Earnings call transcript Q1 2023

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Operator

Hello, and welcome to Escalade's First Quarter 2023 Results 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.

I would now like to turn the conference over to Patrick Griffin, Vice President, Corporate Development and Investor Relations. ahead. go Please

Patrick Griffin

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

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

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

Walter Glazer

and Thank to call us today. on joining the those you, Patrick welcome

on in carried have reordering demand first particularly the fourth As in softening expected, with we our the at were a Early consumer elevated POS normalize and most will dynamic Based categories this our recent we anticipated into our impacted categories. pace basketball over of from with that on trends by and is the our of XXXX, quarter for channel that retail, move retail partners, further archery as discussions results quarter. believe year. weighed inventories

fitness supported demand. categories. orders curtailed experienced product temperatures the demand our areas then quarter, by the of in as outdoor the was although many safety quarter, games, by for across progressed conditions conditions were further which cooler improved through improvement indoor impacted Market country during particularly first and month-over-month first we we January weak,

and marketing, e-commerce on demand and e-commerce our in customers, year-over-year product inventory consumer development, destocking of XX% basis overall the direct-to-consumer the teams. increased to e-commerce for and marketplace due the a reflecting our our quarter, continued effectiveness quarter third-party declined our owned our reseller in first within sales sales at While products

In revenue made a the year-over-year decline of the the combination, both a to circumstance more quarter these even compared in in during to profitability first quarter, performance XXXX. and challenging factors contributed first record

level, costs handling continued first headwinds to gross the the product chain supply costs, quarter. us storage favorable volumes inventory and severance incur sales with These At to our shutdown face we in in impacted elevated that mix and less expenses an operational some and period. margin lower led along

resilience more Despite general these believe partially our base. to continued challenges, we've the We our of of our loyalty generally to the pricing and discipline, maintain demand stability which the served softness. price brands and to has speaks customer offset affluent

Looking we forward, see That challenged, levels less towards in inventory the as said, we expect move normalized quarter, the than in in reporting for adjusting throughout so will first our expect more change the we albeit demand down trend second quarter the year. our remain to calendar.

margin an move inventory margins elevated inventory expect decline, storage from mix also better handling and also through pressure We as cost lower improved will sales will in we year. and the result cost while

consumer engagement and build in to growth investing to key development categories. in continued innovative leading on we've market Strategically, product focus positions

fiber technology, recently we our category, malice Pickleball strength, greater are new to be first paddles technology introduced example, For thermo mayhem with new released paddles and carbon into the robust Pickleball all patented new feature power exact for the frame fuse power, our Pickleball an molds the to brand with the which all product platform. provides and better feel. and development our Onix paddle specifications These

pop and the of increases control family expansion an power. with carbon raw paddles launched without maximum Evoke also premier and sacrificing for traction fiber which surface featuring spin We texture,

I'm happy key paddles. tournaments Kovalova, players, these a paddles winning input many as recent with that well new report top are play others Pickleball pro Our champion and to Wright, release. Jo these they as the provided Callie Lucy medals tested Matt before already Smith, in their

key the innovative over in developments. We launching products also new several coming categories for months. are in those Stay exciting tuned

environment, appropriate sheet. current importance As cost understand of challenging healthy we maintaining balance an and we demand structure the navigate the

of past to successfully cash are faced challenges reduce have an expect roughly will with annualized of have of the responding first by to costs our down facility currently XXXX that sale as optimize the we associated by that We part close Rosarito, To quarter. own winding recently $XXX,XXX meantime, million. manufacturing temporary between this our debt. In year-end We savings similar our and footprint. and facility announced we some situation $X.X over this $X.X and this century costs anticipate our including expensed to the half and we the reducing generating Mexico million in to to initiative end, facility, intention divest in

operations. divestiture in Mexico targeted within of to In a total domestically, resulting We the million savings annual recent anticipated second $X.X also force annualized force initiated domestic beginning reduction cost approximately $X.X million be quarter million the addition we XXXX. annually. third Between divestiture we reduction Mexico to from have the domestic reduction resulting quarter and savings operations the XXXX in of our anticipate here action planned to the of the $X.X our from operations, in during our in

We the result discretionary cash cost We balance a and generation capital we an reduced maintain planned opportunities as for evaluating expenditures disciplined allocation, highly structure year expense XXXX. have capital appropriate and also additional to around our and are carefully remain full sheet. healthy reduction ensure all

our We amended leverage. address to successfully temporary higher agreement credit

which to reached X.X times. As is of of the X.X end well our of above our leverage the times, first quarter, net range targeted X.X

cash and improved back year-end. trend leverage our channel range inventories targeted seasonal by we to drive toward demand flows, expect As normalized our

current to quarter, second that job competitively environment the our excellent Entering customers. an do team continues we our also while remain ensuring positioned to support navigating macro the

volatility. our this current the provides challenging, of and category leading customer While base is environment insulation brands level some from loyal

growth what remains for to see balance portfolio period products, will transitional opportunities to attractive over continue prioritize quality during expand high the we consumer of While our deliver acquisitions our sheet. a and as we organic we

team of we loyalty, our focus experiences forward while We hard our next progress value. I look with delivering and quarter. to am all brand to proud shareholder customer as of build you updating creating exceptional that long-term the dedication continue work on

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

Stephen Wawrin

For $XX.X the three of XXXX, loss reported a months net or of Escalade of loss net share ended on per March a XXst, diluted sales $XXX,XXX, million. $X.XX

margin storage the cost XXX as year inventory non-recurring unfavorable basis as high the well result compared inventory, of of the gross of XX.X% product Mexico., to the was The sell reduction mix, off associated prior facility in with company of over first period. primarily cost For XX.X% the quarter, reported cost, our handling divestiture and point in

to the period Brunswick and prior severance SG&A to and administrative $XX.X addition offset certain expense decrease was Billiards, by caused expenses in general X.X% The expenses expenses timing million. of Selling, selling compared by lower year-over-year expenses. selling year declined of variable

Earnings the before operations was capital quarter, quarter million and expenditure which $X the prior $X.X the of the a stable quarter the $X.X in of to year million prior depreciation result first reflects XXXX from the as in of $X.X taxes, interest, compared a quarter $XX.X $XXX,XXX provided year relatively amortization first versus in million receivables through million generated period. of the in declined of by operations by million first XXXX year. of use of approximately for during to period. to reduction capital cash cash is to a increase first cash The from flat flow quarter improvements working and last Total

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

Walt our we of after end As address to leverage. steps the temporarily took mentioned, higher the proactively quarter,

worked have improved banks agreement, with our flexibility. As credit our such, which to our amend we

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

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

the an result, the on comparability of As in year. of opposed XX of year rest throughout dynamic quarter results our period. had This as XXXX days impact XX the the will the prior have to a first operating to continue

will for call we the that, questions. open With

Operator

you very much. Thank

begin the [Operator Instructions] We question-and-answer will session. now

Today's first ahead. question comes from go Rommel Dionisio Aegis Capital. with Please

Rommel Dionisio

Is terms, my that lie? When components talk is they haven't people organization for question. informing but targeted the about letter U.S. maybe corporate? infrastructure, you yet, I you the through and taking of Good the in understand in walk marketing? that, Thanks. that might us morning. I the the the made of sensitivity Could reductions it when general just been all Thanks if and even

Walter Glazer

counts our forward. primarily production say, reduce of inventories. to -- looking we're I Sure. thoughtful that everything for how we unturned. are in We is as Rommel, our really looking employees, say units, stone -- production business down looking your need so employee a our being We're occurring I would we as address structure everywhere. It's fewer occurring we're question. and it within no thanks very But area. in at cost lot leaving going work the

Rommel Dionisio

flexible Okay. to gone you've lean. and fairly know manufacturing And fairly I

consumer several the it to You've acquisitions made type ability the years been demand you that? personnel of probably back? inventory is restocking you won't period up over thing when the to run that or years. back, do pretty -- Thanks. of How where of also a in add last Do and and of -- over you lot need back necessarily think you the lean about the flex have comes you've have maybe kind comes

Walter Glazer

Yeah.

seeing I important we keep make to So, can skills, to But decline. flex make able the seeing being really you abilities. it's sure we -- key reductions, particularly was key -- of the tell seeing we certain in fitness out people, and increase post key a first environment. you that to in like we as we're up want to come may we're the first demand. in want areas COVID that fitness, recall strong is And We're

facility that headcount. where increasing year when workforce We're Illinois is increase need able a hiring but of it a challenging, where tell we our produce we was hiring. it. and So, we're products, in in to we fitness bit than lot ago, still better you our can't a are I the our

Rommel Dionisio

Great. Thanks very much.

Operator

Thank you.

Walter Glazer

that and one comment, if I is it's our is, base. add I'll disappointing. we decline I that may sales customer of if But destocking add result largely this the just may in last believe --

digits, at retail to those single shipments down XX%. down -- it our wholesale was was major customers, POS Our low our and customers

go So, -- were April our the forever, results I we that this inventory us confidence can which March, time. destocking will that better over that were resolve and know the than that And on itself cannot report that gives January. also better than

our plans the in confidence So, we of for future. have some degree

Operator

I over This concludes call to session. Griffin turn for Patrick any back the like our question-and-answer to would remarks. now closing

Patrick Griffin

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

You may now disconnect.

Escalade (ESCA) 9 May 232023 Q1 Earnings call transcript