Escalade, Incorporated Q2 FY2026 earnings call

• Overall Financial Results • Net sales increased 6% year-over-year (YoY) to $57.7 million for Q2 2026 • Gross margin expanded 146 basis points YoY to 26.2%, driven by higher fixed cost absorption from increased sales volume and favorable sales mix • Net income hit $9.4 million (68 cents per diluted share), with EBITDA increasing $9.3 million YoY to $13.2 million • A one-time $9.9 million recovery of previously paid tariffs boosted Q2 operating results

• Product Innovation and New Launches • Launched the Hype Light and Adapt Max pickleball paddles under the Onyx Pickleball brand, targeting different player performance needs • Introduced the Gorilla HydroDunk corrosion-resistant pool basketball hoop, expanding the brand beyond traditional driveway basketball into the pool accessories market • Launched the Lucasi Halo T700 carbon fiber billiards shaft for serious players, delivering improved performance and control • New Trophy Ridge archery accessories launched at the start of 2026 saw strong market traction • New product placements in the safety category (canopy weights, plastic chain) drove business growth

• Balance Sheet and Working Capital • Despite inventory added from two 2025 H2 acquisitions, total inventory declined $1.5 million YoY, reflecting ongoing focus on working capital efficiency for free cash flow generation • Repaid nearly $1.8 million in long-term debt while increasing cash balances by $3.3 million; ended the quarter with $16.4 million in cash and equivalents and $14.9 million in total outstanding debt • Strengthening the balance sheet and maintaining financial flexibility remain core priorities

• Capital Deployment of Tariff Refunds • Portions of the $9.9 million tariff refund will be used to offset higher current costs for freight and commodities, and to cover potential new tariffs • Additional portions will be allocated to consumer and trade promotions, product innovation, and facility capital improvements to boost operational efficiency

Aggregate segment performance is not broken out into formal product segment financials in this transcript. High-level performance across key categories is as follows: 1) Archery: Strong sales growth driven by new product launches and the incremental contribution from the September 2025 Gold Tip acquisition, with market share gains in Trophy Ridge accessories. 2) Safety, table tennis, and basketball: Continued strong demand; basketball expanded into the pool accessory segment with the new Gorilla HydroDunk pool hoop. 3) Outdoor games: Softer demand that partially offset growth in other categories. 4) Pickleball: New product line expansion with two new paddle launches, supporting overall category growth. 5) Billiards: New premium product launch with the Lucasi Halo carbon fiber shaft, strengthening position in the core billiards category.

• Management expects inventory levels to decline further in the second half of 2026, as the company progresses toward its long-term target of approximately three times inventory terms • Management reaffirms confidence that Escalade's business model, new product pipeline, built-in operating leverage, and focus on execution will enable continued profitable top-line growth through the remainder of 2026 despite macroeconomic uncertainty • No formal full-year or second-half financial guidance numerical revision was provided in the transcript

• Macroeconomic headwinds including ongoing inflationary pressures (higher energy costs, elevated broad-based prices) could reduce consumer discretionary spending and create incremental upward pressure on Escalade's cost structure • Persistently higher freight and commodity costs create margin pressure, partially mitigated by the one-time tariff refund • Geopolitical instability is cited as a driver of current transitory high freight costs • Potential new import tariffs are identified as a future cost risk

Q: With higher freight and commodity costs pressuring margins, what is Escalade's near-term plan for price increases to pass these costs through to consumers, given ongoing inflation impacting consumer spending?

A: Management states current pricing is appropriate for the current market environment, and expects recent freight cost increases tied to geopolitical issues may be transitory. The company will use the one-time tariff refund to absorb current higher freight costs rather than implementing near-term price increases, and will fund incremental promotional activity in H2 2026 with portions of the refund.

Q: Can you provide more granular detail on which categories and new products delivered the market share gains that drove Q2 2026 topline growth?

A: The largest market share gains came from the Bear Archery segment's Trophy Ridge accessory line, where new sights, releases, and stabilizers launched at the start of 2026 have seen strong market adoption. Additional share gains and growth came from the safety category, driven by new placements for canopy weights and plastic chain product lines.