Insiders ranked by realized 90-day signed return on their open-market trades at Tile Shop Holdings, Inc.. Minimum 3 scored trades. Returns are signed - a sale followed by a rally counts against the insider.
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.00pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
+0.00pp
Flat
Net-tone change vs last year's 10-K.
MD&A
-
Not scored
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Risk Factors (Item 1A)
72 words
RISK FACTORS
ITEM 1B .
UNRESOLVED STAFF COMMENTS
ITEM 1C.
CYBERSECURITY
ITEM 2 .
PROPERTIES
ITEM 3 .
LEGAL PROCEEDINGS
ITEM 4 .
MINE SAFETY DISCLOSURES
PART II
ITEM 5 .
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
ITEM 6.
[RESERVED]
ITEM 7 .
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MD&A (Item 7)
7,256 words
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CO NDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis together with our consolidated financial statements and related notes included elsewhere in this report. Among other things, those historical consolidated financial statements include more detailed information regarding the basis of presentation for the financial data than is included in the following discussion. This report contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify these statements by words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “depend,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “predict,” “project,” “seek,” “should,” “target,” “will,” “will likely result,” “would,” and similar expressions or variations, although some forward-looking statements are expressed differently. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. The forward-looking statements in this report relate to, among other things, statements about the perceived benefits of the Company’s delisting and deregistration, including our ability to realize the anticipated benefits of the Transaction; our business , marketing strategies, competitive and role in our industry and markets; an overall in the health of the economy, the tile industry, consumer confidence and spending, and the housing market, including as a result of high inflation or fluctuating interest rates, tariffs and other trade and restrictions, in the global banking system, geopolitical , or the possibility of an economic or or other macroeconomic factors; the impact of ongoing supply chain (including tariffs) and inflationary cost pressures, including increased materials, labor, energy, and transportation costs and decreased discretionary consumer spending; our ability to implement and realize the anticipated benefits of our strategic plan; our ability to anticipate consumer trends; any statements with respect to dividends or stock repurchases and timing, methods, and payment of same; the effectiveness of our marketing strategy; potential fluctuations in our comparable store sales; our expectations regarding our and our customers’ financing arrangements and our ability to obtain additional capital , including potential of obtaining financing due to market conditions resulting from geopolitical conditions, including the impacts of tariffs and other trade and restrictions and resulting in the financial, capital and bond markets, and other economic factors; supply costs and expectations, including the continued availability of sufficient products from our suppliers, risks related to relying on foreign suppliers, and the potential impact of the Russia-Ukraine, Israel/Hamas and other geopolitical on, among other things, product availability and pricing and timing and cost of deliveries; the impact of U.S. trade tensions, including increased tariffs and measures imposed by foreign governments; our expectations with respect to ongoing compliance with the terms of the credit facility, including fluctuating interest rates ; our ability to provide timely delivery to our customers ; the effect of regulations on us and our industry, and our suppliers’ compliance with such regulations, including any environmental requirements; the impact of corporate citizenship; labor and our expectations regarding the effects of employee recruiting, training, mentoring, and retention on our business; tax-related risks; the potential impact of cybersecurity or to our management information systems or to third-party information technology systems upon which we rely; widespread , or other of operational, communication or other systems; our ability to implement our information technology and other digital initiatives; our ability to effectively manage our online sales; costs and adequacy of insurance ; the potential impact of natural and other events; risks inherent in operating as a holding company; our ability to maintain internal control over financial reporting; the potential outcome of any legal proceedings; and risks related to ownership of our common stock.
These forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, many of which are difficult to predict and are outside of our control, that may cause our actual results, performance, or achievements to differ materially from any expected future results, performance, or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to:
the level of demand for o ur products;
our ability to grow and remain profitable in the highly competitive retail tile industry;
our ability to access additional capital when and as needed;
our ability to attract and retain qualified personnel;
changes in general economic, business and industry conditions, including any economic downturn or recession;
our ability to introduce new products that satisfy market demand; and
legal, regulatory, and tax developments, including additional requirements imposed by changes in domestic and foreign laws and regulations .
There is no assurance that our expectations will be realized. If one or more of these risks or uncertainties materialize, or if our underlying assumptions prove incorrect, actual results may vary materially from those expected, estimated, or projected. Such risks and uncertainties also include those set forth in Part I, Item 1A. “Risk Factors,” of this report. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Our forward-looking statements speak only as of the time that they are made and do not necessarily reflect our outlook at any other point in time. Except as
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required by law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or for any other reason.
Recent Developments
On December 3, 2025, the Company held the Special Meeting. At the Special Meeting the holders of the Company’s issued and outstanding shares of the common stock, entitled to vote approved, by a majority of the votes cast at the Special Meeting, an amendment to the Certificate of Incorporation to effect the Reverse Stock Split, followed immediately by the Forward Stock Split. The Board determined to effectuate (i) the Reverse Stock Split at a ratio of 1-for-3,000 and (ii) the Forward Stock Split at a ratio of 3,000-for-1. At the direction of the Board, on December 15, 2025, the Company filed the certificates of amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware to effect the Reverse Stock Split at 5:01 p.m., followed immediately by the Forward Stock Split at 5:02 p.m., respectively, on that day.
As a result of the Reverse Stock Split, each share of common stock held by a Cashed-Out Stockholder was converted into the right to receive $6.60 in cash, without interest, per whole share and such stockholders are no longer stockholders of the Company. Stockholders owning a number of shares of common stock equal to or greater than the Minimum Number immediately prior to the effective time of the Reverse Stock Split were not entitled to receive any cash for their fractional share interests resulting from the Reverse Stock Split, if any. The Forward Stock Split, which immediately followed the Reverse Stock Split, reconverted whole shares and fractional share interests held by the Continuing Stockholders back into the same number of shares of the common stock held by such Continuing Stockholders immediately prior to the effective time. As a result of the Forward Stock Split, the total number of shares of common stock held by a Continuing Stockholder did not change. Following the completion of the Reverse Stock Split, the Company paid an aggregate of approximately $32.2 million to the Cashed-Out Stockholders , including stockholders who held fewer than 3,000 shares of common stock through banks and brokers.
On December 17, 2025, the Company filed a Form 25 Notification of Removal from Listing and/or Registration, in order to voluntarily withdraw its common stock from listing on the Nasdaq and to deregister the common stock under Section 12(b) of the Exchange Act. Upon delisting from Nasdaq, on January 2, 2026, the Company filed a Form 15 with the SEC to deregister the common stock under Section 15(d) of the Exchange Act.
The Stock Splits had the effect of reducing the number of record holders of the Company’s common stock to a number below 300 (i.e., the level at or above which the Company is required to file reports with the SEC under the Exchange Act). The Stock Splits were undertaken as part of the Company’s plan to give effect to the Transaction (i.e., the actions the Company has taken to suspend, and events that occur as a result of such actions that have the effect of suspending, the Company’s reporting obligations under the Exchange Act, including effectuating the Stock Splits, delisting the Company’s common stock from trading on Nasdaq, terminating the registration of the Company’s common stock under Sections 12(b) and 12(g) of the Exchange Act and suspending the Company’s reporting obligations under Section 15(d) of the Exchange Act).
As a result of the Transaction, the Company will no longer be subject to the reporting requirements under the Exchange Act or other requirements applicable to a public company, including requirements under the Sarbanes-Oxley Act of 2002 and the listing standards of any national securities exchange. Following the filing of this Annual Report on Form 10-K for the year ended December 31, 2025, therefore, the Company will cease to file annual, quarterly, current, and other reports and documents with the SEC.
Introduction
In light of ongoing changes to U.S. trade policy, including the imposition of elevated tariffs on certain imported goods, the threat of new tariffs, and ongoing negotiations between the U.S. and other countries regarding trade arrangements and tariff levels, the Company is evaluating a range of strategic options to manage the anticipated cost pressures including sourcing adjustments and pricing strategies. The degree of our exposure is dependent on (among other things) the type of goods, rates imposed and timing of the tariffs. On February 20, 2026, the U.S. Supreme Court rendered a decision invalidating tariffs imposed under the International Emergency Economic Powers Act. This decision introduces uncertainty regarding potential refund processes and further uncertainty regarding future trade policy actions and could affect our cost structure and supply chain planning. We continue to monitor developments around the Supreme Court’s decision and evaluate its potential impact on our future financial results and business.
These tariffs, any resulting retaliatory tariffs and any related supply-chain disruptions could have a significant impact on the Company’s consolidated statement of operations and statement of cash flows. In response to currently applicable and potential future tariffs, we are continuing to evaluate actions we can take that are intended to minimize the impact of the tariffs on our financial position and results of operations. While we believe that these actions and policies will mitigate a substantial portion of the impact of
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the tariffs, we cannot provide any assurances that the tariffs or any resulting impediments to trade will not have a material effect on our consolidated statement of operations and statement of cash flows.
In addition, there is meaningful uncertainty related to the confluence of different macroeconomic factors that could influence business conditions in the U.S. The Company continues to monitor the impacts of various macroeconomic factors, such as inflationary pressure, changes in monetary policy, decreasing consumer confidence and spending, the introduction of or changes in tariffs or trade barriers, employment rates, the ongoing U.S. federal government shutdown, and the potential for an economic downturn or recession. Such changes in macroeconomic conditions may lead to increased costs. Additionally, these macroeconomic trends could adversely affect the Company’s customers, which could impact their willingness to spend on the Company’s products and services, or their ability to make payments, which could negatively impact our financial results. While our risk expectation is that these different factors will moderate in the future, the timing and precise outlook for these improvements is uncertain, and we cannot predict the ultimate impact such factors will have on the Company’s business, financial condition, results of operation and cash flows, which will depend largely on future developments.
Overview and Recent Trends
We are a specialty retailer of man-made and natural stone tiles, luxury vinyl tiles, setting and maintenance materials, and related accessories in the United States. We offer a wide selection of products, attractive prices, and exceptional customer service in an extensive showroom setting. As of December 31, 2025, we operated 140 stores in 31 states and the District of Columbia, with an average size of approximately 20,000 square feet.
We purchase our tile products and accessories directly from suppliers and manufacture our own setting and maintenance materials, such as thinset, grout, and sealers. We believe that our long-term supplier relationships, together with our design and manufacturing and distribution capabilities, enable us to offer a broad assortment of high-quality products to our customers, who are primarily homeowners and professionals, at competitive prices. We have invested significant resources to develop our proprietary brands and product sources, and we believe that we are a leading retailer of natural stone, man-made and luxury vinyl tiles, setting and maintenance materials, and related accessories in the United States.
The table below sets forth information about our net sales, operating (loss) income and stores opened from 2023 to 2025.
For the year ended December 31,
(in thousands, except store data)
Net sales
(Loss) Income from operations
Net cash provided by operating activities
New stores opened during period
We serve customers who seek to undertake a wide range of projects; however, many end customers choose to work with us when they choose to remodel their home. Historically, we have monitored existing home sales trends as a leading indicator of demand in our industry, which remained challenged during 2025. For the year ended December 31, 2025, our comparable store sales decreased by 2.8% due to lower levels of traffic, partially offset by an increase in average ticket value.
Our operating results are heavily dependent upon the prices paid to acquire man-made and natural stone products from our suppliers around the world. Cost increases from our suppliers as well as increases in tariffs paid to import tile products into the United States contributed to a 190 basis points decrease in our gross margin rate from 65.7% in 2024 to 63.8% in 2025.
Selling, general and administrative expenses decreased by $3.5 million, or 1.6%, from $224.4 million in 2024 to $220.8 million in 2025. The decrease was primarily due to a $2.6 million reduction in selling, general and administrative expenses associated with the closure of our New Jersey and Wisconsin distribution centers and a $1.1 million decrease in wages associated with reductions in staffing levels at our corporate offices. Excluding the impact of the New Jersey and Wisconsin distribution center closures, variable expenses decreased by $1.5 million and depreciation expense decreased by an additional $1.3 million, which were partially offset by a $1.1 million increase due to costs incurred in connection with the delisting process as well as an increase in other legal expenses, a $0.7 million increase in shipping, a $0.5 million increase in IT, a $0.5 million increase in operating supplies and a $0.4 million increase in marketing.
In response to the challenges faced in our industry and continued pressure on our topline results, during 2025, we took steps to close our distribution center located in Spring Valley, Wisconsin, reduce staffing levels at our corporate office and closed two store locations. We did not incur any material asset impairment or severance costs in connection with these actions. In February 2026, the Company sold its distribution center in Wisconsin for a total cash consideration of $1.2 million. The distribution center was classified
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as held for sale within other current assets, net in the consolidated balance sheet as of December 31, 2025, with a net book value of $0.4 million. The sale resulted in a gain of $0.8 million, which will be recognized in the first quarter of 2026.
Cash balances decreased by $10.9 million from $21.0 million on December 31, 2024 to $10.1 million on December 31, 2025. The decrease in cash was primarily due to cash disbursements of $32.0 million to fund shares repurchased in 2025 in connection with the Transaction and $9.6 million used to purchase property, plant and equipment that were partially offset by $5.8 million of operating cash flow and $25.0 million of borrowings on our line of credit. Borrowings outstanding on our revolving line of credit were $25.0 million as of December 31, 2025. As of December 31, 2024, we had no borrowings outstanding on our revolving line of credit.
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Selected Financial Data
The following table sets forth selected historical financial information derived from (i) our audited financial statements included elsewhere in this report as of December 31, 2025 and 2024 and for the years ended December 31, 2025, 2024, and 2023 and (ii) our audited financial statements not included elsewhere in this report as of December 31, 2023, 2022, and 2021 and for the years ended December 31, 2022 and 2021. The following selected financial data should be read in conjunction with the remainder of this section and the financial statements and the related notes appearing elsewhere in this report.
As of December 31, or for the year ended December 31,
(in thousands, except per share and store data)
Statement of Income Data
Net sales
Cost of sales
Gross profit
Selling, general and administrative
expenses
(Loss) Income from operations
Interest expense, net
(Loss) Income before income taxes
Benefit (Provision) for income taxes
Net (loss) income
(Loss) Earnings per share (diluted)
Weighted average shares
outstanding (diluted)
Balance Sheet Data
Cash and cash equivalents
Inventories
Total assets
Lease obligations
Total debt (1)
Total stockholders' equity
Working capital
Cash Flow Data
Net cash provided by operating
activities
Net cash used in investing activities
Net cash (used in) provided by
financing activities
Other Selected Financial Data
(unaudited)
Dividends paid per share
Adjusted EBITDA (2)
Adjusted EBITDA margin (2)
Gross margin rate (3)
Operating (loss) income margin (4)
Comparable store sales (decline) growth (5)
Stores open at end of period
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(1) Total debt includes current maturities of long-term debt and long-term debt balances.
(2) We calculate Adjusted EBITDA by taking net (loss) income calculated in accordance with accounting principles generally accepted in the United States (“GAAP”) and adjusting for interest expense, income taxes, depreciation and amortization, and stock based compensation expense. Adjusted EBITDA margin is equal to Adjusted EBITDA divided by net sales. For more information about Adjusted EBITDA and Adjusted EBITDA margin, see “Non-GAAP Measures” below.
(3) Gross margin rate is equal to gross profit divided by net sales.
(4) Operating (loss) income margin is equal to (loss) income from operations divided by net sales.
(5) Comparable store sales (decline) growth is the percentage change in sales of comparable stores period-over-period. A store is considered comparable on the first day of the 13th full month of operation. When a store is relocated, it is excluded from the comparable store sales growth calculation. Comparable store sales (decline) growth amounts include total charges to customers less any actual returns. We include the change in the allowance for anticipated sales returns applicable to comparable stores in the comparable store sales calculation. Comparable store sales data reported by other companies may be prepared on a different basis and therefore may not be useful for purposes of comparing our results to those of other businesses. Company management believes the comparable store sales (decline) growth metric provides useful information to both management and investors to evaluate the Company’s performance, the effectiveness of its strategy and its competitive position.
Key Components of our Consolidated Statements of Operations
Net Sales – Net sales represents total charges to customers, net of returns, and includes freight charged to customers. We recognize sales at the time that the customer takes control of the merchandise or final delivery of the product has occurred. We are required to charge and collect sales and other taxes on sales to our customers and remit these taxes back to government authorities. Total revenues do not include sales tax because we are a pass-through conduit for collecting and remitting sales tax. Sales are reduced by a reserve for anticipated sales returns that we estimate based on historical returns.
Comparable store sales (decline) growth is the percentage change in sales of comparable stores period-over-period. A store is considered comparable on the first day of the 13th full month of operation. When a store is relocated, it is excluded from the comparable store sales (decline) growth calculation. Comparable store sales (decline) growth amounts include total charges to customers less any actual returns. We include the change in allowance for anticipated sales returns applicable to comparable stores in the comparable store sales calculation. Comparable store sales data reported by other companies may be prepared on a different basis and therefore may not be useful for purposes of comparing our results to those of other businesses. Company management believes the comparable store sales (decline) growth metric provides useful information to both management and investors to evaluate the Company’s performance, the effectiveness of its strategy and its competitive position.
Cost of Sales – Cost of sales consists primarily of material costs, freight, customs and duty fees, and storage and delivery of product to the customers, as well as physical inventory losses and costs associated with manufacturing of setting and maintenance materials.
Gross Profit – Gross profit is net sales less cost of sales. Gross margin rate is the percentage determined by dividing gross profit by net sales.
Selling, General and Administrative Expenses – Selling, general and administrative expenses consist primarily of compensation costs, occupancy, utilities, and maintenance costs, advertising costs, shipping and transportation expenses to move inventory from our distribution centers to our stores, and depreciation and amortization.
Income Taxes – We are subject to income tax in the United States as well as other tax jurisdictions in which we conduct business.
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Comparison of the Year Ended December 31, 2025 to the Year Ended December 31, 2024
% of sales (1)
% of sales (1)
($ in thousands)
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
(Loss) Income from operations
Interest expense, net
(Loss) Income before income taxes
Benefit (Provision) for income taxes
Net (loss) income
(1) Amounts do not foot due to rounding.
Net Sales – Net sales decreased $10.3 million, or 3.0%, in 2025 compared to 2024. Sales at comparable stores decreased by 2.8% during 2025. The decrease in annual sales was primarily due to a decrease in traffic that was partially offset by a modest improvement in average order value.
Gross Profit – Gross profit decreased $12.9 million, or 5.6%, in 2025 compared to 2024. The gross margin rate was 63.8% and 65.7% for 2025 and 2024, respectively. The decrease in gross margin rate was primarily due to an increase in product costs, partially attributable to an increase in tariffs, an increase in customer delivery expenses and higher levels of discounting in 2025.
Selling, General and Administrative Expenses – Selling, general and administrative expenses decreased $3.5 million, or 1.6%, in 2025 compared to 2024. The decrease was primarily due to a $2.6 million reduction in selling, general and administrative expenses associated with the closure of our New Jersey and Wisconsin distribution centers and a $1.1 million decrease in wages associated with reductions in staffing levels at our corporate offices. Excluding the impact of the New Jersey and Wisconsin distribution center closures, variable expenses decreased by $1.5 million and depreciation expense decreased by an additional $1.3 million, which were partially offset by a $1.1 million increase due to costs incurred in connection with the delisting process as well as an increase in other legal expenses, a $0.7 million increase in shipping, a $0.5 million increase in IT, a $0.5 million increase in operating supplies and a $0.4 million increase in marketing.
Provision for Income Taxes – The benefit (provision) for income taxes for 2025 and 2024 was $1.4 million and ($0.9) million, respectively. The change in the provision for income taxes was primarily due to taxable income in 2024 and a pretax loss in 2025. Our effective tax rate was 23.2% in 2025 and 28.4% in 2024. The decrease in effective tax rate was largely due to the impact of permanent differences relative to the pretax income or pretax loss generated in each period.
Comparison of the Year Ended December 31, 2024 to the Year Ended December 31, 2023
A detailed discussion of the fiscal year 2024 performance compared to fiscal year 2023 is set forth in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Comparison of the Year Ended December 31, 2024 to the Year Ended December 31, 2023,” in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on February 27, 2025, which discussion is incorporated herein by reference.
Non-GAAP Measures
We calculate Adjusted EBITDA by taking net (loss) income calculated in accordance with GAAP and adjusting for interest expense, income taxes, depreciation and amortization, and stock-based compensation expense. Adjusted EBITDA margin is equal to Adjusted EBITDA divided by net sales. We calculate pretax return on capital employed by taking (loss) income from operations divided by capital employed. Capital employed equals total assets less accounts payable, income taxes payable, other accrued liabilities, lease liability and other long-term liabilities. Other companies may calculate both Adjusted EBITDA and pretax return on capital employed differently, limiting the usefulness of these measures for comparative purposes.
We believe that these non-GAAP measures of financial results provide useful information to management and investors regarding certain financial and business trends relating to our financial condition and results of operations. Our management uses these non-GAAP measures to compare our performance to that of prior periods for trend analyses, for purposes of determining management incentive compensation, for budgeting and planning purposes, and for assessing the effectiveness of capital allocation over time. These measures are used in monthly financial reports prepared for management and our Board of Directors. We believe that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial measures with other specialty retailers, many of which present similar non-GAAP financial measures to investors.
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Our management does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitations of these non-GAAP financial measures are that they exclude significant expenses and income that are required by GAAP to be recognized in our consolidated financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which expenses and income are excluded or included in determining these non-GAAP financial measures. In order to compensate for these limitations, management presents non-GAAP financial measures in connection with GAAP results. We urge investors to review the reconciliation of our non-GAAP financial measures to the comparable GAAP financial measures and not to rely on any single financial measure to evaluate our business.
The reconciliation of Adjusted EBITDA to net (loss) income for the years ended December 31, 2021 through December 31, 2025 is as follows:
Years Ended December 31,
(in thousands)
Net (loss) income
Interest expense, net
(Benefit) Provision for income taxes
Depreciation & amortization
Stock based compensation
Adjusted EBITDA
Adjusted EBITDA as a percentage of net sales for the years ended December 31, 2021 through December 31, 2025 is as follows:
Years Ended December 31,
% of net sales
Net (loss) income
Interest expense, net
(Benefit) Provision for income taxes
Depreciation & amortization
Stock based compensation
Adjusted EBITDA
(1) Amounts do not foot due to rounding.
The calculation of pretax return on capital employed is as follows:
($ in thousands)
December 31,
(Loss) Income from operations
Total Assets
Less: Accounts payable
Less: Income tax payable
Less: Other accrued liabilities
Less: Lease liability
Less: Other long-term liabilities
Capital Employed
Pretax Return on Capital Employed
(1) Income statement accounts represent the activity for the trailing twelve months ended as of each of the balance sheet dates. Balance sheet accounts represent the average account balance for the four quarters ended as of each of the balance sheet dates.
Liquidity and Capital Resources
Our principal sources of liquidity include $10.1 million of cash and cash equivalents at December 31, 2025, cash provided by operating activities and borrowings available under our credit facility. We expect to use this liquidity for maintaining our existing stores, purchasing additional merchandise inventory, and general corporate purposes.
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On September 30, 2022, Holdings and its operating subsidiary, The Tile Shop, and certain subsidiaries of each entered into a Credit Agreement with JPMorgan Chase Bank, N.A. and the lenders party thereto, including Fifth Third Bank (as amended, the “Credit Agreement”). The Credit Agreement provides us with a senior credit facility consisting of a $75.0 million revolving line of credit through September 30, 2027. Borrowings pursuant to the Credit Agreement initially bear interest at a rate per annum equal to: (i) Adjusted Term SOFR Rate (as defined in the Credit Agreement), plus a margin ranging from 1.25% to 1.75%; (ii) Adjusted Daily Simple SOFR (as defined in the Credit Agreement), plus a margin ranging from 1.25% to 1.75%; or (iii) the Alternate Base Rate (as defined in the Credit Agreement), plus a margin ranging from 0.25% to 0.75%. The margin is determined based on the Rent Adjusted Leverage Ratio (as defined in the Credit Agreement). Borrowings outstanding as of December 31, 2025 were SOFR-based interest rate loans. The SOFR-based interest rate was 5.72% on December 31, 2025.
The Credit Agreement is secured by virtually all of our assets, including but not limited to, inventory, accounts receivable, equipment and general intangibles. The Credit Agreement contains customary events of default, conditions to borrowing and restrictive covenants, including restrictions on our ability to dispose of assets, engage in acquisitions or mergers, make distributions on or repurchases of capital stock, incur additional debt, incur liens or make investments. The Credit Agreement also includes financial and other covenants, including covenants to maintain a Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of no less than 1.20 to 1.00 and a Rent Adjusted Leverage Ratio (as defined in the Credit Agreement) of no greater than 3.50 to 1.00. The Company was not in compliance with the covenants as of December 31, 2025 but received a waiver by the lenders January 28, 2026, which put the Company in compliance with the covenants.
Borrowings outstanding consisted of $25.0 million on our line of credit as of December 31, 2025. We have standby letters of credit outstanding related to our workers’ compensation and medical insurance policies. As of December 31, 2025, standby letters of credit totaled $1.2 million, leaving $48.8 million available for borrowing on the revolving line of credit, which may be used for maintaining our existing stores, purchasing additional merchandise inventory, and general corporate purposes.
On December 15, 2025 , the Company effected the Reverse Stock Split. As a result of the Reverse Stock Split, each stockholder of record owning fewer than 3,000 shares of common stock immediately prior to the effective time of the Reverse Stock Split became entitled to receive $6.60, without interest, in cash for each whole share of Common Stock held by such stockholder at the effective time of the Reverse Stock Split (the “Cashed-Out Stockholders”). Following the completion of the Reverse Stock Split, the Company paid an aggregate of approximately $32.2 million to the Cashed-Out Stockholders, including to stockholders holding through banks and brokers, of which $32.0 million was paid in the fourth quarter of 2025, with the remainder paid during the first quarter of 2026, using a combination of cash on hand and borrowings under the Company’s line of credit.
During 2026, we expect to use cash for maintaining our existing stores, purchasing additional merchandise inventory, and general corporate purposes. Additionally, as described further in Note 6 of the Notes to the Consolidated Financial Statements, as of December 31, 2025, our lease liability under operating leases totaled $134.8 million. Contractual lease payments range from $13.9 million to $39.6 million on an annual basis over the next five years. We are also obligated to fund certain self-insured employee benefits, including our medical and workers’ compensation plans. As of December 31, 2025, accrual balances related to our estimated workers’ compensation claims and medical claims totaled $1.4 million and $0.6 million, respectively. Additionally, we have contractual obligations related to software service arrangements with suppliers for fixed or minimum amounts. Future minimum payments at December 31, 2025 for purchase obligations were $2.7 million. Amounts due under these arrangements in 2026, 2027, and 2028 total $1.2 million, $1.1 million, and $0.4 million, respectively.
We currently believe that our cash and cash equivalents, cash flows from operations and access to cash under our credit facility will be adequate to meet our ongoing operating requirements over the next twelve months and our long-term liquidity requirements.
Capital Expenditures
The following table summarizes our capital expenditures during the years ended December 31, 2025, 2024 and 2023.
Years Ended December 31,
(in millions)
New store building, existing store remodels and store merchandising investments
Information technology infrastructure
Distribution and manufacturing facilities
Our capital expenditure plan includes store refresh and remodels, information technology upgrades or enhancements, and replacing equipment at our stores and distribution centers. Our capital requirements will vary based on the number of stores that we choose to renovate or degree of investment in new technology. Our decisions regarding opening, relocating, or renovating stores, and whether to engage in strategic acquisitions, will be based in part on macroeconomic factors and the general state of the U.S. economy, as well as the local economies in the markets in which our stores are located.
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Cash Flows
The following table summarizes our cash flow for the years ended December 31, 2025, 2024 and 2023 .
For the year ended December 31,
(in thousands)
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Operating Activities
Cash flows from operating activities provide us with a significant source of liquidity. Net cash provided by operating activities was $5.8 million, $27.1 million, and $62.1 million in 2025, 2024 and 2023, respectively. The decrease in operating cash flows in 2025 compared to 2024 was primarily due to an increase in inventory in 2025 compared to a decrease in inventory in 2024, a decrease in net income, and a decrease in depreciation expense.
Investing Activities
Net cash used in investing activities was $9.4 million, $14.3 million and $15.3 million in 2025, 2024 and 2023, respectively. The decrease in investing activities in 2025 was due to lower levels of capital expenditures during 2025 to invest in store remodels, store merchandising, distribution, and internal fleet.
Financing Activities
Net cash used in financing activities was $7.3 million, $0.5 million and $45.9 million in 2025, 2024 and 2023, respectively. The increase in cash used in financing activities was attributable to $32.0 million paid to repurchase shares during 2025 that was partially offset by $25.0 million of borrowings on our revolving line of credit.
Critical Accounting Estimates
Our financial statements are prepared in accordance with GAAP. The preparation of our financial statements and related disclosures requires us to make estimates, assumptions, and judgments that affect the reported amount of assets, liabilities, revenues, costs and expenses, and related disclosures. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances, but all such estimates and assumptions are inherently uncertain and unpredictable. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from those estimates and assumptions, and it is possible that other professionals , applying their own judgment to the same facts and circumstances, could develop and support alternative estimates and assumptions that would result in material changes to our operating results and financial condition. Our most critical accounting estimates are summarized below. For further information on our critical and other significant accounting policies, see the notes to the consolidated financial statements included in this report.
Recognition of Revenue
Description: Revenues are recognized when control of promised goods or services is transferred to our customers, in an amount that reflects the consideration received in exchange for those goods or services. We recognize service revenue, which consists primarily of freight charges for home delivery, when the service has been rendered. We are required to charge and collect sales and other taxes on sales to our customers and remit these taxes back to government authorities. Total revenues do not include sales tax because we are a pass-through conduit for collecting and remitting sales tax.
Judgement and uncertainties involved in the estimate: Net sales are reduced by an allowance for anticipated sales returns that we estimate based on historical returns. Our process to establish a sales return reserve contains uncertainties because it requires management to make assumptions and to apply judgment to estimate future sales returns and exchanges. Merchandise exchanges are not considered merchandise returns and, therefore, are excluded when calculating the sales returns reserve.
Effect if actual results differ from the assumptions: Actual return trends have not varied significantly from estimated amounts in prior periods. However, if the nature of sales returns changes significantly, our sales could be adversely impacted. A 10% change in our sales returns reserves and related return assets at December 31, 2025 would have had a $0.2 million net impact on operating income during fiscal 2025.
Table of Contents
Inventory Valuation and Shrinkage
Description: Our inventory consists of purchased merchandise held for resale and manufactured items. Inventories are stated at the lower of cost (determined using the moving average cost method) or net realizable value. We capitalize the cost of inbound freight, duties, and receiving and handling costs to bring purchased materials into our distribution network. The labor and overhead costs incurred in connection with the production process are included in the value of manufactured finished goods.
Judgement and uncertainties involved in the estimate: We provide provisions for losses related to shrinkage and other amounts that are otherwise not expected to be fully recoverable. These provisions are calculated based on historical shrinkage, selling price, margin and current business trends. These estimates have calculations that require management to make assumptions based on the current rate of sales, age, salability and profitability of inventory, historical percentages that can be affected by changes in our merchandising mix, customer preferences, rates of sell through and changes in actual shrinkage trends.
Effect if actual results differ from the assumptions: We do not believe there is a reasonable likelihood that there will be a material change in the assumptions we use to calculate our inventory provisions. However, if actual results are not consistent with our estimates and assumptions, we may be exposed to losses that could be material. A 10% change in our inventory valuation and shrinkage reserves at December 31, 2025 would have had a $0.1 million net impact on operating income during fiscal 2025.
Impairment of Long-Lived Assets
Description: Property, plant and equipment are carried at cost less accumulated depreciation, which is amortized over the useful life of the assets. Leasehold improvements are amortized over the shorter of their estimated useful lives or lease period (including expected renewal periods). Property, plant, equipment, and right of use assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The evaluation is performed at the lowest level of identifiable cash flows independent of other assets, which typically occurs at an individual store level. An impairmentloss is recognized when estimated undiscounted future cash flows from the operations and/or disposition of the assets are less than the carrying amount.
Judgement and uncertainties involved in the estimate: The significant assumption used in developing undiscounted cash flow analyses is the estimate of future sales. Measurement of an impairmentloss is based on the excess of the carrying amount of the asset group over its fair value. Fair value is measured using discounted cash flows or independent opinions of value, as appropriate.
Effect if actual results differ from the assumptions: If actual results are not consistent with our estimates and assumptions used in determining future cash flows and asset fair values, we may be exposed to losses that could be material. During the fiscal years ended December 31, 2025, 2024 and 2023, the Company recorded asset impairment charges of $0.3 million, $0.9 million and $1.0 million, respectively, which were classified in selling, general and administrative expenses.
New Accounting Pronouncements
For a summary of recently issued accounting pronouncements, refer to Note 1 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information.
