Tile Shop Holdings, Inc.

Ladies and gentlemen, please stand by. Your conference call will begin momentarily. Once again, ladies and gentlemen, thank you for calling. Please remain on your lines. Your conference call will begin momentarily. Thank you for your patience. Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Tile Shop Holdings Incorporated first quarter 2022 earnings conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during a session, you will need to press star then 1 on your telephone keypad. As a reminder, this conference call is being recorded. If you require any further assistance, please press star then 0. At this time, I would like to turn the conference over to Mr. Mark Davis.

Thank you. Good morning to everyone and welcome to the Tile Shops. first quarter earnings call. Joining me today are Kavi Loma, our Chief Executive Officer, and Carla Lunen, our Chief Financial Officer. Certain statements made during the call today constitute forward-looking statements made pursuant to and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties, that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in our earnings press release issued earlier and in our filings with the SEC. Forward-looking statements made today are as of the date of this call, and we do not undertake any obligation to update these forward-looking statements. Today's call will also include certain non-GAAP measurements. Please see our earnings release for a reconciliation of those non-GAAP financial measures, which has also been posted on our company website. With that, let me now turn the call over to Cavi. Cavi?

Thanks, Mark. Good morning, everyone, and thank you for joining us today for an update on our business and a review of our first quarter financial results. Earlier this morning, we reported revenues that eclipsed $100 million in a quarter for the first time in our history. We also set our fourth consecutive quarterly sales record. While home improvement tailwinds have continued and our recent pricing actions have contributed to our results, these results would not have been possible without the strong execution by the entire tile shop team. There are three specific areas I'd like to touch on this morning. First, our in-store execution continues to improve. Over the last year, we've made it a point to focus on our people, cultivate talent, and reinforce our brand promise to provide best-in-class service. Recall that it was just a little over a year ago when we started rebuilding our team by adding staff in our stores and expanding our store hours. We also increased the number of regional managers overseeing our 143-store portfolio from six to nine, which increased the level of interaction between sales leadership in each of our stores. We've been successful in strengthening our talent bench. At the same time, we've raised the bar and have been able to make a number of strategic moves to replace managers who are struggling to meet our expectations. Today, we're in a much better position with our staffing levels and the caliber of the talent managing our stores. Second, we continue to see strength in our professional customer channel, which exceeded 60% of our overall sales mix during the quarter. Our pro market managers have done a great job cultivating relationships with our best pros. Our loyalty program provides great benefits to our professional customers that include tiered discounts, referral rebates, and no fee job site delivery for the pros who do the most business with us. Our assortment includes products specifically sourced for our pros that include reputable brands in the industry, such as Weedy and Ardex. This has proven to be a winning formula that has helped us sustain growth and sales to this key customer segment. Third, the investments we've made in our digital commerce capabilities are also contributing to the improvement in our top-line results. For instance, we launched our visualizer last year, which gives our customers access to a virtual design studio. Additionally, We've enhanced the way we merchandise our inventory online and further merge the digital and in-store shopping experiences. Our constant work on our digital commerce is paying off. Online orders increased by over 30% between the first quarter of 2021 and the first quarter of 2022. While online orders still represent less than 5% of our overall orders, we are pleased with our progress and believe we have an opportunity for continued growth in digital sales. turning to our supply chain. In-stock levels have continued to get closer to pre-COVID levels, despite all the recent disruptions in the worldwide supply chain. We've successfully worked with a number of our suppliers to secure delivery of inventory that have been backordered, and we are now in a much better position from an inventory availability standpoint. While product availability continues to improve, inflationary cost pressure remains a challenge across the industry. We continue to see elevated rates for international container freight, and many of our vendors across the world are raising prices in response to increases in the cost of energy, labor, and other inflationary cost pressures. Currently, this is most pronounced in Europe, where natural gas prices have increased in recent months following Russia's invasion of Ukraine. Natural gas is a key resource used by our vendors to fire the kilns that are used to make ceramic, porcelain, and other man-made tiles. Further, increases in oil prices contribute to higher costs to extract stone from quarries around the world and to transport it for fabrication. In the near term, we anticipate that the cost pressures will persist. In response to these challenges, we're executing several actions. We're pulling forward some purchases on items to secure shipment before price increases go into effect. We're raising our prices. We completed a price increase in January of 2022. We also completed a similar price increase in April of 2022. While we continue to evaluate and adjust pricing in future periods, as it makes sense, and as always, we're evaluating alternative sources of supply across the globe, most recently targeting South America and the United States. We're always searching for the best vendors to deliver the best products and the best prices. The current inflationary backdrop is volatile, but I'm confident we have the right team in place to help navigate the current challenges I'll now hand the call over to Carla to touch on our financial results. Carla?