Tile Shop Holdings, Inc 10-Q for FY2025 Q3
Tile Shop Holdings, Inc. (TTSH)
About this 10-Q
Tile Shop Holdings, Inc filed this 10-Q on November 4, 2025, covering the quarter ended September 30, 2025 (FY2025 Q3).
Headline figures
Quarter ended September 30, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $83.06M
- down 1.7% from $84.51M a year earlier
- Net loss
- $1.61M
- compared with net income of $41K a year earlier
- Diluted EPS
- -$0.04
- compared with $0.00 a year earlier
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________
FORM
_____________________________
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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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:
_____________________________
(Exact name of registrant as specified in its charter)
_____________________________
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(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
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(Address of principal executive offices) | (Zip Code) |
(
(Registrant’s telephone number, including area code)
_____________________________
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
The |
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. 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). 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.
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Large accelerated filer | ¨ | x | |
Non-accelerated filer | ¨ | Smaller reporting company | |
| 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
As of November 3, 2025, there were
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TILE SHOP HOLDINGS, INC.
Table of Contents
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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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)
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| September 30, |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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Receivables, net |
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Inventories |
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Income tax receivable |
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Other current assets, net |
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Total Current Assets |
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Property, plant and equipment, net |
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Right of use asset |
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Deferred tax assets |
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Other assets |
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Total Assets |
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Liabilities and Stockholders' Equity |
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Current liabilities: |
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Accounts payable |
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Income tax payable |
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Current portion of lease liability |
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Other accrued liabilities |
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Total Current Liabilities |
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Long-term debt |
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Long-term lease liability, net |
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Other long-term liabilities |
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Total Liabilities |
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Stockholders’ Equity: |
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Common stock, par value $ |
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Preferred stock, par value $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total Stockholders' Equity |
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Total Liabilities and Stockholders' Equity |
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See accompanying Notes to Consolidated Financial Statements.
Tile Shop Holdings, Inc. and Subsidiaries
Consolidated Statements of Operations
(dollars in thousands, except per share data)
(unaudited)
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| Three Months Ended |
| Nine Months Ended | ||||||||
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Net sales |
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Cost of sales |
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Gross profit |
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Selling, general and administrative expenses |
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(Loss) Income from operations |
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Interest income/(expense), net |
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(Loss) Income before income taxes |
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Benefit (Provision) for income taxes |
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Net (loss) income |
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(Loss) Income per common share: |
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Basic |
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Diluted |
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Weighted average shares outstanding: |
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Basic |
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Diluted |
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See accompanying Notes to Consolidated Financial Statements.
Tile Shop Holdings, Inc. and Subsidiaries
Consolidated Statements of Comprehensive (Loss) Income
(dollars in thousands)
(unaudited)
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| Three Months Ended |
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Net (loss) income |
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Currency translation adjustment |
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Other comprehensive income |
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Comprehensive (loss) income |
| $ | ( |
| $ | |
| $ | ( |
| $ | |
See accompanying Notes to Consolidated Financial Statements.
Tile Shop Holdings, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
(dollars in thousands)
(unaudited)
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| Common stock |
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| Amount |
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| Accumulated |
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Balance at June 30, 2024 |
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Issuance of restricted shares |
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Stock based compensation |
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Tax withholdings related to net share settlements of stock based compensation awards |
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Foreign currency translation adjustments |
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Net income |
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Balance at September 30, 2024 |
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Balance at June 30, 2025 |
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Cancellation of restricted shares |
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Stock based compensation |
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Net loss |
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Balance at September 30, 2025 |
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See accompanying Notes to Consolidated Financial Statements.
Tile Shop Holdings, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
(dollars in thousands)
(unaudited)
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| Common stock |
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| Amount |
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| Accumulated |
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| Total | |||||
Balance at December 31, 2023 |
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Issuance of restricted shares |
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Cancellation of restricted shares |
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Stock based compensation |
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Tax withholdings related to net share settlements of stock based compensation awards |
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Foreign currency translation adjustments |
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Net income |
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Balance at September 30, 2024 |
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Balance at December 31, 2024 |
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Issuance of restricted shares |
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Cancellation of restricted shares |
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Stock based compensation |
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Tax withholdings related to net share settlements of stock based compensation awards |
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Net loss |
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Balance at September 30, 2025 |
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See accompanying Notes to Consolidated Financial Statements.
Tile Shop Holdings, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
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Cash Flows From Operating Activities |
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Net (loss) income |
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Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
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Depreciation and amortization |
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Amortization of debt issuance costs |
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(Gain) loss on disposals of property, plant and equipment |
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Impairment charges |
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Non-cash lease expense |
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Stock based compensation |
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Deferred income taxes |
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Changes in operating assets and liabilities: |
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Receivables, net |
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Inventories |
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Other current assets, net |
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Accounts payable |
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Income tax receivable / payable |
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Accrued expenses and other liabilities |
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Net cash provided by operating activities |
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Cash Flows From Investing Activities |
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Purchases of property, plant and equipment |
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Proceeds from insurance |
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Proceeds from the sale of property, plant and equipment |
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Net cash used in investing activities |
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Cash Flows From Financing Activities |
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Payments of long-term debt |
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Advances on line of credit |
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Employee taxes paid for shares withheld |
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Net cash used in financing activities |
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Effect of exchange rate changes on cash |
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Net change in cash and cash equivalents |
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Cash and cash equivalents beginning of period |
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Cash and cash equivalents end of period |
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Supplemental disclosure of cash flow information |
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Purchases of property, plant and equipment included in accounts payable and accrued expenses |
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Cash paid for interest |
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Cash paid for income taxes, net |
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See accompanying Notes to Consolidated Financial Statements.
Tile Shop Holdings, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited)
Tile Shop Holdings, Inc. (“Holdings,” and together with its wholly owned subsidiaries, the “Company”) was incorporated in Delaware in June 2012.
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, 2024. 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 the Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 27, 2025.
As previously disclosed, the Independent Transaction Committee (the “Transaction Committee”) of the Board of Directors of the Company (the “Board”) comprised of independent directors has recommended, and the Board has approved, a plan to delist its shares of common stock from trading on the Nasdaq Stock Market LLC, suspend its duty to file periodic reports and other information with the U.S. Securities and Exchange Commission (the “SEC”), and to terminate the registration of its common stock under the federal securities laws following the completion of a proposed reverse stock split, immediately followed by a forward stock split, subject to obtaining the requisite approval of the Company’s stockholders at a special meeting of the Company’s stockholders (the “Special Meeting”), which is expected to be held in December 2025.
Specifically, the Transaction Committee recommended and the Board approved a transaction (the “Going Dark Transaction”) whereby the Company would effect a reverse stock split of the common stock at a ratio not less than 1-for-
The primary purpose of the Reverse Stock Split is to enable the Company to reduce to and maintain the number of its record holders of common stock below
Tile Shop Holdings, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited)
company and to focus the Company's resources on enhancing long-term stockholder value. The Company anticipates savings of approximately $
The Board has determined the Going Dark Transaction is in the best interests of all the Company’s stockholders. The Company currently realizes none of the traditional benefits of public company status yet incurs all the significant annual expenses and indirect costs associated with being a public company. Without its public company status, the Company would have an ongoing cost structure befitting its current and foreseeable scale of operations and its management would be able to have an increased focus on core operations.
The Company filed a preliminary proxy statement on Schedule 14A on October 6, 2025. The Company intends to file a definitive proxy statement as soon as practicable. Subject to stockholder approval of the Reverse Stock Split at the Special Meeting, it is anticipated that the Reverse Stock Split would become effective shortly after the Special Meeting. Subject to receiving such stockholder approval, as soon as practicable after the Special Meeting, the Company expects to terminate the registration of its common stock with the SEC and de-list its common stock from the Nasdaq Stock Market LLC. As a result, at such time, (i) the Company would cease to file annual, quarterly, current, and other reports and documents with the SEC and (ii) our common stock would no longer be listed on the Nasdaq Stock Market LLC.
Even if the Stock Split is approved by stockholders at the Special Meeting, the Board may determine not to implement the Reverse Stock Split and complete the Going Dark Transaction if subsequently it determines that the Going Dark Transaction is not in the best interests of the Company and its stockholders.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this ASU improve the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. The Company will adopt this guidance as of December 31, 2025. The Company is currently evaluating the impact of this guidance on the Company’s consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU No. 2024-03 “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” This ASU requires public business entities to disclose, for interim and annual reporting periods, additional information about certain income statement expense categories. The requirements are effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027. Entities are permitted to apply either the prospective or retrospective transition methods. The Company is currently evaluating the impact that the adoption of this ASU will have on its consolidated financial statements and related disclosures.
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.
The following table presents revenues disaggregated by product category:
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| For the three months ended |
| For the nine months ended | ||||||||
| September 30, |
| September 30, | ||||||||
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
Man-made tiles(1) | | % |
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Natural stone tiles | |
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Setting and maintenance materials | |
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Accessories | |
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Delivery service | |
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Total | | % |
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(1) Man-made tile revenues include sales of luxury vinyl tile products.
Tile Shop Holdings, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited)
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 at 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 $
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 $
Customers may return purchased items for an exchange or refund. The Company records a reserve for estimated product returns based on 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 September 30, 2025 and December 31, 2024 were as follows:
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| 2024 | ||
Other current accrued liabilities |
| $ | |
| $ | |
Other current assets |
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Sales returns reserve, net |
| $ | |
| $ | |
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
Tile Shop Holdings, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited)
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 September 30, 2025 and December 31, 2024:
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| December 31, | ||
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| 2025 |
| 2024 | ||
Finished goods |
| $ | |
| $ | |
Raw materials |
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Total |
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| $ | |
Effective tax rates for the nine months ended September 30, 2025 and 2024 were based on the Company’s forecasted annualized effective tax rates and were adjusted for discrete items that occurred within each period. The Company’s effective tax rate was
The Company records interest and penalties relating to uncertain tax positions in income tax expense. As of both September 30, 2025 and 2024, the Company had
On July 4, 2025, the President signed H.R. 1, the One Big Beautiful Bill Act (“OBBBA”) into law. The OBBBA permanently extends several provisions of the Tax Cuts and Jobs Act (“TCJA”) that were previously scheduled to expire, including, but not limited to, the immediate expensing of qualified property under bonus depreciation. In addition, the OBBBA introduces modifications to various U.S. corporate tax provisions, such as changes to interest expense limitations, the treatment of research and development expenditures, and the international tax regime. The Company has completed an evaluation of the OBBBA and determined that the enacted changes do not have a material impact on the Company’s income tax provision for the quarter ended September 30, 2025. The Company will continue to monitor future regulatory guidance and assess the potential impact of any subsequent developments related to the OBBBA.
Basic (loss) earnings per share is calculated by dividing net (loss) income by the weighted-average number of common shares outstanding during the period. Diluted (loss) earnings per share is calculated by dividing net (loss) 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 (loss) earnings per share were calculated as follows:
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| For the three months ended |
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| September 30, |
| September 30, | ||||||||
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
Net (loss) income | $ | ( |
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| $ | ( |
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Weighted average shares outstanding - basic |
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Effect of dilutive securities attributable to stock based awards |
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Weighted average shares outstanding - diluted |
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(Loss) Income per common share: |
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Basic | $ | ( |
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Diluted | $ | ( |
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| $ | ( |
| $ | |
Anti-dilutive securities excluded from earnings per share calculation |
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Tile Shop Holdings, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited)
Other accrued liabilities consisted of the following:
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| December 31, | ||
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| 2025 |
| 2024 | ||
Customer deposits |
| $ | |
| $ | |
Sales returns reserve |
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Accrued wages and salaries |
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Payroll and sales taxes |
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Other current liabilities |
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Total other accrued liabilities |
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| $ | |
On
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
The Company had
The Company leases its retail stores, certain distribution space, and office space. Leases generally have an initial term of to
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Leases (in thousands) | Classification |
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| September 30, 2025 |
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Assets |
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Operating lease assets | Right of use asset |
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Total leased assets |
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Noncurrent |
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Operating | Long-term lease liability, net |
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Total lease liabilities |
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| $ | |
Tile Shop Holdings, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited)
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Lease cost (in thousands) | Classification |
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| September 30, 2025 |
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Operating lease cost | SG&A expenses |
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Variable lease cost(1) | SG&A expenses |
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Lease cost (in thousands) | Classification |
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| September 30, 2025 |
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Operating lease cost | SG&A expenses |
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Variable lease cost(1) | SG&A expenses |
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Short term lease cost | SG&A expenses |
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Net lease cost |
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(1) Variable lease cost consists primarily of taxes, insurance, and common area or other maintenance costs for the Company’s leased facilities.
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Other Information (in thousands) |
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| September 30, 2025 |
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Cash paid for amounts included in the measurement of lease liabilities |
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Operating cash flows from operating leases |
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Lease right-of-use assets obtained or modified in exchange for lease obligations |
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| $ | |
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.
Tile Shop Holdings, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited)
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 September 30, 2025 and December 31, 2024 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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| September 30, 2025 |
| December 31, 2024 | ||
Assets |
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Cash and cash equivalents |
| Level 1 |
| $ | |
| $ | |
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, bank deposits and money market funds primarily held in short term US treasury securities. 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 and nine months ended September 30, 2025, the Company recorded $
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
Stock options:
The Company measures and recognizes compensation expense for all stock based awards at fair value. The financial statements for the three and nine months ended September 30, 2025 and 2024 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
As of September 30, 2025, the Company had fully vested outstanding stock options to purchase
Tile Shop Holdings, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(unaudited)
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 $
As of September 30, 2025, the Company had
The Company’s Chief Executive Officer is the Chief Operating Decision Maker (“CODM”). The CODM utilizes the Company’s annual budget planning process, which includes Company-wide initiatives, as a key input to resource allocation. The CODM makes decisions on resource allocation and evaluates financial performance on a total Company basis; therefore, the Company has
The Company has concluded that consolidated net (loss) income is the measure of segment profitability. The following table presents the Company’s segment revenue and gross profit, significant segment expenses, segment (loss) income from operations and net (loss) income provided to the CODM:
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| September 30, |
| September 30, | ||||||||
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| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
Net sales |
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Cost of sales |
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Adjusted selling, general and administrative expenses* |
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(Loss) Income from operations |
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Interest income/(expense), net |
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(Loss) Income before income taxes |
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Benefit (Provision) for income taxes |
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Net (loss) income |
| $ | ( |
| $ | |
| $ | ( |
| $ | |
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, 2024 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, the Going Dark Transaction, including the timing and stockholder approval of the Reverse Stock Split and our ability to realize the anticipated benefits (as defined below); 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 high inflation or fluctuating interest rates, tariffs and other trade barriers and restrictions, instability in the global banking system, a prolonged shutdown of the U.S. federal government, geopolitical instability or the possibility of an economic downturn or recession or other macroeconomic factors; the impact of ongoing supply chain disruptions (including tariffs) 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, including the impacts of tariffs and other trade barriers and restrictions and resulting volatility in the financial, capital and bond markets, 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; the impact of U.S. trade tensions, including increased tariffs and retaliatory measures imposed by foreign governments; our expectations with respect to ongoing compliance with the terms of the Credit Agreement (as defined below), including fluctuating 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 requirements; the impact of corporate citizenship; labor shortages and our expectations regarding the effects of employee recruiting, training, mentoring, and retention on our business; tax-related risks; the potential impact of cybersecurity breaches or disruptions to our management information systems or to third-party information technology systems upon which we rely; widespread outages, interruptions or other failures of operational, communication, or other 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 and other catastrophic events; risks inherent in operating as a holding company; our ability to maintain effective 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, 2024 and in this Quarterly Report on 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 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.
Recent Developments
As previously disclosed, the Independent Transaction Committee (the “Transaction Committee”) of the Board of Directors of the Company (the “Board”) comprised of independent directors has recommended, and the Board has approved, a plan to delist its shares of common stock from trading on the Nasdaq Stock Market LLC, suspend its duty to file periodic reports and other information with the U.S. Securities and Exchange Commission (the “SEC”), and to terminate the registration of its common stock under the federal securities laws following the completion of a proposed reverse stock split, immediately followed by a forward stock split, subject to obtaining the requisite approval of the Company’s stockholders at a special meeting of the Company’s stockholders (the “Special Meeting”), which is expected to be held in December 2025.
Specifically, the Transaction Committee recommended and the Board approved a transaction (the “Going Dark Transaction”) whereby the Company would effect a reverse stock split of the common stock at a ratio not less than 1-for-2,000 and not greater than 1-for-4,000 (the “Reverse Stock Split”), followed immediately by a forward stock split of the common stock at the same ratio but inverse (i.e., if the Reverse Stock Split were 1-for-3,000, then the Forward Stock Split would be 3,000-for-1) (the “Forward Stock Split,” and together with the Reverse Stock Split, the “Stock Split”). As a result of the Reverse Stock Split, each share of common stock held by a stockholder of record owning immediately prior to the effective time fewer than the minimum number of shares, which, depending on the Stock Split ratio chosen by the Board, would be between 2,000 and 4,000 shares (the “Minimum Number”), would be converted into the right to receive $6.60 in cash (the “Cash-Out Price”), without interest, and such stockholders would no longer be stockholders of the Company. Stockholders owning a number of shares of common stock equal to or greater than the Minimum Number immediately prior to the effective time of the Reverse Stock Split (the “Continuing Stockholders”) would not be entitled to receive any cash for their fractional share interests resulting from the Reverse Stock Split, if any. The Forward Stock Split, which would immediately follow the Reverse Stock Split, would reconvert whole shares and fractional share interests held by the Continuing Stockholders back into the same number of shares of the common stock held by such Continuing Stockholders immediately before the effective time of the Reverse Stock Split. As a result of the Forward Stock Split, the total number of shares of common stock held by a Continuing Stockholder would not change as a result of the Reverse Stock Split. The Company estimates that as of October 22, 2025, based on a mid-point Reverse Stock Split ratio of 1-for-3,000, approximately 1,307,000 shares of common stock would be cashed out in the Reverse Stock Split and the aggregate cost to the Company of the Going Dark Transaction would be approximately $8.6 million, plus transaction expenses, which are estimated to be approximately $523,000. The Company expects to use cash on hand together with borrowings under its line of credit under the Credit Agreement, if necessary, to fund the Cash-Out Price.
The primary purpose of the Reverse Stock Split is to enable the Company to reduce to and maintain the number of its record holders of common stock below 300. The Company is taking these steps to avoid the substantial cost and expense of being a public reporting company and to focus the Company's resources on enhancing long-term stockholder value. The Company anticipates savings of approximately $2.4 million on an annual basis as a result of the Going Dark Transaction.
The Board has determined the Going Dark Transaction is in the best interests of all the Company’s stockholders. The Company currently realizes none of the traditional benefits of public company status yet incurs all the significant annual expenses and indirect costs associated with being a public company. Without its public company status, the Company would have an ongoing cost structure befitting its current and foreseeable scale of operations and its management would be able to have an increased focus on core operations.
The Company filed a preliminary proxy statement on Schedule 14A on October 6, 2025. The Company intends to file a definitive proxy statement as soon as practicable. Subject to stockholder approval of the Reverse Stock Split at the Special Meeting, it is anticipated that the Reverse Stock Split would become effective shortly after the Special Meeting. Subject to receiving such stockholder approval, as soon as practicable after the Special Meeting, the Company expects to terminate the registration of its common stock with the SEC and de-list its common stock from the Nasdaq Stock Market LLC. As a result, at such time, (i) the Company would cease to file annual, quarterly, current, and other reports and documents with the SEC and (ii) our common stock would no longer be listed on the Nasdaq Stock Market LLC.
Even if the Stock Split is approved by stockholders at the Special Meeting, the Board may determine not to implement the Reverse Stock Split and complete the Going Dark Transaction if subsequently it determines that the Going Dark Transaction is not in the best interests of the Company and its stockholders.
Introduction
Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with the MD&A included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, for important background regarding, among other things, our key business drivers.
In light of ongoing changes to U.S. trade policy, including the imposition of elevated tariffs on certain imported goods, the Company is evaluating a range of strategic options to manage the anticipated cost pressures including sourcing adjustments and pricing strategies. The degree of our exposure is dependent on (among other things) the type of goods, rates imposed and timing of the tariffs. We continue to analyze the impact of these tariffs on our business and actions we can take to minimize their impact.
In addition, there is meaningful uncertainty related to the confluence of different macroeconomic factors that could influence business conditions in the U.S. The Company continues to monitor the impacts of various macroeconomic factors, such as inflationary pressure, changes in monetary policy, decreasing consumer confidence and spending, the introduction of or changes in tariffs or trade barriers, employment rates, the ongoing U.S. federal government shutdown, and the potential for an economic downturn or recession. Such changes in macroeconomic conditions may lead to increased costs. Additionally, these macroeconomic trends could adversely affect the Company’s customers, which could impact their willingness to spend on the Company’s products and services, or their ability to make payments, which could negatively impact our financial results. While our risk expectation is that these different factors will moderate in the future, the timing and precise outlook for these improvements is uncertain, and we cannot predict the ultimate impact such factors will have on the Company’s business, financial condition, results of operation and cash flows, which will depend largely on future developments.
Overview and Recent Trends
We are a specialty retailer of man-made and natural stone tiles, luxury vinyl tiles, setting and maintenance materials, and related accessories in the United States. We offer a wide selection of high-quality products, exclusive designs, knowledgeable staff and exceptional customer service, in an extensive showroom environment with up to 50 full-room tiled displays. As of September 30, 2025, we operated 140 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 man-made and natural stone, luxury vinyl tiles, setting and maintenance materials, and related accessories in the United States.
We serve customers who seek to undertake a wide range of projects; however, many end customers choose to work with us when they choose to remodel their home. Historically, we have monitored existing home sales trends as a leading indicator of demand in our industry. While existing home sales trends have moderated in recent quarters, the level of existing home sales remains at historically low levels. We believe this has resulted in lower levels of demand for home improvement products and has affected our store traffic. Our comparable store sales decreased by 1.4% and 3.0% during the three and nine months ended September 30, 2025, respectively, due to lower levels of traffic in our stores.
Our gross margin rate decreased by (360) basis points to 62.9% during the third quarter of 2025 as compared to 66.5% during the third quarter of 2024. The decrease in gross margin rate was primarily due to an increase in product costs, an increase in customer delivery expenses and higher levels of discounting during the third quarter of 2025.
Many of the items we carry in our assortment are imported from vendors outside the U.S. We face uncertainty related to tariffs and other trade policies, which may increase the costs of securing products from our vendors. Tariffs and other non-tariff trade practices and policies may adversely affect our business in other ways beyond increased costs for our products. Historically, we have taken steps to shift our sourcing strategy away from countries with higher tariff rates in favor of other jurisdictions, but these countermeasures may prove to be ineffective and the ability to predict tariff rates in different countries may be difficult as policies may change on short notice. Uncertainty about trade policy, tariff rates, retaliatory tariffs, and other changes in practices affecting international trade might have an adverse effect on our business and results of operation and we may face challenges in implementing the optimal responses to changing trade conditions.
Selling, general and administrative expenses decreased $1.7 million, or 3.1%, from $56.0 million in the third quarter of 2024 to $54.2 million in the third quarter of 2025. The decrease was due to a $1.0 million reduction in selling, general and administrative expenses associated with the closure of our New Jersey and Wisconsin distribution centers, a $0.6 million decrease in wages associated with a reduction in staffing levels at our corporate offices and a $0.3 million decrease in variable compensation expenses. Excluding the impact of the New Jersey and Wisconsin distribution center closures, depreciation expense decreased an additional $0.5 million. These factors were partially offset by a $0.6 million increase in professional service expenses associated with the proposed delisting and deregistration of the Company as well as other legal expenses.
In response to the continued challenges facing our industry and our topline results, we closed our distribution center based in Spring Valley, WI during the second quarter of 2025. We did not incur any material asset impairment or severance costs in connection with
this distribution center closure. We anticipate the annualized benefit from closing this distribution center will be approximately $1.0 million.
In addition, we closed one store during the second quarter of 2025 and a second store during the third quarter of 2025 at the end of each store’s lease term. We did not incur any material asset impairment or severance costs in connection with the store closures.
On July 4, 2025, the President signed H.R. 1, the OBBBA into law. The OBBBA permanently extends several provisions of the TCJA that were previously scheduled to expire, including, but not limited to, the immediate expensing of qualified property under bonus depreciation. In addition, the OBBBA introduces modifications to various U.S. corporate tax provisions, such as changes to interest expense limitations, the treatment of research and development expenditures, and the international tax regime. The Company has completed an evaluation of the OBBBA and determined that the enacted changes do not have a material impact on the Company’s income tax provision for the quarter ended September 30, 2025. The Company will continue to monitor future regulatory guidance and assess the potential impact of any subsequent developments related to the OBBBA.
During the nine months ended September 30, 2025, we generated $11.3 million of operating cash flow, which was used to fund $7.9 million of capital expenditures. Cash and cash equivalents increased by $3.1 million from $21.0 million on December 31, 2024 to $24.1 million on September 30, 2025. As of September 30, 2025, we had no borrowings outstanding on our line of credit.
Key Components of our Consolidated Statements of Operations
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.
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 September 30, 2025 to the three months ended September 30, 2024
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| ($ in thousands) | ||||||||||
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| 2025 |
| % of sales(1) |
| 2024 |
| % of sales | ||||
Net sales |
| $ | 83,064 |
| 100.0 | % |
| $ | 84,505 |
| 100.0 | % |
Cost of sales |
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| 30,785 |
| 37.1 | % |
|
| 28,277 |
| 33.5 | % |
Gross profit |
|
| 52,279 |
| 62.9 | % |
|
| 56,228 |
| 66.5 | % |
Selling, general and administrative expenses |
|
| 54,245 |
| 65.3 | % |
|
| 55,978 |
| 66.2 | % |
(Loss) Income from operations |
|
| (1,966) |
| (2.4) | % |
|
| 250 |
| 0.3 | % |
Interest income/(expense), net |
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| 4 |
| 0.0 | % |
|
| (71) |
| (0.1) | % |
(Loss) Income before income taxes |
|
| (1,962) |
| (2.4) | % |
|
| 179 |
| 0.2 | % |
Benefit (Provision) for income taxes |
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| 348 |
| 0.4 | % |
|
| (138) |
| (0.2) | % |
Net (loss) income |
| $ | (1,614) |
| (1.9) | % |
| $ | 41 |
| 0.0 | % |
(1) Amounts do not foot due to rounding.
Net Sales Net sales for the third quarter of 2025 decreased $1.4 million, or 1.7%, compared with the third quarter of 2024. Sales decreased at comparable stores by 1.4% during the third quarter of 2025 compared to the third quarter of 2024, primarily due to a decrease in traffic.
Gross Profit Gross profit decreased $3.9 million, or 7.0%, in the third quarter of 2025 compared to the third quarter of 2024. The gross margin rate was 62.9% and 66.5% during the third quarter of 2025 and 2024, respectively. The decrease in the gross margin rate was primarily due to an increase in product costs, an increase in customer delivery expenses and higher levels of discounting during the third quarter of 2025.
Selling, General, and Administrative Expenses Selling, general, and administrative expenses decreased $1.7 million, or 3.1%, from $56.0 million in the third quarter of 2024 to $54.2 million in the third quarter of 2025. The decrease was due to a $1.0 million reduction in selling, general and administrative expenses associated with the closure of our New Jersey and Wisconsin distribution centers, a $0.6 million decrease in wages associated with a reduction in staffing levels at our corporate offices and a $0.3 million decrease in variable compensation expenses. Excluding the impact of the New Jersey and Wisconsin distribution center closures, depreciation expense decreased an additional $0.5 million. These factors were partially offset by a $0.6 million increase in professional service expenses associated with the proposed delisting and deregistration of the Company as well as other legal expenses.
Provision for Income Taxes The benefit (provision) for income taxes for the third quarter of 2025 and 2024 was $0.3 million and ($0.1) million, respectively. The change in the provision for income taxes was primarily due to taxable income in 2024 and a pretax loss in 2025. Our effective tax rate was 17.7% and 77.0% in the third quarter of 2025 and 2024, respectively. The decrease in the effective tax rate was largely due to the impact of permanent differences relative to the pretax income or pretax loss generated in each period.
Comparison of the nine months ended September 30, 2025 to the nine months ended September 30, 2024
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| ($ in thousands) | ||||||||||
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| 2025 |
| % of sales |
| 2024 |
| % of sales | ||||
Net sales |
| $ | 259,333 |
| 100.0 | % |
| $ | 267,617 |
| 100.0 | % |
Cost of sales |
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| 92,142 |
| 35.5 | % |
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| 90,739 |
| 33.9 | % |
Gross profit |
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| 167,191 |
| 64.5 | % |
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| 176,878 |
| 66.1 | % |
Selling, general and administrative expenses |
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| 168,535 |
| 65.0 | % |
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| 172,494 |
| 64.5 | % |
(Loss) Income from operations |
|
| (1,344) |
| (0.5) | % |
|
| 4,384 |
| 1.6 | % |
Interest income/(expense), net |
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| 52 |
| 0.0 | % |
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| (294) |
| (0.1) | % |
(Loss) Income before income taxes |
|
| (1,292) |
| (0.5) | % |
|
| 4,090 |
| 1.5 | % |
Benefit (Provision) for income taxes |
|
| 242 |
| 0.1 | % |
|
| (1,141) |
| (0.4) | % |
Net (loss) income |
| $ | (1,050) |
| (0.4) | % |
| $ | 2,949 |
| 1.1 | % |
Net Sales Net sales for the nine months ended September 30, 2025 decreased $8.3 million, or 3.1%, compared with the nine months ended September 30, 2024. Sales decreased at comparable stores by 3.0% during the nine months ended September 30, 2025 when compared to the nine months ended September 30, 2024, primarily due to a decrease in store traffic.
Gross Profit Gross profit for the nine months ended September 30, 2025 decreased $9.7 million, or 5.5%, compared with the nine months ended September 30, 2024. The gross margin rate was 64.5% and 66.1% for the nine months ended September 30, 2025 and
2024, respectively. The decrease in the gross margin rate was primarily due to an increase in product costs, an increase in customer delivery expenses and higher levels of discounting.
Selling, General, and Administrative Expenses Selling, general, and administrative expenses for the nine months ended September 30, 2025, decreased $4.0 million, or 2.3%, compared with the nine months ended September 30, 2024. The decrease was due to a $1.7 million reduction in selling, general and administrative expenses associated with the closure of our New Jersey and Wisconsin distribution centers, a $1.4 million decrease in wages associated with a reduction in staffing levels at our corporate offices, and a $1.2 million decrease in medical expenses. Excluding the impact of the New Jersey and Wisconsin distribution center closures, depreciation expense decreased an additional $1.8 million. These factors were partially offset by a $0.8 million increase in professional services, a $0.6 million increase in IT costs and a $0.5 million increase in display supply expenses.
Provision for Income Taxes The benefit (provision) for income taxes decreased $1.4 million for the nine months ended September 30, 2025 compared with the nine months ended September 30, 2024 due to a decrease in taxable income. Our effective tax rate for the nine months ended September 30, 2025 and 2024 was 18.7% and 27.9%, respectively. The decrease in the effective tax rate was largely due to the impact of permanent differences relative to the pretax income or pretax loss generated in each period.
Non-GAAP Measures
We calculate Adjusted EBITDA by taking net (loss) 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 (loss) 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 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 (loss) income for the three and nine months ended September 30, 2025 and 2024 is as follows:
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| ($ in thousands) | |||||||||||||
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| Three Months Ended | ||||||||||||
|
| September 30, | ||||||||||||
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| 2025 |
| % of sales(1) |
| 2024 |
| % of sales | ||||||
Net (loss) income |
| $ | (1,614) |
| (1.9) |
| % |
| $ | 41 |
| 0.0 |
| % |
Interest (income)/expense, net |
|
| (4) |
| (0.0) |
| % |
|
| 71 |
| 0.1 |
| % |
(Benefit) Provision for income taxes |
|
| (348) |
| (0.4) |
| % |
|
| 138 |
| 0.2 |
| % |
Depreciation and amortization |
|
| 3,711 |
| 4.5 |
| % |
|
| 4,458 |
| 5.3 |
| % |
Stock based compensation |
|
| 296 |
| 0.4 |
| % |
|
| 336 |
| 0.4 |
| % |
Adjusted EBITDA |
| $ | 2,041 |
| 2.5 |
| % |
| $ | 5,044 |
| 6.0 |
| % |
(1) Amounts do not foot due to rounding.
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| ($ in thousands) | |||||||||||||
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| Nine Months Ended | ||||||||||||
|
| September 30, | ||||||||||||
|
| 2025 |
| % of sales |
| 2024 |
| % of sales | ||||||
Net (loss) income |
| $ | (1,050) |
| (0.4) |
| % |
| $ | 2,949 |
| 1.1 |
| % |
Interest (income)/expense, net |
|
| (52) |
| (0.0) |
| % |
|
| 294 |
| 0.1 |
| % |
(Benefit) Provision for income taxes |
|
| (242) |
| (0.1) |
| % |
|
| 1,141 |
| 0.4 |
| % |
Depreciation and amortization |
|
| 11,906 |
| 4.6 |
| % |
|
| 13,802 |
| 5.2 |
| % |
Stock based compensation |
|
| 981 |
| 0.4 |
| % |
|
| 1,008 |
| 0.4 |
| % |
Adjusted EBITDA |
| $ | 11,543 |
| 4.5 |
| % |
| $ | 19,194 |
| 7.2 |
| % |
The calculation of pretax return on capital employed is as follows:
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| ($ in thousands) |
| ||||
|
| September 30, |
| ||||
|
| 2025(1) |
| 2024(1) |
| ||
(Loss) Income from Operations (trailing twelve months) |
| $ | (2,651) |
| $ | 5,854 |
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|
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Total Assets |
|
| 320,987 |
|
| 321,398 |
|
Less: Accounts payable |
|
| (25,202) |
|
| (22,726) |
|
Less: Income tax payable |
|
| (50) |
|
| (643) |
|
Less: Other accrued liabilities |
|
| (27,653) |
|
| (30,820) |
|
Less: Lease liability |
|
| (140,115) |
|
| (140,503) |
|
Less: Other long-term liabilities |
|
| (4,831) |
|
| (4,952) |
|
Capital Employed |
| $ | 123,136 |
| $ | 121,754 |
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|
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|
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Pretax Return on Capital Employed |
|
| (2.2) | % |
| 4.8 | % |
(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 $24.1 million of cash and cash equivalents at September 30, 2025, 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, LLC 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), 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 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 September 30, 2025.
We had no borrowings outstanding on our line of credit as of September 30, 2025. We have standby letters of credit outstanding related to our workers’ compensation and medical insurance policies. As of September 30, 2025, standby letters of credit totaled $1.2 million. As of September 30, 2025, there was $73.8 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 $7.9 million and $11.8 million for the nine months ended September 30, 2025 and 2024, respectively. Capital expenditures in 2025 were primarily due to investments in store remodels, merchandising, distribution and information technology assets.
Cash Flows
The following table summarizes our cash flow data for the nine months ended September 30, 2025 and 2024.
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| (in thousands) | ||||
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| Nine Months Ended | ||||
|
| September 30, | ||||
|
| 2025 |
| 2024 | ||
Net cash provided by operating activities |
| $ | 11,257 |
| $ | 28,511 |
Net cash used in investing activities |
|
| (7,785) |
|
| (11,661) |
Net cash used in financing activities |
|
| (284) |
|
| (481) |
Operating activities
Net cash provided by operating activities during the nine months ended September 30, 2025 was $11.3 million compared with $28.5 million during the nine months ended September 30, 2024. The decrease was primarily attributable to a decrease in net income and other working capital changes.
Investing activities
Net cash used in investing activities totaled $7.8 million for the nine months ended September 30, 2025 compared with $11.7 million for the nine months ended September 30, 2024. Cash used in investing activities during the nine months ended September 30, 2025 was primarily due to investments in store remodels, merchandising, distribution and information technology assets.
Financing activities
Net cash used in financing activities was $0.3 million for the nine months ended September 30, 2025 compared with $0.5 million for the nine months ended September 30, 2024. The decrease in cash outflows for financing activities from the nine months ended September 30, 2024 to nine months ended September 30, 2025 relates to the impact of employee shares withheld for employee stock award vestings.
Cash and cash equivalents totaled $24.1 million at September 30, 2025 compared with $21.0 million at December 31, 2024. Working capital was $43.7 million at September 30, 2025 compared with $41.4 million at December 31, 2024.
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, 2024.
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 evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2025 and concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q.
Changes in Internal Control Over Financial Reporting
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 September 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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
Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2024, includes a discussion of our risk factors. Except as set forth below, there have been no material changes in the risk factors described in such report.
Subject to stockholder approval at the Special Meeting, the Board has approved a plan to effectuate a reverse/forward stock split to reduce the number of record holders of the Company’s common stock and to delist and terminate the registration of the Company’s common stock under the Exchange Act.
If the proposed reverse/forward stock split is effected, the Company intends to delist and terminate the registration of its common stock under the Exchange Act. Following deregistration, the Company will no longer file annual reports on Form 10-K, quarterly reports on Form 10-Q, o current reports on Form 8-K. Accordingly, there will be significantly less information regarding the Company available to stockholders and potential investors. In addition, the Company will no longer be subject to the provisions of the Sarbanes-Oxley Act and certain of the liability provisions of the Exchange Act, although the Company will still be subject to the antifraud provisions of the Exchange Act and any applicable state securities laws. Following deregistration, the Company’s executive officers, directors and 10% stockholders will no longer be required to file reports relating to their transactions in the common stock with the SEC. In addition, the Company’s executive officers, directors and 10% stockholders will no longer be subject to the recovery of short-swing profits provision of the Exchange Act, and persons acquiring 5% of the common stock will no longer be required to report their beneficial ownership under the Exchange Act. In addition, as soon as practicable following the effective time of the reverse/forward stock split, the Company plans to delist its common stock from the Nasdaq Stock Market LLC. Any trading in our common stock after the delisting and deregistration would only occur in privately negotiated sales or potentially on the OTC Pink Market, if one or more brokers chooses to make a market for our common stock there and complies with applicable regulatory requirements; however, there can be no assurances regarding any such trading. The lack of public information and increased illiquidity will make trading in our shares of common stock more difficult, which may cause the value of our common stock to decrease.
We are vulnerable to changes in political and economic conditions, including the effects of tariffs and international trade wars.
The United States government has implemented significant tariffs measures, including a baseline tariff on products from all countries and higher rates targeting specific countries such as China, Vietnam, Mexico, Canada and the European Union. The United States, or foreign governments may, in the future, adjust and/or impose new quotas, duties, tariffs or reciprocal tariffs or other restrictions which may affect our operations and our ability to purchase imported merchandise at reasonable prices. These potential changes to the trade landscape may require price increases to maintain our target margins, or may cause shortages of certain products, either of which could adversely affect our sales and profitability. The ultimate impact of any tariffs or other trade measures will depend on various factors, including how long such tariffs remain in place, the ultimate levels of such tariffs and how other countries respond to the United States tariffs. We have historically, and intend to continue, to shift our sourcing strategy away from countries with higher tariffs in favor of suppliers in countries with more advantageous tariff rates; however, our ability to successfully execute this strategy depends on a variety of factors, including our ability to identify suppliers who can produce products that meet our quality standards or our ability to mitigate any logistical challenges, and the cost of moving production to the identified countries. If we are unable to mitigate tariff-related risks through supply chain adjustments, pricing strategies, or other measures, our financial performance could be negatively affected.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
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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) | ||
July 1, 2025 - July 31, 2025 |
| 17,795 | (1) | $ | 0.00 |
| - |
| $ | - |
August 1, 2025 - August 31, 2025 |
| - |
|
| - |
| - |
|
| - |
September 1, 2025 - September 30, 2025 |
| 46,434 | (2) |
| 0.00 |
| - |
|
| - |
|
| 64,229 |
| $ | 0.00 |
| - |
| $ | - |
(1) We cancelled 17,795 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 cancelled 46,434 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.
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 September 30, 2025, none of the Company’s directors or executive officers
ITEM 6. EXHIBITS
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|
Exhibit No. | Description |
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002. | |
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes Oxley Act of 2002. | |
Certifications of Chief Executive Officer Pursuant to Section 906 of the Sarbanes Oxley Act of 2002. | |
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 September 30, 2025 are formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive (Loss) 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.
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.
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| TILE SHOP HOLDINGS, INC. |
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Dated: November 4, 2025 | By: | /s/ CABELL H. LOLMAUGH |
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| Cabell H. Lolmaugh |
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| Chief Executive Officer |
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Dated: November 4, 2025 | By: | /s/ MARK B. DAVIS |
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| Mark B. Davis |
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| Chief Financial Officer |
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EXHIBIT 31.1
302 CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Cabell H. Lolmaugh, certify that:
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I have reviewed this quarterly report on Form 10-Q of Tile Shop Holdings, Inc.; |
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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; |
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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; |
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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: |
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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; |
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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; |
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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 |
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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 |
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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): |
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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 |
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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. |
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Date: November 4, 2025 |
/s/ CABELL H. LOLMAUGH |
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Cabell H. Lolmaugh |
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Chief Executive Officer |
EXHIBIT 31.2
302 CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Mark B. Davis, certify that:
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I have reviewed this quarterly report on Form 10-Q of Tile Shop Holdings, Inc.; |
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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; |
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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; |
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4. |
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: |
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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; |
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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; |
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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 |
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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 |
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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): |
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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 |
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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. |
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Date: November 4, 2025 |
/s/ MARK B. DAVIS |
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Mark B. Davis |
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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 September 30, 2025 (“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.
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Date: November 4, 2025 |
/s/ CABELL H. LOLMAUGH |
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Cabell H. Lolmaugh |
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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 September 30, 2025 (“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.
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Date: November 4, 2025 |
/s/ MARK B. DAVIS |
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Mark B. Davis |
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Chief Financial Officer |