Escalade, Incorporated

Greetings and welcome to the Escalade First Quarter 2022 Results Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Patrick Griffin, Vice President of Investor Relations and Corporate Development. Thank you, Patrick. You may begin.

Thank you, Operator. I'm Patrick Griffin, Vice President of Investor Relations and Corporate Development. On behalf of the entire team at Escalade, I'd like to welcome you to our first quarter 2022 results conference call. Leading the call with me today are President and CEO Walt Glazer and Stephen Warren, Chief Financial Officer. Today's discussion contains forward-looking statements about future business and financial expectations. Actual results may vary significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including risks described in our periodic reports filed with the SEC. Except as required by law, we undertake no obligation to update our forward-looking statements. At the conclusion of our prepared remarks, we will open the line for questions. With that, I'd like to turn over the call to Walt.

Thank you, Patrick, and welcome to those joining us today for Escalade's first-ever quarterly earnings conference call. We appreciate your interest in our company and look forward to providing you with quarterly updates in the years ahead while working hard to create value for our shareholders through our growing portfolio of recreational brands. Our mission is connecting family and friends, creating memorable moments, and playing life to the fullest. Before we move into a discussion of our recent operational and financial highlights, I want to begin today's call with a high-level overview of our business, along with a summary of our strategic business priorities that we believe will continue to drive profitable growth. Since our company's inception 100 years ago, Escalade has assembled a portfolio of more than 30 leading sports and recreational brands serving a diverse, loyal base of customers. Outdoor categories include basketball, where Escalade is a leading supplier of high-end residential hoops with our Golrilla and Goal Setter brands. Backyard playground equipment supplied by Woodplay. Archery for youth to enthusiasts with Bear Archery. Water sports with our Rave brand. And outdoor games and licensed tailgating supplied by our Victory Tailgate Company. Pickleball is one of the fastest-growing sports in North America, and we were early with our authentic Onyx Endura Pickleball brands. Indoor categories include darting with AccuDart, WinMow, and Unicorn, table tennis with the leading Stiga and Ping Pong brands, game room with several leading brands including Brunswick Billiards, American Heritage, and American Legend, which cover billiards, shuffleboard, foosball, air hockey, poker tables, and related furniture and accessories. And finally, home fitness with our Lifeline and the Step brands. Product innovation remains central to our long-term profitable growth. During the first quarter, our Rave sports brand received Innovative Product of the Year Award from the Water Sports Industry Association for its new Big Easy boat towable. Bear Archery received several Reader Choice Awards for their compound bows from leading archery publications, and our Trophy Ridge brand received several awards and strong trade acceptance at the 2022 Archery Trade Association Show for our Digital React site, a technological advancement in archery sites. Our basketball brands incorporate dozens of patents for technology and enhancements developed by our in-house engineering team. At Escalade, we employ a hybrid sourcing model, one that leverages both domestic manufacturing facilities and international procurement capabilities. Today, we have three manufacturing facilities in the United States, one plant in Mexico, and a very strong Asia sourcing team. We balance our in-house production capabilities with imports as market conditions dictate. Recently, given higher freight costs and supply chain challenges, we've chosen to reshore certain products such as entry-level compound bows, umbrella bases, and fitness weight sets, and we are currently evaluating several additional opportunities. In the current environment, domestic production can be cost-effective while allowing for vastly improved inventory control and on-time delivery. During the last year, we've also added warehouse capacity to store additional buffer inventory in support of customer requirements. Prudent capital allocation is a key focus. Escalade generates healthy free cash flow, and we know that our future success is heavily influenced by how well we invest that capital. Our first priority is reinvesting in our core businesses to protect and build upon our leading market positions and making sure that we are providing great products at a fair price for our consumers. We invest in product development, as mentioned earlier. We buy tooling and equipment to improve quality, to increase capacity, and to enhance efficiency. We've been increasingly investing in digital tools and services to serve our trade partners to create consumer engagement and to provide our employees with the data and information they need to be successful. And we've been investing in our existing and new facilities to support growth. Our board and management remain firm believers in a robust return of capital program having returned nearly $45 million to shareholders since 2019, equally split between regular cash dividends and opportunistic share repurchases. Last month, our Board of Directors approved a dividend increase to 15 cents per quarter, an increase of 7.1%. Throughout our history, Escalade has been an active acquirer of complementary recreational brands and assets, During the past decade alone, we've completed 12 acquisitions, including substantial platform companies in new and adjacent markets, as well as smaller bolt-on acquisitions in existing categories. We've bought both successful business that would benefit from Escalade's resources, and we've bought assets out of bankruptcy. A common theme is businesses that fit our mission and create shareholder value. Finally, we've also sold businesses to redeploy capital where we expected to generate better returns. We also believe it's critical that the interests of the company, the board and the management team are aligned with our shareholders. We think one of the best ways to achieve this alignment is to have officers and directors who hold a significant equity position and escalate. To that end, our officers and directors ownership represents over 20% of the shares outstanding. Turning now to a discussion of our first quarter performance, we generated strong Q1 results versus the first quarter of 2021, highlighted by growth in net sales, EBITDA, and net income. First quarter net sales growth, excluding acquisition-related contributions, increased 12.2% in the first quarter, driven by strong organic growth across our basketball, archery, pickleball, and indoor game categories. It is important to note that some sales from Q2 were pulled forward into Q1 and we experienced a very favorable mix which enhanced our gross margin in the first quarter. We anticipate the global supply chain issues to continue for the foreseeable future with the current COVID situation in China and the West Coast Longshoremen contract coming up for renewal this summer. We are carefully monitoring point of sale data along with consumer behavior and sentiment given rising interest rates, inflation, and geopolitical uncertainty. We serve a broad range of consumers and have performed well in a variety of economic environments over the past century. We're leaders in a diverse range of categories with a wide range of price points to address consumer needs. In January, we completed the acquisition of Brunswick Billiards, the largest and oldest provider of billiard tables, game tables, and game room furniture in the United States. Founded in 1845, Brunswick is an iconic American brand. An interesting fact is that Abraham Lincoln owned a Brunswick billiard table. We view ourselves as the steward of this great brand, and just like all of our other great brands, we will invest, protect, and build upon its name and reputation. The Brunswick integration is well underway as we combine our talented teams to create a world-class billiards business. We expect the Brunswick acquisition will be accretive to earnings beginning in the second half of 2022. Following our completion of the Brunswick acquisition, along with our share repurchases and intentional purchase of buffer inventory intended to mitigate supply chain disruptions, our net leverage has increased versus historical levels while remaining manageable. At the end of the first quarter, our ratio of net debt to trailing 12 months EBITDA was 2.56. The remainder of 2022 debt reduction will be a focus and an excellent opportunity to increase shareholder value through deleveraging. With that, I turn the call over to Stephen for a review of our recent financial results.