Escalade NASDAQ: ESCA reported third-quarter 2026 net income of $6.7 million, or $0.48 per diluted share, as higher gross margin, improved working-capital efficiency and a tariff recovery helped offset a 3% decline in sales.
For the three months ended Sept. 30, net sales were $65.6 million. President and Chief Executive Officer Patrick Griffin said the sales decline reflected softness in basketball, indoor games and table tennis, along with a difficult comparison against the prior-year period, when shipments delayed from the second quarter by tariff-related market volatility lifted sales.
The company also attributed the decline in part to its strategic exit from certain lower-margin product lines. Growth in archery, safety and outdoor games partially offset those pressures. Archery benefited from demand for vertical bows and the contribution from Gold Tip, which Escalade acquired in September 2025.
Margins Rise as Sales Mix Shifts
Gross margin rose 123 basis points year over year to 29.4%, compared with 28.1% in the prior-year quarter. Chief Financial Officer Stephen Wawrin said the improvement reflected lower operational costs from better fixed-cost absorption and a favorable sales mix, including Gold Tip’s contribution as the acquired business continued to ramp.
During the question-and-answer session, Griffin said the favorable mix was primarily related to changes in Escalade’s customer base rather than consumers trading up to premium products. The company generated more dealer business with customers that had fewer programs, as well as more direct-to-consumer sales, which Griffin said generally carry higher margins.
Selling, general and administrative expenses increased $0.4 million from the year-earlier period to $11.6 million. Wawrin attributed the increase largely to costs associated with the AllCornhole and Gold Tip businesses, acquisition-related professional fees and higher advertising expense.
EBITDA increased to $10 million from $8.6 million a year earlier. The increase reflected improved gross profit and a $1.6 million recovery of previously paid tariffs received during the quarter, according to Wawrin.
Cash Flow, Inventory and Balance Sheet
Cash flow from operations totaled $14.9 million in the third quarter, compared with cash used of $1 million in the prior-year quarter. Wawrin said the improvement was driven primarily by higher net income and lower working-capital requirements.
Griffin said Escalade continued to improve asset utilization despite adding inventory through the Gold Tip and AllCornhole acquisitions in the second half of 2025 and the ASL Solutions acquisition during the third quarter of 2026. Total inventory was $2.9 million below the prior-year level, he said, as the company works toward a longer-term inventory-turn target of three times.
The company repaid $1.8 million of debt during the quarter and increased its cash balance by $8.1 million. At Sept. 30, Escalade had $24.5 million in cash and equivalents and $13.1 million in total debt, all classified as current. The company ended the period with a net cash position of $11.4 million.
Griffin said the company’s low-cost fixed-rate debt and higher cash balances also increased net interest income. In response to an analyst question, he said the company’s reported cash balance included the tariff refund received during the period, and that the refund affected free cash flow.
Holiday Promotions and Product Pipeline
Management said it is entering the holiday season with inventory levels it considers comfortable. Griffin said Escalade expects a promotional retail environment and plans to use more frequent promotions to highlight new products and value while reaching consumers earlier in the holiday buying cycle.
“We know it is going to be a promotional environment,” Griffin said, adding that the strategy is not intended to work through excess retail inventory.
The company also detailed several product launches across its portfolio. In pickleball, Onix introduced the Praxis paddle, featuring an Endurafoam core and raw carbon-fiber surface, as well as the Aeris, an entry-level lightweight paddle offered in multiple colors. In game-room products, Escalade introduced the STIGA Onyx18 table tennis table and the Pro Carbon Cybershape racket. Its billiards lineup added the American Heritage Ann Arbor 8-foot table.
Griffin said current investments in innovation are expected to support an acceleration of new product introductions entering 2027 and may help the company gain share in several categories.
Capital Allocation Focuses on Acquisitions and Investment
Escalade said it remains focused on strategic, accretive acquisitions that expand existing platforms, add exposure to attractive categories and strengthen its competitive position. Griffin said the company has a growing pipeline of acquisition opportunities that meet those criteria.
He said Escalade is comfortable maintaining cash equivalent to roughly one turn of EBITDA while evaluating acquisition opportunities. Management also expects additional capital-expenditure spending in the fourth quarter and into 2027 to improve capacity and efficiency. The company plans to continue paying its dividend and may repurchase shares when its board determines that doing so is appropriate.
Griffin said the company believes its operating model, recent acquisitions, capital-allocation discipline and financial flexibility position it to manage through continued pressure on discretionary consumer spending from inflation and broader economic uncertainty.
About Escalade (NASDAQ:ESCA)
Escalade, Inc is a sporting goods manufacturer and distributor headquartered in Evansville, Indiana. The company develops, manufactures and markets products for recreational and competitive sports, with a focus on indoor and outdoor activities.
Its product portfolio includes table tennis equipment, pickleball and other game-related products, archery equipment, darts, billiards, game-room furnishings, and outdoor recreation products. Escalade sells products under a variety of established brands, including STIGA, Onix, Accudart, Victory Tailgate, Harrows and Unicorn, as well as through private-label offerings.
Escalade serves sporting goods retailers, specialty dealers, mass merchants, e-commerce channels and institutional customers in the United States and international markets.
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