross put shelf of our likely

expenses. dollars SG&A expect fixed we our result of and of profit However, the on products incremental increase leverage sales gross these in improve an will

Second level, stores. transportation million decrease a impairment quarter decreased expenses compared a and were The that for recorded $XXX,XXX at depreciation. million in largely $X.X decreases a million to was offset partially decrease decrease quarter decrease charge in XXXX. These compensation asset variable store second underperforming SG&A a a in $XXX,XXX by shipping of $X.X to $X when the attributable by was and

had targets our been quarter, given plan. amounts incentives, that reserves for achieve to annual incentive relative to set our the required under second performance bonuses annual the aside we During for adjusted our financial

otherwise from compensation performance compensation certain granted expense been on what approximately $X.X have target levels reduced at reversed vesting adjustments in we earlier that Additionally, containing restricted by conditions it of million. SG&A XXXX. These been had incentive-based awards would share share-based inclusive our expense

million in last $X.X of the to EBITDA quarter XXXX income Net during $XX.X same the second compared to $XX.X in compared same was million adjusted $X.X million last period period year. and year million the was

decreased XXXX per XXXX. the during to $X.XX Second $X.XX quarter quarter from by quarter second the earnings $X.XX of second during share of

million of the balance by strong the quarter quarter. a decreased have at sheet. Inventory to end from million to $X.X continue the We second sequentially $XXX.X first

continued outstanding million helped of our of the debt deliver million have flow. $XX flow. the to also $XX.X beginning cash to We Year-to-date, reduce cash second quarter. at end This $XX.X the million the us from operating generated strong we of year has at

we million by with six balance cash Additionally, during the cash been reserves year our a quarter able $X.X $XX.X of first ended million. have second to the months grow and the of

expect term. to We near cash our continue down debt the to use to pay excess in

questions. With to that, Cabby take I are any and happy

Instructions]. [Operator

first Our comes of Street. Smith Lake Mark from question

is, of give that the the you store in guys while. new a anything question for going early I probably updates this, any how new know learned it's gate, or this have out first thoughts for First us can around me it's you with and but store and

new This traffic our Mark. event and store actually week the a well absolutely, and able nice pro pros retail visit last location. to was I very Yes, our and for customer. and positioned happy for with had is Cab. We're that

in Springs, I put and have tested few a them we and think we've there high other in things stores hopes. Colorado into action

far, happy. so We're good. And so

can spoke on great. about Any going? Is LVT, you of initial on outperforming? us would a expectation? fair insights additional of You kind be it hitting thoughts amount it kind give Is LVT how that's

our more And and I down. continuing awareness, more, the slowing I want continuing to thus results will. of see summer. far and assortment. But with I'm the sales through more I that get segment don't to always It's we're always see it happy of out and

to ask I wanted inventory. about

the had come down couple a how much guys kind attractive increases ahead through kind would out Any of heavy of last down and your gone And insights coming us at pretty in You and comfort inventory great. price of of of pipe maybe can here. call here kind today? kind it's sell Walk bought inventory margin. there of, some but still of be us – you level we'll quarters, walk the that through have still with your you prebought pretty it, through

bring to $XXX inventory still down our We've We're million. been over quite bit. a able

think to have bring I it future. even in down more we the opportunity

It's As to freight. DCs, our good. structure lower our better with continues cost product a resource that's hit

see of through newer to that more We're of in higher-priced So the we're continue come out stuff going to is inventory system. months. and weeks, coming some starting get our the to that landing of

we're inventory better same So But the we feel price. can is what have to I of buying we're a right? So at lower units, going amount even more.

units gives increase us that our though comes to going we're number margin hopefully, confidence somewhere But here even So, quarters. our be an going down, are in that the see, the inventory coming there. our same around or to in

I out or behavior. tough consumer for is seeing consumer question press called on in environment drive is release guys just think products? being maybe spending pretty it more last macroeconomic takes know in the you your And that to it here. you what really What still you're spur some me the

right trend getting better it's it's with trend remodeling say, There's direction. housing worse activity. still to as We And the and starting less turnover. well or, we in

was nature. still on. And opening these the up that year. high-end with hear our that impacted are more We're and to for to retail I to that wet has are ramping they're QX custom is go QX, and as busy, feel blanket not But pros through on get the still and traffic Our up. And the going We those, a but seeing think what rising to put builds But last things that. of permits larger that's interest slow. going pressure we rates, more the Pultes, feel it Hortons through it's start I more going stores. be that houses like but I homebuilders our about

things a a hoping XXXX still with and inventory the But to little will better no doubt. half of see priced go well. in We're it's back challenge, bit more

at Davis remarks. to I now I conference turn Mark for questions am back would showing the no closing further time. like this to

XX-K have Thank listening anticipate interest Shop. our great in today. conference our filing you a Form call. The We your Tile you And for earnings Thank to day. for later

This you concludes today's for conference. Thank participating.

now may You disconnect.