TTSH - Earnings call transcript Q2 2022 | Tile Shop Holdings, Inc.

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Operator

Good day, and welcome to the Second Quarter 2022 Tile Shop Holdings, Inc. Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. to of conference Accounting Investor like Davis, to Officer. now President Vice Relations would turn over the Mark I and Chief Please go ahead.

Mark Davis

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

the any include earnings made of press forward-looking call, do The our release the in as will me the pursuant forward-looking Karla XXXX date our and during to the also amended. measurements. forward-looking Please and non-GAAP let for the those now and that, Joining Executive today of constitute has statements Securities of cause website. of call undertake and Officer. non-GAAP Lunan, to measures, issued the Litigation and we the to this of Cabby. Private filings Company earnings SEC. described our known are from over risks within our Act our with subject uncertainties Chief Cabby are Chief unknown statements. actual materially Today's turn safe earlier today obligation which our reconciliation in both been forward-looking financial a also today and me risks release uncertainties Such update of Officer; call to statements. differ as Certain call Reform With Financial harbor statements could Those such made Cabby? are provisions results Lolmaugh, posted and see to statements these to certain are statements that meaning not made

Cabell Lolmaugh

interest We a a quarter update another by thank for review good on and quarter, you business Good for had and highlighted results. joining an Thanks, second Mark. of financial our today morning, base clear progress our of everyone, We've paying double-digit sales $XXX great is made execute. our and that off. building store existing in this are to strong is relationships underway. comps in strategic team performance, The to number tailwinds focus we increase over reasons quarters continues the on rising see that analysts our why It our and sales the million. us excess macro half home home during spending Industry of of enjoyed in as we have may we've possible patterns a starting and exciting XXXX. cite existing consumer slowdown signs improvement change. rates, a several second pros, see spending in slowing Despite we initiatives with last shifts the

started provide our high-level With to trend have started weeks. employees, in the XXXX business on supply in recent decelerate mind, our this to observe objectives, an our overview update as surrounding in strategic that chain. growth orders new and in to like our in We I'd our has stores execution

current is to the we've attract and in on remains employees, skills First, invest current respect given it cultivated have in new to culture we talented employee such challenging environment. our stay high and labor in been a are focused it the initiatives, people, enhance a demand, shortages To to talent our with this, especially ahead engagement. team. across to lead foster of our organization our The privilege designed

leaders have we teams. interaction paths career training, refined year, past increased our for opportunities and the Over between developed and their

It's bring During everyone our we've the of market store all managers, forward are meeting sales since to and with managers able to third holding been our quarter, national we leadership. pro several looking together. been years

best excitement extra build milestones an event special practices, relationships, and surrounding we the think I So this reinforce our future. vision for celebrate as build will be

the a pro seen variety nice such average I've during execution increase in-store sales on I with ticket. to quarter. improve. back-shelf metrics, results different We pleased our in as conversion, the and of a attachment continues Second, am rates saw

XX% total Our of our pro mix exceeded sales.

activities. follow-up quotes technology piloted new and interactions base to as roll store We the log the such our our We to process customer third tool out and quarter. that during streamlines successfully a sample plan of rest to monitor also this orders

progress on initiatives last have chain made Lastly, our over we supply nice the six months.

in-stock about of level normal, to levels demands. we are customer carrying are we and the meet inventory Our feel back good to

recently product have the a these an pressure been cost response for purchases to inflationary $X.X While contributed are in to increases implemented. to to million suppliers cost In our persist. continuing before during price along response certain In not sequential will the This availability quarter. we pressures, in anticipate we near-term, pulled pressures. were the has issue pass price us, increases increase forward that inventory

to nice of quarter we focused results. touch able source We sources the positioned supply, and over high-quality I'll control. where hand continuing on to lower are now to we and alternative In what on at to strategy we are our to financial products are Karla Karla? prices. short, can also evaluate a call had our stay

Karla Lunan

quarter. increased modest The of pressures. average generated gross a our primarily Thanks, Comparable sales to XXX an million quarter Cabby. Good XX%, revenue sequential to driven offset partially a basis new basis the improvement our sequentially and was up last decrease from by largely due unit rate improvement $XXX.X This offset The actions due which during volumes. increase points cost pricing pricing down in inflationary points year's record. but XX%. partially second XX everyone. morning, was store during and by quarterly The margin sales in second by ticket, was the was from represents actions the by quarter, quarter first

our pressures to the and to in expect in near-term. elevated costs chain continue stay We our supply cost the inflationary inventory

pricing Cab future cost to our a earlier, softening conservative demand intend Given the that approach to more suppliers to during pass-through to the actions. volumes from increases decrease in take and future We unit about our we plan customers. quarter, second spoke the trend

prices required margin rates. we However, planning to maintain are to raise current not our gross to levels the

when of costs. expense, and increased quarter a expenses, $X to in we on and the XXXX. Pay the to XXXX compared by excluding rates benefit to As second during continued pressure half million bonus of levels, increase expect increased quarter by of SG&A due margin result, million benefits an second during staffing gross see sales the expenses $X.X commissions second XXXX.

million occupancy repair increased due costs $X and in maintenance increase common area by store normal an costs our Additionally, utility store billings. expenses, to

the an We also quarter and three the to the to Approximately by were partially was in on $X.X decrease XXXX. XXXX travel when bonuses. quarter the a quarter increases $XXX,XXX of payments during in These offset second additional a in due decrease during a marketing second million remaining $XXX,XXX of decrease quarter. in was spent due annual expense decrease of to the quarters and expected incentive sales compared the bonus

quarter $X.X was EBITDA the $XXX,XXX. and second by million. adjusted depreciation was of Additionally, XXXX million expense during decreased income $XX.X Net

was Our offset to adjusted in by due to bonus expenses. XX.X%, fell the lower XX EBITDA rate margin decrease margin basis that year-over-year gross points partially largely

the sheet. to Moving balance

earlier. the purchases of the of mentioned that quarter, Cab the forward end our pull This included some As inventory inventory of was balance $XXX million.

We expect inflationary inflationary pressures next expected near-term. pressure over to in certain result in The is several decision balances cost and inventory our the the elevated to combination ongoing of accelerate cost persist purchases to quarters. the

any results dynamic $X debt against and end are million With with are bank we As that, of the environment. macro cash our of happy of proactive we questions. second had a In pleased and I million. closing, Cabby quarter at the quarter, remained to $XX.X staying take and are the

Operator

question go Capital now comes today We begin The Instructions] the Please Markets. Jensen] [Operator session. will first [Connor from with ahead. question-and-answer

Unidentified Analyst

economic at Connor you an stores for you was issues due Smith of or Capital the customer right behavior Mark us seeing Street spending kind Jensen with if I just on what slowed could Markets. as you're Lake wondering now? have give canceled consumer projects been update in to

Cabell Lolmaugh

is is environment. slowing With we're the I and little Hey, it's the it's ticket traffic seasonality are is think, Thanks consumer a along This bit Connor. a the here though for solid Cab. knowing with, question. pretty still noticing we What there, macro average. that spending, – seeing

during months, a So customer. we areas believe us but our the seeing slowed to expect impacting more it's getting we're that our in to summer traffic bit are little see

strong. we slightly, more gone ticket So the little average balance has very hope. a But bit order is the down than still would

delays helped and QX inventory well. has in our going think of QX really very cancellations. don't We position lot and I as have a us into few

they are knock it their for when excited labor think them. the there to out get to I projects done people have

Unidentified Analyst

maybe here? slowing guys housing you how the impacted have to on starts us as then historically weaken trends of update housing And market kind

Cabell Lolmaugh

points few a we're sales, new than Typically, existing sales. home better Yes. home

order this when it I not with was we're in housing. in bank starting XXXX surprised all you happening a when manager store but see we're going when So QX, significant QX, us you we happy it being in that for. look the and slow. to We're into depressed, by And our in a and And have happened. results environment seeing what's we're with tells what that very at

it, So and and just I tightened before. going through this our through people still we are remodel. to belts went And grind

are We – can't a their get have house, new remodel a they're going they existing. that to lot of customers into

we're wanting So customers that are do still for and well to engaged the positioned work.

Unidentified Analyst

performing? stores lastly, stores? capital, whether on then growth in of And any the are the update And remodel stores new for current how use be any updates plans investments the on or it continued

Cabell Lolmaugh

out the we products And not the in excited absolutely. look want has been results. Yes, good. remodels. with We're pretty great. the still We're response of getting We're them. They

may day. about talking out about some that allocation, right excited crews there think we're now, accomplish we remodeling things stores. year. this able be to here have we our we So With every capital it We're

business So say Connor. But in currently, I'm things the or stores putting not not now. we're with we going I'm out we're to there's other new not any looking right will. investments at there that

Operator

comes Wealth Dave ahead. [Operator from Instructions] question Please Kanen Kanen The go next with Management.

David Kanen

Congratulations Hi. quarter. a nice on Good morning.

in question inflation. first is So regards to

assuming Are down natural of that the to business? that's function gross remains starting which margins as elevated. Labor going come the I gas, have year. container know You I'm transportation back probably is seeing such half we're costs but probably, pressures, still the in see of a that spot your down meaningfully. sequentially impact COGS direct tracking bright you're to you one and continued alluded

Cabell Lolmaugh

where seeing we six floor Cab. it hits model, months David, costs these our excited have before We're order go down, our products Hey, do WACC DCs. and a it's that meaning we

So are come yes, our We six say the challenged that pricing now, orders we've placing will with months we have – placed we're with that orders rolling down. still we're ago through.

but Some of probably XXXX. in benefit get come will down, the COGS that we'll

cost. that cycling inventory in million we're $XXX a higher through a at have We

We are high right we like But of natural what away resourcing, or challenged where with at as container it grind we looking got we things different well. actively excited, to the they're resourcing, but not world see with as have now. gas at areas costs. looking We're

David Kanen

by a we did And luxury tile. and F&D quarter, example, you're taking to going guys in see, vinyl that then And carrying very product impacted LL, doing some new is that for space. on well – Okay. last Lumber touched Liquidators, checks being you start we

we're it's we that? know as enter. the how multibillion-dollar give me TAM. to read the a see look of can I you What's guys? roll should you cadence or terms guys for but a excited opportunity early know market in So it you I it's at you read on And early, out? preliminary

Cabell Lolmaugh

been a pretty few more, about now. only just We've of year results. We Yes. a those SKUs. had for a and test. we're It's with carrying added Sure. a excited few LVT more We

in segment. carry of So we're ways to see splash in lot mega with a that or customers end areas bigger investment LVT. that everything things to make where other our our make adapting they're out, you and company ready typically It's getting on hardwood. carpet arena. to pros but positioning with we're a noticed a the little to seeing how more We're into We've

kitchens, in of and go bathrooms, an for like things rooms, a we're So mud you selling you even opportunity areas fireplaces, tile but that. would tile, lot bedrooms gives never to LVT where rooms, find typically laundry our

excited So more we're come. it, about pretty to but

David Kanen

maybe slowing traffic rates is have do be though to the with It a going for that from have through even that? they regards like way Okay. agreements, back Can what you bit, covenants omitted a month willing opportunity what's permit – interest that in to even And we though stock year were amend prices yet. where commentary other buybacks? down. not? from are X.XX haven't almost would me credit again. the your little and I you to you then your down this an ago tell permitted, guys dug Gasoline seems points dropped actually what's And current

be one were So if coming that many again. of have, revenue or things substantially to at the has could don't our the Friedman performing know. But best is don't did Hardware, the consumer even way We the – to flattened earnings what the Restoration very last one affected have of crystal been things stocks opportunities grow to a our ball. to back were the share repurchases we like through that we in large of which EBITDA flattened world. share Gary repurchases decade similar But over

you So please, get potentially the covenants? it be, through on earnings need comment can augmentations that could me, to if loan so that And we for amendments you, would allocation? drive capital or growth

Mark Davis

in is is morning, credit to Mark does below amending the acknowledge to we terms ratio that, Davis. good in options repurchase shareholders, history in decide front broader What continue hypothetical just agreement us terms as to for of yes, long of we'll so. that do the as that and do credit right our for raising, the considering David. leverage to This Hey. a we trying want Good of would really provide you're company ability point. a all decision at and stays I to to various the shares and our a have here certain really agreement make point. idea this end, of And

David Kanen

Okay. in time. your second half luck Thanks year and Guys, beyond. of of for the the best

Cabell Lolmaugh

David. Thanks,

Operator

session. Davis for our to back the closing any remarks. turn I would question-and-answer concludes to conference like Mark This over

Mark Davis

We Thank and XX-Q day. your anticipate Thank listening our interest the Shop, you have great today. call. to Tile a for our for conference earnings you filing in later Form

Operator

today's conference The concluded. now you has presentation. for Thank attending

You may now disconnect.

Tile Shop (TTSH) 6 Aug 222022 Q2 Earnings call transcript