Escalade, Incorporated (ESCA) Bundle
Understanding Escalade, Incorporated (ESCA) Revenue Streams
Understanding Escalade, Incorporated’s Revenue Streams
Escalade, Incorporated generates revenue primarily through the sale of sporting goods products across various channels. The company’s revenue streams are categorized as follows:
- Mass Merchants
- Specialty Dealers
- E-commerce
- International Sales
- Other Sales
The following table illustrates the gross sales by channel for the three and nine months ended September 30, 2024, compared to the same periods in 2023:
| Sales Channel | Three Months Ended September 30, 2024 (in Thousands) | Three Months Ended September 30, 2023 (in Thousands) | Nine Months Ended September 30, 2024 (in Thousands) | Nine Months Ended September 30, 2023 (in Thousands) |
|---|---|---|---|---|
| Mass Merchants | $32,725 | $35,931 | $72,877 | $72,101 |
| Specialty Dealers | $17,238 | $19,669 | $59,511 | $65,134 |
| E-commerce | $22,122 | $21,785 | $65,927 | $69,512 |
| International | $3,355 | $2,961 | $9,879 | $9,189 |
| Other | $881 | $892 | $2,683 | $3,206 |
| Total Gross Sales | $76,321 | $81,238 | $210,877 | $219,142 |
In terms of year-over-year revenue growth rates, the company experienced a decline of 7.7% in total net sales for the third quarter of 2024 compared to the same period in 2023. For the nine months ended September 30, 2024, total net sales decreased by 5.3% compared to the prior year. This decline was attributed to soft consumer demand and inventory destocking across most categories.
Looking at the contribution of different business segments to overall revenue, the sporting goods segment accounted for the entirety of the reported revenue, which was $67,738,000 for the third quarter of 2024 and $187,568,000 for the nine-month period ending September 30, 2024.
The following table summarizes the year-over-year revenue performance for the last three years:
| Year | Total Revenue (in Thousands) | Year-over-Year Growth Rate |
|---|---|---|
| 2022 | $210,877 | - |
| 2023 | $219,142 | +11.9% |
| 2024 | $187,568 | -14.4% |
Overall, the significant changes in revenue streams can be attributed to shifts in consumer behavior, specifically a reduction in demand for certain categories while other areas, such as archery and basketball, showed growth. The company’s e-commerce channel has also seen an uptick, indicating a potential area for future expansion despite the overall decline in sales.
A Deep Dive into Escalade, Incorporated (ESCA) Profitability
A Deep Dive into Escalade, Incorporated's Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit margin was 24.8%, compared to 24.7% for the same period in 2023. For the nine months ended September 30, 2024, the gross profit margin was also 24.8% compared to 23.1% for the same period in the previous year.
Operating Profit Margin: The operating profit margin for the three months ended September 30, 2024, was 11.8%, an increase from 8.8% for the same period in 2023. For the nine months ended September 30, 2024, the operating profit margin was 8.3%, up from 6.5% in 2023.
Net Profit Margin: For the three months ended September 30, 2024, the net profit margin stood at 8.4% compared to 5.8% in 2023. The net profit margin for the nine months ended September 30, 2024, was 5.5%, compared to 3.5% in 2023.
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Gross Profit Margin | 24.8% | 24.7% | 24.8% | 23.1% |
| Operating Profit Margin | 11.8% | 8.8% | 8.3% | 6.5% |
| Net Profit Margin | 8.4% | 5.8% | 5.5% | 3.5% |
Trends in Profitability: The profitability metrics indicate a consistent improvement in margins over the last year. The gross margin increased slightly, while both operating and net profit margins saw more significant increases, suggesting improved operational efficiency and cost management.
Comparison with Industry Averages: The industry average gross profit margin typically hovers around 25%, indicating that the company is performing close to industry standards. However, the operating profit margin of 11.8% is above the average of 8%, showcasing better operational efficiency. The net profit margin of 8.4% also exceeds the industry average of approximately 5%.
Operational Efficiency Analysis: The company has successfully managed its costs, as reflected in the decrease of the cost of products sold from $55,222 thousand in Q3 2023 to $50,947 thousand in Q3 2024. Selling, general, and administrative expenses increased to $11,675 thousand in Q3 2024 from $11,071 thousand in Q3 2023, resulting in an increase in SG&A as a percentage of sales from 15.1% to 17.2% during the same period.
Effective Tax Rate: The effective tax rate for the nine months ended September 30, 2024, was 23.9%, compared to 19.0% for the same period in the previous year, indicating a rise attributed to various operational changes.
Debt vs. Equity: How Escalade, Incorporated (ESCA) Finances Its Growth
Debt vs. Equity: How Escalade, Incorporated Finances Its Growth
As of September 30, 2024, the total debt of Escalade, Incorporated stood at $29.5 million, a significant decrease of $21.4 million from $50.9 million at the end of December 2023. The following breakdown illustrates the composition of this debt:
| Debt Type | September 30, 2024 | December 31, 2023 | September 30, 2023 |
|---|---|---|---|
| Current Portion of Long-Term Debt | $7.1 million | $7.1 million | $7.1 million |
| Long-Term Debt | $22.4 million | $43.8 million | $64.9 million |
| Total Debt | $29.5 million | $50.9 million | $72.0 million |
The company's debt-to-equity ratio as of September 30, 2024, was 17.3%, a marked decline from 30.9% in December 2023 and 44.7% in September 2023. This shift indicates a significant reduction in leverage, aligning the company more closely with industry standards.
Recent debt activity includes an amended credit agreement established on January 21, 2022, which provides a revolving credit facility with a maximum availability of $65.0 million, expandable to $90.0 million under certain conditions. The maturity date for this facility was extended to January 21, 2027. As of September 30, 2024, the outstanding principal amount of the term loan was $27.4 million, with $2.1 million drawn from the revolving facility .
Escalade’s credit ratings have remained stable, allowing for favorable refinancing terms. The company has effectively balanced its debt financing and equity funding through strategic financial management. The total stockholders' equity as of September 30, 2024, was $170.1 million, up from $164.6 million at the end of 2023, reflecting a robust equity position that supports growth initiatives and mitigates financial risk.
The following table summarizes the equity position over recent periods:
| Date | Common Stock | Retained Earnings | Total Stockholders' Equity |
|---|---|---|---|
| September 30, 2024 | $5.9 million | $164.2 million | $170.1 million |
| December 31, 2023 | $4.5 million | $160.1 million | $164.6 million |
| September 30, 2023 | $3.9 million | $157.2 million | $161.2 million |
This financial structure highlights the company's prudent approach to financing its growth, balancing between leveraging debt and maintaining a solid equity foundation to support long-term objectives and operational flexibility.
Assessing Escalade, Incorporated (ESCA) Liquidity
Assessing Escalade, Incorporated's Liquidity
Current Ratio: As of September 30, 2024, the current ratio stands at 3.44, calculated as total current assets of $144,664,000 divided by total current liabilities of $41,960,000.
Quick Ratio: The quick ratio is calculated at 3.23, derived from current assets of $144,664,000, less inventories of $85,485,000, resulting in adjusted current assets of $59,179,000 divided by current liabilities of $41,960,000.
Analysis of Working Capital Trends
As of September 30, 2024, working capital is $102,704,000, reflecting a decrease from $113,570,000 in December 31, 2023. The decline in working capital is primarily attributed to a reduction in cash and cash equivalents from $16,000 to $426,000 and a decrease in inventories from $92,462,000 to $85,485,000.
Cash Flow Statements Overview
Operating Cash Flow: For the nine months ended September 30, 2024, the net cash provided by operating activities is $23,759,000, compared to $27,706,000 for the same period in 2023.
Investing Cash Flow: Net cash used in investing activities is $4,275,000 for the nine months ended September 30, 2024, against ($1,563,000) in 2023.
Financing Cash Flow: Cash used in financing activities totals ($27,624,000) for the nine months ended September 30, 2024, compared to ($29,191,000) in 2023.
Potential Liquidity Concerns or Strengths
Total debt as of September 30, 2024, is $29,496,000, a decrease from $50,896,000 in December 31, 2023, with debt as a percentage of stockholders' equity at 17.3%. This indicates improved leverage and a stronger equity position.
| Financial Metric | September 30, 2024 | December 31, 2023 | September 30, 2023 |
|---|---|---|---|
| Current Assets | $144,664,000 | $146,831,000 | $175,947,000 |
| Current Liabilities | $41,960,000 | $33,264,000 | $44,221,000 |
| Working Capital | $102,704,000 | $113,570,000 | $131,726,000 |
| Net Cash from Operating Activities | $23,759,000 | $27,706,000 | $27,706,000 |
| Net Cash used in Investing Activities | $4,275,000 | ($1,563,000) | ($1,563,000) |
| Net Cash used in Financing Activities | ($27,624,000) | ($29,191,000) | ($29,191,000) |
| Total Debt | $29,496,000 | $50,896,000 | $72,039,000 |
| Debt to Equity Ratio | 17.3% | 30.9% | 44.7% |
Is Escalade, Incorporated (ESCA) Overvalued or Undervalued?
Valuation Analysis
To determine whether the company is overvalued or undervalued, we will analyze key valuation ratios, stock price trends, dividends, and analyst consensus.
Valuation Ratios
The following table summarizes the key valuation ratios as of September 30, 2024:
| Ratio | Value |
|---|---|
| Price-to-Earnings (P/E) | 20.0 |
| Price-to-Book (P/B) | 1.4 |
| Enterprise Value-to-EBITDA (EV/EBITDA) | 11.2 |
Stock Price Trends
The stock price trends over the last 12 months have shown the following performance:
- September 2023: $12.50
- December 2023: $14.00
- March 2024: $13.75
- June 2024: $15.50
- September 2024: $14.75
Dividend Yield and Payout Ratios
The company declared dividends of $0.15 per share in Q3 2024. The dividend yield is calculated as follows:
| Metric | Value |
|---|---|
| Annual Dividend | $0.60 |
| Stock Price (as of September 30, 2024) | $14.75 |
| Dividend Yield | 4.07% |
| Payout Ratio | 81.08% |
Analyst Consensus
As of September 2024, analyst consensus on the stock valuation is:
- Buy: 2
- Hold: 5
- Sell: 1
This consensus indicates a generally cautious outlook, with more analysts recommending to hold the stock rather than buy or sell.
Key Risks Facing Escalade, Incorporated (ESCA)
Key Risks Facing Escalade, Incorporated
Overview of Internal and External Risks
Escalade, Incorporated faces a variety of internal and external risks that may impact its financial health. Key risks include:
- Industry Competition: The company operates in a competitive environment with significant competition from both established and new entrants in the sporting goods sector.
- Regulatory Changes: Changes in regulations, particularly related to product safety and environmental standards, could impose additional costs or restrictions on operations.
- Market Conditions: Economic fluctuations and changes in consumer demand can adversely affect sales and profitability.
Discussion of Operational, Financial, or Strategic Risks
Recent earnings reports highlight several operational and financial risks:
- Declining Sales: Total net sales for the nine months ended September 30, 2024, decreased by 5.3% compared to the same period in 2023, primarily due to soft consumer demand and inventory destocking.
- Increased Costs: The gross margin increased to 24.8% in Q3 2024 from 24.7% a year prior, driven by improved fixed cost absorption, despite a $1.8 million increase in the cost of goods sold.
- Debt Levels: Total debt as of September 30, 2024, was $29.5 million, a decrease of $21.4 million from December 31, 2023.
Mitigation Strategies or Plans
The company has implemented several strategies to mitigate risks:
- Cost Management: Initiatives to control costs and manage inventory levels are ongoing.
- Strategic Transactions: The company is actively pursuing strategic transactions to enhance operational efficiency.
| Risk Factor | Description | Impact | Mitigation Strategy |
|---|---|---|---|
| Industry Competition | High competition within the sporting goods market. | Pressure on market share and pricing. | Enhance product differentiation and marketing efforts. |
| Regulatory Changes | Potential new regulations on product safety. | Increased compliance costs. | Proactive compliance programs and legal reviews. |
| Market Conditions | Fluctuating economic conditions affecting consumer spending. | Reduced sales and revenue volatility. | Diverse product offerings and market segments. |
| Debt Levels | Total debt of $29.5 million with a decreasing trend. | Potential liquidity issues. | Debt restructuring and refinancing options. |
Future Growth Prospects for Escalade, Incorporated (ESCA)
Future Growth Prospects for Escalade, Incorporated
Analysis of Key Growth Drivers
The company's growth drivers include product innovations, market expansions, and strategic acquisitions. In recent reports, the company has focused on enhancing its product lines in archery and basketball, which have shown promising sales growth.
Future Revenue Growth Projections and Earnings Estimates
For the fiscal year 2024, total net sales are projected at $250 million, reflecting a recovery from the $198 million reported in 2023. Earnings per share are estimated to grow to $0.90 from $0.74 in the previous year.
Strategic Initiatives or Partnerships
The company has entered into partnerships aimed at expanding its e-commerce presence, with a target to increase online sales by 15% year-over-year. Additionally, the recent sale of its Mexican subsidiary for $6.6 million is expected to streamline operations and reduce costs.
Competitive Advantages
Escalade benefits from a diversified product portfolio and established distribution channels, including mass merchants and specialty dealers. The company holds a strong market position in archery and basketball equipment, with significant brand recognition in these categories.
| Growth Metrics | 2023 Actual | 2024 Projected |
|---|---|---|
| Total Net Sales | $198 million | $250 million |
| Earnings Per Share | $0.74 | $0.90 |
| Online Sales Growth Target | N/A | 15% |
| Proceeds from Mexican Subsidiary Sale | N/A | $6.6 million |
Conclusion
With strategic initiatives in place and a focus on product innovation, the company is well-positioned for growth in the competitive landscape of sporting goods.
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Article updated on 8 Nov 2024
Resources:
- Escalade, Incorporated (ESCA) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Escalade, Incorporated (ESCA)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Escalade, Incorporated (ESCA)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.