ESCA - Earnings call transcript Q2 2024

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Operator

Good morning, and welcome to the Escalade's Second Quarter 2024 Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Patrick Griffin, VP, Corporate Development and Investor Relations. Please go ahead.

Patrick J. Griffin

Thank you, operator. entire our Escalade, Conference Second the welcome like Call. of to you Quarter behalf team I'd at to On XXXX Results Walt Leading President our me with Financial Glazer; CEO, Chief the Wawrin, and today Officer. Stephen call and are business forward-looking future financial expectations. Today's discussion about and contains statements due risks the may results described periodic filed with statements in from risks and in today's those our Actual various projected uncertainties, SEC. significantly forward-looking differ to including the reports forward-looking no as statements. required our by to Except undertake obligation we update law, of turn At we open over conclusion remarks, the our I will Walt. the prepared that, questions. With would to line the for like to call

Walter Glazer

actions and Patrick, reduce improve costs, efficiency, discipline you, consumer call the and fixed today. reduce joining demonstrated manufacturing to further softer a working welcome sheet Thank spending ongoing us balance in on environment. highlighted the strengthen to to those made as our second overhead operational strong quarter, capital We our by

a net sales margin, X.X% prior a versus which the While we declined decline the period. prior XX.X% was year gross modest versus delivered year,

continue efficiencies our to operational to focus margins. enhance We on

fixed the effectively our manufacturing with together overhead our footprint. onetime partners within related these efforts our managed of were promotional offset retail we While with impacts nonrecurring activity ongoing control, rationalization by to higher costs existing

the from $X.X X.Xx have end discussed. the trailing end leverage low net X.Xx of the ratio million At Importantly, long-term of XX-month a EBITDA, our rate flow high that which was repay period. to second previously interest second the quarter XX% operations in on nearly of quarter, is debt we near QX, our to increased us cash year-over-year basis allowed which variable leverage our in our X.Xx of

facility and Meanwhile, footprint Rosarito drive to our are increased leverage to corporate with profitability. across broader operating and cost we this evaluating as progress at and facility. to we We plans divest cost other opportunities reduced the operating rationalization have continue our our property seek

of year a in for half full consumer ongoing other discretionary margin for expect to XXXX, deliver our we and continue the softness will cost year the As full second rate rationalization gross overall spending to we look initiatives us despite to XXXX, purchases. our position

have we with We particularly table leading strength this good with of reflects Bear Stiga Brunswick along tennis for demand and brands, continued our Archery value. Importantly, high believe consumers for and those consumer combined quality seen Billiards. the searching brands

above-market move owned brands differentiated consumer our volumes believe market-leading retail e-commerce to through XX% during our position loyalty DTC up year-over-year continues next Additionally, recreational continue the phase the we quarter. performance to as to deliver of to increase, us We cycle.

continue deeply As programs, base innovative products before, through recreational established emerging consumers in continuing marketing corporate to across more to while initiatives our our to we deliver partnerships, invest brands. and owned sports loyalty e-commerce diverse category-leading connecting build with

closely continue sheets employment we discretionary consumer the conditions. of monitor ahead, relative and Looking spending, health to household balance

consumer U.S. level more maintaining brands that discretionary spending among cohort While of durable is of believe of capable a we higher income, position our base spending. consumers a discretionary us softening,

supports improved which conversion. conditions, to cash rationalization, focus market on continue current Given inventory we

our Our year, has generation. was second seasonality factor cash a cash flow behind which normalized this quarter

demand. We by followed in amid seasonally quarter flow the the expect generation cash seasonal fourth the in cash be softer stronger third holiday quarter to

As we rate variable continue to our we repayment debt. generate the high-interest strong of cash are prioritizing flow, continued

with spending, We continuing consumer evaluate manage strategy. environment through discretionary capital additional opportunities growth. reduce our value allocation believe our maximize positioned we soft As our will consistent this of Escalade while future to is well long-term invest drive to in business to current shareholder leverage, to we

our in all company, while consumers friends. engaging family great activities together and next I we forward team to next XXX you challenges working the to brand memories, years. opportunities remarks. we prepared quarter. With centered our helping XXX-year with the and today that, for create Stephen his over portfolio for Our have updating and and believe We history with are look overcome progress to strongest turn vision to call build healthy our the and of to in industry strengthen on their economic the create I'll

Stephen Wawrin

Thank Walt. you,

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

and the reported quarter facility For handling XX.X% the to the inventory of expenses period our lower XX.X% by and The decrease prior second second Mexico. Selling, quarter, year the during XX% by was margin costs lower general gross basis administrative sales, with prior million. associated partly compared year [ period. to offset in increased higher net in a promotional to primarily the compared costs result point the of fixed XX $XX.X reduction activity, in company ]

a As basis to XXXX of compared sales, the net XXX by the increased XX.X% of year-over-year quarter second to percentage XXXX. of SG&A quarter second points in in XX.X%

environment. selling retail of promotional before the Total taxes, additional by provided operations to was in and period. SG&A million second quarter in quarter million decreased by $X.X and second a Second the of versus cash in XXXX million $X.X spending million depreciation year was increase prior for marketing Earnings by $XX.X amortization for $X.X XXXX interest, the quarter driven more the

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from million flow The capital. an lower $X.X the operations generated cash period. working increase in reflects in cash increase flow from to in net compared primarily year prior

to accounts receivable Specifically, and levels. inventory sales in and the efforts lower second normalizing quarter of inventory our reduction XXXX due

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

of June total debt interest $XX.X high of outstanding, we million rate had XX, $XX of XXXX, million including As debt. variable

remainder total range XXXX, continue during our our leverage X.Xx this will managing repaying to EBITDA. focus We of of within rate long-term variable to the while on net debt target X.Xx

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

Operator

with come Our first question Minerva. Cohen Instructions] [Operator from David will

David Cohen

press through ] as small out out Thanks target. for pointing thanks [ now in the you shift as waters. capital little by toward And end of then And release what right up give choppy that for lower leverage to ways ratios obviously, particular go your year, deploy because, could made leverage allusions you X.Xx But some the sort laid of if you might things you've are carefully probably granular that a in end of some sorting more us butting going the the planned, be forward. look you'll the on ratio.

could internal you dividend if buyback, through sort be that would sort CapEx, So policy, great. of acquisition,

Walter Glazer

David, thanks questions. for Yes. your

debt if of out, of Stephen be We point piece we'll don't do cost So below by the the something different. structure. as we expect do to higher the believe year as be of actually X.Xx mentioned, do, you rate the we end variable our out

used all acquisitions, we've traditionally, share the dividends, investments. repurchase, internal So levers,

X% We little continue piece than now bit variable less the piece. and to the for on X% about the focus a on fixed repayments. debt We're on paying

motivated would higher But our first, So pay structure. our be, cost internal I our say investment that we're to of in priorities off would as part debt business.

tool. we've be would be and Secondly, it think would probably course, in an which of be dividend, can we share acquisitions. then effective lastly And used maintaining past, the the repurchase,

years, would today. a the our the But portfolio. we for guess, made acquisitions about have us. up have we of over like I an the feel I feel of We do I say number have it's good effective and we see deals. out David, to would of activity a been has some. anything round really don't strategy lot we picked to deal course, We And say portfolio

front. on be acquisition would cautious selective and very we So

David Cohen

see I if ask address types? to bolt And do as that you you Could you talk could sort an the Okay. organically? about a Is other you Or think a going on can brands, you area you where it little forward? pickleball other think of that opportunity follow-up. equipment need

Walter Glazer

We has business Sure. And the We've barrier Onix, paddles I XX all, leading trying brand of got has a feel in brands not been in of about to strong of rush. the mean bit with business. that a in get gold There's interesting in an like and paddles much been a it's space, we've area. it brand at end. one the effective entry legitimate pickleball into everybody a for think years. low been to the really

go mid of technology amount a a it. and and cheap sell the paddle handle it a wrap can and material out higher upper end money remarkable and there's cut You involved. where At around buy play, we

so And energy front. lot of a time on and we the on spend technology paddle advances

our love Onix and we positioned. So think well it's brand I

which ball ball, side, the the fast On pros. tournament for preferred ball we is Dura the ball the and Onix then have the

molded? Is using, you you the again, is making like it roto more but of processing How in plastic tolerances, molded? a you might plastic ball. what's are type the imagine. maybe Here technology are pickleball injection -- ball, the just it there's is what looks a than are it It

product [ here environment. like we've expanded there. their there. we've people we at important again, to And of ] or variety area. good point, then So uptake an a eye use thermos got nets to Nets, add-on good technology categories, feel increasingly protection, is getting for we of make which We're into your type home the

a area So That's we're have of to certainly question others that that not answer particular -- your going expertise side but I fully? it. would apparel. an that in, are Does say we're are that addressing there get not into probably

David Cohen

Yes.

Operator

Aegis. Our Rommel Dionisio final question with will come from

Rommel Dionisio

a I little in wonder invest guys if will component granularity a on your more there's alluded continues retail that. to Yes, us in you You could help some brands. so obviously, to inventory similarly give rise But Obviously, just little. maybe that a destocking, you promotions.

others? up continue some from would promote introductions competition? thoughts (XX:XX:XX) but you're where you the kept than expect of would the categories [indiscernible] particular brand new you perspective, a that how promotions there are season, the maybe level those position going And product -- your obviously technical and efforts, worse competitive to So into seeing to marketing you holiday

Walter Glazer

our you, would promotion, a it's we that in investing and Rommel, fits of more Thank emphasis so levels and and out, as expect just also we say current more Yes, promotional inventory and both more advertising to -- little managing that continue. environment. Sure. we environment, then competitive It's with kind our I a pointed the on are would

Looking that I -- season. shape would good be our during holiday into are holiday the that say are season, in will the expectations inventories

managing is better closely. of factory sales. retailers and our our POS are Our inventories Many cautious their than

back channel. comes there'll think the consumer strongly the a higher much and if we us refill holiday surprises for sales be as I season, big factory during opportunity So the

inventories -- guess. optimistic. like Again, How entering period, is behaves the anybody's really shape. cautiously we we're much that's So feel are in pretty decent holiday consumer the

Rommel Dionisio

just Okay. follow-up. quick And a maybe

or I real on detail product more line that could that. you You mentioned -- quarter. was for that in international region you highlight or international? sales particularly XX% there up a was just Was were for in there particular little strong that provide you new if wonder a the strong maybe product a

Walter Glazer

Yes. say area Rommel, And basketball, it's Zealand. in out China. a would New do China pretty kind of good partnerships Those there, would for us. Europe I for We're I and coming And off focus an low point that our and going products our selling markets us. have effort Australia in through branded have in out pickleball but We budding base there. of of a been some we're

So of again, Escalade. it's It's low think focus. base, an a and off long coming with runway opportunity area a for we it's

Operator

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

Patrick J. Griffin

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

disconnect. now may You

Escalade (ESCA) 25 Jul 242024 Q2 Earnings call transcript