Q.E.P. Co., Inc. Reports Fiscal 2024 Nine Month and Third Quarter Financial Results

Q.E.P. CO., INC. (the “Company” or “QEP”) reported its consolidated results of operations for the first nine months and third quarter of its fiscal year 2024, which ended on November 30, 2023, and announced the declaration of a special dividend.

Results of Operations

During the third quarter of fiscal 2024, QEP successfully completed the divestment of its North American flooring businesses and its UK operations. As of the third quarter, these businesses are now classified as discontinued operations. Amounts for prior periods, including sales and operating income, have been reclassified to conform to this presentation.

QEP reported net sales of $233.1 million for the nine months ended November 30, 2023, a decrease of $23.8 million or 9.3% from the $256.9 million reported in the same period of fiscal 2023. The Company reported net sales of $74.6 million for the quarter ended November 30, 2023, which was comparable to the $74.5 million reported in the same period of fiscal 2023. The decrease in net sales was primarily due to a general softening in consumer demand in the domestic and international segments as well as the currency translation impact of the stronger U.S. Dollar in the current period.

The Company’s gross profit for the first nine months of fiscal 2024 was $74.3 million compared to $69.4 million in the corresponding fiscal 2023 period, an increase of $4.9 million or 7.0%. Gross profit for the third quarter of fiscal 2024 was $24.4 million, representing an increase of $3.7 million or 18.0%, from $20.7 million in the corresponding fiscal 2023 period. The Company’s gross margin as a percentage of net sales for the first nine months and third quarter of fiscal 2024 was 31.9% and 32.7%, respectively, which increased from 27.0% and 27.8% in the corresponding prior fiscal year periods, respectively. The increase in gross margin as a percentage of net sales was largely due to lower inbound freight costs.

Lewis Gould, Executive Chairman, commented on the Company’s results, “The third quarter was highlighted by significant progress in the ongoing realignment of the Company’s focus on its market leadership in flooring installation tools and accessories. During the quarter, we successfully completed the exit from our North American flooring product lines and divested our UK operations. Proceeds from these transactions have positioned the Company to become debt-free by fiscal year-end, with a healthy cash balance.”

Leonard Gould, President & Chief Executive Officer, added, “This strategic transformation allows the Company to intensify our focus on the innovation and expansion of our best-in-class product offerings to our diverse customer base, offsetting the softer consumer demand caused by the current macroeconomic backdrop of higher inflation and higher cost of borrowing.”

Operating expenses for the first nine months and third quarter of fiscal 2024 were $64.3 million and $21.8 million, respectively, or 27.6% and 29.2% of net sales in those periods, compared to $61.7 million and $18.6 million, respectively, or 24.0% and 24.9% of net sales in the comparable fiscal 2023 periods. The increase in operating expenses was due to higher personnel and transaction costs in the current period.

Interest expense has trended down in recent months as the significant repayment of debt has offset higher interest rates during the current period.

The provision for income taxes as a percentage of income before taxes was 28.0% for the first nine months and third quarter for both fiscal 2024 and fiscal 2023.

Net loss for the first nine months and third quarter of fiscal 2024 was $3.3 million and $5.9 million, respectively, or $0.97 and $1.76, respectively, per diluted share. Excluding discontinued operations, adjusted net income for the first nine months and third quarter of fiscal 2024 was $6.0 million and $1.6 million, respectively, or $1.79 and $0.48, respectively, per diluted share. For the comparable periods of fiscal 2023, adjusted net income was $4.4 million and $1.0 million, respectively, or $1.31 and $0.31, respectively, per diluted share.

Earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations for the first nine months and third quarter of fiscal 2024 was $11.2 million and $3.0 million, respectively, as compared to $8.9 million and $2.5 million for the first nine months and third quarter of fiscal 2023, respectively.

Cash provided by operations during the first nine months of fiscal 2024 was $29.7 million as compared to cash used in operations of $2.2 million in the first nine months of fiscal 2023, reflecting the reduction in inventory to more normalized levels from the elevated levels of the previous year. In the first nine months of fiscal 2024, cash provided by operations, along with proceeds from the sale of businesses, was used to reduce borrowings under the Company’s credit facilities, fund capital expenditures and increase cash balances.

Working capital as of November 30, 2023 was $59.0 million compared to $55.0 million at the end of fiscal 2023. Aggregate available cash, net of outstanding debt at the end of the third quarter of fiscal 2024 was $16.9 million compared to aggregate debt, net of available cash of $33.5 million or 43.0% of equity at the end of fiscal 2023.

Special Dividend

On January 9, 2024, the Board of Directors of the Company declared a special dividend of $1.00 per share or approximately $3.3 million. The dividend will be payable on February 16, 2024 to stockholders of record as of the close of business on January 22, 2024.

Mr. Lewis Gould stated, “The Board of Directors agreed to use a portion of the proceeds generated from our recent divestitures to return capital to its stockholders through the payment of a special dividend. The payment of related debt and the special dividend will not impact the Company’s ability to make strategic investments in the business and meet its operating needs in the coming year. The Company’s Board of Directors is committed to implementing additional initiatives to return value to our stockholders.”

For full results click here.

About QEP

Founded in 1979, Q.E.P. Co., Inc. is a leading designer, manufacturer and distributor of a broad range of best-inclass flooring and installation solutions for commercial and home improvement projects worldwide. QEP offers a comprehensive line of specialty installation tools, adhesives, and underlayment as well as a complete line of hardwood, luxury vinyl, and modular carpet tile. QEP sells its products throughout the world to home improvement retail centers, professional specialty distribution outlets, and flooring dealers under brand names including QEP®, LASH®, ROBERTS®, Vitrex®, Brutus®, PRCI®, Plasplugs®, Tomecanic®, Premix-Marbletite® (PMM), Apple Creek®, Homelux®, Capitol® and XPS Foam™. Brand names featured under QEP’s Harris Flooring Group® include Harris®, Kraus® and Naturally Aged Flooring™. QEP is headquartered in Boca Raton, Florida with offices in Canada, Europe, Asia, Australia and New Zealand.

Contact:

Enos Brown – Executive Vice President & CFO – (561) 994-5550

Source: Q.E.P. Co., Inc.