Ethan Allen Interiors (ETD) 25 Jan 232023 Q2 Earnings call transcript

Good afternoon, and welcome to the Ethan Allen fiscal 2023 Second Quarter Analyst Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. Please note that this conference is being recorded.

pleasure Chief your Financial my Senior Matt now President, Vice Officer is to host introduce McNulty, It and Treasurer. you. Thank

begin. may You

your Thank CEO. Allen's And today afternoon! is Farooq Results. you, for Chairman, today Camilla. us President prepared speak financial performance our for midway joining and With Mr. Kathwari our thank close me to the our and questions. will prepared remarks, open XXXX After to Fiscal our you Ethan remarks, will Kathwari, open Second while we Quarter then I will through. discuss Good call

reconciliations remind Before you audience News we begin, will also Relations page I'd like and Investor under the this to recorded be is our find financial the webcast website. of on live on via the being on our this There call our website. a Press tab non-GAAP to Events the and today's contains that of made also www.ethanallen.com replay which Release, call release of in of will available call. and referred measures and copy phone A

those for assumes Our forward-looking complete forward-looking or matters refer are and call. risks to to this materially. cause statements SEC any to that comments no could our obligation filings include to subject uncertainties actual of Please company that review results may risks. revise today The differ a update discussed during

the to Kathwari. Mr. over now call that, I'm pleased turn to With

call. Thank you, earnings Matt, and second XXXX welcome to fiscal our quarter

results. with pleased are our We

of personal helped has with game technology We been interior stronger where products personal orders. in offerings workshops; in delivery $XXX.X at American also North we interior of one clients designers our the to Our delivered sale America. our network XX% a of unique in-home were including Combining changer. of backlog million a were made the by provide logistics a price and factors, service our result design destination; many strong North

margin and XX.X%. increased operating XX% margin increased gross to Our to income

strong cash ended of grew share no Our debt. by $XXX.X of per XX.X%. and $X.XX adjusted million with We earnings

overview integrated financials, and to will going our unique brief review be the of structure a opportunity provides Our I strengthened, Matt? and vertically continues forward. after Matt focus

Mr. Thank you, Kathwari.

we results financial GAAP Non-GAAP detailed are performance release. business. initiatives, other a on impairments corporate As in both these and our and actions We and non-GAAP restructuring and include our non-GAAP the further operating reminder, underlying a that results believe trends better presentation press of basis. reflect present

and year one Our consolidated of net million by the quarters effects of backlog was a were sales product partially sales, lower of second largest by taking quarter pricing the historical comparison. net prior difficult helped The volumes. $XXX.X led strong offset second mix, actions positive unit to which for

with second pre-pandemic our quarter norms, year fiscal backlog quarter from levels. and X%. weeks backlog, consolidated XX% XXXX, reflective we remain as it more We of wholesale backlog able up ended to of bringing Compared the wholesale ago XX% the down net to of We than $XX.X more of million, pre-pandemic historical which were were reduce higher a number sales the is of current.

down XX.X% and the to GSA of of Wholesale orders. due XXXX, segment fiscal to and incoming primarily timing orders year XX.X% international for second down written pre-pandemic were the last orders quarter lower

to comparable. XX.X% Our due retail a down prior orders strong were year

retail product orders of wholesale promotional mix, XX% to were margin mix X.X%. product the favorable disciplined in points actions, our to when decrease lower unit a However, in and costs, freight offset inbound by compared QX retail pricing a grew gross basis volume. sales and activity XXXX, from XXX in only Consolidated change a partially down quarter

our as moderate shape sales, we from this backlog. normalized of last towards of Retail of XX.X% began consolidated wholesale consolidated We down sales had expected take and to more XX.X% sales this order to percentage QX. year, to retail in were delivered levels out sales

operating margin sales second and disciplined to margin to delivery from net and costs. to high due wholesale retail XX.X% cost offset gross approach by the maintaining year Adjusted improvement year XX.X% in control, quarter, increased the a savings current last lower expense partially and

expenses last gross year ongoing reflecting to despite due environment. XX.X% sales to sales from up base. declining a was Adjusted earnings our of and reduced to SG&A XX.X% Our net year, diluted share decreased per net a leverage this expense $X.XX operating improved XX.X% margins

rate Our XX.X%, the last same quarter the was effective for tax as year

resources. turning our liquidity to Now and capital

we XXXX, million $XXX.X XX, no December of of investments with outstanding and had debt. As cash

liquidity and facility. equivalents, cash investments credit available our of cash sources include Our under short-term and amounts

up during period operating due the $X.X activities working total million million income increase the an to cash an from generated $XX.X during half of in year our quarter, net $XX.X in higher XXXX, capital. improvement bringing in and to prior We from million first the

share, and share were X, XX. In and retail. of $X.X our as and per announced, quarterly which on expenditures paid on quarter the areas $X.XX we for regular technology Capital November, in declared February investments various just per within declared million of included payable a January regular was dividend manufacturing, quarterly another yesterday, $X.XX dividend Board

we EPS during net operating just and in summary, second income increased gross our current diluted completed In operating margin, margin, income, environment. the quarter operating despite

Mr. With Kathwari. I will the back that, turn call to over

Thanks. All right, Matt.

strengthened in have products introduced following We will substantially months. the be new and six our offerings

the good is were new three strong developing while products, new busy last news limited we only years, the we products. introduced During

combining traditional We have greatly mediums with the also digital increasingly enhanced mediums. our marketing,

XX% about in stronger. and are our is American on Our orders. North supply our receipt side workshops products made made custom of XX% of About

addition important of Our and has workforce production with investments America continued factors: technology. two in North capacity in qualified very been first, increased

good a our clients. service to position in are We

as and talented interior reintroduced with are design Our interior very designers. being an design refreshed centers destination

design centers more reinventing with of relevant and are our the We projection projections. fashionable

the very most design in XX Our plan projection. to months to in convert is this next of XXX centers North exciting America the

review our partners. international with plan also to We the projection

has retail changer. a Combining technology our interior crafts personal in and game manufacturing network with been persons our service in of our designers

financial to maintain We progress are results. good position a in continue strong and our

for pleased and questions comments. open With this, to we’re

Instructions]. questions. you. our question [Operator Capital proceed Brad from first Thomas will KeyBanc come with And with Markets. Please Thank your

Yeah, hello Brad!

Matt! Good How you are afternoon, Farooq! Good Hi! doing? afternoon,

your voice Brad. Good to hear

Likewise, good to Farooq. your hear voice

All right.

the strong earnings you? I hoping feel for you're bit was gross on that's competitive could how about the more I thought a margins were going like a the more quarter. you impressive. about gross particularly congratulations and industry you thinking little here this talk for and if getting Well, is if risk forward margins

have Yes course gross Brad, of have and higher which had is reflects we of you through technology. strong also a said, we very that margins, the made improvements combination volume as

just we is have increased you till our sales by now people instance, In our our from XXXX XX%, for actually better terms to of – of perspective, has in give result X%, retail. having overall and very our while at which a at quality manufacturing, down over technology our important, about gone just a manufacturing, headcount

are helped productive. more us factors the those have become that So,

also margins, think course, But to do where margins, higher in objective our continue of we manufacturing the are Then volumes with especially side. going forward, gross from that. gross benefit is I I think

sales the the you pandemic That's volume and here? great. industry starting think And pull benefit orders slowed of of a How that cost do Farooq, you the if during with bit. going declining the bit, levers have you know from might course the business forward the about orders structure and the a we to during see the whole slow

Yes.

very while is very, have Our to Well, backlogs the of news deliver been we are high. production, our increase are course, the that start products, backlogs, backlogs still decent good reduce to able our our with.

to we fine-tune environment, our always and that, terms the this do are our very business, carefully However, watching have say with carefully yes, you manufacturing, as in the very logistics. watching network, might We'll structure we at continue know, retail fine-tuned in much place, stage, both but you of lien. operated

just mind, years many manufacturing to it that know used in You keep plants. we back, have not XX was

twice we that and have much North XX Carolina, and in Vermont, did producing America. Mexico Honduras the as Now North is

Similarly our we now to logistics, two. centers, distribution have we XX major national used have

have very of as markets, sales carefully us the going we But is up. make and in to attitudes, some sales, to which the have forward. however, go don't adjustments of hold we the So we efficient, becoming terms more a will done watching are so help work Brad we consumer lot if

Farooq. so great. much That’s Thanks

right All Thanks. Brad.

[Operator Instructions].

Fernández Our Group. Advisory your from Cristina will with next question. Please Telsey proceed with come question

Cristina! hello Yeah,

Hi! a that any questions. afternoon had order of demand, around quarter, saw callouts for Can you Farooq Any affected helpful. regions? what any others on and lines how or there couple than Matt. the progress? the I would or color Were you Good were more product it provide intake be more did categories

Yes.

we in know of course course to had we the very, the Of very compare of year. previous high down from was written terms when previous this levels business year, compared you last the in business the

business in strong have overall had upholstery But very a we our business.

extend upholstery increase programs where also has factor technology the the we quite work interior held of has up help. doing, utilize major saw our are to to to the But support our been that an Our course ability well. designers interior designers in

then That rather has provide a they selling total important business to able more dining factor, than our, they and a products. various Because living been categories are seen, you say, really in room and we we you that, accents. items maintained our a a do to when much, very room, and have might say, have from good of might that, solution our bedroom

design. we what as less a business That's qualified, invested we marketing has about destination. designers, have – look that, more to when going Cristina manufacturing. and Because two, five why message more I in seen to in we're our we're Cristina, going I'm said, years or great talented, great are interior we we about I and forward. in have been interior deal, and our three we and deal have doing an to because more fact back, last going we think we our So years communication, the four today sure see see XX% had in towards we all technology continue them in continue you've at have to is our and a That's invest providing gone than design our more but designers to

structure? what do which you had on think to this structure. a the follow-up a the you the quarters $XXX and this around operating If made annually, margin of is That's you've eventually helpful. cost sales back changes level to achieve Brad's about were I million cost can at level, the with question to scenario pre-pandemic level second remain was in go that question,

when also margins look at at at Well, the at XX%, When that you instance, you for operating when XX%. know that's I and a look you pre-pandemic margins, good take margin operating our gross were XX%. to even were go XX%, back think about question a our they that time our you levels,

course of comparing think XX% which XX%, a the of were Those on high is when XX%, opportunity. look course and at to you lower XX% an we the pretty I So industry, have we margin. really side,

So our volume an or than think or fact it of our a strengthening I operations, structure have forward. of we at much depend we margins. spent have going of But will Whether it our so so on maintain lower back. sales logistics, cost margins, a and but have sales depend was we retail time upon maintaining the four stronger manufacturing, years our network, higher higher today will our is XX% we five how opportunity we our of lot maintaining course, also opportunity strengthening with able upon deliver, to because of good are it can of

talked interior or the design know stores? one the helpful. specifics, the refreshed can for the that's you you will about, last provide be what And Okay, you new was then centers more in that on exactly refreshes

think that's I development. important Yes, a very

been that's one it, projection. going to is planning do be will center, that new also as the to new to design March Danbury XXX in really it's a about is oriented, our and projection in we also renovate all project then, plan that are now be open we our fact, that Ethan which one that more on Manhattan, and Allen centers. are of next and We've design up. talking the will design almost next It year centers one to the it country, are stylish, we them projection In going have what the to in right going in our in will designer we Danbury working

and it. higher lot to back, doing in here, at projection is advertising, The use us fortunately our which color, up know digital magazine. think The were take magazine, already in if I of of look didn't also and you job much make two don’t it million weeks. end. But with advertising, It getting was Ukraine, studio two we our magazines months if that you're are marketing, a I sure style, projection able talk us with years every providing strong terms sending photography. is we are used today a a out have photo we five nine And amazing and but I'm fact does then to to really today take a impossible one in we XX an digital page digital to printed of

digital tremendously important. is So

their it's the center. Our designers today work in design to with homes, are in are they clients, able whether whether

service And that's is So Cristina rather more furniture next design combining a center be we important. personal and than technology year to is, centers or the design tremendously see That in are so. what going our store.

investment increase how you one there to a And or all you design see refresh centers? last need one. Is to CapEx do but sorry, make like much the

mean design most the major, it, paint, refreshing the color is be to is center work going of I our and products. Most position. – going not to is because new be It good in of

you helpful. best luck Thank and of Okay, much quarter! so this

you right, All very . thank much.

no Instructions]. for I time. closing questions [Operator at comments. There Mr. like to the are back to would Kathwari over further floor this turn

well journey. much. thank to you right, Look All continuing our forward very

to this is just me mentioning meeting. Matt our and mine and was I know consecutive Matt mentioning – was You XXXth that that to quarterly

all, you you, see to getting just started. and great always it's we're I talk So to to say

forward to you And So look Camilla, thanks much thanks. talking to very and soon.

this today's And you. Thank concludes teleconference.

you You time. this disconnect your your at may today. participation lines Thank for