Executive Summary

Q2 2025 revenue declined 13.1% year over year to $54.3M, while diluted EPS fell to $0.13 from $0.20; gross margin expanded 56 bps to 24.7% despite $1.6M tariff costs that reduced gross margin by ~200 bps .
Sequentially, revenue and EPS declined from Q1 2025 ($55.5M; $0.19), with gross margin down from 26.7% as tariff expenses and weather-driven category headwinds weighed on mix and shipments .
Balance sheet improved: total debt fell to $22.0M, cash rose to $10.4M, and net leverage decreased to 0.5x TTM EBITDA; the company repurchased ~$0.8M of stock and maintained its $0.15 dividend .
Management emphasized tariff-mitigation actions (targeted price increases, supplier negotiations) and continued share gains in several categories; near-term stock narrative hinges on tariff trajectory, consumer demand elasticity to pricing, and holiday sell-through quality .

What Went Well and What Went Wrong

What Went Well

Gross margin resilience: Q2 gross margin increased to 24.7% (+56 bps YoY) due to lower fixed and logistics costs despite tariff headwinds; excluding tariffs, management indicated gross margin would have been ~28% .
Market share gains and product innovation: Management cited maintained or gained share in basketball, safety, archery, and recreational games; new ONIX Hype paddles and STIGA Paragon table launched to support momentum .
Capital allocation discipline: Net leverage 0.5x, cash generation of $13.3M from operations in Q2, ~$0.8M buybacks, and continued $0.15 dividend .

What Went Wrong

Top-line pressure: Revenue -13.1% YoY to $54.3M on softer demand and delayed shipments tied to tariff volatility; operating income and EBITDA declined YoY .
Tariff and mix headwinds: ~$1.6M in tariff costs reduced gross margin by ~200 bps; unfavorable product mix also pressured margins .
Weather and shipment timing: Unfavorable weather slowed early summer demand in outdoor categories; shipment pauses to avoid peak tariff rates impacted the quarter’s sell-in cadence .

Financial Results

Headline Metrics vs Prior Periods and Estimates

Metric	Q2 2024	Q1 2025	Q2 2025 Actual	Q2 2025 Consensus
Revenue ($M)	$62.5	$55.5	$54.3	N/A (not available via S&P Global)
Diluted EPS ($)	$0.20	$0.19	$0.13	N/A (not available via S&P Global)
Gross Margin (%)	24.2%	26.7%	24.7%	—
Operating Income ($M)	$4.5	$3.7	$2.6	—
EBITDA ($M, Non-GAAP)	$5.8	$4.9	$3.9	N/A (not available via S&P Global)

Notes: Q2 consensus not available via S&P Global for EPS/Revenue/EBITDA; management cited ~$0.4M non-recurring executive transition costs in Q2 .

Quarterly Trend (Last 3 Quarters)

Metric	Q4 2024	Q1 2025	Q2 2025
Revenue ($M)	$63.9	$55.5	$54.3
Diluted EPS ($)	$0.19	$0.19	$0.13
Gross Margin (%)	24.9%	26.7%	24.7%
EBITDA ($M, Non-GAAP)	$5.9	$4.9	$3.9

Balance Sheet & Cash Flow KPIs

KPI	Q4 2024	Q1 2025	Q2 2025
Cash & Equivalents ($M)	$4.19	$2.21	$10.42
Total Debt ($M)	—	$23.8	$22.0
Net Debt / TTM EBITDA (x)	0.8x	0.8x	0.5x
Cash from Operations ($M)	$12.3 (Q4)	$3.79 (Q1)	$13.3 (Q2)

Segment breakdown: Not disclosed in the Q2 2025 press release/8-K; results presented on a consolidated basis .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY or Q3/Q4 2025	Not provided	Not provided	—
Gross Margin	FY or Q3/Q4 2025	Not provided	Not provided; expects tariff impact to rise in 2H with mitigation via pricing and supplier negotiations	—
OpEx / SG&A	FY 2025	Not provided	No numeric guidance; noted ~$0.4M non-recurring transition costs in Q2	—
Tax Rate	FY 2025	Not provided	Not provided	—
Dividend per share	Next payable Oct 2025	$0.15 declared for Jul 2025 payment	$0.15 declared; record Oct 6, payable Oct 13, 2025	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current Period (Q2 2025)	Trend
Tariffs/trade	Early tariff effects noted late Q1; evaluating mitigation options . Cost rationalization groundwork in 2024 .	~$1.6M tariff costs in Q2, ~200 bps GM headwind; mitigation via price increases and supplier cost sharing; expect higher tariff costs in 2H .	Intensifying headwind; more explicit mitigation playbook.
Consumer demand/macro	Soft consumer demand across many categories in Q4; cautious near-term outlook . Q1 softness in basketball/table tennis; growth in archery/safety .	Demand uncertainty persists; consumer trade-down behavior; housing/interest rates hurting indoor/outdoor rec categories .	Persistent softness; price sensitivity elevated.
Supply chain & inventory	Reduced square footage and inventory; efficiency gains (Q4) .	~$14M YoY inventory reduction in Q2; slightly lower seasonal build ahead of holidays .	Structural improvement; disciplined inventory flow.
Product innovation	Ongoing focus; plan to invest in 2025 (Q4) .	Accelerating cadence; ONIX Hype paddles; STIGA Paragon table; no slowdown despite tariffs .	Accelerating launches to gain share.
Category performance	Archery/table tennis/fitness strength in Q4; archery/safety growth in Q1 .	Share maintained/gained in basketball, safety, archery, recreational games; outdoor categories weather-impacted .	Mixed: gains in core; weather/tariffs weigh on outdoor.
Capital allocation	Reset $20M buyback program; reducing debt; dividend maintained (Q4) .	~$0.8M repurchases; dividend maintained; leverage 0.5x; open to tuck-in M&A .	Continued discipline; optionality for M&A.

Management Commentary

“Despite continued softness in our sporting goods and recreation equipment markets, we delivered year-over-year gross margin improvement, even after incurring $1.6 million in tariff-related costs” .
“We are collaborating with our retail and supply partners to enhance our supply chain efficiency while implementing targeted price increases where appropriate… mitigate the impact of ongoing tariff-related headwinds” .
“Excluding [tariff] impact, our gross margin would have been approximately 28% for the quarter” .
“We maintained or gained market share in key categories, including basketball, safety, archery, and recreational games” .
“In the second quarter, we repurchased approximately $0.8 million of shares… reduced our total debt by 49.0% versus the prior-year period… continue to prioritize returning capital… while investing in new product innovation and domestic manufacturing capabilities” .

Q&A Highlights

Product launch cadence: Management will not delay launches due to tariffs/retail inventory; they are “leaning in” and accelerating introductions to drive a strong holiday season, while monitoring pricing/promo dynamics .
Mix and weather: Unfavorable weather slowed summer demand in basketball and outdoor recreational product; shipments were temporarily paused as tariffs spiked, then resumed when rates normalized somewhat, affecting Q2 shipments/mix .
Margin drivers: Gross margin would have approximated 28% absent tariff costs; GM improvement was driven by lower manufacturing/logistics costs from facility consolidation and cost rationalization .

Estimates Context

Q2 2025: Wall Street consensus for revenue, EPS, and EBITDA was not available via S&P Global for this quarter; therefore, no vs-consensus comparisons are presented for Q2.
Forward look (context): Current S&P Global consensus for Q3 2025 stands at Revenue $62.32M*, EBITDA $5.79M*, and EPS $0.23*; this sets a higher sequential bar versus Q2 actuals ($54.3M revenue; $3.9M EBITDA; $0.13 EPS) . Values retrieved from S&P Global.*

Key Takeaways for Investors

Margin durability amid headwinds: Structural cost actions are supporting margins; tariff mitigation (pricing, supplier cost-sharing) is crucial as 2H tariff impact rises .
Near-term demand risk: Discretionary category pressure and weather/timing effects weighed on Q2; holiday sell-through and elasticity to price increases are key watch items .
Balance sheet strength: Low leverage (0.5x) and strong Q2 cash generation provide flexibility for continued buybacks, dividend, and selective tuck-in M&A .
Share gains and innovation: Continued market share momentum in core categories, backed by stepped-up product launches, should support relative performance even in a soft macro .
Sequential setup: With Q3 consensus implying a rebound*, execution on pricing, supply chain flow, and retailer inventory positioning will drive the print/guide setup into the holidays. Values retrieved from S&P Global.*

Appendix: Source Documents

Q2 2025 8-K and press release, including financial statements and dividend declaration .
Q2 2025 earnings call transcript (prepared remarks and Q&A) .
Q1 2025 8-K press release and financials for sequential comparisons .
Q4 2024 press release and financials for trend context .

Footnote: *Values retrieved from S&P Global.

ESCALADE INC (ESCA)·Q2 2025 Earnings Summary