Escalade Inc. Navigates Soft Consumer Demand with Solid Third Quarter 2024 Earnings
EVANSVILLE, Ind., Oct. 24, 2024 /PRNewswire/ — Escalade, Inc. (ESCA), a prominent manufacturer and distributor of sporting goods and indoor/outdoor recreational equipment, today announced its financial results for the third quarter and year to date of 2024. While the company experienced a 7.7% decline in net sales during the third quarter, it still managed to report a solid net income of $5.7 million, reflecting a strong financial performance amidst a challenging market landscape.
Third Quarter 2024 Highlights
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Net sales
reached $67.7 million, representing a 7.7% decrease compared to the same period in 2023. This decline was primarily attributed to soft consumer demand and inventory destocking across most categories, partially offset by growth in the archery, safety, and basketball categories.*
Operating income
amounted to $8.0 million, compared to $6.4 million in the third quarter of 2023. This increase was driven by improved fixed cost absorption, partially offset by increased cost of goods sold due to non-recurring expenses related to strategic cost rationalization initiatives.*
Net income
came in at $5.7 million, or $0.40 earnings per diluted share, exceeding the $4.3 million, or $0.31 per diluted share, reported in the third quarter of 2023.Nine Months Ended September 30, 2024
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Net sales
for the nine months ended September 30, 2024, reached $187.6 million, a decline of 5.3% compared to the same period in 2023. This decrease was also attributed to soft consumer demand and channel destocking, but was partially offset by growth in table tennis, basketball, and archery categories.*
Operating income
for the first nine months of 2024 amounted to $15.5 million, up from $12.9 million in 2023.*
Net income
for the nine-month period reached $10.3 million, or $0.73 per diluted share, compared to $7.0 million, or $0.50 per diluted share, in the same period of 2023.Key Drivers of Performance and Future Outlook
Escalade’s third-quarter performance was driven by a combination of factors, including:
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Improved gross margin:
The company reported a gross margin of 24.8% for the quarter, a 10 basis point increase compared to the same period in 2023. This improvement was attributed to enhanced fixed cost absorption, partially offset by increased cost of goods sold related to strategic cost rationalization initiatives.*
Strong cash flow:
Escalade generated $10.5 million of cash flow from operations in the third quarter of 2024, compared to $14.8 million in the same quarter of 2023.*
Robust EBITDA growth:
Earnings before interest, taxes, depreciation, and amortization (EBITDA) increased by 26.0% to $9.9 million in the third quarter of 2024, compared to $7.9 million in the previous year.*
Debt reduction:
Escalade has been actively reducing its debt load, with total debt at the end of the third quarter reaching $29.5 million, down from $72.0 million at the end of the third quarter of 2023. The company repaid $13.7 million of outstanding debt during the quarter, bringing its net debt-to-trailing twelve-month EBITDA ratio to 1.1x.Despite the challenging market conditions, Escalade remains confident about its future prospects. The company’s long-term strategy focuses on portfolio optimization, operational rigor, fixed cost reductions, product innovation, and brand building investments. Escalade believes its leading portfolio of brands will enable it to continue to outperform across its core categories as the economic cycle evolves.
Management Commentary
Walter P. Glazer, Jr., President and CEO of Escalade, highlighted the company’s strategic focus on long-term value creation through a combination of portfolio optimization, operational rigor, and fixed cost reductions. He emphasized the company’s commitment to product innovation and brand building investments, despite the current challenging market conditions.
Glazer acknowledged the cautiousness of consumers and retail partners regarding spending on discretionary recreational goods, leading to a likely more promotional fourth quarter as retailers strive to drive consumer demand. He expressed confidence in Escalade’s ability to navigate this phase of the economic cycle with its strong brand portfolio.
He also highlighted the company’s success in growing international sales and its owned e-commerce sales, despite the overall decline in sales channels during the third quarter.
Glazer further outlined the company’s ongoing cost rationalization program, including the divestiture of its Mexico facility, optimization of its Eagan, Minnesota operations, and the wind down of its Orlando, Florida operations, which are expected to be completed by year-end. He emphasized that these initiatives will generate sustained margin improvement into 2025.
Escalade’s commitment to debt reduction remains a top priority. The company aims to pay off its higher-cost variable-rate debt by year-end 2024. Additionally, it successfully renegotiated its revolving credit facility in October 2024, securing more favorable terms, a lower cost of debt, and a reduction in unused availability.
Looking Ahead
Escalade is confident in its ability to navigate the current market environment and build upon its leading positions in the markets it serves. The company’s strategy is focused on continuous investment in its brands, which provide consumers with innovative, high-quality products that promote a healthy and active lifestyle.
Conference Call Details
A conference call will be held on Thursday, October 24, 2024, at 11:00 a.m. ET to review the company’s financial results, discuss recent events, and conduct a question-and-answer session. The conference call and accompanying presentation materials will be available on the Investor Relations section of Escalade’s website at www.escaladeinc.com.
About Escalade
Founded in 1922 and headquartered in Evansville, Indiana, Escalade designs, manufactures, and sells sporting goods, fitness, and indoor/outdoor recreation equipment. The company’s mission is to connect families and friends, creating lasting memories. Its leading brands include Brunswick Billiards®, STIGA® table tennis, Accudart®, RAVE Sports® water recreation, Victory Tailgate® custom games, Onix® pickleball, GoalrillaTM basketball, Lifeline® fitness, Woodplay® playsets, and Bear® Archery. Escalade’s products are available online and at leading retailers nationwide.
Forward-Looking Statements
This report contains forward-looking statements relating to present or future trends or factors that are subject to risks and uncertainties. These risks include, but are not limited to: Escalade’s ability to achieve its business objectives; Escalade’s ability to successfully achieve the anticipated results of strategic transactions, including the integration of the operations of acquired assets and businesses and of divestitures or discontinuances of certain operations, assets, brands, and products; the continuation and development of key customer, supplier, licensing and other business relationships; Escalade’s ability to develop and implement our own direct to consumer e-commerce distribution channel; the impact of competitive products and pricing; product demand and market acceptance; new product development; Escalade’s ability to successfully negotiate the shifting retail environment and changes in consumer buying habits; the financial health of our customers; disruptions or delays in our business operations, including without limitation disruptions or delays in our supply chain, arising from political unrest, war, terrorism, labor strikes, natural disasters, public health crises such as the coronavirus pandemic, and other events and circumstances beyond our control; the impact of management’s conclusion, in consultation with the Audit Committee, that material weaknesses existed in the Company’s internal control procedures over financial reporting; the evaluation and implementation of remediation efforts designed and implemented to enhance the Company’s control environment, which remediation efforts are ongoing; the potential identification of one or more additional material weaknesses in the Company’s internal control of which the Company is not currently aware or that have not yet been detected; the Company’s inability or failure to fully remediate material weaknesses in our internal control procedures over financial reporting or any other material weaknesses in the future could result in material misstatements in our financial statements; Escalade’s ability to control costs, including managing inventory levels; Escalade’s ability to successfully implement actions to lessen the potential impacts of tariffs and other trade restrictions applicable to our products and raw materials, including impacts on the costs of producing our goods, importing products and materials into our markets for sale, and on the pricing of our products; general economic conditions, including inflationary pressures; fluctuation in operating results; changes in foreign currency exchange rates; changes in the securities markets; continued listing of the Company’s common stock on the NASDAQ Global Market; the Company’s inclusion or exclusion from certain market indices; Escalade’s ability to obtain financing, to maintain compliance with the terms of such financing and to manage debt levels; the availability, integration and effective operation of information systems and other technology, and the potential interruption of such systems or technology; the potential impact of actual or perceived defects in, or safety of, our products, including any impact of product recalls or legal or regulatory claims, proceedings or investigations involving our products; risks related to data security or privacy breaches; the potential impact of regulatory claims, proceedings or investigations involving our products; potential residual impacts of the COVID-19 global pandemic on Escalade’s financial condition and results of operations; and other risks detailed from time to time in Escalade’s filings with the Securities and Exchange Commission. Escalade’s future financial performance could differ materially from the expectations of management contained herein. Escalade undertakes no obligation to release revisions to these forward-looking statements after the date of this report.
Investor Relations Contact
Patrick Griffin
Vice President – Corporate Development & Investor Relations
812-467-1358
SOURCE Escalade, Incorporated