Tile Shop Holdings, Inc. (TTSH) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. The 2020 annual meeting of the stockholders of Tile Shop Holdings is now called to order. I would like to extend our welcome to any stockholders attending this virtual annual meeting. [Operator Instructions] During the annual meeting, we will address questions from stockholders pertaining to the proposals being considered at that time, and stockholder questions and other topics will be addressed following the formal portion of the meeting. My name is Peter Kamin. I'm Chairman of the Board of the Directors of Tile Shop Holdings, and I will be serving as chairman of this meeting. In that capacity, I appoint Nancy DiMattia, our Senior Vice President and Chief Financial Officer, to act as secretary of the meeting. Broadridge Financial Solutions will serve as inspector of election for proxies submitted other than at this meeting, and Mark Davis will serve as inspector of election for votes submitted online during this virtual annual meeting. The oath and report of the inspector of election will be filed with the minutes of this meeting. Also present online today are the following members of our Board of Directors and Director nominees: Cabby Lolmaugh, Chief Executive Officer; Mark Bonney; Deborah Glasser; Peter Jacullo; and Linda Solheid. Also from legal counsel, Jurgita Ashley at Thompson Hine and from our auditor, Mindy Dragisich of Ernst & Young.

I have copies of proxy statement and notice of internet availability of proxy materials and an affidavit of mailing from Broadridge Financial Solutions stating that copies of the notice for the meeting were mailed to each stockholder of record as of close of business on June 1, 2020, the record date for this meeting and commencing June 4, 2020. These documents will be included in the minutes for this meeting.

According to the report of the inspector of election, we had 51,375,030 shares of common stock outstanding as of June 1, 2020, the record date, and 46,141,486 shares of common stock are represented at this meeting, either in person or by proxy. Because at least the majority of the outstanding shares of common stock are represented, there is a quorum. Therefore, this meeting is lawfully convened, and the polls for voting on all matters are hereby opened at this time. All stockholders entitled to vote at this meeting have the ability to do so online. If you are a stockholder entitled to vote and have not yet voted or if you want to change your previously cast vote, please do so via the website used to access this meeting. Please remember that if you've already voted by mailing in your proxy by telephone or online, it is not necessary to vote again. After voting has been completed on all matters on the agenda, we will close the polls, and the inspector of election will provide his preliminary report. The proxies solicited by the Board of Directors can be tallied at one time even though they contain 3 matters for consideration, and the votes cast online today can be handled the same way. Accordingly, I intend to first briefly discuss each matter to be acted on at this meeting. And at the conclusion of the discussion of all items, we will take the vote. Since no stockholder nominations or proposals were properly filed in advance of this meeting, the business of this meeting is limited to the 3 matters identified in the notice of meeting and described in our proxy statement. The vote required for each proposal is described in the proxy statement. The first item of business is the election of Peter H. Kamin and Mark J. Bonney as Class II directors to hold office until the 2023 Annual Meeting of Stockholders; and Deborah K. Glasser and Linda Solheid as Class III directors to hold office until the 2021 annual meeting of stockholders. No nominations may be made at this meeting. So therefore, I declare nominations to be closed. The second item of business is the ratification of the appointment of Ernst & Young LLP as the company's independent registered public accounting firm for the fiscal year ending December 31, 2020. The third item of business is the approval on a nonbinding and advisory basis of named Executive Officer compensation. Having reviewed the items of business before this meeting, are there any questions for the representative of Ernst & Young LLP or any other discussion with respect to these items of business? Seeing no further questions, we'll move on. The polls are about to close. So if you have not yet voted, please do so. [Voting]

The polls for voting on the matters before this meeting are hereby closed. The following preliminary results are based upon votes cast prior to the start of the meeting. The final voting results will be included with the minutes of this annual meeting and publicly announced by way of a filing with the Securities and Exchange Commission. First, each of the Director nominees has been duly elected to the Board, with each nominee receiving a plurality of the votes cast. Second, at least the majority in voting power of the votes cast by the holders of all shares of stock present or represented at this annual meeting and voting on this proposal have voted in favor of the proposal to ratify the appointment of Ernst & Young LLP as the company's independent registered public accounting firm for the fiscal year ending December 31, 2020. Therefore, this proposal has passed. Third, at least the majority in voting power of the votes cast by the holders of all shares of stock present or represented at this annual meeting and voting on this proposal have voted in favor of approving on a nonbinding and advisory basis named executive officer compensation. This advisory approval will be taken into consideration by the Board and the Compensation Committee. That concludes the business for the meeting. The meeting is now adjourned. I will now begin to respond to questions and other topics submitted during the annual meeting and invite you to ask any questions you might have regarding the company and its business. [Operator Instructions] I'll now turn over the meeting to Mark Davis, our Chief Accounting Officer, who will be moderating the Q&A session.

Thank you, Peter, and good morning. Our first question is for Cab. It reads, I realized that you haven't released your second quarter earnings yet, but could you please comment on the impact that COVID-19 has had on your business? And what you expect as we move through the second half of the year?

Good morning. Thank you for the question. You are correct. We haven't released our second quarter earnings, and we're looking forward to providing a more detailed update in a couple weeks. Now what I can share with you today is that we started the quarter seeing a sharp decline in traffic and sales. When we reported our first quarter earnings, we disclosed that our traffic and sales were down approximately 50% in April, due to store closures and shelter in place orders stemming from COVID-19. Now like many other retailers, we've seen conditions improve in May and June as restrictions have started the list, and we've been able to reopen our stores. Now this has been good for our business. Now as we look ahead towards the second half of 2020, we're cautiously optimistic that consumers will be shifting more of their spending away from categories like travel and entertainment and investing in their homes. This backdrop could provide a nice tailwind. However, we're also well aware that the fact that COVID cases are escalating in many of the markets we serve. This could result in a new round of restrictions during the second half of the year which would likely have a negative impact on our traffic and sales. Now given the uncertainty of the current situation, we're focusing on what we can control. Specifically, we're concentrating on improving retail execution in our stores, growing our relationships with our professional customers and managing our expenses. Now this was the winning formula that helped us achieve strong results during the first quarter and the key to help us ensure we're able to capitalize on improving conditions while limiting our exposure should conditions deteriorate.

Thank you, Cab. Our second question this morning is for Nancy. Nancy, could you please comment on the status of shareholder litigation? And if you have any comments on company plans of relisting on the stock exchange?

Our July 6 8-K gives the specifics of the settlement agreement, and we're currently working on the settlement stipulation. We expect to have that soon, and we'll release it when it's final. At this time, we're focused on finalizing the settlement stipulation and implementing the final settlement. I don't have any further comments at this time.

Thank you, Nancy. And that concludes the questions that have been submitted. I turn the meeting back over to you, Peter.

That concludes the business for the meeting. The meeting is now adjourned. Thanks, everyone, for your participation.

This now concludes the meeting. Thank you for joining, and have a pleasant day.