Escalade, Inc.’s second-quarter total net sales declined 7.7 percent year-over-year to $62.5 million. The company attributed the decrease to softening consumer demand and channel inventory de-stocking, particularly in the indoor/outdoor games categories; however, the decline was partly offset by growth in the company’s Stiga Table Tennis, Bear Archery, and Brunswick Billiards brands.

“At a category level, our second quarter net sales reflect solid demand for our Stiga table tennis, Bear Archery, and Brunswick Billiards product assortments,” offered Walter P. Glazer, Jr., president and CEO of Escalade, Inc. “However, as we progressed through the second quarter, our retail partners became incrementally more cautious in many categories, opting to keep channel inventory low amid concerns around the pace of consumer demand.

“Mass merchant, specialty dealer and third-party e-commerce channel sales were all soft during the quarter, partly offset by 15 percent growth in international sales and 28 percent growth in our owned e-commerce sales. Overall, our differentiated branded products continue to resonate with consumers, and we believe that our strong portfolio of brands position us to outperform the broader recreational equipment market as we move through this economic cycle, ” Glazer continued.

Escalade reported second quarter gross margin of 24.2 percent of net sales, a decline of 40 basis points versus the prior-year quarter, primarily driven by lower fixed cost absorption, increased customer program spending, and severance-related expenses associated with the company’s ongoing asset optimization initiative.

Second quarter operating income was $4.5 million in Q2, compared to $6.3 million in 2023.

“During the second quarter, our operating margins were unfavorably impacted by a combination of lower fixed cost absorption and higher promotional activity, offset by continued cost reduction actions designed to further optimize both our supply chain and manufacturing footprint,” continued Glazer. “Entering the third quarter, we initiated additional cost rationalization programs to further reduce fixed overhead expenses as we continue to align our operating footprint with the current demand environment. Even with the cautious demand outlook for the second half of 2024, we continue to see the opportunity for margin improvement for the full year 2024, when compared to 2023.”

Escalade reported net income of $2.8 million, or 20 cents per diluted share, in the first quarter, compared to net income of $3.6 million, or 26 cents per diluted share, for the second quarter in 2023.

The company said it generated $13.3 million of cash flow from operations in the second quarter 2024, compared to $8.4 million for the comparative quarter in 2023.

“As consumers and our retail partners adopt a more cautious stance toward their near-term spending outlook for discretionary recreational goods, we’ve continued to prioritize operating discipline and balance sheet optimization, consistent with our long-term focus on maximizing shareholder value,” explained Glazer. “During the second quarter, cash flow from operations increased nearly 60 percent versus the prior-year period, supporting a further reduction in outstanding indebtedness and improving our net leverage. With a strengthened balance sheet, a leading portfolio of recreational brands, and a proven track record of weathering market fluctuations, we are confident in our ability to achieve profitable growth as we approach a cyclical recovery.”

Earnings before interest, taxes, depreciation, and amortization (EBITDA) declined 23.9 percent to $5.8 million in the second quarter versus $7.7 million in the prior-year Q2 period.

Year-to-Date Results
For the six months ended June 30, 2024, total net sales declined 3.9 percent to $119.8 million on a year-over-year basis, again due to softening consumer demand and channel de-stocking, partly offset by growth in our table tennis, basketball, and archery categories.

First half operating income was $7.5 million compared to $6.4 million in 2023.

Escalade reported net income of $4.6 million, or 33 cents per diluted share, in the first half, compared to net income of $2.7 million, or 20 cents per diluted share for the first half of 2023.

Balance Sheet and Cash Management
Total debt at the end of the quarter was $43.2 million, down from $84.0 million at the end of the second quarter last year.

“We repaid nearly $10.4 million of debt during the second quarter, bringing our ratio of net debt to trailing-twelve-month EBITDA to 1.7x as of June 30, 2024, well within our long-term target of 1.5x to 2.5x,” Glazer detailed. “While we continue to target further repayment of our high-interest variable rate debt during the second half of the year, we will also begin to evaluate other opportunities to maximize shareholder value aligned with our long-term capital allocation strategy. We will continue to prioritize investment in our brands and new product development, consistent with our commitment to promoting the healthy, active lifestyles that define our valued consumers.”

As of June 30, 2024, the company had total cash and equivalents, and availability on its senior secured revolving credit facility maturing in 2027 of $71.4 million.

At the end of the second quarter 2024, net debt (total debt less cash) was 1.7x trailing twelve-month EBITDA.

“As part of our continued focus on our asset base, we have made good progress on the divestiture of our Mexico operations,” Glazer added. “Beyond our Mexico operations, we continue to focus on maximizing our return on assets and took further steps to rationalize our domestic footprint during the second quarter.”

Escalade announced a quarterly dividend of 15 cents per share to be paid to all shareholders of record on October 7, 2024, and payable on October 14, 2024.

Image courtesy Stiga