TILE SHOP HOLDINGS, INC. Q4 FY2023 earnings call

• In 2023, the company executed its strategy, managed expenses, and reduced inventory levels, fully paying off debt. - Macro headwinds affected the business, with declines in existing home sales turnover. - Focus on growing share of wallet with core customers, including professional customers where pro referral sales are over 70% of sales mix. - Plan to regain share of retail DIY customers by introducing products at attractive price points, including new LVT assortment and retail financing options. - E-commerce growth: Fourth quarter online orders grew by over 30% compared to the same period last year; revamped sampling process led to increased sampling activity. - No new store openings planned for 2024; continue to evaluate store repositioning opportunities.

Comparable Store Sales: Fourth quarter comparable store sales decreased by 3.2%, which was a 170 basis point improvement from the third quarter comps. For the full year 2023, comparable store sales decreased by 4.1%. Gross Margin: Fourth quarter gross margin rate was 64.7%, a +20 basis point increase compared to the fourth quarter of 2022. For the full year 2023, gross margin rate decreased by 120 basis points to 64.4%. SG&A Expenses: Fourth quarter SG&A expenses were $53.2 million, $700,000 lower than the fourth quarter of 2022. For the full year 2023, SG&A expenses decreased by $9.4 million or 4% from 2022.

• Anticipate continued margin expansion in 2024 but note recent freight rate increases from Panama and Suez Canals could impact this. - Pursuing strategies to grow LVT and back shelf sales, which have lower gross margin, and while comfortable with the trade-off (to increase gross profit and leverage fixed SG&A), outperformance could contract gross margin rates. - No new store openings planned for 2024.

• Recent freight rate increases in Panama and Suez Canals, especially on inbound containers from Asia, could impact expected margin expansion in 2024. - If LVT and back shelf sales outperform goals, there may be a contraction of gross margin rates.