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EI

ESCALADE INC (ESCA)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 revenue and EPS beat: Net sales $67.8M vs S&P Global consensus $62.3M*, and diluted EPS $0.40 vs $0.23*, driven by broad-based category strength and pricing actions; gross margin expanded to 28.1% (+334 bps YoY) despite $4.3M tariff costs .
  • Mix and execution: Strength in archery, table tennis, billiards, and safety offset basketball softness; targeted July price increases and lower fixed/storage costs underpinned margin gains .
  • Balance sheet and capital returns: Net leverage 0.7x TTM EBITDA; total debt $20.2M; quarterly dividend maintained at $0.15 per share payable Jan 12, 2026 .
  • Leadership change and M&A: Patrick J. Griffin appointed Interim CEO; closed acquisition of Gold Tip and Bee Stinger, expanding archery portfolio and aiming for accretion in 2026 .
  • Outlook: Management expects cautious, value-driven consumer into Q4, balanced promotions with retail partners, and “sustained” improved gross margin performance; tariff impact expected to be lower in Q4 vs Q3 .

Note on estimates: * Values retrieved from S&P Global.

What Went Well and What Went Wrong

  • What Went Well

    • Gross margin inflection: 28.1% vs 24.8% YoY on efficiency and lower storage/handling cost; targeted pricing offset $4.3M tariff costs .
    • Category share gains: Safety and archery gained share, helped by domestic manufacturing and inventory availability; table tennis and billiards also strong .
    • Strategic expansion: Acquisition of Gold Tip and Bee Stinger broadens archery, with management targeting accretion in 2026; “sustained” margin performance expected .

  • What Went Wrong

    • EBITDA down YoY: $8.6M vs $9.9M, primarily due to a $3.9M prior-year gain on asset sale; operating income $7.3M vs $8.0M YoY .
    • Tariff headwind: $4.3M impact in Q3; management expects Q4 to be lower but remains a key variable .
    • Cash flow noise: Operating cash usage in Q3; PR cites ($0.1)M while CFO referenced ~$1M usage; both compare unfavorably to $10.5M in Q3’24, reflecting seasonal working capital build .

Financial Results

Q3 2025 vs S&P Global Consensus

MetricActualConsensus*Surprise
Revenue ($M)$67.786 $62.319*+$5.467 (+8.8%)
Diluted EPS ($)$0.40 $0.23*+$0.17 (+73.9%)

Note on estimates: * Values retrieved from S&P Global.

Quarterly Financials (chronological: YoY comp, Q1–Q3 2025)

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Net Sales ($M)$67.738 $55.479 $54.333 $67.786
Gross Margin (%)24.8% 26.7% 24.7% 28.1%
Operating Income ($M)$7.974 $3.652 $2.621 $7.301
Net Income ($M)$5.667 $2.619 $1.825 $5.554
Diluted EPS ($)$0.40 $0.19 $0.13 $0.40
EBITDA ($M, Non‑GAAP)$9.921 $4.922 $3.934 $8.588
Cash from Ops ($M, quarterly)$10.5 $3.791 $13.299 ($0.1)
Total Debt ($M, period-end)$29.5 $23.8 $22.0 $20.2
Cash & Equivalents ($M)$0.426 $2.214 $10.422 $3.509

Notes:

  • Press release cites GM expansion of 334 bps YoY; CFO referenced 344 bps; math from 28.1% vs 24.8% implies ~330 bps; we note the discrepancy for completeness .
  • CFO verbally cited ~$1M operating cash usage in Q3 vs PR figure of ($0.1)M; both attribute to seasonal working capital build .

Category Commentary (no formal segment disclosure)

CategoryQ3 2025 Commentary
ArcheryDemand strength; launch of 2026 assortment (30+ products); acquisition of Gold Tip and Bee Stinger .
SafetyMarket share gains supported by domestic manufacturing .
Table TennisFavorable demand .
BilliardsFavorable demand .
BasketballSofter market demand .
PickleballCompetitive; maintaining share; ongoing product investment (e.g., Hype launch) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per shareNext payment (Jan 12, 2026)$0.15 (prior quarter approved Jul 31 for Oct 2025) $0.15 per share; record Jan 5, 2026; payable Jan 12, 2026 Maintained
Gross MarginNear term (Q4 2025)No formal prior guidanceManagement expects to “sustain improved gross margin performance” Directional positive
Tariff impactQ4 2025No formal prior guidanceExpected lower vs Q3 Directional positive
Promotional strategyHoliday 2025N/ABalanced promotions with retail partners to maximize sell-through New qualitative detail

No formal revenue/EPS quantitative guidance was provided.

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025, Q2 2025)Current Period (Q3 2025)Trend
Tariffs / TradeQ1: Early tariff effects, mitigation options . Q2: Softer sales incl. delayed shipments; targeted price increases; tariff mitigation playbook .$4.3M tariff cost; price hikes in July; expect lower tariff impact in Q4 .Improvement expected in Q4; proactive mitigation.
Supply chain readinessQ2: Enhancing supply chain efficiency .“Ahead of schedule” on inventory deliveries for holiday season .Positive readiness into peak season.
Category performanceQ1: Archery, outdoor games, darting, safety up; basketball/table tennis softer . Q2: Broad softness; safety gained share .Archery, safety, table tennis, billiards strong; basketball soft .Stabilizing mix; share gains in core.
PricingQ2: Targeted price increases planned .Series of price increases in July; surgical approach .Executing pricing without derailing demand.
Capital allocationQ1: Dividend; repurchases; debt paydown . Q2: $0.8M repurchases; leverage down to 0.5x .Leverage ~0.7x; continued dividend; open to buybacks and tuck‑in M&A .Balanced: low leverage, optionality.
Leadership—Interim CEO appointment; board to search for permanent CEO .Transition underway, strategy continuity emphasized.
Product innovationQ1: Focus on innovation . Q2: Ongoing innovation .2026 archery lineup; brand partnerships increasing visibility .Continued pipeline build.

Management Commentary

  • “We gained market share, particularly in our safety and archery categories, supported by the strength of our domestic manufacturing presence and consistent product availability.” — Interim CEO Patrick J. Griffin .
  • “Gross margin improved significantly, driven by operational efficiency and targeted price increases in the quarter, which more than offset $4.3 million in tariff-related costs.” — Griffin .
  • “We expect consumers to remain cautious and value-driven… executing a balanced promotional strategy… Supported by our reduced operational footprint and ongoing cost discipline, we expect to sustain improved gross margin performance.” — Griffin .
  • “During the quarter, we completed the acquisition of Gold Tip… These two brands expand our archery product portfolio and position us for continued market share gains… accretive to earnings in 2026.” — Griffin .
  • CFO: “Gross margins of 28.1% compared to 24.8%… increase… primarily… facility consolidation and cost reduction… partially offset by $4.3 million in tariff related costs.” — Stephen Wawrin .

Q&A Highlights

  • Market share and category mix: Management highlighted share gains in safety and strength across games categories; archery momentum continues with new products .
  • Pickleball: Competitive but stable share at key retailers; continued product launches (Hype) and long-term category commitment .
  • Tariffs outlook: Dynamic policy environment; management expects Q4 tariff impact to be lower than Q3 .
  • Capital allocation: With leverage low, management eyes cash build, further M&A (pipeline exists), continued dividend, and opportunistic buybacks; ongoing investments in domestic production and warehousing .
  • Leadership transition: Board-led search for permanent CEO; emphasis on continuity with growth mindset aligned to culture .

Estimates Context

  • Coverage is thin: 1 estimate for EPS and revenue for Q3 2025; Actuals beat both S&P Global consensus revenue ($67.786M vs $62.319M*) and EPS ($0.40 vs $0.23*) .
  • Implications: The magnitude of the beat, combined with management’s expectation of lower Q4 tariff impact and sustained gross margin, could prompt upward adjustments to near-term margin assumptions; however, management flagged a cautious consumer and balanced promotions into holiday, which may temper top-line expectations .

Note on estimates: * Values retrieved from S&P Global.

Key Takeaways for Investors

  • Clear beat on both revenue and EPS with strong gross margin execution despite $4.3M tariff headwind; pricing and cost actions are working .
  • Mixed category dynamics but core (archery, safety, table tennis, billiards) performing; basketball remains a drag .
  • Q4 setup: Cautious consumer and promotional environment, but management expects lower tariff impact and sustained margins; inventory positioning is favorable for holiday .
  • Balance sheet strength provides multiple levers (dividend, buybacks, M&A); leverage at ~0.7x supports optionality .
  • Strategic archery expansion via Gold Tip/Bee Stinger enhances category leadership and offers 2026 accretion potential .
  • Governance/leadership transition is underway; board signaling continuity and focus on execution .
  • Watch for potential estimate revisions on margins given Q3 print and Q4 tariff outlook; revenue trajectory remains sensitive to consumer and promo elasticity .

Appendix: Source Documents

  • Q3 2025 8‑K and Exhibit 99.1 press release (financials, dividend) .
  • Q3 2025 press release (PR Newswire mirror) .
  • Q3 2025 earnings call transcript (prepared remarks and Q&A) .
  • Executive management change press release .
  • Gold Tip acquisition press release (Sep 29, 2025) .
  • Q2 2025 8‑K/press release (trend analysis) .
  • Q1 2025 8‑K (trend analysis) .

Note on estimates: * Values retrieved from S&P Global.