Tile Shop Holdings, Inc.

Good day and thank you for standing by. Welcome to the fourth quarter 2023 Tile Shop Holdings, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will hear a message advising your hand is raised. To withdraw your question, press star 1 again. Please note that today's conference is being recorded. I would now like to pass the call over to Mark Davis, Vice President of Investor Relations and Chief Accounting Officer. Please go ahead.

Thank you. Good morning, everyone, and welcome to the Tile Shop's fourth quarter earnings call. Joining me today are Cab 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. The 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 Kev.

Thanks, Mark. Good morning, everyone, and thank you for joining us today for an update on our business. During 2023, we were able to execute our strategy, manage expenses, and reduce inventory levels, which put us in a position to fully pay off our debt before the end of the year. I'm proud of this accomplishment, which highlights the cash flow generating strength of our business model, even in the face of a challenging macro backdrop. It's important to note that macroeconomic headwinds presented significant challenges to our business over the last year. During 2023, Existing home sales turnover, which we view as a key leading indicator to remodeling activity, continues to decline year over year. While this trend appears to be starting to moderate, it has created challenges across the home improvement industry. In recent months, consumer surveys indicated continued pressure in the levels of intent to complete home improvement projects, which extends to the hard surface flooring category. Given this backdrop, it is critical that we continue to execute our strategy to grow our shared wallet with our core customers. Growing our business with our professional customers remains important to our strategy. Professional customers represent a meaningful portion of our sales mix, and the referral business provided by professional customers is critical to our success. We invest in relationships and processes to help simplify the shopping experience for our pros. We're happy to host the pro in our stores as they work with their customers to make product selections, or by taking the lead in the design process with the pros and clients to help maximize the time they can spend on their job sites. The tiered discounts and cash rebates on referral sales are important benefits of our pro loyalty program that have helped propel sales connected to pros to over 70% of our sales mix. The combination of pro and referral sales have grown at a faster rate than our overall sales in the last several years. While this reflects progress with one important customer segment, we believe there's an opportunity to refine our strategy to connect with retail customers who are not working directly with a pro. These customers tend to take on smaller projects, such as a backsplash for a kitchen or an LVT project in a front entryway. Historically, we had a strong presence in this segment. However, over the past five years or so, our assortment moved toward more design-centric, on-trend, and expensive products as we targeted the higher-end customer. We believe we have an opportunity to regain share of retail customers seeking a DIY project by introducing more products at price points that are attractive to this customer segment. The introduction of LVT assortment about a year ago was one step taken to help cater to this type of customer. We have also introduced new retail financing options over the last year. And finally, we're excited to introduce a number of high-quality products in 2024 that will appeal to retail customers seeking value to complete a small project on a budget. We do all this with a continued focus on providing exceptional service to our customers by offering an unparalleled shopping experience where retail customers have the opportunity to work with our knowledgeable sales associates who are well-versed in design and installation techniques. The knowledge that our team provides to help a DIY customer differentiates the tile shop service offering versus our competition. Another initiative we have underway relates to our e-commerce platform. We've made a number of subtle changes to our website over the last year that have contributed to strong growth in online order activity. During the fourth quarter, our online orders grew by over 30% when compared to the same period last year. I'm particularly excited about the steps taken by our e-commerce, marketing, and distribution teams to revamp our sampling process. We've enhanced the presentation of the samples available to our customers, reduced the time it takes to fulfill a sample order, and improved our processes to follow up with customers who placed sample orders to ensure we're meeting our commitment to provide exceptional service. Sampling activity has picked up since making these changes. Moving to store growth. We continue to believe there are ample opportunities to continue to grow our business by focusing on executing our strategy across our existing 142 store base. At this time, we do not intend to open any new stores during 2024. We intend to continue to evaluate options to reposition our stores as opportunities arise in connection with lease renewals. I remain enthusiastic about the future of our business. While we are being challenged by macroeconomic headwinds, our team continues to meet the challenge, execute our strategy, and deliver results. I look forward to a continued success in 2024. With that, I'll now hand the call over to Carla.