Sign in

You're signed outSign in or to get full access.

EI

ESCALADE INC (ESCA)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 was resilient: revenue fell 3.2% YoY to $55.5M but gross margin expanded 161 bps to 26.7%, lifting EPS to $0.19 vs $0.13 last year; management emphasized cost actions and footprint rationalization as the key drivers, partially offsetting late‐quarter tariff headwinds of a little over 100 bps on gross margin .
  • Operating cash flow improved to $3.8M (vs ~$0.0M in Q1’24), enabling debt paydown ($1.8M), $2.1M dividend and $1.4M in buybacks; total debt ended Q1 at $23.8M and net leverage at 0.8x TTM EBITDA, with cost of debt at 2.97% .
  • Management began to see early tariff effects late in Q1 and is pursuing mitigation: diversified sourcing, selective pricing, product engineering, and inventory alignment; leadership framed the margin gains as “durable” under the leaner model .
  • No formal revenue/EPS guidance was issued; dividend of $0.15 per share was declared for July; internal control material weaknesses were fully remediated in Q1, with no impact to historical financials .
  • Likely stock catalysts: clarity on tariff trajectory and mitigation effectiveness; sustained gross margin >26%; category growth (archery, darting, outdoor games) against still‑soft discretionary demand .

What Went Well and What Went Wrong

  • What Went Well

    • Gross margin expansion to 26.7% (+161 bps YoY) despite late‑quarter tariff drag; management views the improvement as durable under the leaner footprint and cost structure .
    • Positive category mix: growth in archery, darting, outdoor games, and safety offsetting softness in basketball and table tennis .
    • Capital discipline: $3.8M operating cash flow, debt down to $23.8M, 0.8x net leverage; returned capital via dividends and buybacks .

  • What Went Wrong

    • Top‑line contracted 3.2% YoY on continued discretionary softness and weakness in basketball and table tennis .
    • Tariff impact began late in Q1 and reduced gross margin by a “little over 100 bps,” introducing uncertainty to 2H pricing and sourcing plans .
    • Inventory up modestly sequentially as the company built for spring, though still substantially below prior year; demand patterns remain uneven with some consumers delaying purchases .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Net Sales ($USD Millions)$57.304 $63.942 $55.479
Diluted EPS ($)$0.13 $0.19 $0.19
Gross Margin (%)25.0% 24.9% 26.7%
Operating Income ($USD Millions)$3.060 $4.513 $3.652
EBITDA ($USD Millions)$4.436 $5.924 $4.922
Cash from Operations ($USD Millions)$0.007 $12.300 $3.791
Total Debt ($USD Millions)$53.5 $25.6 $23.8
Net Income ($USD Millions)$1.775 $2.700 $2.619

Consensus vs Actual (Q1 2025):

  • S&P Global Wall Street consensus for revenue and EPS was not available (insufficient coverage). No numerical comparison to estimates can be made at this time. Values retrieved from S&P Global.

KPIs and Balance Sheet

KPIQ1 2024Q4 2024Q1 2025
Inventory ($USD Millions)$95.991 $76.025 $77.001
Net Leverage (x TTM EBITDA)n/a0.8x 0.8x
Dividend per Share (Declared)$0.15 $0.15 $0.15 (payable July 14, 2025)
Share Repurchases ($USD Millions)$0.000 ~$2.2 $1.381
Interest Expense ($USD Millions)$0.735 $0.307 $0.244
Gross Margin Tariff Impact (bps)n/an/a~-100 bps

Notes:

  • Management indicated the gross margin increase was primarily due to lower fixed/handling/logistics costs from footprint and cost rationalization .
  • Cost of debt cited at 2.97% alongside low leverage .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2025Not providedNot providedn/a
Gross MarginFY 2025Not providedNot provided (management reiterated durable improvement) n/a
OpEx/SG&AFY 2025Not providedNot providedn/a
Interest ExpenseFY 2025Not providedNot providedn/a
Tax RateFY 2025Not providedNot providedn/a
DividendQ2/Q3 2025$0.15 (historical run-rate) $0.15 declared for July 14, 2025 Maintained
Share RepurchaseFY 2025Authorized up to $20M (as of Q4’24) Ongoing; $1.4M repurchased in Q1 n/a

No formal revenue/EPS guidance was issued in Q1.

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Tariffs / Trade PolicyAdvanced shipments ahead of potential tariffs; balanced inventory approach . Limited direct tariff commentary in Q3 narrative; macro caution .Early tariff effects late Q1; mitigation via sourcing diversification, surgical pricing, redesign/engineering, inventory alignment ; quantified ~100 bps GM drag .Tariff headwinds emerged; mitigation playbook expanding .
Cost Structure / FootprintMexico facility sale; Orlando wind-down; 20% footprint reduction; one-time costs absorbed in 2023–24 .Structural margin gains (161 bps YoY) viewed as durable; internal control weaknesses remediated .Efficiency program moving to steady-state benefits .
Consumer Demand / PromotionsPersistent softness; more promotional holiday outlook; category pockets (archery/safety/basketball) .Soft discretionary demand; strength in archery, darting, outdoor games, safety; mixed behavior given macro uncertainty .Demand mixed; category wins continue .
DTC / E-commerceDTC up 29% YoY in Q3; ongoing investments .Increase focus on DTC/e-commerce presence and consumer engagement initiatives .Investment phase continuing .
Capital Allocation / LeverageDebt reduction priority; plan to eliminate variable-rate debt by YE’24; dividend maintained .Net leverage 0.8x; $1.8M debt reduction; dividend and buybacks; cost of debt 2.97% .Balance sheet strength sustained .
Internal ControlsMaterial weaknesses noted in risk disclosures (remediation ongoing) .Remediation completed in Q1; no impact to historical financials .Control environment improved .
Innovation / ProductNew bows (Bear Archery), Onix Supercell paddle, Adidas fitness distribution .STIGA and Onix pipelines; Brunswick Billiards 180th anniversary limited releases; GOLD CROWN VII launch .Ongoing brand-led innovation .
International / RegionalInternational sales +13% in Q3 .Targeting share gains domestically and internationally via brand building and DTC .Continued emphasis .

Management Commentary

  • “Our first quarter results underscore the effectiveness of our operational discipline initiatives, culminating in gross margins of 26.7%… This 161-basis-point year-over-year increase in margin reflects an improvement in our cost structure.” — Walt Glazer, Chairman .
  • “We began to see the early effects of new tariffs… and are evaluating all available options to mitigate the effect… including… product engineering, pricing where appropriate, and expanding domestic manufacturing capacity.” — Armin Boehm, CEO & President .
  • “Net income of $2.6 million or $0.19 per diluted share on net sales of $55.5 million… EBITDA increased… to $4.9 million… net debt… 0.8x TTM EBITDA… total debt $23.8 million.” — Stephen Wawrin, CFO .
  • “Over the past 12 months, we reduced our debt by nearly $30 million… net leverage… 0.8x trailing 12 months EBITDA… cost of debt of just 2.97%.” — Walt Glazer .

Q&A Highlights

  • Tariff impact quantified: “a little bit over 100 basis points negative impact in Q1” on gross margin; despite this, reported +161 bps YoY GM expansion, underscoring structural savings .
  • Mitigation levers: optimizing supply chain (including potential pivots within Asia), negotiating supplier concessions, selective pricing, cost reductions, and careful inventory management; emphasized agility under uncertainty .
  • Inventory strategy: despite value of pre‑tariff inventory, company continues rightsizing; inventories at $77.0M (down YoY), with some seasonal builds ahead of spring .

Estimates Context

  • S&P Global consensus for Q1 2025 revenue and EPS was unavailable (insufficient coverage), so no beat/miss determination can be made. Values retrieved from S&P Global.
  • Modeling implications: consider structurally higher gross margin vs prior year (+161 bps YoY to 26.7%) even with ~100 bps tariff drag; lower interest expense vs last year ($0.24M vs $0.74M in Q1’24); and net leverage at 0.8x supporting ongoing capital return flexibility .

Key Takeaways for Investors

  • Margin durability: Structural savings (footprint and cost rationalization) are flowing through; Q1 GM 26.7% despite ~100 bps tariff headwind suggests resilience and potential upside if tariff pressure eases .
  • Tariff overhang with mitigation: Management is proactively diversifying sourcing, adjusting pricing, and engineering products to reduce exposure; near‑term volatility in gross margin mix is possible as actions phase in .
  • Category leadership matters: Strength in archery, darting, outdoor games, and safety is offsetting weakness in basketball/table tennis; innovation funnels (STIGA/Onix/Brunswick) aim to capture share .
  • Balance sheet optionality: 0.8x net leverage and 2.97% cost of debt underpin dividend continuity and opportunistic buybacks while maintaining flexibility for selective M&A .
  • Cash generation improving: Operating cash flow recovered to $3.8M vs ~$0 in Q1’24, supporting ongoing deleveraging and returns even amid softer demand .
  • No formal guidance: With macro uncertainty and tariff dynamics, management avoided numeric guidance; monitor cadence of tariff mitigation and demand elasticity to assess FY trajectory .
  • Watchlist catalysts: concrete updates on tariff mitigation efficacy, sustained gross margin ≥26%, category sell-through in spring/summer, and incremental DTC traction could re-rate sentiment .

Sources: Q1 2025 8-K and press release ; Q1 2025 earnings call transcript ; Additional press release (call date) ; Q4 2024 materials ; Q3 2024 materials .