ETHAN ALLEN INTERIORS INC Q3 FY2025 earnings call

• Company was founded 93 years ago in Vermont, went private in 1989, went public in 1993. Paid $711.3 million in dividends and repurchased $625.1 million in stock since 1989. Cash position is $183 million. Headcount reduced by 36% since 2019. - Financial results in third quarter had strong gross margin, managed expenses, positive operating cash flow, and robust balance sheet with no debt. - Tariff exposure: 75% of furniture made in North America (US, Mexico, Honduras), with limited exposure to China (less than 5% of total cost of goods). Took steps to mitigate tariff impact. - Initiatives: Focus on reinvention using technology, relevant offerings with classic and modern design perspectives, effective marketing leveraging technology, efficient manufacturing in North America, excellent national and retail logistics, and state-of-the-art retail design centers with talented designers.

Consolidated net sales for the third quarter were $142.7 million. The wholesale segment sales were elevated due to higher intercompany sales to retail, which also increased wholesale operating income. Retail segment written orders were down 13.2%, while wholesale orders decreased by 11.2%. The consolidated gross margin was 61.2% driven by lower raw material input costs, reduced headcount, higher average ticket price, and technology investments. Adjusted operating margin was 8%, compared to 10% a year ago. Adjusted diluted EPS was $0.38. Wholesale backlog was $54.6 million at March 31, showing a decline in the last three months.

• Exposure to tariffs which could impact costs. - Economic uncertainty, elevated interest rates, and challenging housing market which affect demand. - Changes in domestic and international conditions that could impact operations.

Q: How does tariffs affect Ethan Allen's relative positioning in the industry and any expected price increases?

A: Ethan Allen is less impacted by tariffs due to most manufacturing in North America. So far, no need to raise prices significantly as impact from tariffs is relatively small.

Q: Comment on April and early May demand trends relative to March quarter?

A: April had softness, but May so far shows somewhat more positive trend.

Q: Thoughts on using promotions to drive traffic and order intake?

A: Concerns about consumers mean increasing discounts not the best approach; will maintain offerings without special heavy promotions.

Q: Impact of changes in the State Department on contract business?

A: State Department has been more cautious recently, but contract still exists with lesser business coming in.

Q: SG&A increase and marketing plans?

A: Advertising expenses are more efficient due to technology; sending out 18 million digital magazines monthly with lower cost, will continue to increase marketing efficiency without increasing dollar cost