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EI

ESCALADE INC (ESCA)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered mixed results: net sales fell 2.4% to $63.9M and diluted EPS declined to $0.19, while gross margin expanded 61bps to 24.9% on lower manufacturing/logistics costs .
  • Operating discipline drove strong cash generation ($12.3M) and deleveraging; net leverage fell to 0.8x TTM EBITDA and total debt ended at $25.6M following payoff of variable-rate borrowings .
  • Board reset the share repurchase program to up to $20.0M and maintained the quarterly dividend at $0.15 per share; buybacks of ~$2.2M executed in Q4 .
  • Wall Street consensus (S&P Global) for Q4 2024 EPS/revenue was unavailable at time of review; no beat/miss determination could be made. Estimates context below.

What Went Well and What Went Wrong

What Went Well

  • Margin expansion despite lower sales: gross margin rose to 24.9% (+61bps YoY) driven by lower manufacturing and logistics costs tied to footprint rationalization and workforce reductions .
  • Strong cash generation and deleveraging: $12.3M cash from operations in Q4; net leverage down to 0.8x; variable-rate debt fully repaid by year-end .
  • Capital return and flexibility: repurchased ~$2.2M of shares in Q4; program reset to $20.0M; dividend maintained at $0.15 per share .
    “We remain highly focused on disciplined capital efficiency… We reduced total inventories by 18% over the last year… resulting in a net leverage ratio of 0.8x at year-end 2024” – Walter P. Glazer, Jr. .

What Went Wrong

  • Soft demand pressured top-line: Q4 net sales declined 2.4% YoY due to softer consumer demand across most product categories .
  • Earnings contraction: operating income down 9% to $4.5M; EBITDA down 7.6% to $5.9M; diluted EPS fell to $0.19 (vs $0.21) .
  • Q4 cash from ops lower YoY as inventory reduction tailwinds normalized: $12.3M vs $20.6M in Q4 2023; management noted reduced contribution from inventory drawdown vs prior year .

Financial Results

Quarterly performance (sequential trend: Q2 → Q3 → Q4)

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$62.526 $67.738 $63.942
Gross Margin %24.2% 24.8% 24.9%
Operating Income ($USD Millions)$4.457 $7.974 $4.513
EBITDA ($USD Millions)$5.838 $9.921 $5.924
Net Income ($USD Millions)$2.844 $5.667 $2.700
Diluted EPS ($USD)$0.20 $0.40 $0.19

Q4 year-over-year comparison (Q4 2023 → Q4 2024)

MetricQ4 2023Q4 2024
Revenue ($USD Millions)$65.506 $63.942
Gross Margin %24.3% 24.9%
Operating Income ($USD Millions)$4.959 $4.513
EBITDA ($USD Millions)$6.410 $5.924
Net Income ($USD Millions)$2.864 $2.700
Diluted EPS ($USD)$0.21 $0.19
Cash from Operations ($USD Millions)$20.6 $12.3

Balance sheet and leverage trend (Q2 → Q3 → Q4)

MetricQ2 2024Q3 2024Q4 2024
Net Debt / TTM EBITDA (x)1.7x 1.1x 0.8x
Total Debt ($USD Millions)$43.2 $29.5 $25.6
Cash & Equivalents ($USD Millions)$0.362 $0.426 $4.194
Inventories ($USD Millions)$86.571 $85.485 $76.025
Revolver Availability ($USD Millions)$71.4 (incl. cash + revolver) $58.3 (post amendment) $52.3

Segment/category commentary (directional; no numeric breakdown disclosed)

CategoryQ2 2024Q3 2024Q4 2024
ArcheryGrowth (Bear Archery) Growth Improved demand
Table TennisGrowth (STIGA) Solid demand Improved demand
BasketballStrength Growth Mixed (not specifically cited)
FitnessStrength (Brunswick Billiards, fitness portfolio) Noted performance Improved demand; adidas distribution onboarding

KPIs

KPIQ2 2024Q3 2024Q4 2024
Cash from Operations ($USD Millions)$13.3 $10.5 $12.3
EBITDA Margin (%)9.3% (5.838/62.526) 14.6% (9.921/67.738) 9.3% (5.924/63.942)
Dividend per Share ($)$0.15 (declared) $0.15 (declared) $0.15 (declared for Apr 14, 2025)
Share Repurchases ($USD Millions)n/an/a~$2.2

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance/ActionChange
Share Repurchase AuthorizationOngoing$15.0M authorization (existing) Reset to up to $20.0M Raised
DividendQ1 2025 payable$0.15 per share (maintained through 2024) $0.15 per share payable Apr 14, 2025 Maintained
Variable-Rate DebtFY2024Expected payoff by year-end 2024 Fully repaid; $25.6M fixed-rate debt remaining Achieved/Completed
Liquidity (Revolver Availability)Q4 2024$58.3M post Oct amendment $52.3M availability at 12/31/2024 Reduced availability (structural)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Supply chain & footprint optimizationReducing fixed costs; divesting Mexico; efficiency focus Sale of Mexico facility; wind down Orlando; ~20% footprint reduction planned Footprint/winddown completed; 23% headcount reduction; margin tailwinds expected Execution largely complete; tailwinds to margins
Tariffs/macroCautious consumer; higher promotions Expect promotional Q4; cautious demand outlook Detailed tariff playbook; diversified sourcing; some businesses benefit; de minimis closure supports domestic producers Increased focus; mitigation strategies articulated
Product performanceStrength in STIGA, Bear Archery, Brunswick Billiards Strength in archery, safety, basketball; DTC +29% Improved demand in archery, table tennis, fitness; new product launches (Onix, Brunswick Gold Crown) Ongoing innovation; selective category strength
Inventory rationalizationWorking capital reduction; cash conversion focus Continued reduction; channel destocking Inventories down 18% YoY; further reductions targeted in 2025 Continuing to optimize
Capital allocationPriority to repay high-cost debt; evaluating buybacks/acquisitions Below target leverage; prioritize variable-rate payoff Buybacks executed; authorization raised; balanced return of capital Shift toward balanced returns as leverage falls

Management Commentary

  • “During the fourth quarter, we maintained strong operational discipline… culminating in margin expansion and strong free cash flow generation” – Walter P. Glazer, Jr. .
  • “We reduced total inventories by 18% over the last year… resulting in a net leverage ratio of 0.8x at year-end 2024” – Walter P. Glazer, Jr. .
  • “As of December 31, 2024… net debt outstanding… was 0.8x TTM EBITDA… we repaid the remaining balance of our variable interest rate debt” – Stephen Wawrin .
  • “We will continue to pursue our disciplined approach to capital allocation including remaining selective acquirors of high quality, complementary brands” – Walter P. Glazer, Jr. .

Q&A Highlights

  • Inventory strategy under potential tariffs: Management advanced some shipments ahead of tariffs but still sees room to reduce inventories while maintaining service levels .
  • Gross margin drivers: Mix was roughly “fleet average”; key driver was absorption of costs tied to facility/footprint reduction with expectation of better margins going forward .
  • Nonrecurring costs magnitude: One-time 2024 costs roughly comparable to the $3.9M gain on sale booked in Q3 2024 .
  • Capital allocation: With leverage materially lower, company resumed buybacks (~$2.2M) and remains selective on M&A, while maintaining the dividend .

Estimates Context

  • S&P Global consensus estimates for Q4 2024 EPS and revenue were unavailable due to a temporary request limit; we could not evaluate beat/miss versus Street for ESCA this quarter. We attempted to retrieve “Primary EPS Consensus Mean” and “Revenue Consensus Mean” for Q4 2024 but were unable to access data at this time. As a result, estimates comparison is not presented [GetEstimates error].
  • Given softer consumer demand and promotional environment, Street models may need to reflect: modest revenue pressure, near-term SG&A and promo dynamics, and margin tailwinds from footprint actions; however, formal consensus deltas cannot be quantified here .

Key Takeaways for Investors

  • Margin resilience amid soft demand suggests structural improvements from footprint rationalization should sustain gross margin around mid-20s with potential upside as one-time costs roll off in 2025 .
  • Balance sheet is meaningfully de-risked (0.8x net leverage); variable-rate debt repaid; cash generation supports flexibility for buybacks and selective M&A, a likely stock reaction catalyst .
  • Shareholder returns are intensifying: authorization raised to $20M and dividend maintained; expect continued balanced capital allocation .
  • Category strengths (archery, table tennis, fitness) and product launches (Onix, Brunswick Gold Crown) underpin brand momentum even as broader discretionary demand remains cautious .
  • Tariff mitigation playbook and sourcing diversification should limit downside; some domestic operations (archery, US Weight) may benefit, supporting margin stability .
  • Watch inventory and promo cadence: inventory normalized but further reductions targeted; promotions likely remain a near-term headwind to margins vs full structural savings .
  • Leadership transition to new CEO (effective Apr 1, 2025) introduces potential strategic refresh while preserving the cost-discipline trajectory; monitor messaging in upcoming quarters .