Escalade reported sales declined 5.4 percent in the second quarter due to lower demand within the fitness and outdoor categories, including archery and water sports.
Second Quarter 2022
(compared to the second quarter 2021)
- Net Sales decreased 5.4 percent to $94.3 million;
- Organic sales, excluding acquisition contributions, declined 13.0 percent;
- Gross margin was flat at 25.2 percent and gross profit decreased 5.4 percent;
- Operating income decreased 23.4 percent to $8.2 million;
- Net income of $5.7 million, or $0.42 per diluted share versus $8.1 million, or $0.58 per share, for Q2 2021;
- EBITDA decreased 15.7 percent to $10.3 million; and
- Announced $0.15 per share cash dividend to shareholders of record on September 6, 2022.
Six Months Ended July 9, 2022
(compared to the first half 2021)
- Net Sales increased 4.9 percent to $166.7 million;
- Organic sales, excluding acquisition contributions, declined 3.6 percent;
- Gross margin declined 46 basis points, to 26.3 percent;
- Operating income decreased 3.4 percent to $17.2 million;
- Net income of $12.3 million, or $0.91 per diluted share versus $13.6 million, or $0.97 per diluted share, for 2021; and
- EBITDA increased 1.5 percent to $20.9 million.
For the three months ended July 9, 2022, Escalade reported a net income of $5.7 million, or $0.42 per diluted share, on net sales of $94.3 million. The company reported a gross margin of 25.2 percent, consistent with the prior-year period, despite continued challenges related to the global supply chain, raw materials cost inflation and labor constraints.
SG&A expense, as a percentage of net sales, increased to 15.6 percent in the second quarter 2022, versus 13.9 percent in the prior-year period, due to lower sales volume and expenses related to the acquisition and integration of Brunswick Billiards. SG&A expenses for the legacy business units were down year over year on an absolute basis.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) declined 15.7 percent to $10.3 million in the second quarter 2022, versus $12.3 million in the prior-year period. For the six months, year-to-date EBITDA increased 1.5 percent to $20.9 million versus $20.6 million in 2021.
As of July 9, 2022, the company had total cash and equivalents of $6.2 million, together with $7.3 million of availability on its senior secured revolving credit facility maturing in 2027. At the end of the second quarter 2022, net debt (total debt less cash) was 2.55x trailing twelve-month EBITDA.
During the second quarter strong organic demand for indoor games and pickleball, together with a contribution from the Brunswick Billiards acquisition completed on January 21, 2022, were more than offset by the timing of shipments within the basketball category, along with lower demand within the fitness and outdoor categories, including archery and water sports.
Escalade announced a quarterly dividend of $0.15 per share to be paid to all shareholders of record on September 6, 2022 and disbursed on September 13, 2022.
Management Commentary
“During the second quarter, we continued to build leading positions across our niche sports, games, and outdoor categories, while leveraging the benefits afforded by our hybrid manufacturing and sourcing capabilities, decentralized structure and lean operating model,” said Walter P. Glazer, Jr., President and CEO, Escalade.
“Although rising interest rates, inflationary headwinds and geopolitical uncertainty have dampened broader consumer sentiment and demand currently, our diverse portfolio of premium brands and base of consumers who value quality, performance, and an active lifestyle, should support our growth plans over the longer term.
“Second quarter sales declined on a year-over-year basis due to softness in select outdoor categories, together with the previously announced pull-forward of basketball revenue from the second to the first quarter of 2022. Importantly, gross profit margin held consistent with the prior-year period, as we successfully navigated rising material, shipping and labor costs.
“The integration of our recently completed acquisition of Brunswick Billiards has progressed ahead of plan and, as previously disclosed, is expected to be accretive to earnings in the second half of 2022. We believe this acquisition will allow for meaningful cross-selling synergies across our billiards and indoor recreation markets, categories that continue to outperform in the current market environment.
“Subsequent to the quarter end, we exercised a portion of our accordion availability, expanding our senior revolving credit facility by $10 million. We have an additional $15 million that we could exercise in the future, further increasing our credit line.
“We’ve demonstrated a commitment to effective capital allocation and disciplined balance sheet management, an approach that contributes to long-term value creation. Looking ahead, our near-term capital allocation priorities include a targeted reduction in net leverage, investments in organic growth initiatives, and the consistent payment of a quarterly cash dividend,” concluded Glazer.
Escalade’s brands include Brunswick Billiards, Stiga table tennis, Accudart, Rave Sports water recreation, Victory Tailgate custom games, Onix pickleball, Goalrilla basketball, Lifeline fitness, Woodplay playsets, and Bear Archery.
Photo courtesy Escalade/Onix