Form 10-Q - Quarterly report [Sections 13 or 15(d)]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________

FORM 10-Q

_____________________________

(Mark One)


x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024


¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from – to –

Commission file number: 001-35629

_____________________________

TILE SHOP HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

_____________________________


Delaware	45-5538095
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)


14000 Carlson Parkway
Plymouth, Minnesota	55441
(Address of principal executive offices)	(Zip Code)

(763) 852-2950

(Registrant’s telephone number, including area code)

_____________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.0001 par value

TTSH

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨	Smaller reporting company	x
		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

As of May 6, 2024, there were 44,526,194 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

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TILE SHOP HOLDINGS, INC.

Table of Contents


		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Consolidated Balance Sheets	3
	Consolidated Statements of Income	4
	Consolidated Statements of Comprehensive Income	5
	Consolidated Statements of Stockholders’ Equity	6
	Consolidated Statements of Cash Flows	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.	Controls and Procedures	19
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3.	Defaults Upon Senior Securities	21
Item 4.	Mine Safety Disclosures	21
Item 5.	Other Information	21
Item 6.	Exhibits	22
Signatures		23

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Tile Shop Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets

(dollars in thousands, except per share data)



	March 31,		December 31,
	2024		2023
	(unaudited)		(audited)
Assets
Current assets:
Cash and cash equivalents	$	24,027	$	8,620
Receivables, net		3,935		2,882
Inventories		88,835		93,679
Income tax receivable		127		129
Other current assets, net		9,744		9,248
Total Current Assets		126,668		114,558
Property, plant and equipment, net		62,372		64,317
Right of use asset		128,976		129,092
Deferred tax assets		4,971		5,256
Other assets		2,935		3,449
Total Assets	$	325,922	$	316,672

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	24,263	$	23,345
Income tax payable		1,275		1,135
Current portion of lease liability		28,084		27,265
Other accrued liabilities		34,061		27,000
Total Current Liabilities		87,683		78,745
Long-term debt		-		-
Long-term lease liability, net		111,911		112,697
Other long-term liabilities		5,024		5,543
Total Liabilities		204,618		196,985

Stockholders’ Equity:
Common stock, par value $0.0001; authorized: 100,000,000 shares; issued and outstanding: 44,593,602 and 44,510,779 shares, respectively		4		4
Preferred stock, par value $0.0001; authorized: 10,000,000 shares; issued and outstanding: 0 shares		-		-
Additional paid-in capital		128,798		128,861
Accumulated deficit		(7,420)		(9,109)
Accumulated other comprehensive loss		(78)		(69)
Total Stockholders' Equity		121,304		119,687
Total Liabilities and Stockholders' Equity	$	325,922	$	316,672

See accompanying Notes to Consolidated Financial Statements.

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Tile Shop Holdings, Inc. and Subsidiaries

Consolidated Statements of Income

(dollars in thousands, except per share data)

(unaudited)



	Three Months Ended
	March 31,
	2024		2023
Net sales	$	91,728	$	102,019
Cost of sales		31,409		36,481
Gross profit		60,319		65,538
Selling, general and administrative expenses		58,036		61,413
Income from operations		2,283		4,125
Interest expense, net		(166)		(798)
Income before income taxes		2,117		3,327
Provision for income taxes		(428)		(815)
Net income	$	1,689	$	2,512

Income per common share:
Basic	$	0.04	$	0.06
Diluted	$	0.04	$	0.06

Weighted average shares outstanding:
Basic		43,570,745		43,237,856
Diluted		43,717,347		43,509,993

See accompanying Notes to Consolidated Financial Statements.

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Tile Shop Holdings, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(dollars in thousands)

(unaudited)



	Three Months Ended
	March 31,
	2024		2023
Net income	$	1,689	$	2,512
Currency translation adjustment		(9)		5
Other comprehensive (loss) income		(9)		5
Comprehensive income	$	1,680	$	2,517

See accompanying Notes to Consolidated Financial Statements.

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Tile Shop Holdings, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity

(dollars in thousands)

(unaudited)



	Common stock
	Shares	Amount		Additional ‎paid-in ‎capital		Accumulated ‎deficit		Accumulated ‎other ‎comprehensive ‎income (loss)		Total
Balance at December 31, 2022	44,377,445	$	4	$	127,997	$	(19,180)	$	(52)	$	108,769
Issuance of restricted shares	495,402		-		-		-		-		-
Cancellation of restricted shares	(175,784)		-		-		-		-		-
Stock based compensation	-		-		405		-		-		405
Tax withholdings related to net share settlements of stock based compensation awards	(88,080)		-		(427)		-		-		(427)
Foreign currency translation adjustments	-		-		-		-		5		5
Net income	-		-		-		2,512		-		2,512
Balance at March 31, 2023	44,608,983	$	4	$	127,975	$	(16,668)	$	(47)	$	111,264

Balance at December 31, 2023	44,510,779	$	4	$	128,861	$	(9,109)	$	(69)	$	119,687
Issuance of restricted shares	359,218		-		-		-		-		-
Cancellation of restricted shares	(208,281)		-		-		-		-		-
Stock based compensation	-		-		392		-		-		392
Tax withholdings related to net share settlements of stock based compensation awards	(68,114)		-		(455)		-		-		(455)
Foreign currency translation adjustments	-		-		-		-		(9)		(9)
Net income	-		-		-		1,689		-		1,689
Balance at March 31, 2024	44,593,602	$	4	$	128,798	$	(7,420)	$	(78)	$	121,304

See accompanying Notes to Consolidated Financial Statements.

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Tile Shop Holdings, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(dollars in thousands)

(unaudited)



	Three Months Ended
	March 31,
	2024		2023
Cash Flows From Operating Activities
Net income	$	1,689	$	2,512
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		4,742		5,783
Amortization of debt issuance costs		18		64
Loss on disposals of property, plant and equipment		40		7
Impairment charges		-		112
Non-cash lease expense		6,703		6,385
Stock based compensation		392		405
Deferred income taxes		285		593
Changes in operating assets and liabilities:
Receivables, net		(1,053)		(412)
Inventories		4,845		5,472
Other current assets, net		(1)		89
Accounts payable		800		2,125
Income tax receivable / payable		142		4,503
Accrued expenses and other liabilities		(13)		(1,816)
Net cash provided by operating activities		18,589		25,822
Cash Flows From Investing Activities
Purchases of property, plant and equipment		(2,719)		(3,367)
Net cash used in investing activities		(2,719)		(3,367)
Cash Flows From Financing Activities
Payments of long-term debt		(10,000)		(30,400)
Advances on line of credit		10,000		10,000
Employee taxes paid for shares withheld		(455)		(427)
Net cash used in financing activities		(455)		(20,827)
Effect of exchange rate changes on cash		(8)		3
Net change in cash, cash equivalents and restricted cash		15,407		1,631
Cash, cash equivalents and restricted cash beginning of period		8,620		7,759
Cash, cash equivalents and restricted cash end of period	$	24,027	$	9,390

Cash and cash equivalents	$	24,027	$	8,624
Restricted cash		-		766
Cash, cash equivalents and restricted cash end of period	$	24,027	$	9,390

Supplemental disclosure of cash flow information
Purchases of property, plant and equipment included in accounts payable and accrued expenses	$	548	$	646
Cash paid for interest		127		958
Cash received for income taxes, net		-		(4,280)

See accompanying Notes to Consolidated Financial Statements.

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Tile Shop Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited)

Note 1: Background

Tile Shop Holdings, Inc. (“Holdings,” and together with its wholly owned subsidiaries, the “Company”) was incorporated in Delaware in June 2012.

The Company is a specialty retailer of natural stone, man-made and luxury vinyl tiles, setting and maintenance materials, and related accessories in the United States. The Company manufactures its own setting and maintenance materials, such as thinset, grout, and sealers. The Company’s primary market is retail sales to consumers, contractors, designers and home builders. As of March 31, 2024, the Company had 142 stores in 31 states and the District of Columbia, with an average size of approximately 20,000 square feet. The Company has distribution centers located in Michigan, New Jersey, Oklahoma, Virginia and Wisconsin. The Company also has a sourcing office located in China.

The accompanying Consolidated Financial Statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the rules and regulations for reporting on Form 10-Q. Accordingly, they do not include certain information and disclosures required for comprehensive financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature, including the elimination of all intercompany transactions. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2024.

These statements should be read in conjunction with the Consolidated Financial Statements and footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. The accounting policies used in preparing these Consolidated Financial Statements are the same as those described in Note 1 to the Consolidated Financial Statements in such Form 10-K.

SEC Developments Relating to Climate Change Disclosures

On March 6, 2024, the Securities and Exchange Commission (the “SEC”) adopted final rules under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, to require public companies (including the Company) to provide detailed climate-related information in their registration statements and periodic reports. Among other things, the final rules require public companies to disclose information about (i) climate-related risks that have had, or are reasonably likely to have, a material impact on the company’s business strategy, results of operations, or financial condition; (ii) the actual and potential material impacts of such risks on the company’s strategy, business model, and outlook; (iii) a company’s activities, if any, to mitigate or adapt to material climate-related risks; (iv) the role of the board of directors in overseeing climate-related risks and management’s role in assessing and managing the company’s material climate-related risks; (v) processes the company uses for identifying, assessing, and managing material climate-related risks; (vi) the company’s Scope 1 Greenhouse Gas (“GHG”) emissions (direct GHG emissions) and Scope 2 GHG emissions (indirect GHG emissions resulting from purchased energy) when such emissions are material and an attestation report covering such disclosures; and (vii) expenditures, costs, and losses incurred as a result of severe weather events and other natural conditions (subject to disclosure thresholds) to be disclosed in notes to the financial statements. Compliance with these requirements will be phased in over a period of years, with disclosure by large accelerated filers starting in 2026 with respect to information for the 2025 fiscal year and disclosure by smaller reporting companies (such as the Company at this time) starting in 2028 with respect to information for the 2027 fiscal year, if not delayed by the SEC. Certain requirements such as GHG emissions do not apply to smaller reporting companies (such as the Company at this time).

Various organizations have filed lawsuits seeking to invalidate the SEC’s final rules that mandate climate-related disclosures. These lawsuits, which challenge the authority of the SEC to adopt these rules, have been consolidated in the United States Court of Appeals for the Eighth Circuit. On April 4, 2024, the SEC issued an order staying its final climate disclosure rules pending the completion of judicial review of these lawsuits. The Company is monitoring developments in these lawsuits.

Note 2: Revenues

Revenues are recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration received in exchange for those goods or services. Sales taxes are excluded from revenues.

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Tile Shop Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited)

The following table presents revenues disaggregated by product category:



	For the three months ended
	March 31,
	2024		2023
Man-made tiles⁽¹⁾	53	%	52	%
Natural stone tiles	22		23
Setting and maintenance materials	15		15
Accessories	8		8
Delivery service	2		2
Total	100	%	100	%

⁽¹⁾Man-made tile revenues include sales of luxury vinyl tile products.

The Company generates revenues by selling tile products, setting and maintenance materials, accessories, and delivery services to its customers through its store locations and online. The timing of revenue recognition coincides with the transfer of control of goods and services ordered by the customer, which falls into one of three categories described below:

Revenue recognized when an order is placed – If a customer places an order in a store and the contents of their order are available, the Company recognizes revenue concurrent with the exchange of goods for consideration from the customer.

Revenue recognized when an order is picked up – If a customer places an order for items held in a centralized distribution center, the Company requests a deposit from the customer at the time they place the order. Subsequently, when the contents of the customer’s order are delivered to the store, the customer returns to the store and picks up the items that were ordered. The Company recognizes revenue on this transaction when the customer picks up their order.

Revenue recognized when an order is delivered – If a customer places an order in a store and requests delivery of their order, the Company prepares the contents of their order, initiates the delivery service, and recognizes revenue once the contents of the customer’s order are delivered.

The Company determines the transaction price of its contracts based on the pricing established at the time a customer places an order. The transaction price does not include sales tax as the Company is a pass-through conduit for collecting and remitting sales tax. Any discounts applied to an order are allocated proportionately to the base price of the goods and services ordered. Deposits made by customers are recorded in other accrued liabilities. Deferred revenues associated with customer deposits are recognized at the time the Company transfers control of the items ordered or renders the delivery service. In the event an order is partially fulfilled as of the end of a reporting period, revenue will be recognized based on the transaction price allocated to the goods delivered and services rendered. The customer deposit balance was $14.9 million and $10.7 million as of March 31, 2024 and December 31, 2023, respectively. Revenues recognized during the three months ended March 31, 2024 that were included in the customer deposit balance as of the beginning of the period were $9.5 million.

The Company extends financing to qualified professional customers who apply for credit. Customers who qualify for an account receive 30-day payment terms. The accounts receivable balance was $3.9 million and $2.9 million at March 31, 2024 and December 31, 2023, respectively. The Company expects that the customer will pay for the goods and services ordered within one year from the date the order is placed. Accordingly, the Company does not adjust the promised amount of consideration for the effects of the financing component.

Customers may return purchased items for an exchange or refund. The Company records a reserve for estimated product returns based on the historical returns trends and the current product sales performance. The Company presents the sales returns reserve as an other current accrued liability and the estimated value of the inventory that will be returned as an other current asset in the Consolidated Balance Sheet. The components of the sales returns reserve reflected in the Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023 were as follows:


	(in thousands)
	March 31,		December 31,
	2024		2023
Other current accrued liabilities	$	4,187	$	3,640
Other current assets		1,364		1,220
Sales returns reserve, net	$	2,823	$	2,420

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Tile Shop Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited)

Note 3: Inventories

The Company’s inventory consists of manufactured items and purchased merchandise held for resale. Inventories are stated at the lower of cost (determined using the moving average cost method) or net realizable value. The Company capitalizes the cost of inbound freight, duties, and receiving and handling costs to bring purchased materials into its distribution network. The labor and overhead costs incurred in connection with the production process are included in the value of manufactured finished goods. Inventories were comprised of the following as of March 31, 2024 and December 31, 2023:



	(in thousands)
	March 31,		December 31,
	2024		2023
Finished goods	$	87,067	$	92,205
Raw materials		1,768		1,474
Total	$	88,835	$	93,679

The Company provides provisions for losses related to shrinkage and other amounts that are otherwise not expected to be fully recoverable. These provisions are calculated based on historical shrinkage, selling price, margin and current business trends. The provision for losses related to shrinkage and other amounts was $1.1 million and $1.3 million as of March 31, 2024 and December 31, 2023, respectively.

Note 4: Income Taxes

The provision for income taxes was $0.4 million and $0.8 million for the first quarter of 2024 and 2023, respectively. The decrease in income tax expense was primarily due to a decrease in pre-tax earnings during the first quarter of 2024 as compared to the first quarter of 2023. The Company’s effective tax rate for the three months ended March 31, 2024 and 2023 was 20.2% and 24.5%, respectively. The decrease in the effective tax rate was largely due to an increase in tax benefits associated with employee equity award vestings that occurred during the first quarter of 2024.

The Company records interest and penalties relating to uncertain tax positions in income tax expense. As of both March 31, 2024 and 2023, the Company had not recognized any liabilities for uncertain tax positions, nor had interest and penalties related to uncertain tax positions been accrued.

Note 5: Earnings Per Share

Basic earnings per share is calculated by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is calculated by dividing net income by the weighted-average number of common shares outstanding, after taking into consideration all dilutive potential shares outstanding during the period.

Basic and diluted earnings per share were calculated as follows:


	(dollars in thousands, except per share data)
	For the three months ended
	March 31,
	2024		2023
Net income	$	1,689	$	2,512
Weighted average shares outstanding - basic		43,570,745		43,237,856
Effect of dilutive securities attributable to stock based awards		146,602		272,137
Weighted average shares outstanding - diluted		43,717,347		43,509,993
Income per common share:
Basic	$	0.04	$	0.06
Diluted	$	0.04	$	0.06
Anti-dilutive securities excluded from earnings per share calculation		139,319		720,701

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Tile Shop Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited)

Note 6: Other Accrued Liabilities

Other accrued liabilities consisted of the following:



	(in thousands)
	March 31,		December 31,
	2024		2023
Customer deposits	$	14,878	$	10,719
Sales returns reserve		4,187		3,640
Accrued wages and salaries		4,975		5,523
Payroll and sales taxes		2,907		2,129
Other current liabilities		7,114		4,989
Total other accrued liabilities	$	34,061	$	27,000

Note 7: Long-term Debt

On September 30, 2022, Holdings and its operating subsidiary, The Tile Shop, and certain subsidiaries of each entered into a Credit Agreement with JPMorgan Chase Bank, N.A. and the lenders party thereto, including Fifth Third Bank (the “Credit Agreement”). The Credit Agreement provides the Company with a senior credit facility consisting of a $75.0 million revolving line of credit through September 30, 2027. Borrowings pursuant to the Credit Agreement initially bear interest at a rate per annum equal to: (i) Adjusted Term SOFR Rate (as defined in the Credit Agreement), plus a margin ranging from 1.25% to 1.75%; (ii) Adjusted Daily Simple SOFR (as defined in the Credit Agreement), plus a margin ranging from 1.25% to 1.75%; or (iii) the Alternate Base Rate (as defined in the Credit Agreement), plus a margin ranging from 0.25% to 0.75%. The margin is determined based on The Tile Shop’s Rent Adjusted Leverage Ratio (as defined in the Credit Agreement).

The Credit Agreement is secured by virtually all of the assets of the Company, including, but not limited to, inventory, accounts receivable, equipment and general intangibles. The Credit Agreement contains customary events of default, conditions to borrowing and restrictive covenants, including restrictions on the Company’s ability to dispose of assets, engage in acquisitions or mergers, make distributions on or repurchases of capital stock, incur additional debt, incur liens or make investments. The Credit Agreement also includes financial and other covenants, including covenants to maintain a Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of no less than 1.20 to 1.00 and a Rent Adjusted Leverage Ratio (as defined in the Credit Agreement) of no greater than 3.50 to 1.00. The Company was in compliance with the covenants as of March 31, 2024.

The Company had no borrowings outstanding on its line of credit as of March 31, 2024. The Company has standby letters of credit outstanding related to its workers’ compensation and medical insurance policies. As of March 31, 2024, standby letters of credit totaled $1.4 million. As of March 31, 2024, there was $73.6 million available for borrowing on the revolving line of credit, which may be used for maintaining the Company’s existing stores, purchasing additional merchandise inventory, and general corporate purposes.

Note 8: Leases

The Company leases its retail stores, certain distribution space, and office space. Leases generally have an initial term of ten to fifteen years, and contain renewal options. Assets acquired under operating leases are included in the Company’s right of use assets in the accompanying Consolidated Balance Sheet. The Company’s lease agreements do not contain significant residual value guarantees, restrictions or covenants. Leasehold improvements are amortized using the straight-line method over the shorter of the original lease term, the renewal term if the lease renewal is reasonably certain or the useful life of the improvement.

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Tile Shop Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited)

Leases (in thousands)	Classification		March 31, 2024		December 31, 2023
Assets
Operating lease assets	Right of use asset	$	128,976	$	129,092
Total leased assets		$	128,976	$	129,092

Liabilities
Current
Operating	Current portion of lease liability	$	28,084	$	27,265
Noncurrent
Operating	Long-term lease liability, net		111,911		112,697
Total lease liabilities		$	139,995	$	139,962


		Three Months Ended
Lease cost (in thousands)	Classification		March 31, 2024		March 31, 2023
Operating lease cost	SG&A expenses	$	9,536	$	8,892
Variable lease cost⁽¹⁾	SG&A expenses		3,759		3,557
Short term lease cost	SG&A expenses		77		79
Net lease cost		$	13,372	$	12,528

⁽¹⁾Variable lease cost consists primarily of taxes, insurance, and common area or other maintenance costs for the Company’s leased facilities.


	Three Months Ended
Other Information (in thousands)		March 31, 2024		March 31, 2023
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	9,644	$	9,472
Lease right-of-use assets obtained or modified in exchange for lease obligations	$	6,588	$	6,700

Note 9: Fair Value of Financial Instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. To measure fair value, the Company uses a three-tier valuation hierarchy based upon observable and non-observable inputs:

Level 1 – Unadjusted quoted prices that are available in active markets for the identical assets or liabilities at the measurement date.

Level 2 – Significant other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly, including:

Quoted prices for similar assets or liabilities in active markets;

Quoted prices for identical or similar assets or liabilities in non-active markets;

Inputs other than quoted prices that are observable for the asset or liability; and

Inputs that are derived principally from or corroborated by other observable market data.

Level 3 – Significant unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment.

The following table sets forth by level within the fair value hierarchy the Company’s financial assets that were accounted for at fair value on a recurring basis at March 31, 2024 and December 31, 2023 according to the valuation techniques the Company uses to determine their fair values. There have been no transfers of assets among the fair value hierarchies presented.

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Tile Shop Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited)

	Pricing	Fair Value at
	Category	March 31, 2024		December 31, 2023
Assets		(in thousands)
Cash and cash equivalents	Level 1	$	24,027	$	8,620

The following methods and assumptions were used to estimate the fair value of each class of financial instrument. There have been no changes in the valuation techniques used by the Company to value the Company’s financial instruments.

Cash and cash equivalents: Consists of cash on hand and bank deposits. The value was measured using quoted market prices in active markets. The carrying amount approximates fair value.

Fair value measurements also apply to certain non-financial assets and liabilities measured at fair value on a nonrecurring basis. Property, plant and equipment and right of use assets are measured at fair value when an impairment is recognized and the related assets are written down to fair value. During the three months ended March 31, 2023, Company recorded $0.1 million of impairment charges in selling, general and administrative expenses to write-down property, plant and equipment and right of use assets to their estimated fair values. The Company measured the fair value of these assets based on projected cash flows, an estimated risk-adjusted rate of return and market rental rates for comparable properties. Projected cash flows are considered Level 3 inputs. Market rental rates for comparable properties are considered Level 2 inputs. The Company did not record any impairment charges during the three months ended March 31, 2024.

Note 10: Equity Incentive Plans

On July 20, 2021, the Company’s stockholders approved the 2021 Omnibus Equity Compensation Plan (the “2021 Plan”). The 2021 Plan replaced the 2012 Omnibus Award Plan (the “Prior Plan”). Awards granted under the Prior Plan that were outstanding on the date of stockholder approval remained outstanding in accordance with their terms. The maximum number of shares that may be delivered with respect to awards under the 2021 Plan is 3,500,000 shares, subject to adjustment in certain circumstances. Shares tendered or withheld to pay the exercise price of a stock option or to cover tax withholding will not be added back to the number of shares available under the 2021 Plan. To the extent that any award under the 2021 Plan, or any award granted under the Prior Plan prior to stockholder approval of the 2021 Plan, is forfeited, canceled, surrendered or otherwise terminated without the issuance of shares or an award is settled only in cash, the shares subject to such awards granted but not delivered will be added to the number of shares available for awards under the 2021 Plan.

Stock options:

The Company measures and recognizes compensation expense for all stock based awards at fair value. The financial statements for the three months ended March 31, 2024 and 2023 include compensation expense for the portion of outstanding awards that vested during those periods. The Company recognizes stock based compensation expenses on a straight-line basis over the requisite service period of the award, which is generally the option vesting term. The Company did not record any stock based compensation related to stock options during the three months ended March 31, 2024. Total stock based compensation expense related to stock options was less than $0.1 million for the three months ended March 31, 2023. Stock based compensation expense pertaining to stock options is included in selling, general and administrative expenses in the accompanying Consolidated Statements of Income.

As of March 31, 2024, the Company had fully vested outstanding stock options to purchase 295,367 shares of common stock at a weighted average exercise price of $7.07 per share.

Restricted stock:

The Company awards restricted common shares to selected employees and to non-employee directors. Recipients are not required to provide any consideration upon vesting of the award. Restricted stock awards are subject to certain restrictions on transfer, and all or part of the shares awarded may be subject to forfeiture upon the occurrence of certain events, including employment termination. Certain awards are also subject to forfeiture if the Company fails to attain certain performance targets. The restricted stock is valued at its grant date fair value and expensed over the requisite service period or the vesting term of the awards. The Company adjusts the cumulative expense recognized on awards with performance conditions based on the probability of achieving the performance condition. Total stock based compensation expense related to restricted stock was $0.3 million and $0.4 million for the three months ended March 31, 2024 and 2023, respectively. Stock based compensation expense pertaining to restricted stock awards is included in selling, general and administrative expenses in the accompanying Consolidated Statements of Income.

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Tile Shop Holdings, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(unaudited)

As of March 31, 2024, the Company had 920,681 unvested outstanding restricted common shares.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of Tile Shop Holdings, Inc.’s (“Holdings,” and together with its wholly owned subsidiaries, the “Company,” “we,” “us,” or “our”) financial condition and results of operations should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023 and our consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify these statements by words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “depend,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “predict,” “project,” “seek,” “should,” “target,” “will,” “will likely result,” “would,” and similar expressions or variations, although some forward-looking statements are expressed differently. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. The forward-looking statements in this Quarterly Report on Form 10-Q are based on current expectations and assumptions that are subject to risks and uncertainties, many of which are difficult to predict and are outside of our control, that may cause our actual results, performance, or achievements to differ materially from any expected future results, performance, or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, our anticipated new store openings, remodeling plans, and growth opportunities; our business strengths, marketing strategies, competitive advantages and role in our industry and markets; an overall decline in the health of the economy, the tile industry, consumer confidence and spending, and the housing market, including as a result of rising inflation or interest rates, instability in the global banking system, geopolitical instability or the possibility of an economic downturn or recession or other macroeconomic factors; the impact of ongoing supply chain disruptions and inflationary cost pressures, including increased materials, labor, energy, and transportation costs and decreased discretionary consumer spending; our ability to successfully implement and realize the anticipated benefits of our strategic plan; our ability to successfully anticipate consumer trends; any statements with respect to dividends or stock repurchases and timing, methods, and payment of same; the effectiveness of our marketing strategy; potential fluctuations in our comparable store sales; our expectations regarding our and our customers’ financing arrangements and our ability to obtain additional capital, including potential difficulties of obtaining financing due to market conditions resulting from geopolitical conditions and other economic factors; supply costs and expectations, including the continued availability of sufficient products from our suppliers, risks related to relying on foreign suppliers, and the potential impact of the Russia-Ukraine, Israel/Hamas and other geopolitical conflicts on, among other things, product availability and pricing and timing and cost of deliveries; our expectations with respect to ongoing compliance with the terms of the Credit Agreement (as defined below), including increasing interest rates; our ability to provide timely delivery to our customers; the effect of regulations on us and our industry, and our suppliers’ compliance with such regulations, including any environmental or climate change-related requirements; the impact of corporate citizenship and environmental, social and governance matters; labor shortages and our expectations regarding the effects of employee recruiting, training, mentoring, and retention on our ability to recruit and retain employees; tax-related risks; the potential impact of cybersecurity breaches or disruptions to our management information systems; our ability to successfully implement our information technology and other digital initiatives; our ability to effectively manage our online sales; costs and adequacy of insurance; the potential impact of natural disasters, which may worsen or increase due to the effects of climate change, and other catastrophic events; risks inherent in operating as a holding company; fluctuations in material and energy costs, including ongoing volatility of oil and gas prices; our ability to remediate the material weaknesses in our internal control over financial reporting; the potential outcome of any legal proceedings; risks related to ownership of our common stock; and those factors set forth in the section captioned “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 and in this Form 10-Q.

There is no assurance that our expectations will be realized. If one or more of these risks or uncertainties materialize, or if our underlying assumptions prove incorrect, actual results may vary materially from those expected, estimated, or projected. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Furthermore, such forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

We intend to use our website, investors.tileshop.com, as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD of the Securities and Exchange Commission (“SEC”). Such disclosures will be

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included on our website under the heading News and Events. Accordingly, investors should monitor such portions of our website, in addition to following our press releases, SEC filings and public conference calls and webcasts. Information contained on or accessible through our website is not a part of, and is not incorporated by reference into, this Quarterly Report on Form 10-Q or any other report or document we file with the SEC. Any reference to our website is intended to be an inactive textual reference only.

Overview and Recent Trends

We are a specialty retailer of natural stone, man-made and luxury vinyl tiles, setting and maintenance materials, and related accessories in the United States. We offer a wide selection of products, attractive prices, and exceptional customer service in an extensive showroom setting. As of March 31, 2024, we operated 142 stores in 31 states and the District of Columbia, with an average size of approximately 20,000 square feet.

We purchase our tile products and accessories directly from suppliers and manufacture our own setting and maintenance materials, such as thinset, grout, and sealers. We believe that our long-term supplier relationships, together with our design and manufacturing and distribution capabilities, enable us to offer a broad assortment of high-quality products to our customers, who are primarily homeowners and professionals, at competitive prices. We have invested significant resources to develop our proprietary brands and product sources, and we believe that we are a leading retailer of natural stone, man-made and luxury vinyl tiles, setting and maintenance materials, and related accessories in the United States.

Our business continues to be impacted by a number of macroeconomic factors, including rising interest rates, and slowing existing home turnover. We believe this is contributing to a slowdown in demand for home improvement products. Our comparable store sales decreased by 10.2% during the three months ended March 31, 2024 due to lower levels of traffic in our stores.

Our first quarter in 2024 included an extra day when compared to the first quarter of 2023. Using average daily sales for the period, we estimate that the impact of the additional day in 2024 resulted in an increase in sales of approximately $1.0 million. At the same time, we believe the impact of the additional day in 2024 was offset by a change in the timing of Easter from April in 2023 to March in 2024.

Our gross margin rate improved by 160 basis points from the first quarter of 2023 to 65.8% for the three months ended March 31, 2024. The improvement in gross margin rate was primarily due to lower levels of international freight and decreases in product costs.

Selling, general and administrative expenses decreased $3.4 million, or 5.5%, from $61.4 million in the first quarter of 2023 to $58.0 million in the first quarter of 2024. The decrease was due to a $2.9 million decrease in variable costs, and a $1.0 million decrease in depreciation expense, which were partially offset by a $0.6 million increase in rent expense.

During the three months ended March 31, 2024, we generated $18.6 million of operating cash flow, which was used to fund $2.7 million of capital expenditures. Cash and cash equivalents increased by $15.4 million from $8.6 million on December 31, 2023 to $24.0 million on March 31, 2024. As of March 31, 2024, we had no borrowings outstanding on our line of credit.

Key Components of our Consolidated Statements of Income

Net Sales – Net sales represents total charges to customers, net of returns, and includes freight charged to customers. We recognize sales at the time that the customer takes control of the merchandise or final delivery of the product has occurred. We are required to charge and collect sales and other taxes on sales to our customers and remit these taxes back to government authorities. Total revenues do not include sales tax because we are a pass-through conduit for collecting and remitting sales tax. Sales are reduced by a reserve for anticipated sales returns that we estimate based on historical returns.

Comparable store sales growth is the percentage change in sales of comparable stores period-over-period. A store is considered comparable on the first day of the 13th full month of operation. When a store is relocated, it is excluded from the comparable store sales growth calculation. Comparable store sales growth amounts include total charges to customers less any actual returns. We include the change in allowance for anticipated sales returns applicable to comparable stores in the comparable store sales calculation. Comparable store sales data reported by other companies may be prepared on a different basis and therefore may not be useful for purposes of comparing our results to those of other businesses. Company management believes the comparable store sales growth (decline) metric provides useful information to both management and investors to evaluate the Company’s performance, the effectiveness of its strategy and its competitive position.

Cost of Sales – Cost of sales consists primarily of material costs, freight, customs and duties fees, and storage and delivery of product to the customers, as well as physical inventory losses and costs associated with manufacturing of setting and maintenance materials.

Gross Profit – Gross profit is net sales less cost of sales. Gross margin rate is the percentage determined by dividing gross profit by net sales.

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Selling, General, and Administrative Expenses – Selling, general, and administrative expenses consist primarily of compensation costs, occupancy, utilities, maintenance costs, advertising costs, shipping and transportation expenses to move inventory from our distribution centers to our stores, and depreciation and amortization.

Income Taxes – We are subject to income tax in the United States as well as other tax jurisdictions in which we conduct business.

Results of Operations

Comparison of the three months ended March 31, 2024 to the three months ended March 31, 2023


	($ in thousands)
	2024		% of sales		2023		% of sales⁽¹⁾
Net sales	$	91,728	100.0	%	$	102,019	100.0	%
Cost of sales		31,409	34.2	%		36,481	35.8	%
Gross profit		60,319	65.8	%		65,538	64.2	%
Selling, general and administrative expenses		58,036	63.3	%		61,413	60.2	%
Income from operations		2,283	2.5	%		4,125	4.0	%
Interest expense		(166)	(0.2)	%		(798)	(0.8)	%
Income before income taxes		2,117	2.3	%		3,327	3.3	%
Provision for income taxes		(428)	(0.5)	%		(815)	(0.8)	%
Net income	$	1,689	1.8	%	$	2,512	2.5	%

⁽¹⁾ Amounts do not foot due to rounding.

Net Sales Net sales for the first quarter of 2024 decreased $10.3 million, or 10.1%, compared with the first quarter of 2023. Sales decreased at comparable stores by 10.2% during the first quarter of 2024 compared to the first quarter of 2023, due to a decrease in traffic.

Gross Profit Gross profit decreased $5.2 million, or 8.0%, in the first quarter of 2024 compared to the first quarter of 2023. The gross margin rate was 65.8% and 64.2% during the first quarter of 2024 and 2023, respectively. The improvement in gross margin rate was primarily due to lower levels of international freight and decreases in product costs.

Selling, General, and Administrative Expenses Selling, general, and administrative expenses decreased $3.4 million, or 5.5%, from $61.4 million in the first quarter of 2023 to $58.0 million in the first quarter of 2024. The decrease was due to a $2.9 million decrease in variable costs, and a $1.0 million decrease in depreciation expense, which were partially offset by a $0.6 million increase in rent expense.

Interest Expense Interest expense was $0.2 million and $0.8 million for the first quarter of 2024 and 2023, respectively. The decrease was due to a decrease in average borrowings outstanding on our line of credit.

Provision for Income Taxes The provision for income taxes for the first quarter of 2024 and 2023 was $0.4 million and $0.8 million, respectively. The decrease in the provision for income tax was due to a decrease in pretax income. Our effective tax rate was 20.2% and 24.5% in the first quarter of 2024 and 2023, respectively. The decrease in the effective tax rate was largely due to an increase in the tax benefit associated with employee equity award vestings that occurred during the first quarter of 2024.

Non-GAAP Measures

We calculate Adjusted EBITDA by taking net income calculated in accordance with accounting principles generally accepted in the United States (“GAAP”), and adjusting for interest expense, income taxes, depreciation and amortization, and stock based compensation expense. Adjusted EBITDA margin is equal to Adjusted EBITDA divided by net sales. We calculate pretax return on capital employed by taking income from operations divided by capital employed. Capital employed equals total assets less accounts payable, income taxes payable, other accrued liabilities, lease liability and other long-term liabilities. Other companies may calculate both Adjusted EBITDA and pretax return on capital employed differently, limiting the usefulness of these measures for comparative purposes.

We believe that these non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to our financial condition and results of operations. Our management uses these non-GAAP measures to compare our performance to that of prior periods for trend analyses, for purposes of determining management incentive compensation, for budgeting and planning purposes and for assessing the effectiveness of capital allocation over time. These measures are used in monthly financial reports prepared for management and our Board of Directors. We believe that the use of these

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non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial measures with other specialty retailers, many of which present similar non-GAAP financial measures to investors.

Our management does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitations of these non-GAAP financial measures are that they exclude significant expenses and income that are required by GAAP to be recognized in our consolidated financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which expenses and income are excluded or included in determining these non-GAAP financial measures. In order to compensate for these limitations, management presents non-GAAP financial measures in connection with GAAP results. We urge investors to review the reconciliation of our non-GAAP financial measures to the comparable GAAP financial measures and not to rely on any single financial measure to evaluate our business.

The reconciliation of Adjusted EBITDA to net income for the three months ended March 31, 2024 and 2023 is as follows:



	($ in thousands)
		Three Months Ended
		March 31,
		2024		% of sales		2023		% of sales⁽¹⁾
Net income		$	1,689	1.8	%	$	2,512	2.5	%
Interest expense			166	0.2	%		798	0.8	%
Provision for income taxes			428	0.5	%		815	0.8	%
Depreciation and amortization			4,742	5.2	%		5,783	5.7	%
Stock based compensation			392	0.4	%		405	0.4	%
Adjusted EBITDA		$	7,417	8.1	%	$	10,313	10.1	%

⁽¹⁾ Amounts do not foot due to rounding.

The calculation of pretax return on capital employed is as follows:


	($ in thousands)
	March 31,
	2024⁽¹⁾			2023⁽¹⁾
Income from Operations (trailing twelve months)	$	14,316		$	21,998

Total Assets		322,685			346,695
Less: Accounts payable		(24,560)			(28,002)
Less: Income tax payable		(652)			(850)
Less: Other accrued liabilities		(31,865)			(37,696)
Less: Lease liability		(134,303)			(130,385)
Less: Other long-term liabilities		(4,720)			(4,623)
Capital Employed	$	126,585		$	145,139

Pretax Return on Capital Employed		11.3	%		15.2	%

⁽¹⁾ Income statement accounts represent the activity for the trailing twelve months ended as of each of the balance sheet dates. Balance sheet accounts represent the average account balance for the four quarters ended as of each of the balance sheet dates.

Liquidity and Capital Resources

Our principal liquidity requirements have been for working capital and capital expenditures. Our principal sources of liquidity are $24.0 million of cash and cash equivalents at March 31, 2024, our cash flow from operations, and borrowings available under our Credit Agreement. We expect to use this liquidity for maintaining our existing stores, purchasing additional merchandise inventory, and general corporate purposes.

On September 30, 2022, Holdings and its operating subsidiary, The Tile Shop, and certain subsidiaries of each entered into a Credit Agreement with JPMorgan Chase Bank, N.A. and the lenders party thereto, including Fifth Third Bank (the “Credit Agreement”). The Credit Agreement provides us with a senior credit facility consisting of a $75.0 million revolving line of credit through September 30, 2027. Borrowings pursuant to the Credit Agreement initially bear interest at a rate per annum equal to: (i) Adjusted Term SOFR Rate (as defined in the Credit Agreement), plus a margin ranging from 1.25% to 1.75%; (ii) Adjusted Daily Simple SOFR (as defined in the Credit Agreement), plus a margin ranging from 1.25% to 1.75%; or (iii) the Alternate Base Rate (as defined in the Credit Agreement),

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plus a margin ranging from 0.25% to 0.75%. The margin is determined based on the Rent Adjusted Leverage Ratio (as defined in the Credit Agreement).

The Credit Agreement is secured by virtually all of our assets, including but not limited to, inventory, accounts receivable, equipment and general intangibles. The Credit Agreement contains customary events of default, conditions to borrowing and restrictive covenants, including restrictions on our ability to dispose of assets, engage in acquisitions or mergers, make distributions on or repurchases of capital stock, incur additional debt, incur liens or make investments. The Credit Agreement also includes financial and other covenants, including covenants to maintain a Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of no less than 1.20 to 1.00 and a Rent Adjusted Leverage Ratio (as defined in the Credit Agreement) of no greater than 3.50 to 1.00. We were in compliance with the covenants as of March 31, 2024.

We had no borrowings outstanding on our line of credit as of March 31, 2024. We have standby letters of credit outstanding related to our workers’ compensation and medical insurance policies. As of March 31, 2024, standby letters of credit totaled $1.4 million. As of March 31, 2024, there was $73.6 million available for borrowing on the revolving line of credit, which may be used for maintaining our existing stores, purchasing additional merchandise inventory, and general corporate purposes.

We believe that our cash flow from operations, together with our existing cash and cash equivalents and borrowings available under our Credit Agreement, will be sufficient to fund our operations and anticipated capital expenditures over at least the next twelve months and our long-term liquidity requirements.

Capital Expenditures

Capital expenditures were $2.7 million and $3.4 million for the three months ended March 31, 2024 and 2023, respectively. Capital expenditures in 2024 were primarily due to investments in new stores, store remodels, merchandising, distribution and information technology assets.

Cash flows

The following table summarizes our cash flow data for the three months ended March 31, 2024 and 2023.



	(in thousands)
	Three Months Ended
	March 31,
	2024		2023
Net cash provided by operating activities	$	18,589	$	25,822
Net cash used in investing activities		(2,719)		(3,367)
Net cash used in financing activities		(455)		(20,827)

Operating activities

Net cash provided by operating activities during the three months ended March 31, 2024 was $18.6 million compared with $25.8 million during the three months ended March 31, 2023. The decrease was primarily attributable to the collection of an income tax refund in the three months ended March 31, 2023 that was not repeated again in 2024, combined with a decrease in net income.

Investing activities

Net cash used in investing activities totaled $2.7 million for the three months ended March 31, 2024 compared with $3.4 million for the three months ended March 31, 2023. Cash used in investing activities during the three months ended March 31, 2024 was primarily due to investments in store remodels, merchandising, distribution and information technology assets.

Financing activities

Net cash used in financing activities was $0.5 million for the three months ended March 31, 2024 compared with $20.8 million for the three months ended March 31, 2023. Cash outflows for financing activities during the three months ended March 31, 2023 were primarily related to payments made against our line of credit. We were able to fully repay our line of credit in 2023. Accordingly, cash outflows to repay balances due on our line of credit decreased between the three months ended March 31, 2023 and March 31, 2024, respectively.

Cash and cash equivalents totaled $24.0 million at March 31, 2024 compared with $8.6 million at December 31, 2023. Working capital was $39.0 million at March 31, 2024 compared with $35.8 million at December 31, 2023.
‎

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our primary risk exposures or management of market risks from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We have established disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that information relating to the Company is accumulated and communicated to management, including our principal officers, as appropriate to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2024 and have concluded that our disclosure controls and procedures were not effective as of March 31, 2024 due to the material weaknesses in our internal control over financial reporting as described below.

Material Weakness in Internal Control over Financial Reporting

A material weakness is a significant deficiency, or combination of significant deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, the application of any evaluation of effectiveness to future periods is subject to the risk that controls may become inadequate because of changes in conditions, or that compliance with the policies or procedures may deteriorate.

As previously disclosed in our form 10-K for the year ended December 31, 2023, we identified the following two material weaknesses in our internal control over financial reporting:

The ineffective design of the Company’s information technology general controls (“ITGCs”), which stemmed from deficiencies in user access controls, which did not adequately restrict access to the Company’s financial reporting system, did not ensure appropriate segregation of duties, and did not prevent unauthorized individuals from having the ability to create, post and modify journal entries. The material weakness also resulted in the ineffectiveness of automated and manual business process controls throughout the Company’s financial reporting and business transaction cycles that are dependent upon the affected ITGCs.

The breakdown in the operating effectiveness of the Company’s controls designed to identify and ensure timely recognition of new and modified leases, as well as additional deficiencies in the design and operating effectiveness of the Company’s controls to review key inputs underlying certain lease accounting calculations.

These deficiencies resulted in an elevated risk that a material misstatement of our annual or interim financial statements would not be prevented or detected by other compensating controls. Notwithstanding the identified material weaknesses, we believe the consolidated financial statements included in this Form 10-Q fairly present, in all material respects, our financial condition, results of operations, and cash flows for the periods presented in conformity with GAAP.

Planned Remediation of Material Weaknesses

Management has actively engaged in implementing remediation plans to address the material weaknesses outlined above. Steps taken by management in connection with management’s remediation efforts during the three months ended March 31, 2024 include:

Restricting access in our enterprise resource planning (“ERP”) system to process transactions that could trigger a manual journal entry initiated outside of the park and post process for users who are responsible for reviewing account reconciliations.

Implementing a new monitoring control to identify the population of transactions processed in our ERP system that generate accounting entries that do not go through the park and post process and assessing the compensating controls designed to reduce the risk of misstatement arising from these transactions to an appropriate level.

Adjusting access profiles in the Company’s ERP system to eliminate the ability for a user to modify and subsequently approve a manual journal entry.

Reviewing activity occurring during the quarter to identify and assess the appropriateness of manual journal entries that had been modified and approved by the same user.

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Enhanced lease related controls to ensure all new leases and lease modifications are identified in a timely manner as well as to ensure leases and lease related accounts are accounted for appropriately.

We continue to implement the remediation steps with respect to the material weaknesses outlined above which include an ongoing effort to refine the control designed to identify access profiles in our ERP system that result in segregation of duties risks. Each identified material weakness in internal control over financial reporting will not be considered remediated until the applicable controls have been in operation for a sufficient period of time for our management to conclude that such material weakness has been remediated. We will continue to assess the effectiveness of our remediation efforts in connection with our evaluations of internal control over financial reporting. No assurance can be made that our remediation efforts will be completed in a timely manner or that the updated controls and procedures associated with such efforts will be deemed adequate after being subjected to testing.

Changes in Internal Control over Financial Reporting

Other than the changes discussed above, there were no changes in internal control over financial reporting (as defined by Rule 13a-15(f) under the Exchange Act) during the quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, intends that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and not be detected.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are, from time to time, party to lawsuits, threatened lawsuits, disputes and other claims arising in the normal course of business. We assess our liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that we will incur a loss and the amount of the loss can be reasonably estimated, we record a liability in our consolidated financial statements. These legal accruals may be increased or decreased to reflect any relevant developments on a quarterly basis. Where a loss is not probable or the amount of the loss is not estimable, we do not record an accrual, consistent with applicable accounting guidance. In the opinion of management, while the outcome of such claims and disputes cannot be predicted with certainty, our ultimate liability in connection with these matters is not expected to have a material adverse effect on our results of operations, financial position or cash flows, and the amounts accrued for any individual matter are not material. However, legal proceedings are inherently uncertain. As a result, the outcome of a particular matter or a combination of matters may be material to our results of operations for a particular period, depending upon the size of the loss or our income for that particular period.

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities



Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(in thousands) ‎Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs
January 1, 2024 - January 31, 2024	-		$	-	-	$	-
February 1, 2024 - February 29, 2024	59,334	⁽¹⁾		5.93	-		-
March 1, 2024 - March 31, 2024	217,061	⁽²⁾		2.09	-		-
	276,395		$	1.64	-	$	-

(1)We cancelled 59,334 shares that were forfeited when vesting conditions were not met, in accordance with the terms of the 2021 Omnibus Equity Compensation Plan and the related award agreements. We did not pay cash to repurchase these shares, nor were these repurchases part of a publicly announced plan or program.

(2)We withheld a total of 38,963 shares and 29,151 shares to satisfy tax withholding obligations due upon the vesting of restricted stock grants, as allowed by the 2012 Omnibus Award Plan and 2021 Omnibus Equity Compensation Plan, respectively. Additionally, 49,693 shares and 99,254 shares were forfeited when vesting conditions were not met, in accordance with the terms of the 2012 Omnibus Award Plan and 2021 Omnibus Equity Compensation Plan, respectively, and the related award agreements. We did not pay cash to repurchase these shares, nor were these repurchases part of a publicly announced plan or program.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

Rule 10b5-1 Trading Plans

During the quarter ended March 31, 2024, none of the Company’s directors or executive officers adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any “non-Rule 10b5-1 trading arrangement” (as defined in Item 408(c) of Regulation S-K).
‎

Table of Contents

ITEM 6. EXHIBITS


Exhibit No.	Description
3.1	Certificate of Incorporation of Tile Shop Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-4 (Reg. No. 333-182482) filed with the Securities and Exchange Commission on July 2, 2012).
3.2	Certificate of Amendment to the Certificate of Incorporation of Tile Shop Holdings, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 21, 2021).
3.3	By-Laws of Tile Shop Holdings, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-4 (Reg. No. 333-182482) filed with the Securities and Exchange Commission on July 2, 2012).
10.1***	Amendment to Employment Agreement, dated as of March 18, 2024, by and between Tile Shop Holdings, Inc. and Mark Davis (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 18, 2024).
31.1*	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
32.1**	Certifications of Chief Executive Officer Pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
32.2**	Certifications of Chief Financial Officer Pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
101*	The following financial statements from the Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 are formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements.
104*	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed herewith

** Furnished herewith

*** Management compensatory plan or arrangement.

‎

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	TILE SHOP HOLDINGS, INC.

Dated: May 9, 2024	By:	/s/ CABELL H. LOLMAUGH
		Cabell H. Lolmaugh
		Chief Executive Officer


Dated: May 9, 2024	By:	/s/ MARK B. DAVIS
		Mark B. Davis
		Chief Financial Officer

EXHIBIT 31.1

302 CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Cabell H. Lolmaugh, certify that:

I have reviewed this quarterly report on Form 10-Q of Tile Shop Holdings, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a- 15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: May 9, 2024	/s/ CABELL H. LOLMAUGH

	Cabell H. Lolmaugh
	Chief Executive Officer

EXHIBIT 31.2

302 CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Mark B. Davis, certify that:

I have reviewed this quarterly report on Form 10-Q of Tile Shop Holdings, Inc.;

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: May 9, 2024	/s/ MARK B. DAVIS

	Mark B. Davis,
	Chief Financial Officer

Exhibit 32.1

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906

of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. §1350 (as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002), I, Cabell H. Lolmaugh, the Chief Executive Officer of Tile Shop Holdings, Inc. (the “Company”), hereby certify that the Quarterly Report on Form 10-Q of the Company for the period ended March 31, 2024 (“the Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.


Date: May 9, 2024	/s/ CABELL H. LOLMAUGH

	Cabell H. Lolmaugh
	Chief Executive Officer

Exhibit 32.2

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906

of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. §1350 (as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002), I, Mark B. Davis, the Chief Financial Officer of Tile Shop Holdings, Inc. (the “Company”), hereby certify that the Quarterly Report on Form 10-Q of the Company for the period ended March 31, 2024 (“the Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.


Date: May 9, 2024	/s/ MARK B. DAVIS

	Mark B. Davis,
	Chief Financial Officer

Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Mar. 31, 2024	May 06, 2024
Document And Entity Information
Document Type	10-Q
Document Quarterly Report	true
Current Fiscal Year End Date	--12-31
Document Period End Date	Mar. 31, 2024
Document Transition Report	false
Entity File Number	001-35629
Entity Registrant Name	TILE SHOP HOLDINGS, INC.
Entity Incorporation State Country Code	DE
Entity Tax Identification Number	45-5538095
Entity Address, Address Line 1	14000 Carlson Parkway
Entity Address City Or Town	Plymouth
Entity Address State Or Province	MN
Entity Address Postal Zip Code	55441
City Area Code	763
Local Phone Number	852-2950
Security 12b Title	Common Stock, $0.0001 par value
Trading Symbol	TTSH
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock Shares Outstanding		44,526,194
Document Fiscal Year Focus	2024
Amendment Flag	false
Document Fiscal Period Focus	Q1
Entity Central Index Key	0001552800

Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Current assets:
Cash and cash equivalents	$ 24,027	$ 8,620
Receivables, net	3,935	2,882
Inventories	88,835	93,679
Income tax receivable	127	129
Other current assets, net	9,744	9,248
Total Current Assets	126,668	114,558
Property, plant and equipment, net	62,372	64,317
Right of use asset	128,976	129,092
Deferred tax assets	4,971	5,256
Other assets	2,935	3,449
Total Assets	325,922	316,672
Current liabilities:
Accounts payable	24,263	23,345
Income tax payable	1,275	1,135
Current portion of lease liability	28,084	27,265
Other accrued liabilities	34,061	27,000
Total Current Liabilities	87,683	78,745
Long-term debt
Long-term lease liability, net	111,911	112,697
Other long-term liabilities	5,024	5,543
Total Liabilities	204,618	196,985
Stockholders’ Equity:
Common stock, par value $0.0001; authorized: 100,000,000 shares; issued and outstanding: 44,593,602 and 44,510,779 shares, respectively	4	4
Preferred stock, par value $0.0001; authorized: 10,000,000 shares; issued and outstanding: 0 shares
Additional paid-in capital	128,798	128,861
Accumulated deficit	(7,420)	(9,109)
Accumulated other comprehensive loss	(78)	(69)
Total Stockholders' Equity	121,304	119,687
Total Liabilities and Stockholders' Equity	$ 325,922	$ 316,672

Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2024	Dec. 31, 2023
Consolidated Balance Sheets [Abstract]
Common stock, par value (per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	44,593,602	44,510,779
Common stock, shares outstanding	44,593,602	44,510,779
Preferred stock, par value (per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0

Consolidated Statements of Income - USD ($) $ in Thousands	3 Months Ended
Consolidated Statements of Income - USD ($) $ in Thousands	Mar. 31, 2024	Mar. 31, 2023
Consolidated Statements of Operations [Abstract]
Net sales	$ 91,728	$ 102,019
Cost of sales	31,409	36,481
Gross profit	60,319	65,538
Selling, general and administrative expenses	58,036	61,413
Income from operations	2,283	4,125
Interest expense, net	(166)	(798)
Income before income taxes	2,117	3,327
Provision for income taxes	(428)	(815)
Net income	$ 1,689	$ 2,512
Income per common share:
Basic	$ 0.04	$ 0.06
Diluted	$ 0.04	$ 0.06
Weighted average shares outstanding:
Basic	43,570,745	43,237,856
Diluted	43,717,347	43,509,993

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Consolidated Statements of Comprehensive (Loss) Income [Abstract]
Net income	$ 1,689	$ 2,512
Currency translation adjustment	(9)	5
Other comprehensive (loss) income	(9)	5
Comprehensive income	$ 1,680	$ 2,517

Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]	Accumulated other comprehensive income (loss) [Member]	Total
Beginning balance at Dec. 31, 2022	$ 4	$ 127,997	$ (19,180)	$ (52)	$ 108,769
Beginning balance (in shares) at Dec. 31, 2022	44,377,445
Issuance of restricted shares (in shares)	495,402
Cancellation of restricted shares (in shares)	(175,784)
Stock based compensation		405			405
Tax withholdings related to net share settlements of stock based compensation awards		(427)			(427)
Tax withholdings related to net share settlements of stock based compensation awards (in shares)	(88,080)
Foreign currency translation adjustments				5	5
Net income			2,512		2,512
Balance at Mar. 31, 2023	$ 4	127,975	(16,668)	(47)	111,264
Balance (in shares) at Mar. 31, 2023	44,608,983
Beginning balance at Dec. 31, 2023	$ 4	128,861	(9,109)	(69)	$ 119,687
Beginning balance (in shares) at Dec. 31, 2023	44,510,779				44,510,779
Issuance of restricted shares (in shares)	359,218
Cancellation of restricted shares (in shares)	(208,281)
Stock based compensation		392			$ 392
Tax withholdings related to net share settlements of stock based compensation awards		(455)			(455)
Tax withholdings related to net share settlements of stock based compensation awards (in shares)	(68,114)
Foreign currency translation adjustments				(9)	(9)
Net income			1,689		1,689
Balance at Mar. 31, 2024	$ 4	$ 128,798	$ (7,420)	$ (78)	$ 121,304
Balance (in shares) at Mar. 31, 2024	44,593,602				44,593,602

Consolidated Statements of Cash Flows - USD ($)	3 Months Ended
Consolidated Statements of Cash Flows - USD ($)	Mar. 31, 2024	Mar. 31, 2023
Cash Flows From Operating Activities
Net income	$ 1,689,000	$ 2,512,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	4,742,000	5,783,000
Amortization of debt issuance costs	18,000	64,000
Loss on disposals of property, plant and equipment	40,000	7,000
Impairment charges	0	112,000
Non-cash lease expense	6,703,000	6,385,000
Stock based compensation	392,000	405,000
Deferred income taxes	285,000	593,000
Changes in operating assets and liabilities:
Receivables, net	(1,053,000)	(412,000)
Inventories	4,845,000	5,472,000
Other current assets, net	(1,000)	89,000
Accounts payable	800,000	2,125,000
Income tax receivable / payable	142,000	4,503,000
Accrued expenses and other liabilities	(13,000)	(1,816,000)
Net cash provided by operating activities	18,589,000	25,822,000
Cash Flows From Investing Activities
Purchases of property, plant and equipment	(2,719,000)	(3,367,000)
Net cash used in investing activities	(2,719,000)	(3,367,000)
Cash Flows From Financing Activities
Payments of long-term debt	(10,000,000)	(30,400,000)
Advances on line of credit	10,000,000	10,000,000
Employee taxes paid for shares withheld	(455,000)	(427,000)
Net cash used in financing activities	(455,000)	(20,827,000)
Effect of exchange rate changes on cash	(8,000)	3,000
Net change in cash, cash equivalents and restricted cash	15,407,000	1,631,000
Cash, cash equivalents and restricted cash beginning of period	8,620,000	7,759,000
Cash, cash equivalents and restricted cash end of period	24,027,000	9,390,000
Cash and cash equivalents	24,027,000	8,624,000
Restricted cash		766,000
Cash, cash equivalents and restricted cash end of period	24,027,000	9,390,000
Supplemental disclosure of cash flow information
Purchases of property, plant and equipment included in accounts payable and accrued expenses	548,000	646,000
Cash paid for interest	$ 127,000	958,000
Cash received for income taxes, net		$ (4,280,000)

Background

3 Months Ended

Mar. 31, 2024

Background [Abstract]

Background

Note 1: Background

Tile Shop Holdings, Inc. (“Holdings,” and together with its wholly owned subsidiaries, the “Company”) was incorporated in Delaware in June 2012.

SEC Developments Relating to Climate Change Disclosures

Revenues

3 Months Ended

Mar. 31, 2024

Revenues [Abstract]

Revenues

Note 2: Revenues

The following table presents revenues disaggregated by product category:



	For the three months ended
	March 31,
	2024		2023
Man-made tiles⁽¹⁾	53	%	52	%
Natural stone tiles	22		23
Setting and maintenance materials	15		15
Accessories	8		8
Delivery service	2		2
Total	100	%	100	%

⁽¹⁾Man-made tile revenues include sales of luxury vinyl tile products.


	(in thousands)
	March 31,		December 31,
	2024		2023
Other current accrued liabilities	$	4,187	$	3,640
Other current assets		1,364		1,220
Sales returns reserve, net	$	2,823	$	2,420

Inventories

3 Months Ended

Mar. 31, 2024

Inventories [Abstract]

Inventories

Note 3: Inventories



	(in thousands)
	March 31,		December 31,
	2024		2023
Finished goods	$	87,067	$	92,205
Raw materials		1,768		1,474
Total	$	88,835	$	93,679

Income Taxes

3 Months Ended

Mar. 31, 2024

Income Taxes [Abstract]

Income Taxes

Note 4: Income Taxes

Earnings Per Share

3 Months Ended

Mar. 31, 2024

Earnings Per Share [Abstract]

Earnings Per Share

Note 5: Earnings Per Share

Basic and diluted earnings per share were calculated as follows:


	(dollars in thousands, except per share data)
	For the three months ended
	March 31,
	2024		2023
Net income	$	1,689	$	2,512
Weighted average shares outstanding - basic		43,570,745		43,237,856
Effect of dilutive securities attributable to stock based awards		146,602		272,137
Weighted average shares outstanding - diluted		43,717,347		43,509,993
Income per common share:
Basic	$	0.04	$	0.06
Diluted	$	0.04	$	0.06
Anti-dilutive securities excluded from earnings per share calculation		139,319		720,701

Other Accrued Liabilities

3 Months Ended

Mar. 31, 2024

Other Accrued Liabilities [Abstract]

Other Accrued Liabilities

Note 6: Other Accrued Liabilities

Other accrued liabilities consisted of the following:



	(in thousands)
	March 31,		December 31,
	2024		2023
Customer deposits	$	14,878	$	10,719
Sales returns reserve		4,187		3,640
Accrued wages and salaries		4,975		5,523
Payroll and sales taxes		2,907		2,129
Other current liabilities		7,114		4,989
Total other accrued liabilities	$	34,061	$	27,000

Long-term Debt

3 Months Ended

Mar. 31, 2024

Long-term Debt [Abstract]

Long-term Debt

Note 7: Long-term Debt

Leases

3 Months Ended

Mar. 31, 2024

Leases [Abstract]

Leases

Note 8: Leases

Leases (in thousands)	Classification		March 31, 2024		December 31, 2023
Assets
Operating lease assets	Right of use asset	$	128,976	$	129,092
Total leased assets		$	128,976	$	129,092

Liabilities
Current
Operating	Current portion of lease liability	$	28,084	$	27,265
Noncurrent
Operating	Long-term lease liability, net		111,911		112,697
Total lease liabilities		$	139,995	$	139,962


		Three Months Ended
Lease cost (in thousands)	Classification		March 31, 2024		March 31, 2023
Operating lease cost	SG&A expenses	$	9,536	$	8,892
Variable lease cost⁽¹⁾	SG&A expenses		3,759		3,557
Short term lease cost	SG&A expenses		77		79
Net lease cost		$	13,372	$	12,528

⁽¹⁾Variable lease cost consists primarily of taxes, insurance, and common area or other maintenance costs for the Company’s leased facilities.


	Three Months Ended
Other Information (in thousands)		March 31, 2024		March 31, 2023
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	9,644	$	9,472
Lease right-of-use assets obtained or modified in exchange for lease obligations	$	6,588	$	6,700

Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2024

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

Note 9: Fair Value of Financial Instruments

Level 1 – Unadjusted quoted prices that are available in active markets for the identical assets or liabilities at the measurement date.

Level 2 – Significant other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly, including:

Quoted prices for similar assets or liabilities in active markets;

Quoted prices for identical or similar assets or liabilities in non-active markets;

Inputs other than quoted prices that are observable for the asset or liability; and

Inputs that are derived principally from or corroborated by other observable market data.

Level 3 – Significant unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment.

	Pricing	Fair Value at
	Category	March 31, 2024		December 31, 2023
Assets		(in thousands)
Cash and cash equivalents	Level 1	$	24,027	$	8,620

Cash and cash equivalents: Consists of cash on hand and bank deposits. The value was measured using quoted market prices in active markets. The carrying amount approximates fair value.

Equity Incentive Plans

3 Months Ended

Mar. 31, 2024

Equity Incentive Plans [Abstract]

Equity Incentive Plans

Note 10: Equity Incentive Plans

Stock options:

As of March 31, 2024, the Company had fully vested outstanding stock options to purchase 295,367 shares of common stock at a weighted average exercise price of $7.07 per share.

Restricted stock:

As of March 31, 2024, the Company had 920,681 unvested outstanding restricted common shares.

Background (Policy)	3 Months Ended
Background (Policy)	Mar. 31, 2024
Background [Abstract]
Nature of Business	The Company is a specialty retailer of natural stone, man-made and luxury vinyl tiles, setting and maintenance materials, and related accessories in the United States. The Company manufactures its own setting and maintenance materials, such as thinset, grout, and sealers. The Company’s primary market is retail sales to consumers, contractors, designers and home builders. As of March 31, 2024, the Company had 142 stores in 31 states and the District of Columbia, with an average size of approximately 20,000 square feet. The Company has distribution centers located in Michigan, New Jersey, Oklahoma, Virginia and Wisconsin. The Company also has a sourcing office located in China.
Basis of Presentation	The accompanying Consolidated Financial Statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the rules and regulations for reporting on Form 10-Q. Accordingly, they do not include certain information and disclosures required for comprehensive financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature, including the elimination of all intercompany transactions. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2024. These statements should be read in conjunction with the Consolidated Financial Statements and footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. The accounting policies used in preparing these Consolidated Financial Statements are the same as those described in Note 1 to the Consolidated Financial Statements in such Form 10-K.

Revenues (Tables)

3 Months Ended

Mar. 31, 2024

Revenues [Abstract]

Schedule of Revenues Disaggregated by Product Category



	For the three months ended
	March 31,
	2024		2023
Man-made tiles⁽¹⁾	53	%	52	%
Natural stone tiles	22		23
Setting and maintenance materials	15		15
Accessories	8		8
Delivery service	2		2
Total	100	%	100	%

⁽¹⁾Man-made tile revenues include sales of luxury vinyl tile products.

Schedule of Components of Returns Reserve


	(in thousands)
	March 31,		December 31,
	2024		2023
Other current accrued liabilities	$	4,187	$	3,640
Other current assets		1,364		1,220
Sales returns reserve, net	$	2,823	$	2,420

Inventories (Tables)

3 Months Ended

Mar. 31, 2024

Inventories [Abstract]

Schedule of Inventories



	(in thousands)
	March 31,		December 31,
	2024		2023
Finished goods	$	87,067	$	92,205
Raw materials		1,768		1,474
Total	$	88,835	$	93,679

Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2024

Earnings Per Share [Abstract]

Schedule of Basic and Diluted Earnings Per Share


	(dollars in thousands, except per share data)
	For the three months ended
	March 31,
	2024		2023
Net income	$	1,689	$	2,512
Weighted average shares outstanding - basic		43,570,745		43,237,856
Effect of dilutive securities attributable to stock based awards		146,602		272,137
Weighted average shares outstanding - diluted		43,717,347		43,509,993
Income per common share:
Basic	$	0.04	$	0.06
Diluted	$	0.04	$	0.06
Anti-dilutive securities excluded from earnings per share calculation		139,319		720,701

Other Accrued Liabilities (Tables)

3 Months Ended

Mar. 31, 2024

Other Accrued Liabilities [Abstract]

Schedule of Other Accrued Liabilities



	(in thousands)
	March 31,		December 31,
	2024		2023
Customer deposits	$	14,878	$	10,719
Sales returns reserve		4,187		3,640
Accrued wages and salaries		4,975		5,523
Payroll and sales taxes		2,907		2,129
Other current liabilities		7,114		4,989
Total other accrued liabilities	$	34,061	$	27,000

Leases (Tables)

3 Months Ended

Mar. 31, 2024

Leases [Abstract]

Schedule of Lease Assets and Liabilities

Leases (in thousands)	Classification		March 31, 2024		December 31, 2023
Assets
Operating lease assets	Right of use asset	$	128,976	$	129,092
Total leased assets		$	128,976	$	129,092

Liabilities
Current
Operating	Current portion of lease liability	$	28,084	$	27,265
Noncurrent
Operating	Long-term lease liability, net		111,911		112,697
Total lease liabilities		$	139,995	$	139,962

Summary of Lease Cost


		Three Months Ended
Lease cost (in thousands)	Classification		March 31, 2024		March 31, 2023
Operating lease cost	SG&A expenses	$	9,536	$	8,892
Variable lease cost⁽¹⁾	SG&A expenses		3,759		3,557
Short term lease cost	SG&A expenses		77		79
Net lease cost		$	13,372	$	12,528

⁽¹⁾Variable lease cost consists primarily of taxes, insurance, and common area or other maintenance costs for the Company’s leased facilities.

Summary of Other Lease Information


	Three Months Ended
Other Information (in thousands)		March 31, 2024		March 31, 2023
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	9,644	$	9,472
Lease right-of-use assets obtained or modified in exchange for lease obligations	$	6,588	$	6,700

Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2024

Fair Value of Financial Instruments [Abstract]

Summary of Fair Value of Financial Assets Measured on a Recurring Basis

	Pricing	Fair Value at
	Category	March 31, 2024		December 31, 2023
Assets		(in thousands)
Cash and cash equivalents	Level 1	$	24,027	$	8,620

Background (Narrative) (Details)	Mar. 31, 2024 ft² store state
Background [Abstract]
Number of stores \| store	142
Number of states in which entity operates \| state	31
Area of stores \| ft²	20,000

Revenues (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended
Revenues (Narrative) (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Revenues [Abstract]
Customer deposit balance	$ 14,878	$ 10,719
Customer deposit balance, revenues recognized	9,500
Accounts receivable	$ 3,935	$ 2,882

Revenues (Schedule of Revenues Disaggregated by Product Category) (Details)	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Disaggregation of Revenue [Line Items]
Total revenue	100.00%	100.00%
Man-Made Tiles [Member]
Disaggregation of Revenue [Line Items]
Total revenue	53.00%	52.00%
Natural Stone Tiles [Member]
Disaggregation of Revenue [Line Items]
Total revenue	22.00%	23.00%
Setting And Maintenance Materials [Member]
Disaggregation of Revenue [Line Items]
Total revenue	15.00%	15.00%
Accessories [Member]
Disaggregation of Revenue [Line Items]
Total revenue	8.00%	8.00%
Delivery Service [Member]
Disaggregation of Revenue [Line Items]
Total revenue	2.00%	2.00%

Revenues (Schedule of Components of Returns Reserve) (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Revenues [Abstract]
Other current accrued liabilities	$ 4,187	$ 3,640
Other current assets	1,364	1,220
Sales returns reserve, net	$ 2,823	$ 2,420

Inventories (Narrative) (Details) - USD ($) $ in Millions	Mar. 31, 2024	Dec. 31, 2023
Inventories [Abstract]
Inventory, provision for shrinkage and other	$ 1.1	$ 1.3

Inventories (Schedule of Inventories) (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Backgrounds [Abstract]
Finished goods	$ 87,067	$ 92,205
Raw materials	1,768	1,474
Total	$ 88,835	$ 93,679

Income Taxes (Narrative) (Details) - USD ($)	3 Months Ended
Income Taxes (Narrative) (Details) - USD ($)	Mar. 31, 2024	Sep. 30, 2023	Mar. 31, 2023
Income Taxes [Abstract]
Provision for income taxes	$ 428,000		$ 815,000
Effective income tax rate		20.20%	24.50%
Liability for uncertain tax positions	0		$ 0
Income tax interest and penalties related to uncertain tax positions	$ 0		$ 0

Earnings Per Share (Schedule of Basic and Diluted Earnings Per Share) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Earnings Per Share [Abstract]
Net income	$ 1,689	$ 2,512
Weighted average shares outstanding - basic	43,570,745	43,237,856
Effect of dilutive securities attributable to stock based awards	146,602	272,137
Weighted average shares outstanding - diluted	43,717,347	43,509,993
Basic net income per share	$ 0.04	$ 0.06
Diluted net income per share	$ 0.04	$ 0.06
Anti-dilutive securities excluded from earnings per share calculation	139,319	720,701

Other Accrued Liabilities (Schedule of Other Accrued Liabilities) (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Other Accrued Liabilities [Abstract]
Customer deposits	$ 14,878	$ 10,719
Sales returns reserve	4,187	3,640
Accrued wages and salaries	4,975	5,523
Payroll and sales taxes	2,907	2,129
Other current liabilities	7,114	4,989
Total other accrued liabilities	$ 34,061	$ 27,000

Long-term Debt (Narrative) (Details) - USD ($)	3 Months Ended
Long-term Debt (Narrative) (Details) - USD ($)	Mar. 31, 2024	Mar. 31, 2023
Debt Instrument [Line Items]
Interest expense	$ 166,000	$ 798,000
Standby Letters of Credit [Member]
Debt Instrument [Line Items]
Standby letters of credit	$ 1,400,000
Credit Agreement [Member]
Debt Instrument [Line Items]
Fixed charge coverage ratio	1.20%
Rent adjusted leverage ratio	3.50%
Credit Agreement [Member] \| Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Credit facility, initiation date	Sep. 30, 2022
Borrowings outstanding	$ 75,000,000.0
Credit facility, amount outstanding	0
Credit facility, available borrowing capacity	$ 73,600,000
Credit Agreement [Member] \| SOFR Rate [Member] \| Minimum [Member] \| Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Credit facility, spread on variable interest rate	1.25%
Credit Agreement [Member] \| SOFR Rate [Member] \| Maximum [Member] \| Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Credit facility, spread on variable interest rate	1.75%
Credit Agreement [Member] \| Daily Simple SOFR Rate [Member] \| Minimum [Member] \| Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Credit facility, spread on variable interest rate	1.25%
Credit Agreement [Member] \| Daily Simple SOFR Rate [Member] \| Maximum [Member] \| Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Credit facility, spread on variable interest rate	1.75%
Credit Agreement [Member] \| Alternate Base Rate [Member] \| Minimum [Member] \| Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Credit facility, spread on variable interest rate	0.25%
Credit Agreement [Member] \| Alternate Base Rate [Member] \| Maximum [Member] \| Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Credit facility, spread on variable interest rate	0.75%

Leases (Narrative) (Details)	Mar. 31, 2024
Minimum [Member]
Lessee, Lease, Description [Line Items]
Operating lease term	10 years
Maximum [Member]
Lessee, Lease, Description [Line Items]
Operating lease term	15 years

Leases (Schedule of Lease Assets and Liabilities) (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Leases [Abstract]
Operating lease assets	$ 128,976	$ 129,092
Total leased assets	128,976	129,092
Current portion of lease liability	28,084	27,265
Long-term lease liability, net	111,911	112,697
Total lease liabilities	$ 139,995	$ 139,962

Leases (Summary of Lease Cost) (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Leases [Abstract]
Operating lease cost	$ 9,536	$ 8,892
Variable lease cost	3,759	3,557
Short term lease cost	77	79
Net lease cost	$ 13,372	$ 12,528

Leases (Summary of Other Lease Information) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Leases [Abstract]
Operating cash flows from operating leases	$ 9,644	$ 9,472
Lease right-of-use assets obtained or modified in exchange for lease obligations	$ 6,588	$ 6,700

Fair Value of Financial Instruments (Narrative) (Details) - USD ($)	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Fair Value of Financial Instruments [Abstract]
Asset impairment charges	$ 0	$ 112,000

Fair Value of Financial Instruments (Summary of Fair Value of Financial Assets Measured on a Recurring Basis) (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Level 1 [Member] \| Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash and cash equivalents	$ 24,027	$ 8,620

Equity Incentive Plans (Narrative) (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended
	Mar. 31, 2024	Sep. 30, 2023	Mar. 31, 2023	Sep. 30, 2022
2021 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares authorized	3,500,000
Employee Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 0.0
Stock options outstanding, weighted average exercise price	$ 7.07
Stock options outstanding	295,367
Employee Stock Option \| Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense			$ 0.1
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense		$ 0.3		$ 0.4
Restricted stock outstanding	920,681

Insider Trading Arrangements	3 Months Ended
Insider Trading Arrangements	Mar. 31, 2024
Insider Trading Arrangements [Line Items]
Rule 10b5-1 Arrangement Adopted Flag	false
Non-Rule 10b5-1 Arrangement Adopted Flag	false
Rule 10b5-1 Arrangement Terminated Flag	false
Non-Rule 10b5-1 Arrangement Terminated Flag	false

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