Q4 2024 Escalade Inc Earnings Call
Good morning, everyone and welcome to the escalated fourth quarter 2024 results conference call.
Operator: Good morning everyone and welcome to the Escalade fourth quarter 2024 results conference call. All participants will be in a listen-only mode. If you need assistance, please see no conference specialist by pressing the star key followed by zero.
All participants will be in a listen only mode.
Should you need assistance. Please they know a conference specialist by pressing the star can you followed by zero.
After todays presentation, there will be an opportunity to ask questions.
Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then 1 using a touch screen telephone. To withdraw your question, you may press star and 2. Please also note today's event is being recorded.
Ask a question you May press Star and then one using a touchstone telephone to withdraw your question you May Press Star then two.
Please also note today's event is being recorded.
Speaker Change: At this time I'd like to turn the floor over to you Patrick Griffin, Vice President of corporate development and Investor Relations. Sir. Please go ahead.
Patrick Griffin: At this time, I'd like to turn the floor over to Patrick Griffin, Vice President of Corporate Development and Investor Relations. Sir, please go ahead. Thank you, Operator. On behalf of the entire team at Escalade, I'd like to welcome you to our fourth quarter and full year 2024 results conference call. Leading the call with me today are President and CEO Walt Glazer and Stephen Wawrin, our Chief Financial Officer. Today's discussion contains forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the SEC.
Thank you operator on behalf of the entire team at escalated I'd like to welcome you to our fourth quarter and full year 2024 results conference call.
Walk Laser: Leading the call with me today are president and CEO walk laser and Stephen Warren Our Chief Financial Officer.
Walk Laser: Today's discussion contains forward looking statements about future business and financial expectations.
Walk Laser: Actual results may differ significantly from those projected in today's forward looking statements due to various risks and uncertainties.
Walk Laser: Including the risks described in our periodic reports filed with the SEC.
Patrick Griffin: Except as required by law, we undertake no obligation to update our forward-looking statement.
Walk Laser: Except as required by law, we undertake no obligation to update our forward looking statements.
Patrick Griffin: At the conclusion of our prepared remarks, we will open the line for questions.
Walt Laser: The conclusion of our prepared remarks, we will open the line for questions with that I would like to turn the call over to Walt.
Walter Glazer: With that, I would like to turn the call over to Walter. Thank you, Patrick, and welcome to those joining us on the call. Throughout 2024, our team successfully navigated a soft period of consumer demand by continuing to prioritize operational discipline, asset optimization, expense reduction, and efficiency gain. These initiatives continued during the fourth quarter, culminating in year-over-year margin expansion and strong cash flow. While fourth quarter sales declined 2% versus the prior year period, we delivered more than 60 basis points of gross margin improvement, largely driven by lower manufacturing and logistics costs. Over the last two years, we've reduced our workforce by approximately 23% while decreasing our owned and leased square footage by nearly 20%.
Walt Laser: Thank you Patrick and welcome to those joining us on the call.
Walt Laser: Throughout 2024, our team successfully navigated a soft period of consumer demand by continuing to prioritize operational discipline asset optimization expense reduction and efficiency gains.
Walt Laser: These initiatives initiatives continued during the fourth quarter, culminating in year over year margin expansion strong cash flow.
Walt Laser: Our fourth quarter sales declined 2% versus the prior year period, we delivered more than 60 basis points of gross margin improvement largely driven by lower manufacturing and logistics costs.
Walt Laser: Over the last two years, we've reduced our workforce by approximately 23%, while decreasing our owned and leased square footage by nearly 20%.
Walter Glazer: These reductions were driven mainly by the closure of our Rosarito, Mexico facility, the termination of a lease in Orlando, Florida, and operational rightsizing across the remainder of our footprint. While we've experienced significant one-time costs related to our operational rightsizing and facility wind-down, we see a pathway for improved operating leverage and margin expansion in the year ahead, even in an environment where consumer demand for discretionary recreational goods remains soft. Beyond our focus on expense control, we also continue to prioritize working capital efficiency. specifically as it relates to inventory optimization. Since our inventory peaked in the third quarter of 2022 as a result of excess purchases during the pandemic and supply chain disruptions which delayed receipt, we've successfully reduced our inventory levels by 44 percent, and in 2024 alone, reduced inventory levels by nearly 20 percent when compared to year-end 2023.
Walt Laser: These reductions were driven mainly by the closure of our Rosarito, Mexico facility, the termination of a lease in Orlando, Florida, and operational right sizing across the remainder of our footprint.
Walt Laser: We experienced significant onetime cost related to our operational right sizing and facility wind down we see a pathway for improved operating leverage and margin expansion in the year ahead.
Walt Laser: Even in an environment, where consumer demand for discretionary recreational goods remained soft.
Walt Laser: Beyond our focus on expense control. We also continue to prioritize working capital efficiency, specifically as it relates to inventory optimization.
Walt Laser: Since our inventory peaked in the third quarter of 2022 as a result of excess purchases during the pandemic and supply chain disruptions, which delayed receipt, we have successfully reduced our inventory levels by 44% and in 'twenty 'twenty four alone reduced inventory levels by nearly 20% when compared to year end 2023.
Walt Laser: While we have largely maintained price discipline with our in line items. We've also moved aggressively when necessary, which negatively impacted gross margins in 2024.
Walter Glazer: While we have largely maintained price discipline with our in-line items, we've also moved aggressively when necessary, which negatively impacted gross margins in 2024. Our improved working capital efficiency has favorably impacted our operating cash flow performance. We generated $36 million in operating cash flow in 2024, including more than $12 million during the fourth quarter. Given our strong pre-cash generation, we were able to pay down $25.3 million in debt during 2024 and ended the year with a net leverage ratio of 0.8 times. In alignment with our balanced capital allocation strategy, we successfully repaid the remainder of our variable rate debt, leaving $25.6 million of fixed rate debt on our balance sheet at year end.
Walt Laser: Our improved working capital efficiency has favorably impacted our operating cash flow performance, we generated 36 million in operating cash flow in 2024, including more than $12 million during the fourth quarter.
Walt Laser: Given our strong free cash generation, we were able to pay down $25 $3 million in debt during 2024 and ended the year with a net leverage ratio of 0.8 times.
Walt Laser: In alignment with our balanced capital allocation strategy, we successfully repaid the remainder of our variable rate debt, leaving $25 $6 million of fixed rate debt on our balance sheet at year end.
Walter Glazer: Our interest rate on the remaining fixed rate debt is 2.97%, which currently allows us to earn positive arbitrage on a cash balance. During the fourth quarter, we also deployed available cash towards share repurchase. executing $2.2 million of buybacks under our existing $15 million authorization. In 2025, we intend to continue our balanced return to capital program and disciplined approach to capital allocation.
Walt Laser: Our interest rate on the remaining fixed rate debt is 297%, which currently allows us to earn positive arbitrage any cash balances.
Walt Laser: During the fourth quarter, we also deployed available cash towards share repurchases executing $2 $2 million of buybacks under our existing $15 million authorization.
Walt Laser: In 2025, we intend to continue our balanced return of capital program and disciplined approach to capital allocation.
Walter Glazer: Successfully realizing the objectives of our cost rationalization program, we now believe our business is well positioned to capitalize on the next expansionary phase of the economic cycle. and Improved Discretionary Consumer Spending on Recreational Products. To that end, we're investing in consumer-driven innovation and strengthening consumer connections while remaining acquirers of complimentary high-value brands consistent with our strategy to build long-term shareholder value. While consumer spending for discretionary recreational goods remains under pressure due to the current macroeconomic conditions and uncertainty, we see pockets of demand growth within our diversified brand portfolio. Recent brand building initiatives have allowed us to establish lasting connections with our consumers by expanding our e-commerce presence, rolling out impactful marketing programs, and strengthening our partnership.
Walt Laser: Successfully realizing the objectives of our cost rationalization program. We now believe our business is well positioned to capitalize on the next expansionary phase of the economic cycle.
Walt Laser: It improved discretionary consumer spending on recreation products.
Walt Laser: To that end, we're investing in consumer driven innovation and strengthening consumer connections, while remaining acquirers of complementary high value brands consistent with our strategy to build long term shareholder value.
While consumer spending for discretionary recreational goods remains under pressure due to the current macro economic conditions and uncertainty, we see pockets of demand growth within our within our diversified brand portfolio.
Walt Laser: Recent brand building initiatives have allowed us to establish a lasting connections with our consumers by expanding our ecommerce presence rolling out and impactful marketing programs and strengthening our partnerships, while continuing to deliver a category leading innovative brands that build consumer loyalty across our diverse base of.
Walter Glazer: while continuing to deliver category-leading, innovative brands that build consumer loyalty across a diverse base of established and emerging recreational sports.
Walt Laser: Of established and emerging recreational sports.
Walt Laser: Going forward, we are increasing our focus on consumer led innovation across our categories. A recent example of our focus is the launch of our new Onyx Malus raw carbon pickle ball paddles, which combines a naturally textured carbon surface with other innovative future features including our patented thermo fused technologies.
Walter Glazer: Going forward, we are increasing our focus on consumer-led innovation across our category. A recent example of our focus is the launch of our new Onyx Malice Raw Carbon Pickleball Paddles which combines a naturally textured carbon surface with other innovative features including our patented ThermoFuse technology process to create maximum spin and control without sacrificing power and power. Our partnership with the American Coronal League continues to bear fruit for both parties. We are increasing our range of high-quality boards, accessories, and high-performance bag sets. As the ACL continues expanding into collegiate, high school, and international tournaments, we are there to support the players with everything from boards and bags to scoring towers, pitch pads, and related accessories.
Walt Laser: Allergy process to create maximum span and control without sacrificing power and pop.
Walt Laser: Our partnership with the American corn only continues to bear fruit for both parties, we are increasing our range of high quality boards accessories and high performance bag sets.
Walt Laser: The ACL continues expanding in a collegiate and high school in international tournaments.
Walt Laser: We are there to support the players with everything from fortune bags to scoring towers pitch pads and related accessories.
Walter Glazer: Consumers can set up a tournament-level cornhole lane at home for practice. The ACL trademark slogan is, anyone can play, anyone can win. And we know the only way to win is to practice. Whether you want to win an ACL tournament or just have fun with your family and friends, Escalade is there for you with our full line of ACL products.
Walt Laser: Consumers can set up a tournament level Cornell lane at home for practice.
Walt Laser: The ACL trademark slogan is anyone can play anyone can win.
Walt Laser: And we know the only way to win is to practice, whether you want to win and ACL tournament or just have fun with your family and friends escalators. There for you with our full line of ACL products.
Walt Laser: On our last conference call I discussed our expansive new lineup of fair archery bows.
Walter Glazer: On our last conference call, I discussed our expansive new lineup of fair archery bows. These have been very well received by archery dealers and consumers. The heavy traffic at our booth during the ATA trade show in January was a testament to the efforts of our Bayer team to deliver great value and performance. And we're not stopping there as we prepare to launch new and improved archery accessories in 2025 that will complement and enhance our installed base of compound and traditional bows. I also discussed our agreement to become the exclusive U.S. distributor of Adidas branded fitness accessories.
Walt Laser: These have been very well received by archery dealers and consumers.
Walt Laser: The heavy traffic at our booth during the a T. A trade show in January was a testament to the efforts of our bear team to deliver great value and performance.
Walt Laser: And we're not stopping there as we prepare to launch new and improved archery accessories in 2025, they will complement and enhance our installed base of compound in traditional Bose.
Walt Laser: I also discussed our agreement to become the exclusive U S distributor of Adidas branded fitness accessories.
Walter Glazer: I'm pleased to report that our U.S. weight team has hit the ground running and we are now shipping Adidas products which are a great compliment to our offering of Lifeline, The Step, and U.S. weight branded fitness equipment and accessories.
Walt Laser: I'm pleased to report that our U S way team has hit the ground running and we are now shipping Adidas products, which are a great complement to our offering a lifeline to step in U S weight branded fitness equipment and accessories.
Walt Laser: Additionally, our Brunswick Billiards group, we launched the newest generation of the iconic Brunswick Gold Crown table at the 1 billion Congress of America show in March.
Walter Glazer: Additionally, our Brunswick Billiards group will launch the newest generation of the iconic Brunswick Gold Crown Table at the Billiard Congress of America show in March. The prior six generations were great. The Gold Crown VII takes performance to a new level while honoring the Gold Crown heritage and aesthetic. Brunswick celebrates its 180th anniversary this year and what better way to show that Brayen continues to lead the industry with innovative products. Brunswick has always been strong in the home market and years ago was the leader in the commercial tables for pool halls and bars. Since our acquisition of the brand in 2022, we have devoted substantial resources to relaunching the gold crown commercial.
Walt Laser: The prior six generations were great.
Walt Laser: The gold Crown seven takes performance to a new level of honoring the gold kind of heritage anesthetic bronze.
Walt Laser: Brunswick celebrates its 118th anniversary this year and what better way to show the brand continues to lead the industry with innovative products.
Seed consumers dealers and installers expectations.
Walt Laser: Brunswick has always been strong in our home market in years ago was the leader in the commercial tables for pool halls in bars.
Walt Laser: Since our acquisition of the brand in 2022, we have devoted substantial resources to Relaunching the gold Crown commercial table assistant.
Walter Glazer: This enhances the visibility of Brunswick and serves those players who do not have the room or resources for their own table at home by allowing them to play on the best at their local venues. Entrepreneurial billiard enthusiasts are setting up high-quality, family-oriented venues with rows of gold-crowned commercial tables.
Walt Laser: This enhances the visibility and Brown of Brunswick and serves those players who does not have the room or resources for their own table at home by allowing them to play on the best at their local venue.
Walt Laser: Entrepreneurial billiard enthusiasts are setting up high quality family oriented venues with Roes of gold Crown commercial tables, we think this trend could be in the early stages.
Walter Glazer: We think this trend could be in the early... Our vision is to build and strengthen our brand portfolio centered on helping consumers create great memories while engaging in healthy activities with their family and friends.
Walt Laser: Our vision is to build and strengthen our brand portfolio centered on helping consumers create great memories, while engaging healthy activities with their family and friends.
Walt Laser: No earnings call. This season would be complete without a discussion of tariffs we've developed a playbook for addressing tariffs over the past few years and had been working to diversify our sourcing we've.
Walter Glazer: No earnings call this season would be complete without a discussion of tariffs. We've developed a playbook for addressing tariffs over the past few years and have been working to diversify our sources. We've moved items back into our domestic factor. expanded sourcing to suppliers in Vietnam, Indonesia, Brazil, India, and others. We've reduced our independence on Mexico through the sale of our facility in Rosarito. While it may be easy to shift production of apparel and other items, our deep supply chain of components and processes in China require a lot more preparation and, currently, cost to move. So while we continue to diversify our sourcing, we are prepared to manage some tariff impact in partnership with our factories while working to mitigate derivative tariff values through reengineering products and processes.
Walt Laser: We've moved items back into our domestic factories expanded sourcing to suppliers in Vietnam, Indonesia, and Brazil, India and others, we've reduced our dependence on Mexico through the sale of our facility in Rosarito.
Walt Laser: While it may be easier to shift production of apparel and other items are deep supply chain of components and processes in China require a lot more preparation and currently cost to move.
So while we continue to diversify our sourcing we are prepared to manage some tariff impact in partnership with our factories are working to mitigate derivatives tariff values through reengineering products and processes.
Walter Glazer: One of our businesses will benefit from the Our archery bows are largely produced in Gainesville, Florida. Our U.S. weight facility is a low-cost domestic producer which benefits from the United States leadership position in plastic resins and natural gas feeds.
Walt Laser: Some of our businesses will benefit from the tariffs are archery bows are largely produced in Gainesville, Florida.
Walt Laser: Our U S Waite facility as a low cost domestic producer, which benefits from the United States leadership position in plastic resins and natural gas feedstock.
Walter Glazer: Finally, the closing of the de minimis loophole will benefit all domestic producers. Under the de minimis rule, importers could avoid prior tariffs by shipping small packages valued at less than $800. Over the past 10 years, the number of De Minimis shipments coming into the U.S. increased nearly tenfold from $139 million in 2015 to $1.36 billion in 2024, with an increase of 36% in 2024 alone.
Walt Laser: Finally, the closing of the de Minimis loophole will benefit all domestic producers.
Walt Laser: Under the de Minimis rule importers could avoid prior tariffs by shipping small packages valued at less than $800.
Walt Laser: Over the past 10 years, the number of de Minimis shipments coming into the U S increased nearly tenfold from a 139 million in 2015 to 1.3 dollars 6 billion in 2024 with an increase of 36% in 2024 alone.
Stephen: Before turning the call over to Stephen I would like to take a moment to thank each of you for your support during my time at escalated.
Walter Glazer: Before turning the call over to Stephen, I would like to take a moment to thank each of you for your support during my time at Escalade. Past four years have flown by and our team has done an amazing job managing through the post pandemic environment. I want to thank them as well. Our talented driven employees have made my job look easy.
Stephen: For the past four years have flown by and our team has done an amazing job managing through the post pandemic environment I want to thank them as well our talented and driven employees have made my job look easy.
Walter Glazer: I look forward to seeing Escalade continue to create long-term shareholder value under the leadership of our incoming CEO, Armin Boom, who plans to start with the company on April 1st and will bring his amazing energy and talents to Escalade.
Stephen: I look forward to seeing escalate continue to create long term shareholder value under the leadership of our incoming CEO Army Boehm, who plans to start with the company on April 1st he will bring his amazing energy and talents to escalate.
Walter Glazer: I'll return to my prior position as Director and Chairman, continuing to serve our shareholders with an enhanced understanding of our company and opportunities.
Speaker Change: I'll return to my prior position as director and chairman continuing to serve our shareholders with an enhanced understanding of our company and opportunities.
Stephen Wawrin: With that, I'll turn the call over to Stephen for his prepared remarks. Thank you, Walt. For the three months ended December 31, 2024, Escalade reported net income of $2.7 million, or $0.19 per diluted share, on net sales of $63.9 million. For the fourth quarter, the company reported gross margin of 24.9% compared to 24.3% in the prior year period. The 61 basis point increase was primarily the result of lower operational costs driven by our footprint rationalization and workforce reduction initiatives. Selling General and Administrative Expenses during the fourth quarter increased by 5% or $0.5 million compared to the prior year period to $10.9 million.
Steven: With that I'll turn the call over to Steven for his prepared remarks. Thank.
Steven: Thank you all for the three months ended December 31, 2024, escalate reported net income of $2 $7 million or <unk> 19 per diluted share on net sales of $63 $9 million.
Steven: For the fourth quarter, the company reported gross margin of 24.9% compared to 24, 3% in the prior year period to 61 basis point increase was primarily the result of lower operational cost driven by our footprint rationalization and workforce reduction initiatives initiatives.
Steven: Selling general and administrative expenses during the fourth quarter increased by 5% or <unk> $5 million compared to the prior year period to $10 $9 million.
Stephen Wawrin: Earnings before interest, taxes, depreciation, and amortization decreased by $0.5 million to $5.9 million in the fourth quarter of 2024 versus $6.4 million in the prior year period. Total cash provided by operations for the fourth quarter of 2024 was $12.3 million for the quarter, compared to $20.6 million in the prior year period. Our inventory reduction initiative contributed less to free cash flow generation in the fourth quarter of 2024 versus the fourth quarter of 2023 as we approached a more optimal inventory level. As Walt mentioned, we expect to further reduce our inventory levels in 2025 as part of our ongoing optimization efforts.
Steven: Earnings before interest taxes, depreciation and amortization decreased by $25 million to $5 $9 million in the fourth quarter of 2024 versus $6 $4 million in the prior year period.
Steven: Total cash provided by operations for the fourth quarter of 2024 was $12 $3 million for the quarter compared to $26 million in the prior year period, our inventory reduction initiative contributed less to free cash flow generation in the fourth quarter of 'twenty 'twenty four versus the fourth quarter of 2023, as we approached a more optimal.
Steven: Inventory level as Walt mentioned, we expect to further reduce our inventory levels in 2025 as part of our ongoing optimization efforts.
Stephen Wawrin: As of December 31st, 2024, the company had total cash in equivalence of $4.2 million. At the end of the fourth quarter of 2024, net debt outstanding or total debt plus cash was 0.8 times trailing 12-month EBITDA. As of December 31, 2024, we had $25.6 million of total debt outstanding. During the fourth quarter, we repaid the remaining balance of our variable interest rate debt. As Walt mentioned, we intend to be mindful of our disciplined approach to allocation of resources, as well as our cost of capital when deploying our cash and pursuing a balanced return of capital program.
Steven: As of December 31, 2024, the company had total cash and equivalents of $4 $2 million at the end of the fourth quarter of 2024 net debt outstanding and our total debt less cash was 0.8 times trailing 12 month EBITDA as.
Steven: As of December 31st 2024, we had $25 $6 million of total debt outstanding during the fourth quarter, we repaid the remaining balance of our variable interest rate debt.
Speaker Change: As Walt mentioned, we intend to be mindful of our disciplined approach to allocation of resources.
Speaker Change: Well as our cost of capital when deploying our cash are pursuing a balanced return of capital program with that operator, we will open the call for questions.
Operator: With that, operator, we will open the call for questions. Ladies and gentlemen, at this time we'll begin the question and answer session. To ask a question, you may press star and then 1 using a touch-tone telephone. If you are using a speakerphone, we do ask that you please pick up your handset before pressing the keys to ensure the best sound quality. To withdraw your questions, you may press star and 2. Once again, that is star and then one to join the question queue.
Speaker Change: Ladies and gentlemen at this time, we'll begin the question and answer session Task. A question you May Press Star and then one using a touchtone telephone if.
Speaker Change: If you are using a speaker phone, we do ask that you. Please pickup your handset before pressing the keys to ensure the best sound quality.
It's your all your questions you May press Star two.
Speaker Change: Once again that is star and then one to join the question queue.
Speaker Change: And our first question today comes from Rommel.
Rommel Dionisio: And our first question today comes from Rommel. Dionisio from Aegis Capital. Please go ahead with your question. Good morning. Thanks for taking my question. With regards to inventories, Stephen, I know you talked about the, well, you two talked about the inventory reduction as being a key metric here over the last several quarters. You made a lot of progress in that, obviously.
Speaker Change: C O from Aegis capital. Please go ahead with your question.
Speaker Change: Oh good morning, Thanks for taking my question, Oh, well they watch the inventories just thinking I know you talked about.
Speaker Change: You talked about the inventory reduction.
Speaker Change: Being a key metric here over the last several quarters you made a lot of progress in that obviously unless you look forward you know wisdom pending potential tariffs how would you think about boosting inventories near term just to make sure you have a safety stock of the Cros purchase at a lower price before Chomsky Kim how do you guys think about that and how can we benchmark that.
Stephen Wawrin: But as you look forward, you know, with impending potential tariffs, would you think about boosting inventories near term just to make sure you have a safety stock or to perhaps purchase at a lower price before tariffs kick in? How do you guys think about that? And how can we benchmark that over the next couple of quarters? Thanks.
Speaker Change: Over the next couple of quarters.
Speaker Change: Hey, good morning, Rommel, Yeah, so for sure we'd.
Stephen Wawrin: Good morning, Rommel. Yeah, so for sure, we advanced some some shipments, we called ahead some some business, some inventory ahead of the tariffs to sort of beat the price increase. But, you know, our goal still remains to be efficient in our, in our use of inventory and working capital. We think there's still room to reduce inventories while maintaining high service levels for our customers. So, you know, we're taking a balanced approach. I would say that we're seeing some opportunities for further reduction.
Speaker Change: Advanced some some shipments we called it had some some business. Some inventory ahead of the tariffs to sort of beat the price increase but.
Speaker Change: You know our goal still remains.
Speaker Change: To be efficient in our use of inventory and working capital.
Speaker Change: We think there's still room to reduce inventories, while maintaining high service levels for our customers. So you know where we're taking a balanced approach.
Speaker Change: I would say that where we're seeing some opportunities for further reductions.
Speaker Change: I said.
Speaker Change: Sure.
Stephen Wawrin: Sure, thanks. And also, not to read too much into what you just said, but would inventories have been even lower if not for taking out some of the safety stock, as you mentioned here, over the last few months or quarters? We think there's opportunity to bring it down further, not to the extent that we did, you know, over the last two years, but definitely some opportunity. Okay, great.
Speaker Change: Oh not to read too much into what you just said well put.
Speaker Change: Inventories have been even lower if not for.
Speaker Change: <unk> taken out some of the safety stock because you mentioned here over the last few months or quarters.
Speaker Change: We think there's opportunity to bring it down further or not not to the extent that we did you know over the last two years, but definitely some some opportunities.
Speaker Change: Okay great.
Rommel Dionisio: And maybe just a follow-up question, if I could, with regards to gross margin. Could you talk about product makeshift? I know you cited strength in archery, table tennis. Wouldn't that come in at a somewhat higher margin as well?
Speaker Change: And maybe just a follow up question if I could with regards to gross margin could you talk about product mix shift I know.
Speaker Change: Sided strength in archery table tennis wound up coming in somewhat higher margin as well was that product mix shift as well.
Stephen Wawrin: Was that product makeshift to win for you in the quarter. Yeah, so I would say that, you know, we're kind of running about the fleet average. There's not been a big shift due to mix, some puts and some takes. I think the real message we want to deliver is, hey, we absorbed a bunch of costs related to, you know, reducing inventory, related to the reduction of our facilities and our footprint. We think that our gross margins, on balance...
Speaker Change: [laughter] tailwind for you in the quarter.
Speaker Change: Yeah.
Speaker Change: Yeah. So I would say that you know, where we're kind of running about the fleet average theres not been a big big shift due to mix. Some some puts and some takes I think the real message. We want to deliver is hey, we absorbed a bunch of costs related to reducing inventory.
Speaker Change: Related to the a reduction of our facilities in our footprint and.
Speaker Change: We think that our gross margins on balance.
Operator: should be better moving forward. Great. Thanks very much. It's very helpful. Once again, if you would like to ask a question, please press star and 1.
Speaker Change: It should be better moving forward.
Speaker Change: Great. Thanks, very much it's very helpful.
Speaker Change: Once again, if he would like to ask a question. Please press star and one.
David Cohen: Our next question comes from David Cohen from Minerva Advisors. Please go ahead with your question. Walt, thank you so much for shepherding the Escalade ship of state through some really really choppy waters. We appreciate the seriousness that you've been with which you've embraced the endeavor. And obviously, the full results don't show with demand sort of muted right now, but a look at the balance sheet is comforting, much more comforting now than it was a couple of years ago, so thanks. Um, uh, you, you're, um... Your text of the release talks about non-recurring expenses. You have referred to them in this call as significant.
Speaker Change: Our next question comes from David Cohen from the nerve at an advisors. Please go ahead with your question.
Speaker Change: Thanks.
David Cohen: Well. Thank you so much for shepherding the escalade ship of state through some really really choppy waters, while we appreciate the seriousness that you've been with which you've embraced the endeavor.
David Cohen: And obviously the full results don't show with demand sort of muted right now but.
David Cohen: Well look at the balance sheet is comforting much more comforting now than it was a couple of years ago. So thank you.
Hum.
David Cohen: Your.
David Cohen: Your talks.
David Cohen: Uh huh.
Speaker Change: Of the release talks about nonrecurring expenses you have referred to them in this call is significant there's some way you can sort of.
Walter Glazer: There's some way you can sort of give us a ballpark on what 2023 and 2024 reflect with regard to those expenses. Obviously, we're just trying to normalize what a going forward profitability profile might look like. Yeah, sure. Sure, David. And thank you for those comments. You know, it's been a real team effort. I mean, everybody in Escalade's been working hard to accomplish these goals and we feel like we're in a great position, you know, going forward. You know, as far as the impact, you know, without getting too granular, the one thing I can tell you is that the one-time costs we absorbed in 2024 are kind of roughly comparable to the gain on sale that we reported, and that was broken out as about $3.9 million.
David Cohen: Give us a ballpark on what 2023 and 'twenty 'twenty four reflect with regard to those expenses. Obviously were just trying to normalize what are going forwards profitability profile might look like.
David Cohen: Yeah sure sure David and thank you for those comments right. You know it's been a real team effort I mean, everybody and escalate has been working hard.
David Cohen: To to accomplish these goals and we feel like we're in a great position going forward.
David Cohen: You know as far as the impact you know without getting too granular that the one thing I can tell you is that the the onetime costs. We absorbed in 2024 are kind of roughly comparable to the gain on sale that we reported and that was broken out is about $3 $9 million. So.
David Cohen: So, I don't know if that's helpful or not, but that should give you some sense of the scale. Okay.
David Cohen: I don't know if that's helpful or not but yep and should give you some sense of the scale.
Okay.
Walter Glazer: Other question that I had for you is with regard to the balance sheet, obviously, The leverage has come way down, and I'm wondering whether that changes your perspective on what the balance of capital allocation should look like. Yeah, so for the last few years, I mean particularly, you know, 21, 22, 23, we were focused entirely on debt reduction. We reported that in the quarter we have begun buying back our stock. We bought back about $2.2 million worth. So that's now available. It's at our disposal, I would say. So, you know, we pay up, as you know, we pay up significant cash dividend.
David Cohen: Other question that I had for you is with regard to the balance sheet obviously.
David Cohen: The leverage has come way down.
David Cohen: Oh, and I'm wondering whether that changes your perspective on what the balance of capital allocation should look like.
David Cohen: Yeah. So for the last few years, so I mean, particularly you know in 'twenty one 'twenty two 'twenty three we were focused entirely on debt reduction and we reported that in the.
David Cohen: Quarter, we have begun buying back our stock we bought back about $2 $2 million worth so that's now.
David Cohen: Mailable, it's at our disposal I would say.
David Cohen: So you know we pay up as you know we pay a significant cash dividend.
David Cohen: We want to continue investing in our core businesses.
Walter Glazer: We want to continue investing in our core businesses. We, as long as it makes sense, we plan to continue to repurchase our shares. And then we're, you know, a very selective acquirer. So if the right opportunity came along. We would definitely be interested.
David Cohen: We are as long as it makes sense well, we plan to continue to repurchase our shares and then where you know a very selective acquirer.
David Cohen: Acquirer, so if the right opportunity came along.
David Cohen: We would we would definitely be interested in that.
David Cohen: Thanks, a lot and best of luck.
David Cohen: Thanks a lot and best of luck, Walt. Thank you, David.
David Cohen: Thank you David.
David Cohen: And ladies and gentlemen, with that we'll be concluding today's question and answer session I'd like to turn the floor back over to Patrick Griffin for any closing remarks.
Operator: And ladies and gentlemen, with that, we'll be concluding today's question and answer session.
Patrick Griffin: I'd like to turn the floor back over to Patrick Griffin for any closing remarks. Thank you, operator. On behalf of everyone at Escalade, including our board of directors, I want to express our deepest gratitude for Walt's leadership and unwavering dedication to successfully navigating the company through the challenging post-pandemic environment and intentionally setting the stage for our next growth phase driven by consumer-led innovation. We are extremely grateful for Walt's contributions and look forward to building upon those with Arm and Boom as our incoming president and CEO.
David Cohen: Thank you operator.
Speaker Change: We happened to everyone at Escalade, including our board of directors I want to express our deepest gratitude for Walter leadership.
Speaker Change: An unwavering dedication to successfully navigating the company through the challenging post pandemic environment and intentionally setting the stage for our next growth phase driven by consumer led innovation.
Speaker Change: We are extremely grateful for Walter contributions and look forward to building upon those with arm and boom.
Speaker Change: Incoming president and CEO.
Patrick Griffin: Once again, thank you for your interest in Escalade and joining our call.
Speaker Change: Once again, thank you for your interest in escalate and joining our call should you have any questions. Please feel free to contact us at <unk> and I are escalating dotcom and a member of our team will follow up with you.
Patrick Griffin: Should you have any questions, please feel free to contact us at ir at escaladeinc.com and a member of our team will follow up with you.
Operator: This concludes our call today, you may now disconnect.
Speaker Change: This concludes our call today you may now disconnect.
Speaker Change: Yeah.
Speaker Change: Ladies and gentlemen, with that we'll conclude today's conference call and presentation. We do thank you for joining.
Operator: Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your...
Speaker Change: You may now disconnect your lines.
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