Escalade, Inc. :ESCA-US: Earnings Analysis: Q3, 2017 By the Numbers : August 15, 2017

Escalade, Inc. reports financial results for the quarter ended July 31, 2017.

We analyze the earnings along side the following peers of Escalade, Inc. – Johnson Outdoors Inc. Class A, Callaway Golf Company, Nautilus Inc and Clarus Corporation (JOUT-US, ELY-US, NLS-US and CLAR-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 52.39 million, Net Earnings of USD 2.10 million.
  • Gross margins narrowed from 24.59% to 24.03% compared to the same period last year, operating (EBITDA) margins now 8.82% from 10.10%.
  • Year-on-year change in operating cash flow of 11.39% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • One-time items weakened operating performance.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-07-31 2017-03-31 2016-12-31 2016-09-30 2016-06-30
Relevant Numbers (Quarterly)
Revenues (mil) 52.39 30.81 45.83 38.79 48.46
Revenue Growth (%YOY) 8.11 -10.87 4.76 12.17 10.66
Earnings (mil) 2.1 1.39 3.46 4.24 2.09
Earnings Growth (%YOY) 0.29 -18.21 21.13 109.22 -35.13
Net Margin (%) 4 4.5 7.56 10.94 4.31
EPS 0.15 0.1 0.24 0.3 0.15
Return on Equity (%) 2.03 1.36 3.42 4.28 2.14
Return on Assets (%) 5.67 3.75 8.77 10.59 5.39

Access our Ratings and Scores for Escalade, Inc.

Market Share Versus Profits

Revenues History
Earnings History

ESCA-US‘s change in revenue this period compared to the same period last year of 8.11% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that ESCA-US is holding onto its market share. Also, for comparison purposes, revenues changed by 70.04% and earnings by 51.01% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings rose year-on-year. But this growth has not come as a result of improvement in gross margins or any cost control activities in its operations. Gross margins went from 24.03% to 24.59% for the same period last year, while operating margins (EBITDA margins) went from 8.82% to 10.10% over the same time frame.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

ESCA-US‘s decline in gross margins has not produced any significant offsetting improvement in its working capital . This leads Capital Cube to conclude that the decline in gross margins are likely from operating issues and not trade-offs with the balance sheet. Working capital days are currently 99.03 days, compared to last year’s level of 64.40 days.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

ESCA-US‘s change in operating cash flow of 11.39% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The expansion in operating (EBIT) margins from 6.20% to 6.36% has also impacted the company’s earnings growth. However, one-time items have been a drag on the operating performance. As a result, the company’s pretax margins contracted from 6.09% to 5.97%.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Escalade, Inc.

Company Profile

Escalade, Inc. engages in the provision of manufacturing and distribution of sporting goods. The company offers sports products in the field of archery, table tennis, basketball, fitness, game tables, billiard, dart and other outdoor sports. It distributes its products through retailers, specialty dealers, key on-line retailers, traditional department stores and mass merchants. The company’s brands include goalrilla, goalstter, goaliath, silverback, hoopstar, woodplay, bear, prince, unicorn, winmau, nodor, arachnid and triumph. Escalade was founded in 1922 and is headquartered in Evansville, IN.

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