Executive Summary

STLY (then Stanley Furniture) delivered sequential improvement: revenue rose to $11.19M (+14.2% q/q) with gross margin 20.0%, and operating loss narrowed to $0.42M; year-over-year revenue fell 4.2% and margin contracted vs 21.7% prior-year .
SG&A dropped to historical lows at $2.66M (23.7% of sales) from $3.36M (34.2%) in Q4 2016, reflecting structural cost resets to lower break-even, despite ~$75k of legal/pro fees tied to Hale Partnership/Stephens Inc. .
Management guided to “slight profitability” beginning in Q2 2017, supported by improved order rates (+4% q/q, +8% y/y), inventory drawdown (-$2.8M q/q), and stabilization in overseas sourcing; company remains debt-free with cash + restricted cash of $4.26M .
Estimate comparisons are unavailable; attempts to pull S&P Global consensus for Q1 2017 failed, so beats/misses vs Street cannot be assessed (estimates unavailable via S&P Global).

What Went Well and What Went Wrong

What Went Well

Sequential revenue growth and margin stabilization: net sales +14.2% q/q to $11.19M; gross margin held ~20.0% vs 20.1% in Q4 while operating loss improved to $(0.42)M from $(1.38)M .
Structural SG&A reductions: SG&A fell to $2.66M (23.7% of sales) from $3.36M (34.2%), with management stating “a significant amount of these reductions are sustainable at twice current revenue levels” .
Stronger demand signals and inventory normalization: order rates +4% q/q and +8% y/y; inventories decreased $2.8M q/q, supporting working capital and future sell-through .

What Went Wrong

Year-over-year decline and margin pressure: revenue down 4.2% y/y (to $11.19M from $11.68M) and gross margin down to 20.0% from 21.7% due to high promotion costs tied to delayed backlog fulfillment .
Ongoing overseas supply challenges: late backlog fulfillment and quality/production delays from 2016 continued to weigh on discounting and margins, though management expects remediation by late Q2 .
Cash flow usage: net cash used in operating activities was $(0.61)M, with management noting cash used to support operations was “less than $200k” excluding a $450k deferred compensation payment; underscores residual friction in operations .

Financial Results

Metric	Q1 2016	Q3 2016	Q4 2016	Q1 2017
Revenue ($USD Millions)	$11.68	$11.04	$9.80	$11.19
Gross Profit ($USD Millions)	$2.54	$1.84	$1.98	$2.24
Gross Margin (%)	21.7%	16.6%	20.2%	20.0%
SG&A ($USD Millions)	$3.31	$3.81	$3.36	$2.66
SG&A (% of Sales)	28.3%	34.5%	34.2%	23.7%
Operating Income ($USD Millions)	$(0.77)	$(1.97)	$(1.38)	$(0.42)
Net Income - (IS) ($USD Millions)	$(1.49)	$(2.08)	$(0.30)	$(0.42)
Diluted EPS - Continuing Operations ($USD)	$(0.10)	$(0.15)	$(0.02)	$(0.03)
CDSOA Proceeds ($USD Millions)	$0.00	$0.00	$1.10	$0.00
Consensus Revenue ($USD Millions)	N/A (S&P Global unavailable)	N/A (S&P Global unavailable)	N/A (S&P Global unavailable)	N/A (S&P Global unavailable)
Consensus EPS ($USD)	N/A (S&P Global unavailable)	N/A (S&P Global unavailable)	N/A (S&P Global unavailable)	N/A (S&P Global unavailable)

Non-GAAP reconciliation (impact of CDSOA and COLI tax effects):

Metric	Q1 2016	Q3 2016	Q4 2016	Q1 2017
Adjusted Net Income ($USD Millions)	$(0.885)	$(2.064)	$(1.322)	$(0.416)
Adjusted Diluted EPS ($USD)	$(0.06)	$(0.15)	$(0.09)	$(0.03)

Selected KPIs and Balance Sheet:

KPI	Q3 2016	Q4 2016	Q1 2017
Order Rates (seq)	N/A	N/A	+4% q/q
Order Rates (y/y)	N/A	N/A	+8% y/y
Inventories ($USD Millions)	$21.35	$22.95	$20.16
Accounts Receivable ($USD Millions)	$5.14	$3.49	$4.59
Cash & Equivalents ($USD Millions)	$7.29	$4.21	$3.60
Restricted Cash ($USD Millions)	$0.663	$0.663	$0.663
Debt Status	Debt-free	Debt-free	Debt-free

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Profitability (GAAP)	Q2 2017	“Modest profits beginning with second quarter results and for the total year” (Feb-2017)	“Second quarter will begin to demonstrate slight profitability” (Apr-2017)	Maintained (refined wording)
Revenue Trajectory	2H 2017	Expect uptick as shipments from multiple vendors service backlog; expansion plans into multiple channels in 1H 2017	Customers “excited about latter half of 2017”; expect revenue growth opportunities as sourcing issues are remedied	Maintained (confidence reinforced)
Margin Outlook	Near-term	Margins “well below expected levels” in Q4/Q1 due to promotions and delays	Slight sequential margin improvement; promotions still elevated due to late backlog fulfillment	Improving slightly
Liquidity/Leverage	1H 2017	Cash near current levels; utilize secured credit facility only if needed for working capital	Debt-free; cash + restricted cash $4.26M; working capital relatively flat	Maintained

Earnings Call Themes & Trends

No Q1 2017 earnings call transcript was found; STLY did not publish a call transcript for the quarter or did not host a call. Themes below are drawn from recent quarterly press releases.

Topic	Previous Mentions (Q3 2016)	Previous Mentions (Q4 2016)	Current Period (Q1 2017)	Trend
Overseas sourcing & Starwood plant	Production delays; quality issues; capacity constraints hurting margins and shipments	Ongoing margin impact; remediation expected to begin in Q2 2017	Late backlog fulfillment still driving promotions; remediation progressing with expectation of slight profitability in Q2	Improving
Demand/orders & product introductions	Backlog increasing; Stone & Leigh brand orders/shipments growing	Expect uptick as multiple vendors ship backlog in Q2	Order rates +4% q/q and +8% y/y; newer products expected to hit retail floors late Q2	Improving
Margins & discounting	Heavy promotions to move older product; margins depressed	Margin pressure from lower absorption and quality costs; 20.2% GM	GM 20.0%; promotions remain elevated due to late backlog fulfillment	Stabilizing
SG&A & break-even	Higher SG&A from advertising and life insurance effects	SG&A elevated; life insurance surrender increased expenses	SG&A to historical lows; reductions “sustainable at twice current revenue levels”	Improving
Liquidity & capital allocation	Secured $4M revolver; special dividends declared/paid	Special $0.25 dividend; cash + restricted cash $4.88M YE16	Debt-free; cash + restricted cash $4.26M; working capital flat	Stable

Management Commentary

“We are beginning to see the signs of an inflection point in the trajectories of several key performance indicators in our business.” — Glenn Prillaman, President & CEO .
“Selling, general and administrative costs for the period decreased to historical lows… a significant amount of these reductions are sustainable at twice current revenue levels.” .
“Although more patience is required… we remain confident that the second quarter will begin to demonstrate slight profitability.” .
“Order rates increased 4% sequentially and 8% over prior year quarter… customers are excited about the latter half of 2017… we look forward to… a profitable, cash generative year of growth.” .

Q&A Highlights

No Q1 2017 earnings call transcript is available; therefore, Q&A highlights and tone changes vs prior quarters cannot be assessed from a call transcript (company did not furnish an earnings call transcript in the period searched).

Estimates Context

We attempted to retrieve S&P Global consensus revenue and EPS estimates for STLY Q1 2017; the request failed, and estimate data could not be accessed. As a result, comparisons to Street expectations are unavailable for this quarter (S&P Global estimates unavailable).

Key Takeaways for Investors

Sequential recovery underway: revenue +14.2% q/q to $11.19M, SG&A ratio down ~10pts q/q, and operating loss narrowed materially; inventory reductions support sell-through momentum into Q2 .
Margin stabilization despite promotions: GM ~20.0% vs 20.1% in Q4; promotions tied to late backlog fulfillment still weigh on profitability but should ease as sourcing normalizes .
Demand indicators positive: order rates +4% q/q and +8% y/y; newer introductions expected to reach retail late Q2, offering near-term catalysts for revenue growth .
Liquidity adequate, debt-free: cash $3.60M plus $0.663M restricted, working capital broadly stable; revolver available if needed (from prior quarter), supporting growth ramp .
Near-term trading lens: watch Q2 print for the promised inflection to slight profitability; monitor evidence of sourcing remediation (reduced promotions, improved margins) and retail placement of new products .
Medium-term thesis: if SG&A resets are sustainable and sourcing issues are resolved, operating leverage could be meaningful at higher revenue levels; risk factors include further supply chain slippage and promotional intensity .
Corporate actions/context: NASDAQ minimum bid price non-compliance notice provides background risk to listing status; management intends to consider options to cure by Aug-2017 .

HG Holdings, Inc. (STLY)·Q1 2017 Earnings Summary