Ethan Allen Reports Fiscal 2022 Third Quarter Results

Ethan Allen Interiors Inc. (“Ethan Allen” or the “Company”) today reported its financial and business results for its fiscal 2022 third quarter ended March 31, 2022.

Farooq Kathwari, Ethan Allen’s Chairman, President and CEO commented, “We are pleased to report double-digit growth in many key operating metrics including sales, income and earnings per share. Our vertically integrated business continues to produce strong results and positions us for future growth. Sales increased 11.7% to $197.7 million, gross margin increased to 60.4% and operating margin rose to 16.5%, resulting in diluted EPS of $0.97, an increase of 59.0%. We paid regular quarterly cash dividends and ended the quarter with a strong balance sheet, including cash and investments of $104.6 million as of March 31, 2022 and no debt. We have paid an annual cash dividend every year since 1996 and have increased our quarterly cash dividend each of the past three years.”

Mr. Kathwari continued, “As we celebrate 90 years of innovation, we remain focused on a single enterprise model while maintaining an entrepreneurial attitude. We introduced several key initiatives during the just completed third quarter including enhancing our commitment to good corporate governance practices by adding a new Board member, new product introductions in upholstery, home office, lighting, outdoor living, decorative accents and a new flooring program, the expansion of our upholstery manufacturing in North Carolina, the opening of a new concept retail design center in Westport, CT, combining enhanced technology and personal service, and expanding our critically important effective marketing campaign.”

“Despite the challenges faced during the quarter, we are managing through them to improve efficiencies, work through our backlog and service customers and consumers while achieving strong profitability. We also took selective price increases to counter rising raw material, freight and labor costs. While we are pleased with our third quarter performance, we also recognize there are several external factors, such as record inflation, rising interest rates, supply chain challenges and global unrest, that have created higher levels of uncertainty. We expect to see softening consumer interest in home furnishings and to address this expected trend, we remain focused on maintaining strong marketing programs, differentiation of relevant offerings, strong and talented associates, and control over our manufacturing and logistics. We remain cautiously optimistic,” concluded Mr. Kathwari.

Fiscal 2022 Third Quarter Highlights

• Consolidated net sales increased 11.7% to $197.7 million
  • Retail net sales of $166.7 million increased 17.9%
  • Wholesale net sales of $121.0 million increased 12.3%
• Demand trends remain strong
  • Wholesale segment written orders declined 0.2%; up 8.4% from the third quarter of fiscal 2019 (prior to the start of the COVID-19 pandemic)
  • Retail segment written orders declined 3.0%; up 18.2% compared with the third quarter of fiscal 2019
• Consolidated gross margin increased to 60.4% from strong retail segment sales, product pricing actions, a favorable product mix and higher manufacturing production partially offset by higher input and freight costs
• Operating margin of 16.5%; adjusted operating margin grew to 15.8% due to strong net sales growth, retail gross margin expansion and cost containment measures; selling, general and administrative expenses decreased from 46.2% to 44.7% of net sales, reflecting the Company’s operating leverage
• Diluted EPS of $0.97 compared with $0.61; adjusted diluted EPS of $0.93 increased 60.3% compared with $0.58
• Generated $17.3 million of cash from operating activities; cash and investments of $104.6 million
• Paid regular quarterly dividends of $0.29 per share on January 5, 2022 and February 23, 2022 totaling $14.7 million
• Announced the strengthening of the Company’s Board of Directors through the election of María Eugenia (Gina) Casar, effective January 25, 2022
• Expanded manufacturing capacity in North Carolina through the purchase of certain property, plant and equipment of Dimension Wood Products, Inc. on February 17, 2022
• Opened the Company’s seventh location in Connecticut, with the grand opening of a new concept design center in Westport; more recently on April 22, 2022, a new design center in Walnut Creek, CA was opened
• Ethan Allen Mexico was named environmentally and socially responsible in March 2022 by the Mexican Center for Corporate Philanthropy and the Alliance for Corporate Social Responsibility

Balance Sheet and Cash Flow

Total cash and cash equivalents were $95.0 million at March 31, 2022, compared with $104.6 million at June 30, 2021. Cash decreased $9.6 million during the first nine months of fiscal 2022 due to $40.1 million in cash dividends paid, including a special dividend of $19.0 million, capital expenditures of $9.0 million and net purchases of investments of $9.5 million partially offset by net cash provided by operating activities of $40.0 million and $10.6 million in proceeds received from sales of property, plant and equipment.

Cash from operating activities totaled $40.0 million, a decrease from $102.1 million in the prior year period primarily due to an increase in working capital partially offset by higher net income generated during the period. The increase in working capital was primarily from higher inventory to increase material availability to support expanded manufacturing and distribution capacity to meet written order growth. The combination of growing our inventory balance to support high demand and the change in customer deposits from increased net shipments led to the significant year-over-year change in working capital.

Inventories, net increased to $182.7 million at March 31, 2022, compared with $144.0 million at June 30, 2021, as the Company continues to increase its manufacturing productivity and service center inventory. The higher levels of inventory increased material availability to support increased production as well as to help protect against future supply chain disruptions and price increases.

Customer deposits from written orders increased $5.8 million during the first nine months and totaled $136.4 million at March 31, 2022. While manufacturing capacity has increased, demand continues to be well above pre-pandemic levels, which drove up customer deposits. Due to the strong written orders taken at both the retail and wholesale segments, order backlog increased and is up approximately 5% compared to the beginning of the fiscal year.

No debt outstanding as of March 31, 2022.

Dividends

On April 26, 2022, the Company’s Board of Directors declared and increased the regular quarterly cash dividend to $0.32 per share, payable on May 25, 2022, to shareholders of record at the close of business on May 10, 2022. Ethan Allen has a long history of returning capital to shareholders and is pleased to increase its regular quarterly cash dividend by 10%, which highlights the Company’s strong balance sheet and operating results.

Conference Call

Ethan Allen will host an analyst conference call today, April 28, 2022, at 5:00 PM (Eastern Time) to discuss its results. The analyst conference call will be webcast live from the Company’s Investor Relations website at ir.ethanallen.com.

The following information is provided for those who would like to participate:

• U.S. Participants:                      877-705-2976
• International Participants:         201-689-8798
• Meeting Number:                      13727696

For those unable to listen live, an archived recording of the call will be made available on the Company’s website referenced above for at least 60 days.

About Ethan Allen

Ethan Allen Interiors Inc. (NYSE: ETD) is a leading interior design company, manufacturer and retailer in the home furnishings marketplace. The Company is a global luxury home fashion brand that is vertically integrated from product design through home delivery, which offers its customers stylish product offerings, artisanal quality, and personalized service. The Company provides complimentary interior design service to its clients and sells a full range of home furnishings through a retail network of design centers located throughout the United States and abroad as well as online at ethanallen.com. Ethan Allen owns and operates ten manufacturing facilities located in the United States, Mexico and Honduras, including one sawmill, one rough mill and a lumberyard. Approximately 75% of its products are manufactured or assembled in these North American facilities.

For more information on Ethan Allen’s products and services, visit www.ethanallen.com.

Contact:

Matt McNulty – Senior Vice President, CFO and Treasurer – IR@ethanallen.com

Source: Ethan Allen Interiors Inc.