What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-08-07 compared with 2025-05-08 · 211 added, 108 removed, 234 unchanged (58% of the section changed)

25 unchanged sentences

and abroad, unrest and sanctions, war, conflict, including the ongoing conflicts between Russia and the Ukraine, conflicts in the Middle East, and increasing tensions between China and Taiwan;

• Legislative and regulatory risk, including those relating to the recent enactment of the OBBBA;

• Product liability claims;

6 unchanged sentences

The Company makes available on its website the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to these reports as soon as reasonably practicable after these reports are filed with or furnished to the SEC.

Users can access these reports free of charge on the Company’s website.

Users can access these reports free of charge on the

Company’s website.

The SEC also maintains a website that contains reports, proxy and information statements, and other information regarding the Company’s electronic filings with the SEC at http://www.sec.gov.

16 unchanged sentences

This concentration in suppliers exposes the Company to risks associated with doing business globally, including risks relating to the tariffs recently implemented and that may be implemented in the future.

As of April 9, 2025, the U.S.

has imposed an aggregate 145% tariff on imports from China.

Other recent tariff policy updates that went into effect in April 2025 include a 10% universal tariff for all countries and reciprocal tariffs for specific countries, which have been paused for 90 days.

On April 9, 2025, the U.S.

imposed an aggregate 145% tariff on imports from China, which was subsequently reduced to 30% effective May 14, 2025 for a 90 day pause period.

Other recent tariff policy updates that went into effect in April 2025 include a 10% universal tariff for all countries and reciprocal tariffs for specific countries, which were originally paused until July 9, 2025 and subsequently extended to August 1, 2025.

As the Company sources almost all of its products from suppliers located outside the United States, primarily in China, any new or increased tariffs, quotas, embargoes, or other trade barriers could impact our supply chain and cost structure.

1 unchanged sentence

The Company continues to monitor these changing tariffs and trade restrictions.

The Company is developing a plan to mitigate the impact of the increase price of goods imported by the Company into the U.S.

The Company may seek to increase prices to its customers, negotiate product costs with its suppliers and further diversify its imports to countries that are expected to be subject to lower tariffs.

To the extent the tariffs remain in place and the Company cannot mitigate the impact of the increase on the price of goods imported by the Company into the U.S., it may result in lower gross margin that the Company realizes from the sale of its products which could materially adversely affect the Company’s results of operations and financial condition and result in an impairment of our long-lived assets, including goodwill within the U.S.

segment reporting unit.

To mitigate the impact of the increase price of goods imported by the Company into the U.S., the Company has negotiated price increase prices with its customers, negotiated product costs with its suppliers and continues to pursue diversification of its imports to countries that are expected to be subject to lower tariffs.

To the extent that tariffs return to higher rates and the Company cannot mitigate the impact of the increase on the price of goods imported by the Company into the U.S., it may result in lower gross margin that the Company realizes from the sale of its products.

The broader macroeconomic impacts related to the changes in tariff policies including potential mitigation efforts by retailers may negatively impact consumer spending and buying patterns of the Company's products.

This could materially adversely affect the Company’s results of operations and financial condition.

In January 2025, the Company announced the relocation of the Company’s east coast distribution facility currently located in Robbinsville, NJ (the “Robbinsville Facility”) to a warehouse and distribution space in Hagerstown, Maryland (the “Hagerstown Facility”).

2 unchanged sentences

The Hagerstown Facility will require capital expenditures for equipment and certain leasehold improvements of approximately $9.0 million.

One-time relocation costs are estimated to be up to $7.0 million, which includes recruitment, relocation of inventory, set up costs and lease expenses prior to the Hagerstown Facility being fully operational.

One-time relocation costs are estimated to be up to $7.0 million, which includes recruitment, relocation of

inventory, set up costs and lease expenses prior to the Hagerstown Facility being fully operational.

These one-time costs are expected to be incurred in 2026.

The Company expects that the Hagerstown Facility will be operational by the second quarter of 2026.

Additionally, in connection with the relocation to the Hagerstown Facility, the Company will receive tax abatement and incentives over the term of the Lease from the State of Maryland and Washington County, Maryland totaling approximately

$13.1 million.

These incentives include real property tax abatement, employee state withholding tax credit, conditional grants and income tax credits.

1 unchanged sentence

The Company expects this plan to improve future results in its International segment through sales growth and the identification costs efficiencies.

On July 8, 2025, the Company announced a reorganization of its international workforce in connection with Project Concord, management's comprehensive plan to propel growth and streamline the cost structure of the International segment.

The reorganization primarily affects the structure of the International segment's merchandising and sales workforce.

The estimated restructuring expenses related to severance associated with the reorganization is $0.3 million.

This charge will be recognized in the third quarter of 2025.

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted in the U.S.

The OBBBA includes a broad range of tax reform provisions affecting businesses, including extending and modifying certain expiring provisions under the Tax Cuts and Job Acts (both domestic and international).

The Company is currently evaluating the impact of the OBBBA on its consolidated financial statements.

BUSINESS SEGMENTS

7 unchanged sentences

In anticipation of the pre-holiday shipping season, inventory levels increase primarily in the June through October time period.

The increase in inventory levels at March 31, 2025 compared to December 31, 2024 was due to preemptive measures taken in anticipation of, and designed to mitigate, the impact of the tariffs that went into effective in April 2025.

Consistent with the seasonality of the Company’s net sales and inventory levels, the Company also experiences seasonality in its inventory turnover and turnover days from one quarter to the next.

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2025 2024 2025 2024

Net sales 100.0 % 100.0 % 100.0 % 100.0 %

3 unchanged sentences

Selling, general and administrative expenses 28.5 27.1 25.4 27.4

Income from operations

Goodwill impairment 25.2 — 12.2 —

(Loss) income from operations

(28.2) 0.8 (13.3) 1.1

Interest expense (3.8) (3.6) (3.6) (3.8)

Mark to market loss on interest rate derivatives

(0.2) (0.1) (0.3) (0.1)

Loss on equity securities

— (10.0) — (5.0)

Loss before income taxes and equity in losses

(32.2) (12.9) (17.2) (7.8)

Income tax benefit (provision)

2.1 0.1 1.1 (0.1)

Equity in losses, net of taxes

1 unchanged sentence

MANAGEMENT’S DISCUSSION AND ANALYSIS

THREE MONTHS ENDED MARCH 31, 2025 COMPARED TO THE THREE MONTHS ENDED

MARCH 31, 2024

Consolidated net sales for the three months ended March 31, 2025 were $140.1 million, representing a decrease of $2.1 million, or 1.5%, as compared to net sales of $142.2 million for the corresponding period in 2024.

THREE MONTHS ENDED JUNE 30, 2025 COMPARED TO THE THREE MONTHS ENDED

JUNE 30, 2024

Consolidated net sales for the three months ended June 30, 2025 were $131.9 million, representing a decrease of $9.8 million, or 6.9%, as compared to net sales of $141.7 million for the corresponding period in 2024.

In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations and was determined by applying 2025 average rates to 2024 local currency amounts, consolidated net sales decreased by $10.4 million, or 7.3%, as compared to consolidated net sales in the corresponding period in 2024.

Net sales for the U.S.

segment for the three months ended March 31, 2025 were $128.5 million, a decrease of $2.0 million, or 1.5%, as compared to net sales of $130.5 million for the corresponding period in 2024.

segment for the three months ended June 30, 2025 were $119.3 million, a decrease of $11.2 million, or 8.6%, as compared to net sales of $130.5 million for the corresponding period in 2024.

Net sales for the U.S.

segment’s Kitchenware product category were $79.5 million for the three months ended March 31, 2025, a decrease of $4.0 million, or 4.8%, as compared to $83.5 million for the corresponding period in 2024.

The decrease was driven by a reduction in sales for kitchen tools and cutlery and boards, partially offset by higher sales for bakeware.

segment’s Kitchenware product category were $82.5 million for the three months ended June 30, 2025, an increase of $1.7 million, or 2.1%, as compared to $80.8 million for the corresponding period in 2024.

The increase was driven by higher sales for cutlery and boards and kitchen measurement products.

These increases were offset by a reduction in sales for kitchen tools and bakeware.

Net sales for the U.S.

segment’s Tableware product category were $27.6 million for the three months ended March 31, 2025, an increase of $1.8 million, or 7.0%, as compared to $25.8 million for the corresponding period in 2024.

The increase was attributable to dinnerware sales in the dollar channel, partially offset by a flatware warehouse club program not repeated in Q1 2025.

segment’s Tableware product category were $21.3 million for the three months ended June 30, 2025, a decrease of $5.0 million, or 19.0%, as compared to $26.3 million for the corresponding period in 2024.

The decrease was attributable to lower warehouse club programs for dinnerware and flatware.

Net sales for the U.S.

segment’s Home Solutions product category were $21.4 million for the three months ended March 31, 2025, an increase of $0.2 million, or 0.9%, as compared to $21.2 million for the corresponding period in 2024.

The increase was attributable to higher sales for Home Décor products driven in the dollar channel and a new warehouse program.

The increase was partially offset by lower sales of bath measurement products.

Net sales for the International segment were $11.6 million for the three months ended March 31, 2025, a decrease of $0.1 million, or 0.9%, as compared to net sales of $11.7 million for the corresponding period in 2024.

In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations, net sales decreased by 0.2%, as compared to consolidated net sales in the corresponding period in 2024.

The decrease was driven by lower sales in the U.K.

segment’s Home Solutions product category were $15.5 million for the three months ended June 30, 2025, a decrease of $7.9 million, or 33.8%, as compared to $23.4 million for the corresponding period in 2024.

The decrease was attributable to lower sales for hydration products, bath measurement products and home décor products.

Net sales for the International segment were $12.6 million for the three months ended June 30, 2025, an increase of $1.4 million, or 12.5%, as compared to net sales of $11.2 million for the corresponding period in 2024.

In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations, net sales increased by $0.8 million, or 6.6%, as compared to consolidated net sales in the corresponding period in 2024.

The increase was driven by improved sales in the U.K.

and continental Europe.

Gross margin for the three months ended March 31, 2025 was $50.6 million, or 36.1%, as compared to $57.5 million, or 40.5%, for the corresponding period in 2024.

Gross margin for the three months ended June 30, 2025 was $50.8 million, or 38.6%, as compared to $54.6 million, or 38.5%, for the corresponding period in 2024.

Gross margin for the U.S.

segment was $46.5 million, or 36.2%, for the three months ended March 31, 2025, as compared to $53.3 million, or 40.8%, for the corresponding period in 2024.

The decrease in the gross margin percentage was driven by customer and product mix.

Gross margin for the International segment was $4.1 million, or 35.3%, for the three months ended March 31, 2025, as compared to $4.2 million, or 35.9%, for the corresponding period in 2024.

The gross margin percentage remained consistent period over period.

segment was $46.7 million, or 39.1%, for the three months ended June 30, 2025, as compared to $50.5 million, or 38.7%, for the corresponding period in 2024.

The improvement in the gross margin percentage was driven by customer mix.

Gross margin for the International segment was $4.1 million, or 32.5%, for the three months ended June 30, 2025, as compared to $4.1 million, or 36.6%, for the corresponding period in 2024.

The decline in gross margin percentage was driven by customer and product mix.

Distribution expenses

Distribution expenses for the three months ended March 31, 2025 were $18.1 million, as compared to $16.2 million for the corresponding period in 2024.

Distribution expenses as a percentage of net sales were 12.9% for the three months ended March 31, 2025, as compared to 11.4% for the three months ended March 31, 2024.

Distribution expenses for the three months ended June 30, 2025 were $17.3 million, as compared to $15.1 million for the corresponding period in 2024.

Distribution expenses as a percentage of net sales were 13.1% for the three months ended June 30, 2025, as compared to 10.6% for the three months ended June 30, 2024.

Distribution expenses as a percentage of net sales for the U.S.

segment were 11.5% and 10.0% for the three months ended March 31, 2025 and 2024, respectively.

segment were 11.4% and 9.1% for the three months ended June 30, 2025 and 2024, respectively.

Distribution expense during the three months ended June 30, 2025 included $0.1 million for redesign costs related to the Company's warehouses.

As a percentage of sales shipped from the Company’s U.S.

warehouses, distribution expenses were 11.9% and 10.5% for the three months ended March 31, 2025 and 2024, respectively.

The increase in expenses as a percentage of sales was attributable to an increase in employee expenses as a result of less labor management efficiencies due to higher inventory levels, higher software expenses due to the launch of a new warehouse management system at the

Company's west coast distribution center in September 2024.

These increases were partially offset by lower freight-out expenses.

Distribution expenses as a percentage of net sales for the International segment were 28.3% for the three months ended March 31, 2025, compared to 27.2% for the corresponding period in 2024.

As a percentage of sales shipped from the Company’s international warehouses distribution expenses were 25.0% and 23.6% for the three months ended March 31, 2025 and 2024, respectively.

The increase in expenses as a percentage of net sales was primarily attributed to an increase in warehouse rent expense, partially offset by lower freight out-expenses.

warehouses, excluding non-recurring expenses, distribution expenses were 11.0% and 9.5% for the three months ended June 30, 2025 and 2024, respectively.

The increase in expenses as a percentage of sales was attributable to lower shipment volume resulting in an unfavorable impact of fixed expenses, higher software expenses due to the launch of a new warehouse management system at the Company's west coast distribution center in September 2024 and an increase in freight-out expenses.

Distribution expenses as a percentage of net sales for the International segment were 29.8% for the three months ended June 30, 2025, compared to 28.5% for the corresponding period in 2024.

As a percentage of sales shipped from the Company’s international warehouses distribution expenses were 26.8% and 25.1% for the three months ended June 30, 2025 and 2024, respectively.

The increase in expenses as a percentage of sales was primarily attributed to higher warehouse expenses related to the expanded distribution of the Company's products within the Asia Pacific region.

Selling, general and administrative expenses

Selling, general and administrative expenses for the three months ended March 31, 2025 were $31.5 million, a decrease of $8.0 million, or 20.3%, as compared to $39.5 million for the corresponding period in 2024.

Selling, general and administrative expenses for the three months ended June 30, 2025 were $37.5 million, a decrease of $0.8 million, or 2.1%, as compared to $38.3 million for the corresponding period in 2024.

Selling, general and administrative expenses for the U.S.

segment were $30.0 million for the three months ended March 31, 2025, as compared to $30.8 million for the corresponding period in 2024.

As a percentage of net sales, selling, general and administrative expenses were 23.3% and 23.6% for the three months ended March 31, 2025 and 2024, respectively.

The decrease in expenses was attributable to lower employee expenses, including incentive compensation, and legal expenses.

This was partially offset by an increase in the provision for doubtful accounts in the current period and an increase in amortization expense related to an indefinite-lived trade name, which was reclassified to a finite-lived trade name in the fourth quarter 2024.

Selling, general and administrative expenses for the International segment were $3.7 million for the three months ended March 31, 2025, as compared to $4.2 million for the corresponding period in 2024.

As a percentage of net sales, selling, general and administrative expenses were 31.9% and 35.9% for the three months ended March 31, 2025 and 2024, respectively.

The decrease in expenses was attributable to lower commission expenses, and foreign currency exchange gains.

Unallocated corporate income for the three months ended March 31, 2025 was $2.2 million, as compared to expenses of $4.5 million for the corresponding period in 2024.

The current period income was driven by the recognition of a net legal settlement gain of $6.4 million.

The remaining decrease compared to the prior period was due to lower incentive compensation and legal expenses, partially offset by an increase in stock compensation expense.

segment were $29.5 million for the three months ended June 30, 2025, as compared to $29.4 million for the corresponding period in 2024.

As a percentage of net sales, selling, general and administrative expenses were 24.7% and 22.5% for the three months ended June 30, 2025 and 2024, respectively.

The increase in selling, general and administrative expenses as a percentage of net sales, was attributable to the impact of fixed costs on lower sales volume, an increase in the provision for doubtful accounts in the current period and an increase in amortization expense related to an indefinite-lived trade name, which was reclassified to a finite-lived trade name in the fourth quarter 2024.

This was partially offset by lower employee expenses, including incentive compensation.

Selling, general and administrative expenses for the International segment were $3.7 million for the three months ended June 30, 2025, as compared to $3.8 million for the corresponding period in 2024.

As a percentage of net sales, selling, general and administrative expenses were 29.4% and 33.9% for the three months ended June 30, 2025 and 2024, respectively.

The decrease in expenses as a percentage of net sales was attributable to higher sales and foreign currency exchange gains.

Unallocated corporate expense for the three months ended June 30, 2025 was $4.3 million, as compared to $5.1 million for the corresponding period in 2024.

The decrease compared to the prior period was due to lower incentive compensation and legal expenses.

Goodwill impairment

During the second quarter of 2025, the Company’s qualitative assessment of goodwill indicated triggering events had occurred in its U.S.

reporting unit.

The Company performed an interim impairment test of the goodwill in the U.S.

reporting unit, that resulted in a $33.2 million non-cash goodwill impairment charge.

Interest expense

Interest expense was $4.9 million and $5.6 million for the three months ended March 31, 2025 and 2024, respectively.

Interest expense was $5.1 million and $5.2 million for the three months ended June 30, 2025 and 2024, respectively.

The decrease in expense was a result of lower average outstanding borrowings in the current period, and lower interest rates on outstanding borrowings.

Mark to market loss on interest rate derivatives

Mark to market loss on interest rate derivatives was $0.5 million for the three months ended March 31, 2025, as compared to a mark to market loss on interest rate derivatives of $0.2 million for the three months ended March 31, 2024.

The loss recognized for the three months ended March 31, 2025 and 2024, respectively, was attributable to the change in the fair value due to the change in the projected interest rate environment.

Mark to market loss on interest rate derivatives was $0.2 million for the three months ended June 30, 2025, as compared to $0.1 million for the three months ended June 30, 2024.

The loss recognized for the three months ended June 30, 2025 and 2024, respectively, was attributable to the change in the fair value due to the change in the projected interest rate environment.

The mark to market amount represents the change in fair value on the Company’s interest rate derivatives that have not been designated as hedging instruments.

These derivatives were entered into for purposes of locking-in a fixed interest rate on a portion of the Company’s variable interest rate debt.

As of March 31, 2025, the intent of the Company is to hold these derivative contracts until their maturity.

Income tax benefit of $0.1 million and provision of $0.2 million for the three months ended March 31, 2025 and 2024, respectively, represent taxes on both U.S.

and foreign earnings at a combined effective income tax benefit rate of 3.3% and provision rate of (5.3)%, respectively.

The negative rate for the three months ended March 31, 2024 reflects tax expense on a pretax financial reporting loss.

The effective tax rate for the three months ended March 31, 2025 differs from the federal statutory income tax rate of 21.0% primarily due to foreign losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance.

The effective tax rate for the three months ended March 31, 2024 differs from the federal statutory income tax rate of 21.0% primarily due to the expiration of non-qualified stock options and the vesting of equity-based awards, where the book expense exceeded the tax deduction upon vesting, and foreign losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance.

As of June 30, 2025, the intent of the Company is to hold these derivative contracts until their maturity.

Loss on equity securities

Loss on equity securities was $14.2 million for the three months ended June 30, 2024.

In the second quarter of 2024, the Company lost significant influence over its investment in Vasconia and discontinued the equity method of accounting.

This change resulted in the reclassification of previously recognized accumulated other comprehensive losses to the investment balance and subsequently resulted in a non-cash loss of $14.2 million, to reduce the investment to its fair value.

NOTE 4 —INVESTMENT for additional information.

Income tax benefit of $2.8 million and benefit of $0.1 million for the three months ended June 30, 2025 and 2024, respectively, represent taxes on both U.S.

and foreign earnings at a combined effective income tax benefit rate of 6.5% and benefit rate of 0.3%, respectively.

The effective tax rate for the three months ended June 30, 2025 differs from the federal statutory income tax rate of 21.0% primarily due to a partial valuation allowance on U.S.

deferred tax assets that are not more likely than not to be realized as a result of the goodwill impairment in the current quarter.

The effective tax rate for the three months ended June 30, 2024 differs from the federal statutory income tax rate of 21.0% primarily due to the expiration of non-qualified stock options and the vesting of equity-based awards, where the book expense exceeded the tax deduction upon vesting, and foreign losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance.

MANAGEMENT’S DISCUSSION AND ANALYSIS

SIX MONTHS ENDED JUNE 30, 2025 COMPARED TO THE SIX MONTHS ENDED

JUNE 30, 2024

Consolidated net sales for the six months ended June 30, 2025 were $271.9 million, a decrease of $12.0 million, or 4.2%, as compared to net sales of $283.9 million for the corresponding period in 2024.

In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations and was determined by applying 2025 average rates to 2024 local currency amounts, consolidated net sales decreased by $12.4 million, or 4.4%, as compared to consolidated net sales in the corresponding period in 2024.

Net sales for the U.S.

segment for the six months ended June 30, 2025 were $247.8 million, a decrease of $13.2 million, or 5.1%, as compared to net sales of $261.0 million for the corresponding period in 2024.

Net sales for the U.S.

segment’s Kitchenware product category were $162.0 million for the six months ended June 30, 2025, a decrease of $2.3 million, or 1.4%, as compared to $164.3 million for the corresponding period in 2024.

The decrease was driven by lower sales for kitchen tools, partially offset by higher sales for cutlery and boards and kitchen measurement products.

Net sales for the U.S.

segment’s Tableware product category were $48.9 million for the six months ended June 30, 2025, a decrease of $3.2 million, or 6.1%, as compared to $52.1 million for the corresponding period in 2024.

The decrease was driven by lower flatware sales due to a warehouse club program not repeated, partially offset by higher sales in dinnerware in the dollar channel.

Net sales for the U.S.

segment’s Home Solutions product category were $36.9 million for the six months ended June 30, 2025, a decrease of $7.7 million, or 17.3%, as compared to $44.6 million for the corresponding period in 2024.

The decrease was attributable to lower sales of hydration products and bath measurement products.

The decrease was partially offset by higher sales for home décor products driven by a new warehouse club program and sales in the dollar channel.

Net sales for the International segment were $24.1 million for the six months ended June 30, 2025, an increase of $1.2 million, or 5.2%, as compared to net sales of $22.9 million for the corresponding period in 2024.

In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations, net sales increased by $0.7 million, or 3.0%, as compared to consolidated net sales in the corresponding period in 2024.

The increase was attributable to higher sales in continental Europe and Australia.

Gross margin for the six months ended June 30, 2025 was $101.5 million, or 37.3%, as compared to $112.1 million, or 39.5%, for the corresponding period in 2024.

Gross margin for the U.S.

segment was $93.4 million, or 37.7%, for the six months ended June 30, 2025, as compared to $103.8 million, or 39.8%, for the corresponding period in 2024.

The decrease in gross margin percentage was due to customer and product mix.

Gross margin for the International segment was $8.1 million, or 33.6%, for the six months ended June 30, 2025, as compared to $8.3 million, or 36.2%, for the corresponding period in 2024.

The decrease in gross margin percentage was driven by customer and product mix.

Distribution expenses

Distribution expenses for the six months ended June 30, 2025 were $35.4 million, as compared to $31.2 million for the corresponding period in 2024.

Distribution expenses as a percentage of net sales were 13.0% for the six months ended June 30, 2025, as compared to 11.0% for the six months ended June 30, 2024.

Distribution expenses as a percentage of net sales for the U.S.

segment were 11.4% and 9.5% for the six months ended June 30, 2025 and 2024, respectively.

Distribution expenses during the six months ended June 30, 2025 and 2024 included $0.1 million for redesign costs related to the Company's warehouses.

As a percentage of sales shipped from the Company’s U.S.

warehouses, excluding non-recurring expenses, distribution expenses were 11.5% and 10.0% for the six months ended June 30, 2025 and 2024, respectively.

The increase in expenses as a percentage of net sales was attributable to lower shipment volume resulting in an unfavorable impact of fixed expenses, an increase in employee expenses as a result of less labor management efficiencies due to higher inventory levels, higher software expenses due to the launch of a new warehouse management system at the Company's west coast distribution center in September 2024 and an increase in freight-out expenses.

Distribution expenses as a percentage of net sales for the International segment were 29.1% for the six months ended June 30, 2025, compared to 27.7% for the corresponding period in 2024.

As a percentage of sales shipped from the Company’s international warehouses, distribution expenses were 25.9% and 24.3% for the six months ended June 30, 2025 and 2024, respectively.

The increase in expenses as a percentage of sales was primarily attributed to higher warehouse expenses related to the expanded distribution of the Company's products within the Asia Pacific region and an increase in freight-out expenses.

Selling, general and administrative expenses

Selling, general and administrative expenses for the six months ended June 30, 2025 were $69.0 million, a decrease of $8.9 million, or 11.4%, as compared to $77.9 million for the corresponding period in 2024.

Selling, general and administrative expenses for the U.S.

segment were $59.5 million for the six months ended June 30, 2025, as compared to $60.3 million for the corresponding period in 2024.

As a percentage of net sales, selling, general and administrative expenses were 24.0% and 23.1% for the six months ended June 30, 2025 and 2024, respectively.

The increase in selling, general and administrative expenses as a percentage of net sales, was attributable to the impact of fixed costs on lower sales volume, an increase in provision for doubtful accounts in the current period, and an increase in amortization expense related to an indefinite-lived trade name, which was reclassified to a finite-lived trade name in the fourth quarter 2024.

This was partially offset by lower employee expenses, including incentive compensation.

Selling, general and administrative expenses for the International segment were $7.4 million for the six months ended June 30, 2025, as compared to $8.0 million for the corresponding period in 2024.

As a percentage of net sales, selling, general and administrative expenses were 30.7% and 34.9% for the six months ended June 30, 2025 and 2024, respectively.

The decrease was primarily attributable to foreign currency exchange gains, and lower advertising expenses.

Unallocated corporate expenses for the six months ended June 30, 2025 were $2.1 million, as compared to expenses of $9.6 million for the corresponding period in 2024.

The decrease in expenses was driven by the recognition of a net legal settlement gain of $6.4 million in the current period, lower incentive compensation and legal expenses, partially offset by an increase in stock compensation expense.

Goodwill impairment

During the second quarter of 2025, the Company’s qualitative assessment of goodwill indicated triggering events had occurred in its U.S.

reporting unit.

The Company performed an interim impairment test of the goodwill in the U.S.

reporting unit, that resulted in a $33.2 million non-cash goodwill impairment charge.

Interest expense

Interest expense was $10.0 million and $10.8 million for the six months ended June 30, 2025 and 2024, respectively.

The decrease in expense was a result of lower average outstanding borrowings in the current period, and lower interest rates on outstanding borrowings.

Mark to market loss on interest rate derivatives

Mark to market loss on interest rate derivatives was $0.7 million for the six months ended June 30, 2025, as compared to $0.3 million for the six months ended June 30, 2024.

The increase was attributable to the change in the fair value based on the increase in interest rates.

The mark to market amount represents the change in fair value on the Company’s interest rate

derivatives that have not been designated as hedging instruments.

These derivatives were entered into for purposes of locking-in a fixed interest rate on a portion of the Company’s variable interest rate debt.

As of June 30, 2025, the intent of the Company is to hold these derivative contracts until their maturity.

Loss on equity securities

Loss on equity securities was $14.2 million for the six months ended June 30, 2024.

In the second quarter of 2024, the Company lost significant influence over its investment in Vasconia and discontinued the equity method of accounting.

NOTE 4 —INVESTMENT for additional information.

Income tax benefit of $2.9 million and income tax provision of $0.2 million for the six months ended June 30, 2025 and 2024, respectively, represent taxes on both U.S.

and foreign earnings at a combined effective income tax benefit rate of 6.2% and income tax provision rate of (0.7)%, respectively.

The negative rate for the six months ended June 30, 2024 reflects tax expense on a pretax financial reporting loss.

The effective tax rate for the six months ended June 30, 2025 differs from the federal statutory income tax rate of 21.0% primarily due to a partial valuation allowance on U.S.

deferred tax assets that are not more likely than not to be realized as a result of the goodwill impairment in the current quarter.

The effective tax rate for the six months ended June 30, 2024 differs from the federal statutory income tax rate of 21.0% primarily due to foreign losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance.

Equity in losses, net of taxes

Equity in losses of Vasconia, net of taxes, was $2.1 million for the three months ended March 31, 2024.

Equity in losses of Vasconia, net of taxes , was $2.1 million for the six months ended June 30, 2024.

LIQUIDITY AND CAPITAL RESOURCES

2 unchanged sentences

The Company’s primary uses of funds consist of working capital requirements, capital expenditures, acquisitions and investments, payments of dividends, and payments of principal and interest on its debt.

At March 31, 2025, the Company had cash and cash equivalents of $10.4 million, compared to $2.9 million at December 31, 2024.

Working capital was $216.4 million at March 31, 2025, compared to $221.8 million at December 31, 2024.

Liquidity as of March 31, 2025 was $89.6 million, consisting of $10.4 million of cash and cash equivalents, $63.2 million of availability under the ABL Agreement, limited by the Term Loan financial covenant, and $16.0 million of available funding under the Receivables Purchase Agreement.

At June 30, 2025, the Company had cash and cash equivalents of $12.0 million, compared to $2.9 million at December 31, 2024.

Working capital was $210.1 million at June 30, 2025, compared to $221.8 million at December 31, 2024.

Liquidity as of June 30, 2025 was $96.9 million, consisting of $12.0 million of cash and cash equivalents, $65.7 million of availability under the ABL Agreement, limited by the Term Loan financial covenant, and $19.2 million of available funding under the Receivables Purchase Agreement.

Inventory, a large component of the Company’s working capital, is expected to fluctuate from period to period, with inventory levels higher primarily in the June through October time period.

2 unchanged sentences

Certain other product categories experience higher inventory turns due to lower minimum order quantities or trending sale demands.

For the three months ended March 31, 2025, inventory turnover was 1.8 times, or 208 days, as compared to 1.8 times, or 203 days, for the three months ended March 31, 2024.

Inventory turns have remained relatively consistent.

For the three months ended June 30, 2025, inventory turnover was 1.5 times, or 241 days, as compared to 1.8 times, or 208 days, for the three months ended June 30, 2024.

Inventory turns have slowed compared to the prior year due to lower sales and higher inventory levels because of higher inventory purchases in the first quarter of 2025 intended to mitigate the impact of the tariffs.

The Company believes that availability under the revolving credit facility under its ABL Agreement, cash on hand and cash flows from operations are sufficient to fund the Company’s operations for the next twelve months.

18 unchanged sentences

The Incremental Facilities may not exceed the sum of (i) $50.0 million plus (ii) an unlimited amount so long as, in the case of (ii) only, the Company’s secured net leverage ratio, as defined in and computed on a pro forma basis pursuant to the Term Loan, after giving effect to such increase, is no greater than 3.25 to 1.00, subject to certain limitations and for the period defined pursuant to the Term Loan but not to mature earlier than the maturity date of the then existing term loans.

As of March 31, 2025 and December 31, 2024, the total availability under the ABL Agreement were as follows (in thousands):

March 31, 2025

As of June 30, 2025 and December 31, 2024, the total availability under the ABL Agreement were as follows (in thousands):

June 30, 2025

December 31, 2024

8 unchanged sentences

The Company’s borrowing capacity may be further limited by the Term Loan financial covenant of 5.00 to 1.00 maximum Total Net Leverage Ratio.

As of March 31, 2025, the availability under the ABL Agreement, limited by the Term Loan financial covenant, was $63.2 million.

As of June 30, 2025, the availability under the ABL Agreement, limited by the Term Loan financial covenant, was $65.7 million.

The current and non-current portions of the Company’s Term Loan included in the condensed consolidated balance sheets were as follows (in thousands):

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

Current portion of Term Loan:

6 unchanged sentences

Total Non-current portion of Term Loan $ 128,456 $ 130,949

The 2024 excess cash flow payment of $1.2 million was paid on April 4, 2025 and reduces the scheduled quarterly payment due on June 30, 2025.

As of March 31, 2025, the Company estimates no excess cash flow payment will be due for 2025.

The 2024 excess cash flow payment of $1.2 million was paid on April 4, 2025 and reduced the scheduled quarterly payment due on June 30, 2025.

As of June 30, 2025, the Company estimates no excess cash flow payment will be due for 2025.

The Company’s payment obligations under its Debt Agreements are unconditionally guaranteed by its existing and future U.S.

4 unchanged sentences

subsidiary guarantors, subject to certain exceptions.

Such security interests consist of (1) a first-priority lien, subject to certain permitted liens, with respect to certain assets of the Company and certain of its subsidiaries (the “ABL Collateral”) pledged as collateral in favor of lenders under the ABL Agreement and a second-priority lien in the ABL Collateral in favor of the lenders under the Term Loan and (2) a first-priority lien, subject to certain permitted liens, with respect to certain assets of the Company and certain of its subsidiaries (the “Term Loan

Collateral”) pledged as collateral in favor of lenders under the Term Loan and a second-priority lien in the Term Loan Collateral in favor of the lenders under the ABL Agreement.

Borrowings under the revolving credit facility bear interest, at the Company’s option, at one of the following rates:

3 unchanged sentences

In addition, the Company pays a commitment fee of 0.20% to 0.25% per annum based on the average daily unused portion of the aggregate commitment under the ABL Agreement.

The interest rate on outstanding borrowings under the ABL Agreement at March 31, 2025 was between 3.79% and 5.86%.

The Company paid a commitment fee of 0.25% on the unused portion of the ABL Agreement during the three months ended March 31, 2025.

The interest rate on outstanding borrowings under the ABL Agreement at June 30, 2025 was between 3.30% and 5.79%.

The Company paid a commitment fee of 0.25% on the unused portion of the ABL Agreement during the six months ended June 30, 2025.

The Term Loan bears interest, at the Company’s option, at one of the following rates:

(i) alternate base rate, defined, for any day, as the greater of (x) the prime rate, (y) a federal funds and overnight bank funding based rate plus 0.5% or (z) one-month Adjusted Term SOFR, but not less than 1.0%, plus 1.0%, plus a margin of 4.5% or (ii) Adjusted Term SOFR (Term SOFR plus the Term SOFR Adjustment) for the applicable interest period, but not less than 1.0%, plus a margin of 5.5%.

The interest rate on outstanding borrowings under the Term Loan at March 31, 2025 was 9.94%.

The interest rate on outstanding borrowings under the Term Loan at June 30, 2025 was 9.93%.

The Debt Agreements provide for customary restrictions and events of default.

1 unchanged sentence

Under the Term Loan, the Total Net Leverage Ratio is not permitted to be greater than 5.00 to 1.00 determined as of the end of each fiscal quarters.

Further, the ABL Agreement provides that during any period (a) commencing on the last day of the most recently ended four consecutive fiscal quarters on or prior to the date availability under the ABL Agreement is less than the greater of $20.0 million and 10% of the aggregate commitment under the ABL Agreement at any time and (b) ending on the day after such availability has exceeded the greater of $20.0 million and 10% of the aggregate commitment under the ABL Agreement for 45 consecutive days, the Company is required to maintain a minimum fixed charge coverage ratio of 1.10 to 1.00 as of the last day of any period of four consecutive fiscal quarters.

The Company was in compliance with the covenants of the Debt Agreements at March 31, 2025.

Further, the ABL Agreement provides that during any period (a) commencing on the last day of the most recently ended four consecutive

fiscal quarters on or prior to the date availability under the ABL Agreement is less than the greater of $20.0 million and 10% of the aggregate commitment under the ABL Agreement at any time and (b) ending on the day after such availability has exceeded the greater of $20.0 million and 10% of the aggregate commitment under the ABL Agreement for 45 consecutive days, the Company is required to maintain a minimum fixed charge coverage ratio of 1.10 to 1.00 as of the last day of any period of four consecutive fiscal quarters.

The Company was in compliance with the covenants of the Debt Agreements at June 30, 2025.

The Company expects that it will continue to borrow, subject to availability, and repay funds under the ABL Agreement based on working capital and other corporate needs.

1 unchanged sentence

Adjusted EBITDA (a non-GAAP financial measure), which is defined in the Company’s Debt Agreements, is used in the calculation of the Fixed Charge Coverage Ratio, Secured Net Leverage Ratio, Total Leverage Ratio and Total Net Leverage Ratio, which are required to be provided to the Company’s lenders pursuant to its Debt Agreements.

The Company’s adjusted EBITDA for the trailing twelve months ended March 31, 2025 was $51.0 million.

Capital expenditures for the three months ended March 31, 2025 were $1.6 million.

The Company’s adjusted EBITDA (including pro forma adjustments), for the trailing twelve months ended June 30, 2025 was $50.7 million.

Capital expenditures for the six months ended June 30, 2025 were $2.7 million.

Non-GAAP financial measure

4 unchanged sentences

Investors should consider this non-GAAP financial measure in addition to, and not as a substitute for, the Company’s financial performance measures prepared in accordance with U.S.

Further, the Company’s non-GAAP information may be

different from the non-GAAP information provided by other companies including other companies within the home retail industry.

The following is a reconciliation of the net (loss) income, as reported, to Adjusted EBITDA, for each of the last four quarters and the 12 months ended March 31, 2025:

Quarter Ended Twelve Months Ended March 31, 2025

June 30, 2024 September 30,

2024 December 31,

Further, the Company’s non-GAAP information may be different from the non-GAAP information provided by other companies including other companies within the home retail industry.

The following is a reconciliation of the net income (loss), as reported, to Adjusted EBITDA, for each of the last four quarters and the 12 months ended June 30, 2025:

Quarter Ended Twelve Months Ended June 30, 2025

September 30, 2024 December 31,

2024 March 31,

2025 June 30,

(in thousands)

Net (loss) income as reported

$ (18,167) $ 344 $ 8,918 $ (4,201) $ (13,106)

Loss on equity securities

Net income (loss) as reported

$ 344 $ 8,918 $ (4,201) $ (39,699) $ (34,638)

Income tax (benefit) provision

Income tax provision (benefit)

1,507 1,671 (142) (2,782) 254

3 unchanged sentences

928 (718) 527 220 957

Goodwill impairment — — — 33,237 33,237

Stock compensation expense 1,042 1,034 1,062 1,044 4,182

1 unchanged sentence

— — (4,578) — (4,578)

Severance expense — — — 270 270

Acquisition related expenses

2 unchanged sentences

662 249 — 139 1,050

Pro forma adjustments (3)

Adjusted EBITDA (4)

$ 16,935 $ 22,973 $ 3,281 $ 3,043 $ 50,732

(1) For the twelve months ended March 31, 2025, legal settlement gain, net included a net settlement of $6.4 million discussed in NOTE 12 — CONTINGENCIES, and adjusted for legal fees incurred from March 2, 2018 through March 31, 2025 of $1.8 million.

(2) For the twelve months ended March 31, 2025, the warehouse redesign expenses were related to the U.S.

(1) For the twelve months ended June 30, 2025, legal settlement gain, net included a net settlement of $6.4 million discussed in NOTE 12 — CONTINGENCIES, and adjusted for legal fees incurred from March 2, 2018 through March 31, 2025 of $1.8 million.

(2) For the twelve months ended June 30, 2025, the warehouse redesign expenses were related to the U.S.

(3) Pro forma adjustments represent the amount of operating expense reductions projected by the Company as a result of actions taken through June 30, 2025 or expected to be taken within 18 months of June 30, 2025, net of the benefits realized during the twelve months ended June 30, 2025.

These actions include cost savings initiatives for the U.S.

segment related to reductions in employee expenses (i.e., including terminated employees, furloughed employees and temporary salary reductions) and costs saving for the International segment related to Project Concord.

(4) Adjusted EBITDA is a non-GAAP financial measure that is defined in the Company’s debt agreements.

Adjusted EBITDA is defined as net (loss) income, adjusted to exclude loss on equity securities, income tax (benefit) provision, interest expense, depreciation and amortization, mark to market loss (gain) on interest rate derivatives, stock compensation expense, legal settlement gain, net and other items detailed in the table above that are consistent with exclusions permitted by our debt agreements.

Adjusted EBITDA is defined as net income (loss), adjusted to exclude income tax provision (benefit), interest expense, depreciation and amortization, mark to market loss (gain) on interest rate derivatives, goodwill impairment, stock compensation expense, legal settlement gain, net and other items detailed in the table above that are consistent with exclusions permitted by our debt agreements.

Accounts Receivable Purchase Agreement

6 unchanged sentences

Either party may terminate the agreement at any time upon sixty days’ prior written notice to the other party.

The Company did not sell receivables to HSBC during the three months ended March 31, 2025 and March 31, 2024.

At March 31, 2025, $16.0 million of accounts receivables were available for sale to HSBC, net of applicable charges.

The Company did not sell receivables to HSBC during the three and six months ended June 30, 2025 and June 30, 2024.

At June 30, 2025, $19.2 million of accounts receivables were available for sale to HSBC, net of applicable charges.

The Company’s risk management strategy includes the use derivative financial instruments to manage its exposure to interest rate movements and to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates primarily to offset the earnings impact related to inventory purchases.

3 unchanged sentences

The Company has limited its credit risk by entering into derivative transactions exclusively with investment-grade rated financial institutions and monitors the creditworthiness of these financial institutions on an ongoing basis.

The Company utilizes standard counterparty master netting agreements that net certain foreign currency and interest rate swap transactions in the event of the insolvency of

one of the parties to the transaction.

The Company utilizes standard counterparty master netting agreements that net certain foreign currency and interest rate swap transactions in the event of the insolvency of one of the parties to the transaction.

These master netting arrangements permit the Company to net amounts due from the Company to counterparty with amounts due to the Company from the same counterparty.

6 unchanged sentences

These non-designated interest rate swaps serve as cash flow hedges of the Company’s exposure to the variability of the payment of interest on a portion of its Term Loan borrowings.

The Company’s total outstanding notional value of interest rate swaps was $50.0 million at March 31, 2025.

The Company’s total outstanding notional value of interest rate swaps was $50.0 million at June 30, 2025.

Foreign Exchange Contracts

2 unchanged sentences

The Company purchases foreign currency forward contracts with terms less than 18 months.

The aggregate gross notional value of foreign exchange contracts at March 31, 2025 was $9.3 million.

The aggregate gross notional value of foreign exchange contracts at June 30, 2025 was $6.1 million.

Operating activities

Net cash provided by operating activities was $16.7 million for the three months ended March 31, 2025, as compared to net cash provided by operating activities of $10.5 million for the three months ended March 31, 2024.

The increase from 2025 compared to 2024 was attributable to a net legal settlement gain received in the current period, timing of collections related to the Company's accounts receivables and timing of payments for accounts payable and accrued expenses, partially offset by increased use of cash related to inventory purchases.

Net cash provided by operating activities was $26.1 million for the six months ended June 30, 2025, as compared to net cash provided by operating activities of $20.9 million for the six months ended June 30, 2024.

The increase from 2025 compared to 2024 was attributable to a net legal settlement gain received in the current period, timing of collections related to the Company's accounts receivables, and lower investment in inventory, partially offset by timing of payments for accounts payable and accrued expenses.

Investing activities

Net cash used in investing activities was $1.6 million and $0.6 million for the three months ended March 31, 2025 and 2024, respectively.

Net cash used in investing activities was $2.7 million and $1.1 million for the six months ended June 30, 2025 and 2024, respectively.

The increase in investment activities was driven by purchases of equipment for the Hagerstown Facility.

Financing activities

Net cash used in financing activities was $7.8 million for the three months ended March 31, 2025, as compared to net cash used in financing activities of $21.4 million for the three months ended March 31, 2024.

Net cash used in financing activities was $14.4 million for the six months ended June 30, 2025, as compared to net cash used in financing activities of $32.5 million for the six months ended June 30, 2024.

The change was attributable to lower net repayments of revolving credit facility in the 2025 period, partially offset by the principal repayment of term loan due to timing.

2 unchanged sentences

The repurchase authorization permits the Company to effect repurchases from time to time through open market purchases and privately negotiated transactions.

No shares were repurchased during the three months ended March 31, 2025.

As of March 31, 2025, the remaining dollar amount available for repurchases under the Board of Directors’ authorized plan was $11.1 million.

No shares were repurchased during the six months ended June 30, 2025.

As of June 30, 2025, the remaining dollar amount available for repurchases under the Board of Directors’ authorized plan was $11.1 million.

Quantitative and Qualitative Disclosures About Market Risk

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis