9.7% Comparable Store Sales Growth

79.8% Operating Income Growth

19.3% Adjusted EBITDA Margin, 40.0% Adjusted EBITDA Growth

Diluted Earnings per Share of $0.07, growth of 133.3%

Non-GAAP Diluted Earnings per Share of $0.08, growth of 166.7%

MINNEAPOLIS, Oct. 20, 2015 (GLOBE NEWSWIRE) -- Tile Shop Holdings, Inc. (NASDAQ:TTS) (the “Company”), a specialty retailer of manufactured and natural stone tiles, setting and maintenance materials, and related accessories, today announced results for its third quarter ended September 30, 2015.

Net sales grew 15.3% to $72.4 million for the quarter ended September 30, 2015 compared with $62.8 million for the third quarter of 2014. The $9.6 million increase in sales was due to a comparable store sales increase of 9.7%, or $6.1 million in the quarter and incremental net sales of $3.5 million from stores not included in the comparable store base.

“We are pleased to report a very strong third quarter,” said Chris Homeister, CEO.  “The progress made on our key initiatives continues to yield positive returns, and our third quarter represented an important milestone in delivering improved operating leverage and significant earnings growth versus last year. Meaningful sequential improvements in both comparable store sales growth and gross margin were key to our results.”

Gross margin was 70.0% for the quarter compared with 69.2% for the third quarter of 2014. The gross margin rate improvement in the third quarter was primarily driven by reduced discounting and improved margin on customer delivery revenue. Gross margin for the nine months ended September 30, 2015 was 69.2%.

Selling, general and administrative costs for the third quarter were $44.0 million compared with $39.8 million for the third quarter of 2014. The $4.2 million increase was primarily driven by the costs associated with opening and operating new stores and variable expenses associated with revenue growth.

The Company opened one new store in the third quarter of 2015 in Haltom City, Texas, in the existing Dallas, Texas market.  As of the end of the quarter, the Company operates 111 stores in 31 states.

For the nine months ended September 30, 2015, net sales grew 14.0% from $193.9 million in 2014 to $221.1 million in 2015. Comparable store sales for the nine month period increased 6.6%.

Non-GAAP Information

The Company presents non-GAAP net income and Adjusted EBITDA to provide useful information to investors regarding the Company’s normalized operating performance.

On a non-GAAP basis, net income for the quarter was $3.9 million, compared to $1.6 million in the comparable prior year period.  Non-GAAP diluted earnings per share for the quarter ended September 30, 2015 were $0.08. Non-GAAP diluted earnings per share for the quarter ended September 30, 2014 were $0.03.

See the “Non-GAAP Net Income” table and the “Non-GAAP Financial Measures” section below for a reconciliation of non-GAAP to GAAP net income.

                                                                                                                                                                        

Non-GAAP Net Income         ($ in thousands, except share and per share data)		Three months ended       September 30,								Nine months ended       September 30,
			2015				2014				2015				2014
Reported income before income taxes	$		6,197		$		2,510		$		20,295		$		15,072
Loss on extinguishment of debt			-				-				194				-
Special charges			162				191				952				1,544
Non-GAAP net income before taxes			6,359				2,701				21,441				16,616
Provision for income taxes			2,500				1,083				8,858				6,646
Non-GAAP net income	$		3,859		$		1,618		$		12,583		$		9,970
Weighted average basic shares outstanding			51,161,348				51,016,487				51,137,650				51,006,610
Weighted average diluted shares outstanding			51,424,979				51,066,497				51,254,547				51,103,216
Basic earnings per share		$	0.08			$	0.03			$	0.25			$	0.20
Diluted earnings per share		$	0.08			$	0.03			$	0.25			$	0.20

  For the third quarter of 2015, Adjusted EBITDA was $13.9 million compared with $10.0 million for the third quarter of 2014, representing 40.0% growth. See the “Adjusted EBITDA” table and the “Non-GAAP Financial Measures” section below for a reconciliation of net income to Adjusted EBITDA.
 

                                                     

Adjusted EBITDA         ($ in thousands)		Three months ended         September 30,						Nine months ended         September 30,
		2015			2014			2015			2014
Net income	$	3,761		$	1,504		$	11,910		$	9,041
Interest expense		503			906			2,101			2,352
Income taxes		2,436			1,006			8,385			6,031
Depreciation and amortization		5,504			5,076			16,597			14,302
Special charges		162			191			952			1,544
Stock-based compensation		1,583			1,284			4,226			3,910
Adjusted EBITDA	$	13,949		$	9,967		$	44,171		$	37,180

  Financial Guidance                                                                                                                                  

The Company is providing updated expectations for full year 2015 based on past performance, anticipated new store openings and current economic conditions.

For the full year ending December 31, 2015 the Company expects:

                                                                                                      

($ in millions, except per share data)	2015				2014
Net sales	$289 - $292			$	257.2
Comparable store sales change	mid single digits				(0.4	%)
Gross Margin % of Net Sales	approx. 69%				69.6	%
Depreciation & Amortization	approx. $23			$	19.9
Stock Based Compensation	approx. $5			$	4.6
Effective Tax Rate	approx. 41%				41	%
Non-GAAP Earnings Per Share	$0.31 to $0.33			$	0.23
Adjusted EBITDA	$57 - $60			$	47.5
Fully diluted shares outstanding	approx. 51 million	51 million
New stores	7 to 8				19
Capital Expenditures	$18 to $20			$	41.2

Webcast and Conference Call

The Company will host a conference call via live webcast for investors and other interested parties beginning at 9:00 a.m. Eastern Time on Tuesday, October 20, 2015. Participants may access the live webcast by visiting the Company’s investor relations website at www.tileshop.com. The call can also be accessed by dialing (844) 421-0597, or (716) 247-5787 for international participants. A webcast replay of the call will be available on the Company’s Investor Relations website at www.tileshop.com.

Additional details can be located in the filing at www.tileshop.com under the Financial Information – SEC Filings section of its Investor Relations page.  

About Tile Shop Holdings and Tile Shop

The Tile Shop is a specialty retailer of manufactured and natural stone tiles, setting and maintenance materials, and related accessories in the United States. The Company offers a wide selection of high quality products, exclusive designs, knowledgeable staff and exceptional customer service, in an extensive showroom environment with more than 50 full-room tiled displays. The Company currently operates 111 stores in 31 states, with an average size of 22,000 square feet. The Tile Shop also sells products online at www.tileshop.com

Non-GAAP Financial Measures

The Company calculates Adjusted EBITDA by taking net income calculated in accordance with GAAP, and adjusting for interest expense, income taxes, depreciation and amortization, stock based compensation and other special, non-recurring charges including investigation and litigation costs.  Adjusted EBITDA margin is equal to Adjusted EBITDA divided by net sales.   Non-GAAP net income excludes loss on extinguishment of debt and special, non-recurring charges including investigation and litigation costs, and is net of tax.

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, and for budgeting and planning purposes.  These measures are used in monthly financial reports prepared for management and our board of directors.  We believe that the use of these 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.

FORWARD LOOKING STATEMENTS

This press release includes “forward looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995.  Forward-looking statements may be identified by the use of words such as “anticipate”, “believe”, “expect”, “estimate”, “plan”, “outlook”, and “project” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters.  These forward looking statements include any statements regarding the Company’s strategic and operational plan and expected financial performance (including the financial performance of new stores).  Forward looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved.  Forward looking statements are based on information available at the time those statements are made and/or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward looking statements, including but not limited to unforeseen events that may affect the retail market or the performance of the Company’s stores.  The Company does not intend, and undertakes no duty, to update this information to reflect future events or circumstances.  Investors are referred to the most recent reports filed with the SEC by the Company.

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

Tile Shop Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
($ in thousands, except share data)
		(Unaudited)						(Audited)
		September 30,         2015						December 31,         2014
ASSETS
Current assets:
Cash and cash equivalents	$			14,644			$			5,759
Trade receivables, net				2,248						1,712
Inventories				63,195						68,857
Income tax receivable				820						4,937
Deferred taxes and other current assets, net				8,281						7,268
Total current assets				89,188						88,533
Property, plant and equipment, net				134,789						139,294
Deferred taxes and other assets, net				24,169						24,363
TOTAL ASSETS	$			248,146			$			252,190
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$			15,621			$			13,759
Income tax payable				3,252						-
Other accrued liabilities				22,414						18,393
Total current liabilities				41,287						32,152
Long-term debt, net				57,555						88,525
Capital lease obligation, net				818						890
Deferred rent				35,320						33,163
Other long-term liabilities				3,260						3,765
TOTAL LIABILITIES				138,240						158,495
Stockholders’ equity:
Common stock, par value $0.0001; authorized: 100,000,000 shares; issued and outstanding: 51,376,166 and 51,314,005 shares, respectively				5						5
Preferred stock, par value $0.0001; authorized 10,000,000 shares; issued and outstanding: 0 shares				-						-
Additional paid-in-capital				178,678						174,371
Accumulated deficit				(68,771	)					(80,681	)
Accumulated other comprehensive income				(6	)					-
Total stockholders’ equity				109,906						93,695
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$			248,146			$			252,190

                                                                                                                                                    

Tile Shop Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
($ in thousands, except share, and per share data)
(Unaudited)
($ in thousands, except per share data)		Three months ended       September 30,										Nine months ended       September 30,
			2015					2014					2015					2014
Net sales	$		72,404			$		62,806			$		221,073			$		193,850
Cost of sales			21,691					19,348					68,096					58,957
Gross profit			50,713					43,458					152,977					134,893
Selling, general and administrative expenses			44,047					39,752					130,678					117,106
Income from operations			6,666					3,706					22,299					17,787
Interest expense			503					906					2,101					2,352
Other income (expense)			34					(290	)				97					(363	)
Income before income taxes			6,197					2,510					20,295					15,072
Provision income taxes			2,436					1,006					8,385					6,031
Net income	$		3,761			$		1,504			$		11,910			$		9,041
Earnings per common share:
Basic		$	0.07				$	0.03				$	0.23				$	0.18
Diluted		$	0.07				$	0.03				$	0.23				$	0.18
Weighted average shares outstanding:
Basic			51,161,348					51,016,487					51,137,650					51,006,610
Diluted			51,424,979					51,066,497					51,254,547					51,103,216
Rate Analysis
Tile Shop Holdings, Inc. and Subsidiaries
Rate Analysis
(Unaudited)
		Three Months ended         June 30,										Nine Months ended         June 30,
			2015					2014					2015					2014
Gross margin rate			70.0		%			69.2		%			69.2		%			69.6		%
SG&A expense rate			60.8		%			63.3		%			59.1		%			60.4		%
Income from operations margin rate			9.2		%			5.9		%			10.1		%			9.2		%
Adjusted EBITDA margin rate			19.3		%			15.9		%			20.0		%			19.2		%

Investors and Media:
Adam Hauser
763-852-2950
investorrelations@tileshop.com