• Net Sales: $63.9 million for Q4 2024.
• Net Income: $2.7 million or $0.19 per diluted share for Q4 2024.
• Gross Margin: 24.9% in Q4 2024, up from 24.3% in the prior year period.
• SG&A Expenses: Increased by 5% to $10.9 million in Q4 2024.
• EBITDA: $5.9 million in Q4 2024, down from $6.4 million in the prior year period.
• Operating Cash Flow: $12.3 million for Q4 2024.
• Inventory Reduction: Inventory levels reduced by nearly 20% in 2024 compared to year-end 2023.
• Debt Repayment: $25.3 million repaid in 2024, with $25.6 million of fixed rate debt remaining at year-end.
• Net Leverage Ratio: 0.8 times at year-end 2024.
• Share Repurchases: $2.2 million executed under a $15 million authorization in Q4 2024.

• Warning! GuruFocus has detected 7 Warning Signs with ESCA.

Release Date: February 26, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Escalade Inc (NASDAQ:ESCA) achieved a 60 basis point improvement in gross margin due to lower manufacturing and logistics costs.
• The company successfully reduced its workforce by approximately 23% and decreased its owned and leased square footage by nearly 20%, enhancing operational efficiency.
• Escalade Inc (NASDAQ:ESCA) generated $36 million in operating cash flow in 2024, with $12 million in the fourth quarter alone.
• The company paid down $25.3 million in debt during 2024, ending the year with a net leverage ratio of 0.8 times.
• Escalade Inc (NASDAQ:ESCA) is investing in consumer-driven innovation and expanding its e-commerce presence, strengthening consumer connections.

Negative Points

• Fourth quarter sales declined by 2% compared to the prior year period.
• The company experienced significant one-time costs related to operational right-sizing and facility wind-down.
• Selling, general, and administrative expenses increased by 5% or $0.5 million compared to the prior year period.
• Earnings before interest, taxes, depreciation, and amortization (EBITDA) decreased by $0.5 million in the fourth quarter of 2024.
• Consumer demand for discretionary recreational goods remains soft due to current macroeconomic conditions and uncertainty.

Q & A Highlights

Q: With regards to inventories, how is Escalade planning to manage inventory levels in light of potential tariffs? A: Walter Glazer, CEO, mentioned that while they have advanced some shipments to beat potential tariff price increases, the goal remains to efficiently manage inventory and working capital. There is still room to reduce inventories while maintaining high service levels.

Q: Could inventories have been lower if not for taking on safety stock in recent months? A: Walter Glazer indicated that there is still an opportunity to further reduce inventory levels, although not to the extent seen over the last two years.

Q: Regarding gross margin, how has product mix shift affected margins, particularly with strength in archery and table tennis? A: Walter Glazer stated that there hasn't been a significant shift due to product mix. The focus has been on absorbing costs related to inventory and facility reductions, with expectations for improved gross margins moving forward.

Q: Can you provide a ballpark figure for non-recurring expenses in 2023 and 2024? A: Walter Glazer explained that the one-time costs absorbed in 2024 are roughly comparable to a $3.9 million gain on sale reported, providing a sense of the scale of these expenses.

Q: With reduced leverage, how does this affect Escalade's capital allocation strategy? A: Walter Glazer noted that the focus has shifted from debt reduction to a balanced approach, including stock buybacks, maintaining cash dividends, investing in core businesses, and being open to selective acquisitions.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.