Ethan Allen Interiors (ETD) 24 Jan 242024 Q2 Earnings call transcript

Good afternoon, and welcome to the Ethan Allen Fiscal 2024 Second Quarter Analyst Conference Call. [Operator Instructions] Please note, this conference is being recorded. It is now my pleasure to introduce you to your host, Matt McNulty, Senior Vice President, Chief Financial Officer and Treasurer. Thank you.

You may begin.

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

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

include and Form statements to are future results forward-looking SEC subject described our risk discussed most during actual cause our complete obligation pleased revise to matters our may uncertainties forward-looking to on could differ Mr. that annual company are risks XX-K. call review any the materially. to to The results in factors call. With update Kathwari. significant that refer that, comments Our affect that could today no turn The risks. filings to this I'm assumes Please over those or of a now for report

good joined. Thanks, to all and have you Matt,

strengthen pleased are and enterprise our our to our to strong continue We review results. to our and second results initiatives financial quarter

our overview strong provides focus quarter brief and will Matt We to our ended I after maintain XXXX. financial of financial continue are XX, review results to and Matt? very positioned. well the strengthen December a our performance. for second And enterprise initiatives

Kathwari. Mr. you, Thank

restructuring underlying GAAP actions, results reflects financial trends As presentation basis. results and a the of other corporate a present and Non-GAAP impairments operating business. both reminder, and better initiatives, non-GAAP we non-GAAP performance the we believe on our exclude

softening just balance quarter economy, by Despite operating completed results are a a robust strong in I Our produced results, will positive sheet. sales financial lower second discuss. and the which highlighted our financial operations in margins, now

$XXX.X of from a more reflecting while trends delivered segment XX.X% design traffic times customer comparable. is continued year demand. X.X%. totaled written which decreased improved Our were times manufacturing Written We with current, consolidated and the lower XXXX. backlog Vermont levels. We home backlogs the near recover from down market, with were in ended and to volume, and sales the quarter quarter lead the reduced that of furnishings reduced wholesale segment of reduce significant casegoods by unit we helping it as center net $XX.X impacted in occurred Wholesale backlog, million, softening pre-pandemic bringing written year, strong production compared strong prior of order weeks to last prior year retail lower lead reduce flooding July orders number in million, increased orders within

Our XX.X%, plant Vermont operated that XX%. completed margin at approximately quarter. Consolidated XXth has margin our gross operations consolidated just resumed exceeded consecutive quarter during capacity was gross wood the and furniture XX%

the with by gross was lower product unit by partially combined mix, sales from and offset consolidated quarter costs current impacted count. in change lower Our volumes, margin head the deleveraging and input

approach These Adjusted ability to erosion from control. and our refresh a expense in operating to partially margin costs our XX.X% headcount savings gross costs reflects lower design grand incremental sales, cost by margin and and of center offset reopenings. maintain lower disciplined were

to operating our has last basis diluted was of pre-pandemic quarter, points. our more, sales our $X.XX. Adjusted decreased fixed XX.X% to SG&A And and sequential points X.X% as increased due reducing EPS margin deleveraging. by On expenses margin second by operating basis up SG&A X.X%. X.X% even basis, compared improved XX.X% up while adjusted a XXX XXXX when equaled net we XX improved Our from expenses cost sales, year

Our was rate for quarter effective ago. a comparable tax XX.X% to XX.X%, year the

In paid cash Also, of per cash investments million cash just We of including operating be turning balance lower Directors robust liquidity. We paid activities November declared a our by a inventory sheet, XXXX, with profits, regular to cash quarter yesterday, ended $XXX.X February. our and quarterly cash announced million driven strong quarter $X.XX during and levels. quarterly $X.XX or in of will which the the collections generated no improved from $XX.X we share, per million regular a of and $X.X of share. Now dividend dividend as outstanding debt. Board

our integrated this We operating strong post-pandemic cash are to marked demand. vertically industry-wide cash able produce was a also pleased a by to dividends period while enterprise position. In double-digit during maintaining pay summary, softening margin

and model Mr. generated the to flow With remain cash protected to strong committed business I management. operating we as will strong Kathwari. positive disciplined expense turn our call over investments margin that, and back now Our

thank Well, you, Matt.

pandemic As backlogs, year we increase we fiscal strong pandemic on period The had high now are and mentioned defined reflected demand which now focus through XXXX our in to as major press sales. We high post record levels. home, entering XXXX returning consumer period. are in the release, pre-pandemic

period. Cash $XX.X XXXX, ago. from For December increased compared and quarter to XX, the ended XX.X% years to quarter gross investments million XXXX. is million of the ending That XX.X% X increased margins a XX, for $XXX.X second December pre-pandemic

in of the During increase we pandemic. an shareholders the to or cash million form the million $XX.X dividends, of period, leading returned period X-year this to up XX.X% have $XXX.X during

was from inventory the headcount pre-pandemic reduced and XXXX. XX.X% of levels reduced December XX.X%, Our

positioned. forward, going are Now we well

introducing We strengthen our improved, to products. that offerings. has chain And continue to our now start plan supply we new

important and North The us been throughout strongly. to Design repositioning a centers very undertaking continues us network position Interior has retail be Destination focus to The is growth. major has placed America of strengthened. our for design Our

of customer This our is also reduced lower floor large production. lower We in interior which core selling North design which amounts have our the manufacturing of American reflected reflected in samples. of space resulted orders, of a centers,

of the centers. repositioning of most completed our have design We

equal while prior advertising as sales X% Our of to net of marketing to greatly enhanced, been has the major pandemic. X% expenses to compared costs reduction

Despite margin operating an maintained of gross delivered lower XX.X% margin sales, XX.X%. and of

areas our integrated vertically many strengthened enterprise. of have our talent We in

has period the our While have their continue other on that focus on now traveling, as areas such homes, to an we believe gives which again opportunity seen focus to started consumers progress. post-pandemic us consumer

positioned well or cautiously remain are We open questions and optimistic to and comments. any very happy for

Budd Thank Our from first Instructions] [Operator you. question of the line comes Tower with Research. Water Bugatch

questions, couple if A might. of I

variance can just across results -- on little geographically about of -- country point that First, volume the bit and to? any the can a terms in you talk you the

don't I Budd, think so. Yes,

was our -- pretty positioning is country. reflecting the our better. the been say But has across differences, or -- East that the If South doing cannot strengths that think somehow I consistent West it or the of or that market. there in were more I

I think consistent. is pretty it

some mentioned color there infer And or been Okay. or might to the the or have that? quarter on consumer from saw of you in the in the can which or orders as give is to starting comment traffic stores. cadence I refocus that website of the you the that, on the that -- you implies difference traffic any home, cadence Any

where furnishings. the -- had most I consumers Yes. that focused were home evident. might interest and a somewhat There interest areas. in say, already -- X was we areas we and lot and more or saw They of what months, say in traffic you in of other the home. saw last XXXX, other their in especially trends greater X month a on purchased And of is actually the December would

the consumers we home. that getting having believe that after focus, months or are back X So X into of not

the if you ask I business at was a the a if So from positive December quantitative network? retail month written auto question,

Yes, it was.

-- color like want any to you do put any to And more a that, number?

too still it's early. Budd,

positives early, there also their challenges overall, are as back think direction. the and areas. we said is still consumers get now in in also I in starting some January, and I in we are a are furnishing perception that starting homes. but that positive It's to we are see But

significant in both And I margin of was course, operating that Okay. quarter-over-quarter noticed, segments. differential the

in what deleverage been might might there volume? going think. -- that? talk issues some the than imply have would you Manufacturing other the have any impacted which to volume mentioned unit than would Can through about segment, You other I other from Were that

volume it the XX.X% XX.X%, reflecting this that pre-pandemic from obviously, than operating a our we That's strong XX.X% at it's margin. XX.X% I I look high still margin. and to operating a look were take went it, I When to good because take operating when sales. the historically, is were a the compared X.X% pre-pandemic our substantially margins that to higher a you before, But if went margins pretty margin year you No, XX.X%, levels. at levels why extremely from our had think margins said our that gross

and of talking us on has just talked impact sales, might question, the segment? the the maybe Can margin. an last help how you gross at margin operating the both color Retail Okay. on the and in And my floor have feel a margin sample had that you much side impact revenue margin about and that -- get

Yes.

are there impacts a think it I number of had.

don't reposition in my centers. was things when our Destination, is decided substantial implemented Design almost designers, custom. all foot an ourselves need square with space. -- strong did Today, floor it X that we interior -- is As design the North with And we of the all to our of comments technology, I and mentioned we of developed American reducing but our XX,XXX actually, manufacturing, as Interior

of we -- Obviously, was rest called it were reduce it when sell floor a say, manufacturing. product, start also from, existing us of margins another products. inventory, many we XX,XXX. in So selling were helped we that it And calendar started we not let were would had -- we impact, it year, And will we the repositioning, lower, the last the Because making it product. XX,XXX size designer year, but custom was and samples. decided XXXX on to the then us from them early that we

over. So that that is of is news good most

Well, very upcoming year. good thank the and you next quarters the luck much, on

much. very Thanks

of comes Markets. question the next line with Brad KeyBanc Thomas Capital Our from

us. you're And was could talk products products ask, you year assortment about change? floor a if degree Thanks that more the that new to a ahead. change little having on in of pleasure. to Always maybe the for the going broader to galleries I degree and first the expecting you your bit in of Farooq, the expect

Brad, created different back, question, had very good we year product, a a that the are our than now almost design Interior Design in a situation is product in which environment a is we because the we same centers. same This were where all the Yes. Destination

new products, our designers for we now to and floor the that determine So how on design much our be have to sell. of we available go centers when of will will introduce how much

are we have going over the now what just Now with we design finished is products. all centers the our repositioning to do country And this.

to are stage, to through their customers. at this spaces, customers. operating available are XX, couldn't of Because they had our design in products will designers We designs We room to digital degree new they the product able designers put a utilize or in with they done making from to our Because great product, today, into the years with they utilize centers. this and centers. technology, have it. stores Today, interior that with to designs are our are smaller design able our think use designers. by be The available get going in don't relatively that rest new to our are back, them technology environments will their have place small, products floors. technology, it XX to the our I in creating to we interior

That's of I other helpful. questions, couple if could. A

some all trends details us Sometimes give quarter-to-date. about you

been by softer of about Some trends? of any color the and the little somewhat trends a the bit could we've weather. if that January, you share have is you that impacted getting Curious late been data feedback have recent in

Yes.

Brad, that important. is think, I

was But the have good been areas where we been was We weather a sales not And weather did areas major in the news down. bad, really where has in a factor. okay. weather this, have those factor, is -- major

as the especially but can it, and I and is first -- say this we So believe place XX, days the XX actually between of the now. we that month the that I taking would difference impacted come that interest would see of out weather this

in our So where I those did be weather much think but interest, bad. areas the very was weather sales there'll impact the more

shape keep Matt, kind of nice And on non-weather affected us about been the March hear. hear to of first occasionally, And terms think helpful that modeling perhaps have to some may I this That's in the we're guess, us for how regions stronger. revenues margins give up. Anything to to where quarter? mind quarter you'll then, or in commentary as

do what Matt, them? give you

past seeing lead the couple us and relatively consistent that stay projection. we're to the trends with takes quarters. of similar I puts will The think would

or don't Now we but we guidance be the just beyond, what would out up in. to to for QX similar I quarter give there ended anticipate -- we somewhat it

Yes, relatively -- some to that the even Obviously, in the operating and had we gross we high. were margins previous had compare we they the decline when year decent it Brad, with sales, see you pandemic can all did you sales, benefit when margins. of the

we decent been have maintain margins. So able to

Very helpful. And good quarter. luck this

much, very Thanks Brad.

of Our Advisory next Group. the question Telsey Cristina Fernandez line with comes from

we I you able When delayed should think going flood flow to to in to sales December had you in were through due to the wanted how the that And last out $XX is the the a just quarter? million how have deliver much income ask, amount? called on I couple. that statement? about of the summer remaining the of that the call, in

Matt, working you you closely. very have What it been do on say?

Yes.

a give that background, to was to able in So to little over capacity get XX% we're quarter. the the up plant pleased

it down shut while. for was quite As back in recall, you a July,

would were we're of So in that XX% amount, of good a I deliver were shape to we able ramped now. portion delivering. to roughly We that XX% we amount. up, say

keeps that does is our it running in what efficiently up Now plants Vermont.

us softening able to the demand, Given going. the it was of keep continue

So in we're X/X quarter. rest the of of the upcoming we'll and way through, it about this deliver

when the last years, because few had lot Yes. of of fact in think a of didn't what change a do. we implications going is -- number the And technology. we brought of Vermont climate in the the Cristina, situation this to

technology what's was going multistory of time. on floor. on of some So that the took had we because repair, going we then to floor we a is number to It's put a first now happen. a that know the equipment, the And lot second equipment replace, of -- don't

equipment that also equipment, -- to ran to the of it's I most But think new think back the purchase we continue, So is or more in -- next normal. weeks, as we less, we they'll few And be had to that repair. in. and I

forward? far I was as refreshes had, any quarter store that And onetime question will then going the expensed second the repeat as was that there this specific amount that was not

talking $X -- mean, I -- we mean, of what in almost Matt, really I terms Yes. is are million?

$XXX,XXX. About half that number, about

the changes, or course, million really sales, some and floor it the nature. and $X.X was products, paint of certainly mostly gross million our of impact, unpaid. About because flooring really that some has rest, or things minor impact impact, an so I had as The impact selling of which was was products. it had earlier, And used, increased an was an $X.X but manufacturing. on It margins. also on said our so

as last the be perspective, aware move updated we a you're then anything should or had, freight any cost XXXX? And that question from seeing -- whether I input parts materials cost, it's we where through

Suez at now us. right the now for look happening the fortunately Cristina, transportation in in Canal what's Yes.

some is impact. going our that of fact would we an through made that products offshore, be impacted. of the because our less it from coming be we have So to of North had products if But in to But going are are most issue. America, XX%

They they America, down start $XX,XXX see to starting down $X,XXX, have but come to from came $X,XXX, you -- overall they're container East from East $X,XXX, seeing have did North Asia We to up from, now let's increase. rates say, to gone can $X,XXX.

then also our at products had delivered products an are involved network own price fact the because nationally. shift exposure through making Our America. is our in North that with That And impact. of our X we limited we

not but would During those prices. Whether not and change we all back I what they've is any it did maintained, cost domestic mean, power any will volumes We any COVID, did the change charges. a costs, we our of increased I say to was see international taking we it or special costs. absorbed, quite now was us. and some normal, impact But costs high are those of internationally. our place most come bit. what down helped

somewhat it smaller us, most For is likely others. than

Thank have. you. the I questions all Those are

Thanks else? And Alicia, anybody very much.

at the else Nobody time. in queue this

terms our joining excited. our in Thanks and continuing and for brand progress look of very forward to is repositioning

and members great of have today, repositioning I we advantages XX of our much senior and retail our that fact, our making and discussing that growth. all division -- programs have how to of very we In position these continue take ourselves members are here involved in need we we they sure

thank participating. very So you much for

today's concludes This teleconference.

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

thanks. All right, Alicia,