Tile Shop Holdings, Inc. (TTSH) Bundle
Understanding Tile Shop Holdings, Inc. (TTSH) Revenue Streams
Understanding Tile Shop Holdings, Inc.’s Revenue Streams
Net Sales: For the nine months ended September 30, 2024, net sales were $267,617,000, a decrease of 8.6% compared to $292,688,000 in the same period of 2023.
Cost of Sales: The cost of sales for the nine months ended September 30, 2024, was $90,739,000, which represented 33.9% of net sales, compared to $104,285,000 and 35.6% of net sales for the same period in 2023.
Gross Profit: Gross profit for the nine months ended September 30, 2024, was $176,878,000, reflecting a gross margin of 66.1%, up from $188,403,000 and 64.4% for the nine months ended September 30, 2023.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate for the nine months ended September 30, 2024, indicates a decline of 8.6% compared to the nine months ended September 30, 2023. For the third quarter of 2024, net sales were $84,505,000, down 8.3% from $92,112,000 in the third quarter of 2023.
Revenue Breakdown by Business Segment
| Segment | Percentage of Revenue (2024) | Percentage of Revenue (2023) |
|---|---|---|
| Man-made tiles | 54% | 54% |
| Natural stone tiles | 21% | 22% |
| Setting and maintenance materials | 15% | 15% |
| Accessories | 7% | 8% |
| Delivery service | 3% | 2% |
Analysis of Significant Changes in Revenue Streams
The overall revenue decline can be attributed to reduced store traffic, impacting comparable store sales, which decreased by 8.4% for the nine months ended September 30, 2024. The gross margin improved due to decreased product costs and stabilizing international freight costs. Selling, general, and administrative expenses slightly decreased by 0.7%, from $173,715,000 in the nine months ended September 30, 2023, to $172,494,000 in the same period in 2024.
In summary, while net sales have decreased significantly, improvements in gross margin and cost management have somewhat mitigated the impact on overall financial health.
As of September 30, 2024, the customer deposit balance was $12,852,000, increasing from $10,719,000 at December 31, 2023.
Overall, the revenue landscape for the company reflects both challenges and adjustments in response to market conditions.
Source: Financial data retrieved from Tile Shop Holdings, Inc. quarterly financial reports.
A Deep Dive into Tile Shop Holdings, Inc. (TTSH) Profitability
Profitability Metrics
Analyzing the profitability metrics of Tile Shop Holdings, Inc. provides critical insights into its financial health. Below are key profitability indicators for the company as of 2024.
Gross Profit, Operating Profit, and Net Profit Margins
| Metric | 2024 (9 months) | 2023 (9 months) | Change |
|---|---|---|---|
| Net Sales ($ in thousands) | $267,617 | $292,688 | -8.6% |
| Cost of Sales ($ in thousands) | $90,739 | $104,285 | -13.0% |
| Gross Profit ($ in thousands) | $176,878 | $188,403 | -6.1% |
| Gross Margin (%) | 66.1% | 64.4% | +1.7% |
| Operating Profit ($ in thousands) | $4,384 | $14,688 | -70.1% |
| Operating Margin (%) | 1.6% | 5.0% | -3.4% |
| Net Income ($ in thousands) | $2,949 | $9,435 | -68.8% |
| Net Profit Margin (%) | 1.1% | 3.2% | -2.1% |
Trends in Profitability Over Time
Comparing the nine months ended September 30, 2024, to the same period in 2023, the company experienced a decrease in net sales by $25.1 million. The gross profit also declined by $11.5 million, reflecting a drop in overall sales performance. However, the gross margin improved from 64.4% to 66.1%, primarily due to decreasing product costs and stabilizing international freight costs.
Comparison of Profitability Ratios with Industry Averages
As of 2024, the company’s net profit margin of 1.1% is below the industry average, which typically ranges from 5% to 10% for specialty retailers. The operating margin of 1.6% also lags behind the industry standard of approximately 5% to 7%.
Analysis of Operational Efficiency
Operational efficiency is crucial for maintaining profitability. The selling, general, and administrative expenses (SG&A) for the nine months ended September 30, 2024, were $172,494 thousand, a slight decrease from $173,715 thousand in 2023, indicating effective cost management efforts. The SG&A as a percentage of sales increased to 64.5% from 59.4%, reflecting higher occupancy and transportation costs.
The gross margin trend shows an improvement, which is a positive sign for the company’s pricing power and cost control. Nevertheless, the significant drop in operating profit indicates that while the company is managing costs effectively, sales volume and traffic remain key areas needing improvement.
Operational Efficiency Metrics
| Metric | 2024 (9 months) | 2023 (9 months) | Change |
|---|---|---|---|
| SG&A Expenses ($ in thousands) | $172,494 | $173,715 | -0.7% |
| SG&A as % of Sales | 64.5% | 59.4% | +5.1% |
| Adjusted EBITDA ($ in thousands) | $19,194 | $32,154 | -40.4% |
| Adjusted EBITDA Margin (%) | 7.2% | 11.0% | -3.8% |
Debt vs. Equity: How Tile Shop Holdings, Inc. (TTSH) Finances Its Growth
Debt vs. Equity Structure
Tile Shop Holdings, Inc. has a defined structure for financing its operations, which includes a mix of debt and equity. As of September 30, 2024, the company's total liabilities stood at $197.5 million, with no long-term debt recorded, reflecting a strategic shift in its financing approach.
Overview of Debt Levels
The company's current liabilities include:
- Accounts payable: $21.4 million
- Income tax payable: $80,000
- Current portion of lease liability: $28.8 million
- Other accrued liabilities: $30.9 million
Total current liabilities amount to $81.1 million, indicating a reliance on short-term financing for operational needs. The company reported a significant improvement in liquidity, with cash and cash equivalents at $25.1 million as of the same date.
Debt-to-Equity Ratio
As of September 30, 2024, the debt-to-equity ratio of the company is calculated as follows:
| Total Liabilities | Total Stockholders' Equity | Debt-to-Equity Ratio |
|---|---|---|
| $197.5 million | $123.2 million | 1.60 |
This ratio exceeds the industry average of approximately 1.0, suggesting that the company is leveraging its equity to support its operations.
Recent Debt Issuances and Credit Ratings
The company entered a credit agreement with JPMorgan Chase Bank and others, providing a $75 million revolving line of credit, which is secured by its assets. This facility is available until September 30, 2027. As of September 30, 2024, there were no outstanding borrowings against this line, indicating a conservative approach to debt management.
Balancing Debt Financing and Equity Funding
Tile Shop Holdings maintains a careful balance between debt and equity financing. The company has not issued new long-term debt recently and has focused on maintaining a strong equity position, as evidenced by an increase in additional paid-in capital to $129.4 million. The absence of long-term debt as of the latest reporting period reflects a strategic decision to minimize interest expenses and maintain financial flexibility.
Overall, the company's financial strategy appears to favor equity financing while managing short-term liabilities effectively, positioning it for potential growth opportunities without the burden of significant debt.
Assessing Tile Shop Holdings, Inc. (TTSH) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The liquidity position of the company can be assessed through its current and quick ratios. As of September 30, 2024, the current ratio is calculated as follows:
| Current Assets (in thousands) | Current Liabilities (in thousands) | Current Ratio |
|---|---|---|
| $123,167 | $81,104 | 1.52 |
The quick ratio, which excludes inventories from current assets, is also a crucial measure:
| Quick Assets (in thousands) | Current Liabilities (in thousands) | Quick Ratio |
|---|---|---|
| $38,639 | $81,104 | 0.48 |
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, was reported as:
| Working Capital (in thousands) | Date |
|---|---|
| $42,063 | September 30, 2024 |
| $35,813 | December 31, 2023 |
This indicates a positive trend in working capital, showing an increase of 17.6% year-over-year.
Cash Flow Statements Overview
An overview of cash flow from operations, investing, and financing activities for the nine months ended September 30, 2024, is as follows:
| Cash Flow Type | Cash Flow (in thousands) |
|---|---|
| Operating Activities | $28,511 |
| Investing Activities | ($11,661) |
| Financing Activities | ($481) |
The net cash provided by operating activities decreased from $56,172 thousand in 2023 to $28,511 thousand in 2024, indicating potential liquidity concerns.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, cash and cash equivalents totaled $25,058 thousand, a significant increase from $8,620 thousand at the end of 2023. The company had no borrowings outstanding on its line of credit, with $73.8 million available for borrowing . However, the decline in operating cash flow and the quick ratio below 1.0 may indicate potential liquidity weaknesses that investors should monitor closely.
Is Tile Shop Holdings, Inc. (TTSH) Overvalued or Undervalued?
Valuation Analysis
In assessing the valuation of Tile Shop Holdings, Inc. (TTSH), we will examine key financial ratios, stock price trends, dividend metrics, and analyst recommendations to determine if the company is overvalued or undervalued.
Price-to-Earnings (P/E) Ratio
The current P/E ratio for TTSH is 6.21. This is based on the trailing twelve months (TTM) earnings per share (EPS) of $0.48.
Price-to-Book (P/B) Ratio
TTSH has a P/B ratio of 1.04, calculated using a book value per share of $4.00 as of September 30, 2024.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio stands at 5.56, with an EBITDA of $19.19 million for the last nine months ending September 30, 2024.
Stock Price Trends
Over the past 12 months, TTSH's stock price has fluctuated between a high of $5.50 and a low of $2.75. As of the latest close, the stock price is $2.98.
Dividend Yield and Payout Ratios
TTSH currently does not pay a dividend, resulting in a dividend yield of 0% and a payout ratio of 0%.
Analyst Consensus on Stock Valuation
Analyst consensus indicates a Hold rating for TTSH, with a price target of $4.00 based on current market conditions and expected performance.
| Metric | Value |
|---|---|
| P/E Ratio | 6.21 |
| P/B Ratio | 1.04 |
| EV/EBITDA | 5.56 |
| 12-Month Stock Price Range | $2.75 - $5.50 |
| Current Stock Price | $2.98 |
| Dividend Yield | 0% |
| Payout Ratio | 0% |
| Analyst Consensus | Hold |
| Price Target | $4.00 |
Key Risks Facing Tile Shop Holdings, Inc. (TTSH)
Key Risks Facing Tile Shop Holdings, Inc.
Overview of Internal and External Risks
The company faces several internal and external risks that can significantly impact its financial health. These include:
- Industry Competition: The retail tile industry is highly competitive, with numerous players vying for market share, leading to pricing pressures and reduced margins.
- Regulatory Changes: Changes in regulations related to consumer protection, labor laws, and environmental standards can impose additional costs and operational challenges.
- Market Conditions: Economic downturns, fluctuations in housing markets, and changes in consumer spending habits can adversely affect sales.
Discussion of Operational, Financial, or Strategic Risks
Recent earnings reports highlight several operational and financial risks:
- Sales Decline: Net sales for the nine months ended September 30, 2024, decreased to $267.6 million, down from $292.7 million in the same period in 2023, marking a decline of 8.6%.
- Comparable Store Sales: Comparable store sales declined by 8.4% for the nine months ending September 30, 2024, primarily due to decreased store traffic.
- Income from Operations: Income from operations dropped to $4.4 million (1.6% of sales) in 2024 from $14.7 million (5.0% of sales) in 2023.
- Interest Expense: Interest expense decreased to $294,000 in the first nine months of 2024 compared to $1.9 million in 2023.
- Net Income: Net income for the nine months ended September 30, 2024, was $2.9 million (1.1% of sales), down from $9.4 million (3.2% of sales) in 2023.
Mitigation Strategies
To address these risks, the company has implemented several strategies:
- Cost Management: The company has reduced selling, general, and administrative expenses to $172.5 million in 2024 from $173.7 million in 2023.
- Store Closures: The closure of underperforming stores and the consolidation of distribution centers are being pursued to enhance operational efficiency.
- Investment in Technology: Continued investment in information technology and distribution capabilities aims to improve customer service and streamline operations.
| Risk Factor | Description | Financial Impact (2024) |
|---|---|---|
| Sales Decline | Net sales decreased by 8.6% year-over-year | $267.6 million |
| Comparable Store Sales | Decline of 8.4% due to reduced traffic | N/A |
| Income from Operations | Income decreased to 1.6% of sales | $4.4 million |
| Net Income | Net income fell to 1.1% of sales | $2.9 million |
| Interest Expense | Reduction in interest expense due to less debt | $294,000 |
| Cash and Cash Equivalents | Increased liquidity from cash flow management | $25.1 million |
Future Growth Prospects for Tile Shop Holdings, Inc. (TTSH)
Future Growth Prospects for Tile Shop Holdings, Inc.
Analysis of Key Growth Drivers
Tile Shop Holdings, Inc. is positioned for potential growth through various strategic initiatives:
- Expansion of store locations: As of September 30, 2024, the company operated 142 stores across 31 states and the District of Columbia.
- Investment in store remodels and technology: In 2024, capital expenditures were approximately $11.8 million, primarily for store remodels and IT improvements.
- Focus on product innovation: The company continues to enhance its product offerings, including man-made and natural stone tiles, and luxury vinyl tiles.
Future Revenue Growth Projections and Earnings Estimates
Despite recent declines in sales, projections for future growth remain optimistic:
- Net sales for the nine months ended September 30, 2024, were $267.6 million, a decrease from $292.7 million in the prior year, representing an 8.6% decline.
- Net income for the same period was $2.9 million, down from $9.4 million, indicating a 68.8% decrease.
- Projected improvements in gross margin rates indicate potential for recovery, with a gross margin of 66.1% for the nine months ended September 30, 2024, up from 64.4% in 2023.
Strategic Initiatives or Partnerships that May Drive Future Growth
The company’s strategic initiatives include:
- Reducing selling, general, and administrative expenses by $1.2 million (0.7%) in the nine months ended September 30, 2024, contributing to increased operational efficiency.
- Partnerships with suppliers to enhance product availability and innovation, securing a competitive edge in the market.
Competitive Advantages that Position the Company for Growth
Tile Shop Holdings benefits from several competitive advantages:
- Strong supplier relationships that allow for favorable pricing and product variety.
- Established brand recognition in the specialty tile market, which supports customer loyalty.
- A comprehensive distribution network that enhances product availability across its stores.
| Financial Metric | 2024 | 2023 | Change |
|---|---|---|---|
| Net Sales ($ million) | 267.6 | 292.7 | -8.6% |
| Net Income ($ million) | 2.9 | 9.4 | -68.8% |
| Gross Margin (%) | 66.1 | 64.4 | +2.7% |
| Capital Expenditures ($ million) | 11.8 | 11.0 | +7.3% |
| SG&A Expenses ($ million) | 172.5 | 173.7 | -0.7% |
As the company navigates current challenges, its focus on strategic growth drivers, operational efficiency, and market positioning will be critical in shaping its future performance and profitability.
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Resources:
- Tile Shop Holdings, Inc. (TTSH) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Tile Shop Holdings, Inc. (TTSH)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Tile Shop Holdings, Inc. (TTSH)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.