Escalade (ESCA) 27 Jul 232023 Q2 Earnings call transcript

Greetings, and welcome to the Escalade Second Quarter 2023 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Patrick Griffin, Vice President of Investor Relations. Thank you, sir.

You may begin.

operator. you, Thank the welcome of conference at I'd Escalade, On to entire our to you results second like behalf team quarter call. XXXX CEO, Wawrin, call are the me Walt and Glazer; Leading and Chief our with Stephen Financial Officer. President today

undertake future various statements results significantly including in risks risks projected and contains those financial forward-looking today's our differ and described about as uncertainties, periodic our discussion to no reports expectations. open we business with questions. by Today's statements filed from in forward-looking At Actual prepared may of for due will obligation to the Except our conclusion required statements. SEC. we forward-looking the update lines law, the the remarks,

would the to turn I Walt. call that, like to With over

margin us to job and debt I'm in on our thoughtful the us Thank highlighted Patrick, growth quarter. made significant first a quarter you, call by beat results, report EBITDA a fantastic team operations, our joining in pleased team cash reductions. second recovering did accomplishments from strong second expense plan quarter the difficult and welcome reductions, delivered from by to substantial those flow These that and today. expansion to the enabled inventory long-term and

during quarter. the volumes Sales significantly improved second

second June we by going X-month traditional calendar included Importantly, a and as our results we within four X, through traditional January year XX our moved report X-week This forward, reporting substantially quarter quarter. results our for were impacted April Previously, XXXX. to days periods. fewer reporting calendar will calendar the on

of an quarter's a in X.X% improvement year-over-year was our which Excluding reporting XX.X%. the decline calendar, on change prior impact over sales the declined of basis, the sales

more of DTC versus sales with marketing non-licensed than year combination campaigns April a recent period, driven our accelerated quarter, ago launches. effective direct-to-consumer product sales second June the through XX% and new During by the meaningfully, up

starts goods optimistic remained consumer of brands our and portfolio channel recent slowdown increases and sales inventories in by this believe housing will in cautiously inflation. stability labor are in soft a in about with to still consumers We sentiment, environment. the elevated, driven and recreational continue While we U.S. resonate and changing somewhat leading retail sporting markets are diverse improved

gross chain to with last should freight of lower-cost margin we restocking move XXX inventories faced XXXX. inventory, mix improvement wholesale supply lessen, position Improved the the further which the discipline, and channel We we favorable between normalization challenges sequential particularly operating holiday continued expenses. resulted this to of respect as a year, a have us product capitalize year Operationally, quarter price in to expense reductions half season. second the basis and in first entering point on more second that anticipate into opportunities leverage,

balance to As to capital positions build improved and continue before, we on growth highly on control, management categories. cost optimization. a investing we market-leading working in innovative in focus Strategically, of remain combination focused sheet product development key

new during playability second performance example, of enthusiasts. improve range launched paddles that a fast-growing we For pickleball market carbon-based of and for quarter, pickleball the the

as the sold well and Consumer our utilize through has launch expectations Technology. patented This our Malice runs. exciting exceeded ThermoFused paddles quickly these as initial Raw of Carbon paddles, Premier our production Mayhem Evoke new range and included which acceptance

category year-over-year of year. the contributed meet double-digit accelerating strong quarter in this second the We significant a growth successful sales are despite manufacturing to also pickleball This launch to shorter demand. our

and and Coach have an who media playmaking social interested announce followers NBA pleased Handle amazing basketball Skills Life are Johnny's collaborated that handling We to founder and to range ability. over brand Johnny are his improve unique also in of skills. weighted has ball X a ball-handling designed accounts launch story the Stephene, basketballs gained Goalrilla with to of our efficiency million

Handle provides new training this consumers about to with their which collaboration, tools game. We effective are improve Life excited

We're at innovative League launch of Outdoors. an coming quarters, Sports other key particularly bags, new over which the Academy several Cornhole products will American + licensed in initially cornhole assortment categories also launching boards and

tune held cornhole American to through Championships, World please August Cornhole some CBS Hill, Network. For the on will XX which Carolina Rock air will in in X, and July and League ESPN thrilling Sports competition, from South the be

importance environment, we fortified the navigate sheet. we balance cost As an maintaining challenging structure of demand know and the appropriate

focus continue cost to maximizing cash structure on We and optimizing our flow.

strides remain costs have and to $X.X we the on results, trend costs improving achieve reducing quarter second of to remainder continue operational million margins cost expenses. the lower our lowering year. to by in great annual and savings track We gross our in already through highlighted fixed As made through by our our expect

continue to end of by XXXX. remain divesting expense Mexico focused facility and the our operations this of We ongoing on carry the

professional We have divestiture. year-to-date this to spent expenses approximately related and $XXX,XXX on services severance

exceeded management, we capital working use mentioned, due previously the more hand. XXX%, As quarter focused cash improved continue flow. sharply including cash during to to second on Cash of optimal our primarily conversion on be the

As reduce we which additional the debt. our we continue our generation, should inventory drive levels will of through the utilize year, cash end to further

of second was our quarter, At net the X.Xx. leverage end the

However, targeted we our remain our leverage committed reducing range between to and X.X X.Xx. to

value-creating capital dividend. to over of lowering capital net including on with business reduction debt our a we spending, current we priorities control While Along with expenditures. have tightly long-term our focus our years allocation of discretionary our acquisitions, the remain leverage, payment and built number continue

the and to macro quarter, do ensuring current we consumers our of support by also with most great metrics. delivering brands. responding Entering to quarter a the the team to our navigating remain loyal improved performance across work in first key retail competitively positioned third disappointing job hard a that good to environment our team a proud while quarter second continues and dedication of I'm our partners

next brand on exceptional you We our build long-term while creating all updating focus to continue quarter. value. experiences consumer will creating all forward shareholder We that to look with loyalty, progress

to over his call the turn I'll Stephen remarks. prepared that, for With

income $X.XX per or million months reported on of diluted XXXX, X net $X.X For share million. of the $XX.X ended June Escalade sales net XX,

was prior by For inventory period. reductions The lower the and costs year and company of XX-basis-point through on quarter, result in margins XX.X% storage elevated quarter. handling in second operating revenue XX.X% lower higher base, partially compared gross second a categories primarily offset inventory, expense decline the leverage of the the cost margin improved implemented comparably reported to and several the

The and administrative selling reduce lower expense Selling, caused million. our XX.X% expenses in prior-year which the fixed variable mentioned SG&A and was period initiatives $X.X general Walt by costs, expenses compared to earlier. declined to year-over-year decrease to

in period. declined year was million versus the period. depreciation the million for of prior interest, taxes, of $X.X amortization in quarter by cash in the provided XXXX. The quarter generated million cash $X.X $X.X Earnings million flow inventories a from reflects to second capital XXXX working by before of cash and to prior operations Total of in $XX.X second $X.X from through compared quarter result to year million the reduction as improvement increase the operations a

$XXX,XXX Additionally, the the capital decreased manage we to carefully as period approximately capital during prior-year from expenditures quarter our spending.

cash the cash XXXX, in outstanding of $XX.X debt As net XX, million of with XXXX. Xx revolving our less total second facility June secured total on or company EBITDA. end At together maturing equivalents of $XXX,XXX of availability the debt and of was credit senior quarter trailing the XXXX, had XX-month

XXXX, paid a record share to September X, disbursed XX, dividend to all per this of announced morning In quarterly of shareholders August addition, be on and XXXX. we $X.XX

last important we XX-month to conventional calendar. thing remember, transitioned on to X, One effective a January reporting

prior in our opposed As the XXX comparability the days quarter operating third year of an period. will the for have of the results as a result, operating quarter. to impact second XXXX days dynamic XX This had on

open With that, questions. call operator, we the for will

[Operator line Rommel of Instructions] Our with first the Aegis from question Capital. comes Dionisio

that the quarter. getting some didn't had And quarter's cost a lower forward, in I result savings also, costs you full expense that severance costs were incurred incurring restructuring should of I most cost of onetime better am Did quarter in as as correctly? but with well as look the efforts. of things in Did cost even the you get to full higher your think savings regards obviously, realized So second benefit? about understand XQ? and reading XQ, maybe I savings severance benefit -- I going recent maybe a some talked you correctly

I I your think understand question. Rommel,

So program, are these that and in opportunities are savings cost teams. an coming we generating initiatives our ongoing every have week from

we At same them. being are receive our time, Mexico the so And down implemented as shutting we they're operation.

the payroll So reduce we're we're to incurring cost facility, severance incurring the we carry there. as costs the

the benefit your us those and So question? both QX, develop and that will most of -- Does XXXX. continue will QX will the continue cost quarter and into things into savings, answer of to third these be

where to trying shutting think No, you levels quarter build and a Yes. be as follow-up, that benchmarking it as stock now? should third number I about terms fourth safety about relative how quarter? to second at very how just we where in down But the it's inventory know quarter were Maybe of in helpful. we should some Rosarito. of the was the think end you're just should

Sure.

been. more down. they half what customers we're inventory this with But that so further our in of inventories. What seeing come I've reduction is looking They we're is second down far year. a great need course, customers observed still on progress both levels, we've the the at made X are They're Of coming But our certain customers ours. in than categories. at in to and anticipate year. further have our progress We conservative

And need and less the so they're even perhaps probably holiday than maybe going they into to XXXX. into carry inventory season going

that. introduced. to -- In up like seen. as short. We're just remains monitoring We're goes, certain new that pickleball, paddles hot we're be low we've these seeing keep where to to chasing But are it inventories with So that improvement. how categories

a with follow-up next Rommel Instructions] Capital. Dionisio [Operator is Our question from Aegis

Great.

Okay.

and before chain if ask know the industry of year So just when supply I one turning last kind more, the was I year could. against I'll that.

looking were bit stronger in contributing additional than cost us update anyway. savings. extent what if little differently guys that's to the for made there, to just drive you've we wonder I could on what progress products to to a were margins XQ you You engineer looking

$XX,XXX -- were container. imperative way the on containers more to it product shipped space plus, the get and items improve Yes, the the was we when take packaging sure. and that to We less

So rates, we've freight freight is that we've now. low are that. seen quite What ocean done rates

continuing we're is but reengineering to so strong those benefit not the impact efforts, And those. from from as

freight packing, And so we're better the better costs. raw container efficiency we're material we're seeing seeing rates, lower currency exchange seeing and lower seeing of we're

to are So contributing things, these Rommel, continue. to the anticipate higher are those and we margins, that effects those

like are at turn further call for There over time. to this any closing Patrick the no Griffin to remarks. I'd questions back

in contact please feel concludes and ir@escaladeinc.com. questions, you any you call Escalade thank today. to your Once joining This again, free have at for interest Should call. our us our

may You now disconnect.