Tile Shop Holdings Inc (TTSH) 2020 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Fourth Quarter 2020 Tile Shop Holdings, Inc. Earnings Conference Call. (Operator Instructions) Please be advised that today's conference may be recorded. (Operator Instructions)

I would now like to turn the conference over to your speaker today, Mark Davis. Please go ahead, sir.

Thank you, Olivia. Good morning to everyone, and welcome to the Tile Shop's fourth quarter earnings call. Joining me today are Cabby Lolmaugh, our Chief Executive Officer; and Nancy DiMattia, our Chief Financial Officer.

Certain statements made during our call today constitute forward-looking statements made pursuant to and within the meaning of the safe harbor provision of Private Securities Litigation Reform Act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements.

Those risks and uncertainties are described in our earnings press release issued earlier and in our filings with the SEC. The forward-looking statements made today are as of the date of this call, and we do not undertake any obligation to update these forward-looking statements.

Today's call will also include certain non-GAAP measurements. Please see our earnings release for a reconciliation of those non-GAAP financial measures, which has also been posted to our company website.

With that, let me now turn the call over to Cabby. Cabby?

Thanks, Mark. Good morning, everyone, and thank you for joining us today for an update on our business and a review of our financial results.

We ended 2020 on a positive note. Our fourth quarter results continue to show progress. However, we still have room to improve. Our sales increased 3.8% to $81.6 million during the fourth quarter of 2020. Sales at comparable stores increased 3.3%, primarily due to an improvement in customer conversion.

Both overall sales growth and comparable store sales growth improved sequentially from the third quarter. The improvement is largely tied to an improving traffic trend we've seen over the last quarter, but our traffic numbers are still down year-over-year. In some regards, this isn't a surprise as we believe that many of our customers are limiting the number of store trips during the pandemic. In addition, there are certain decisions we have made to reduce our expense structure, both from a tactical perspective and in light of the pandemic that have had a negative impact on our traffic.

For example, we have been operating most of our stores at reduced hours since April of 2020, including all of our stores being closed on Sundays. This decision was made for a number of different reasons, including the ability to optimize staffing levels at our stores. It has been a key catalyst that contributed to a $12.4 million reduction in our SG&A expenses collectively for the second half of 2020 when compared to 2019.

During this period, our net income increased by $8.9 million from a net loss of $5.6 million during the second half of 2019 to net income of $3.3 million during the second half of 2020. Additionally, our adjusted EBITDA increased by $8.5 million or 64% to $22 million during the second half of 2020. We are pleased with the dramatic improvement in profitability despite the headwinds this presented to growing traffic in sales.

During the fourth quarter, we performed a test to add 1 to 2 evening hours back to select stores. We were very deliberate with these changes and intentionally staggered these days our stores remained open during the evening across the market. This helped to ensure our customers always had an option to visit a store in the evening that is nearby in those markets. The test proved to be beneficial change, and we were able to incorporate evening hours in many of our stores by the end of the fourth quarter. Plus, we're able to make these adjustments with minimal changes in our staffing levels, thereby keeping our costs down.

During the first quarter of 2021, we are starting to open select stores on Sunday. We are increasing our staffing levels when we decide to open the store on a Sunday.

Now like many other retailers, our supply chain has been affected by COVID-19. During the third quarter of 2020, we started experiencing elevated levels of back orders stemming from delays in replenishment from certain international to Tile suppliers. During the fourth quarter, we continued to experience similar challenges, and this did have an adverse impact on our sales. We are working closely with our network of suppliers to secure delivery of back-order product.

At the beginning of 2020, we had 3 key priorities: focused retail execution, growing sales with our professional customers and disciplined expense management. While COVID-19 had a significant impact on our business, we were able to achieve many of these goals underlying our priorities that ultimately generated the requisite cash for us to fully pay off our debt during the fourth quarter. We now have significant flexibility as a debt-free retailer with a financial model that, in our view, is built to generate substantial operating cash flow.

As we move into 2021, we plan to focus on initiatives that are aimed at driving revenue growth and leveraging our expense structure. We believe there is significant opportunity to drive sales growth within our existing portfolio of stores. Accordingly, our key priorities for 2021 include: focusing on retail execution, enhancing our customers' online experience and refining our purchasing and distribution processes.

With respect to our first priority, we believe our ability to grow revenue and profits within our existing stores is dependent on our ability to improve execution at a store level. We have made significant strides over the past year in many areas, including increasing the number of pros enrolled in our loyalty program, improving our customer delivery collection rates and reducing our discounting.

While this progress is encouraging, we continue to see opportunities for meaningful improvement. For example, we believe we have an opportunity to leverage our technology investments to enhance the way we log customer interactions, trigger up follow-up calls and monitor activity to ensure we're proactively communicating with our customers. We have identified several opportunities like this to improve the way we execute in our stores, and I believe, continuing to focus on retail execution will be a key catalyst to grow revenue.

Our second priority is to enhance our customers' online experience. We aspire to provide the best service in our industry to every customer who walks through our doors, and we have the same high standards for when our customers visit our website. Now more than ever, our customers start their journey online to seek inspiration, weigh options and choose a partner they will work with. We have identified a number of opportunities to enhance our customers' online experience and better integrate their online and in-store shopping experience.

For example, we recently launched our tile visualizer that gives our customers the ability to create a room online, simulate different tile options in their design, save their projects and solicit advice from one of our talented design experts. I believe the steps we're taking to enhance our website are foundational to driving improvements in traffic and sales in the future periods.

Our final priority for 2021 is to refine our purchasing and distribution processes. As I discussed earlier, we're currently working with our suppliers to address elevated levels of back orders. Now we appreciate that much of this was out of the control of our suppliers as they dealt with government shutdowns and reduced hours due to the pandemic, but we have to eliminate all these stocks as quickly as possible.

Additionally, we have identified opportunities to rebalance inventory more efficiently between our distribution centers to reduce the level of stock outages at each location. We continue to evaluate our assortment and ensure we source products on the leading edge of current design trends while maintaining targeted gross margin rates across all of our product categories.

Now before I turn the call over to Nancy, I want to reiterate that despite a challenging 2020, I believe our entire employee base rose to the occasion, particularly our team members in our stores, thank you to our entire organization as well as our vendors, suppliers and customers.

Now the theme for 2021 is focus. We expect to increase our sales in our existing portfolio of stores while maintaining the strong expense management controls.

I'll now turn the call over to Nancy, who will take you through some of the financial details. Nancy?

Thanks, Cabby. Good morning, everyone. As Cabby mentioned, we are pleased with our fourth quarter results. Net sales increased $3 million or 3.8% from $78.6 million during the fourth quarter of 2019 to $81.6 million during the fourth quarter of 2020.

Sales at comparable stores improved 3.3%. The increase in sales at comparable stores was largely driven by an improvement in customer conversion. Our comparable store sales improved sequentially from the third quarter due to improvement in traffic trends. However, our traffic numbers in comparable stores are still down year-over-year due in part to the reduced store hours. Additionally, product shortages were a headwind during the fourth quarter of 2020.

For the full year, net sales decreased $15.3 million or 4.5% from $340.4 million in 2019 to $325.1 million during 2020. Sales at comparable stores decreased by 5.6%. The decrease in sales was largely due to the onset of COVID-19 that resulted in a significant decrease in store traffic levels, particularly during the second quarter of 2020. While traffic levels improved throughout the balance of the year, the combination of reduced hours and product shortages also had an adverse impact on our sales.

Gross profit during the fourth quarter of 2020 was $55.9 million, an increase by $2.1 million or 3.9% when compared to the fourth quarter of 2019. Our gross margin was 68.5%, 10 basis points higher than the fourth quarter of 2019 and 60 basis points better than our gross margin rate reported during the third quarter of 2020. The improvement in our gross margin rate in the fourth quarter compared to the prior year was primarily due to reduced inventory write-downs and better pricing. These factors were partially offset by an increase in customer delivery mix.

For the full year, we generated $221.5 million of gross profit. Our gross margin rate decreased 130 basis points from 69.4% during 2019 to 68.1% in 2020. The decrease in gross margin was primarily driven by an increase in customer delivery mix rendered in 2020 following the onset of COVID-19 and higher levels of inventory write-downs in connection with routine product transitions.

Our selling, general and administration costs decreased by $5 million from $58.2 million during the fourth quarter of 2019 to $53.2 million in the fourth quarter of 2020. The decrease in SG&A from the fourth quarter of last year was due to our reduced hours, which contributed to $1.5 million reduction in compensation and benefit expenses. Additionally, a $1.4 million decrease in depreciation expense and $1.2 million decrease in professional fees contributed to improvement in SG&A expenses year-over-year.

For the full year, selling, general and administrative expenses decreased by $22.3 million to $215.1 million. The decrease was largely due to lower levels of compensation benefits stemming from the head count reduction following the onset of COVID-19 as well as lower variable expenses and lower advertising expenses. We ended the year with 142 stores, which was no change from the beginning of the year.

We're pleased with our profitability metrics during the quarter and year. Net income from the fourth quarter was $1.4 million and fully diluted earnings per share was $0.03. For the full year, our net income was $6 million and fully diluted earnings per share was $0.12.

Adjusted EBITDA increased $5.7 million from $5.1 million during the fourth quarter of 2019 to $10.8 million during the fourth quarter of 2020. Adjusted EBITDA margin was 13.3% for the fourth quarter of 2020, which was a 680-basis-point improvement compared to the fourth quarter of 2019.

Full year adjusted EBITDA was $40 million, an increase of $5.1 million or 15% compared to adjusted EBITDA reported in 2019. The adjusted EBITDA margin for the year was 12.3%, a 210 basis point improvement compared to 2019.

Turning to our balance sheet. We ended the year with $9.6 million of cash and no debt. Inventory at the end of the year totaled $74.3 million and increased slightly from the third quarter.

Cabby shared our 3 priorities in 2021, each of which are focused on improving revenues generated by stores in our current store portfolio. Accordingly, we anticipate capital expenditures between $12 million to $15 million during 2021 to open one new store and relocate one new store. The one store opened in New Jersey on February 19. We model 15 to 20 stores, fund information technology projects tied to our strategic objectives, merchandise new products and enhance the presentation of trending products and maintain distribution centers and our internal fleet. We also anticipate an increase in inventory during 2021 but intend to remain inventory below $90 million.

Before closing, I'd like to provide a brief update on our open process to possibly relist our common stock with NASDAQ. As previously announced on March 1, 2021, after receiving the recommendation of the special committee of our Board of Directors in evaluating the potential benefits, costs, burdens and processes associated with relisting the company's stock with NASDAQ, our Board unanimously voted in favor of authorizing us to apply to relist the company's stock with NASDAQ. We have submitted our application, and we'll be working diligently to respond to any questions posed by representatives from NASDAQ in a timely manner.

We remind our stockholders and others who are considering trading in our security that there can be no assurance that NASDAQ will approve our listing application. Due to the ongoing nature of this open process, we will not be answering any questions about the company's decision to apply to relist with NASDAQ on our call this morning.

In closing, we have a great foundation to hit our 2021 priorities head on. And with no debt, we have a great flexibility and balance sheet strength.

With that, Olivia, Cabby and I are happy to take any questions.

(Operator Instructions) Now first question coming from the line of David Kanen with Kanen Wealth Management.

It's David Kanen, Kanen Wealth Management. The first one is for the quarter, how much revenue -- I'm sorry, what -- could you quantify the amount of orders that you received deposits for that you were not able to ship because you were out of stock, I believe? I forgot exactly how you categorize that. But in Q3, it was a few million bucks. I count that as contributory to the same-store sales number. So if you could help me to understand that, I'd appreciate that.

David, it's Cab. Great question. Yes, it did roll into the fourth quarter. Primarily, it was about the same when looking at the challenges we had in our supply chain with our vendors, and it's not unique in our -- in just the Tile Shop. It's within our industry and a lot of home improvement. I think we can all agree trying to shop for anything these days is tough. But it was primarily around the same number, a couple of million dollars that impacted our back orders during the quarter.

Okay. And then the second part of my question is the investments that you're making on the online -- in regards to the online experience and virtualization, can you provide a little more detail on the time frame for that being rolled out?

Absolutely. We've already rolled out some, like with the visualizer, and we're working on a couple of different enhancements to really increase the ability to identify customers, increase the -- enhance the ability to engage with customers to really see what customers are in tune with the Tile Shop and our assortment and how we can get them through the funnel.

They're ongoing, and it's monthly. We're adding things. I mean, weekly, really, if you check out our website, you're going to see new enhancements continually through the year.

Okay. And then final question. In regards to the tests that you ran with adding hours and then adding Sundays. Could you give us a little more detail, let's call it, the return on invested labor hour, if there's such a thing? Just give us a little bit more color so we understand kind of what the effect was?

Sure. Absolutely. Well, it's a balance. As you know, when COVID hit, and we had to reduce our head counts in the field, it was quite the balance to maintain profitability and be open the hours we needed for our customers.

And so when we started adding hours back throughout the week evening hours, we wanted to do that with the existing staff. So we worked on unique scheduling through the different markets. And we watch traffic counts. We analyze the data for orders during hours placed and closed.

And we saw the benefit there. I'm not going to give you a percentage change in orders placed or deals closed, but we did see the impact it had to allow retail customers the opportunity to come in after work.

And as we saw that grow, we continued that test, I would say, across the chain. So every market now is open later during the week. With Sunday hours, we're very strategic. Each store is unique in its community. And some stores are going to benefit a lot more being open on Sunday than others. So we had to make sure that we tested it with the existing staff. And if we had to add staff, we did.

Now you have to remember, when opening hours or opening another day during the week on a Sunday, not only are you having to hire more people, more associates in the stores, now you're going to have to hire more people in the distribution centers. Now you're going to have to add more trucks to the fleet or more deliveries using whatever shipping we're using for that market.

So it's quite a bit of added expense. And we want to make sure that it aligns with our strategy and profitability metrics. Right now, we have quite a few stores open on Sunday, and we're watching it closely.

Okay. You know what, I'm going to actually go back on my word. I think there was one other thing that I wanted to know. Being that you've paid off all of your debt, how does management and the Board feel about potentially buying back their stock, being that you're going to generate quite a bit of free cash flow going forward?

And then just for the heck of it, if you could just comment on alignment of your employees, have there been any revisions there with the improved performance? Have you taken a look at comp plans and making sure that your employees are happy and that they're aligned based on the company's performance that we've already achieved in future going forward?

Yes, absolutely. I'll take the employee piece, and then I'll hand it over to Nancy to talk about the revenue generation going into 2021.

So employees, yes, we definitely review comp plans. And we have a very strong employee base right now, who saw a lot more customers due to the reduction in head count. And so it was a good year for our employees and their morale is high. They battled through. I'm very proud of them. We were able to add to our leadership team, our CIO, Christopher Davis, who's really brought some great insight and some refreshing new ideas to our team.

And so for the a leadership rank, he's new. Employees are good. And comp change, yes, in retail, commission retail, we do evaluate comp every year. So we did it this year, and we have a very happy employee base.

Nancy, I'll let you take the revenue question there.

Yes. Thanks, Cab. And thanks, David, for the question. We were very focused on paying off our debt in 2020, and we're really pleased that we achieved that goal. So we think that, that's really going to position us extremely well and will provide us some great flexibility in the future.

As we've discussed in our prepared remarks, we've earmarked $12 million to $15 million to our invest in-store remodels, things like technology, store merchandising, our distribution fleet. We will continue to monitor our cash position, and we will evaluate our capital allocation strategy as we move through the year. But keep in mind that we're still very early in the year.

And there's something to be said for generating the cash, but we do have to generate the cash. So certainly, more to come on that, but we are continuing to evaluate our capital allocation strategy as we move through the year.

Okay. And now I'm really pushing it, going overboard. But could you speak to the momentum that you saw in Q4, turning to a positive same-store sales number if that continued and/or accelerated at all with the additional hours that you added in the test in Q1 quarter-to-date?

Yes, David, we were excited in Q4 to year-over-year, what we're seeing in our stores with our customers. I can't really speak to Q1. We don't do that, and you'll hear all about it when we release Q1 at our next call.

Our next question coming from the line of Eric DeLamarter from Half Moon Capital.

Building on David's question about the visualizer you've developed for online application, how are you applying that or adopting that as well in the stores? I know it's become more of a convention amongst some of your peers, versus, I guess, the legacy vignettes that are quite costly and also need to be refreshed as trends evolve. But how is that playing out with those remodels? And how are you thinking about that if you wouldn't mind addressing?

Eric, that's a great question. I wish I had this tool. For 15 years, I worked in the stores, and it was always sketching. I had color pencils and all these things. And now I look and I'm like how spoiled are these guys in the store that they can actually pull up this tool.

And we can change the colors of the cabinets, the countertops, put in the tile, change the different layouts of the tile, and we're getting a lot of positive feedback from our field. We're seeing increased usage week-over-week. Customers are bringing in their own that they're printing out at home.

And you're right, vignettes are costly. And -- but that's what's really set us apart for many years. And having this tool allows us to do a virtual vignette for each customer, and we can switch out the tiles and really give them the idea of what it's going to look like in their home. So we're really excited about this tool and the adoption rate has taken off. So yes, you hit the nail on the head there.

Got you. In these 15 new models you have slated for this year, will that be largely vignette overhauls? Or is that the application of the technology? How does that kind of factor out?

Yes, when we analyze stores and look at doing remodels, there's a lot of things that go into the equation, the tenure of the store, disc or material that's sitting in the vignettes, and then we have a certain way of approaching it. We can do full remodels, we can do scrapes, we can do -- where we leave the cabinets and just update the paint and the tile. There's a lot of different ways we approach a remodel.

And we're adding a lot more space in stores now for design tables and for areas for our customers to actually roll out the blueprints, as they say, instead of having all vignettes. So we're opening up the space a little bit more in some stores. Refreshing, again, we don't have to do full store remodels to add a refreshed look. So we look at each store under a microscope, look at where we need to invest, and we align on that and sign off and move forward. So there's a few underway as we speak.

And one quick -- sorry, go ahead.

No. Just to add to that, you were asking for some very specific details. We're looking to refresh probably 15 to 20 stores this year.

And to Cab's point, it's an evaluation process, right? But typically, when we're talking about refreshing, we're updating some of the older vignettes. And that really excites us because it allows us to display new design trends. And it also allows us to showcase some of the beautiful new product that's going to be arriving.

Got you. And one quick one, you guys have no-debt balance sheet, as mentioned, generating cash flow. Is there any thought about increasing the store openings? You've opened one in New Jersey, but for now, none further planned to open this year, we have retail lease turns and boxes available with more attractive pricing terms and perhaps historically, but then kind of what is your thought there in terms of expansion store unit count-wise?

Well, yes. Great question, again. As we generate the cash flow, what we want to do is, first, obtain our 2021 objectives and fund all of those. And then look at where the market is, look at real estate. Do we want to grow again? Yes. Is it in our immediate plans in 2021? No.

What we want to do is focus, like I said in the prepared remarks, focus, build the reserve, make good decisions going forward, let data really guide us on when and where. So not in 2021 as of right now. Okay.

(Operator Instructions) Our next question coming from the line of Kunal Mehta with Montana Advisors.

Cabby, Nancy, congrats on a good quarter. A job well done. Just quickly, if you guys could give a rough estimate on the onetime uplist cost to the NASDAQ as well as what you've modeled in for kind of going forward in your cost structure being, obviously, on the larger exchange?

Yes, I'll kick that over to Nancy.

Yes. So as we stated in our prepared remarks, we're not going to be taking any questions about our listing status today. But certainly, some of that information you can find in our prior 8-K filings.

Sure. And then kind of tagging on to David's question about you guys are obviously generating a significant amount of cash and the debt has been paid off. Just a suggestion to the Board and to management, the stock is obviously undervalued here. And assuming everything goes as planned to the uplist, my suggestion would be, why consider a large self-tender before you guys get some of these indexes and mutual funds to buy in before you guys uplist. So just to suggestion to pass along, but well -- job well done and congratulations, guys.

Thank you very much.

Thank you.

Our next question coming from the line John Hollander with Chesapeake Advisory.

This is John Hollander. I'm a little bit new to the story. So I just had a few basic questions for you. One is, how much does it cost to build a store?

John, it's a great question for someone new to the story. Absolutely. It's ranged over the last 10 years on the footprint. Historically, way back in the day, it was $1.5 million. And we got it down to $800,000, but typically, it's right around $1 million to build out a store.

Okay. And for that store, what type of returns or how do you analyze the return on that million?

Again, it's really different through each market and each store, how they ramp up. And through the years, that number has changed. I'm not going to speak to current trends or what we're hoping for in Wayne, New Jersey at this point.

Okay. My next question is just to think through impacts of -- we've had slightly increases in mortgage rates, and how your business responds? And what percent would you think is renovations versus new construction versus new sales? How do you just think through that calculus of your customer demand?

Yes, John, it's great. We're primarily a remodel business and custom homes. New construction, we get some of it, but it's not our primary customer. Which really has benefited the tile shop through tough times in the last 20 years, the recession when no one could buy a house, they stuck home and remodeled their own homes, and we did very well during a very difficult time.

So when remodel is high, the Tile Shop always has done pretty well. And so we are very -- how do I say, we're strong when it comes to expense control, and that's our primary objective. And when it comes to tough times or interest rates creep up, we will be fine through those times.

Okay. That's helpful. And could you comment just a little bit on just business trends throughout 2020? What's incredible is that your numbers -- your top line, when you look through it over the year, you're flat with last quarter. Obviously, Q2 was down. The March number was quite high at $94 million. Could you just comment on how business trended over 2020?

Yes. I mean, what everyone needs to remember, we're a fashion business, right? People think tile, they don't think fashion. But what we see in the market today with people, they're looking at their homes a different way. It's not just a utilitarian space to throw hard surface down. They want to make sure that their homes speak about them and how they want to represent themselves. And so it's fashion and it's on trend. And we invested heavily in this area. And we saw that resonate with our customers.

We did see an increase in almost all segments when it comes to what customers are after, bigger tiles, more patterns, more color. It's not so much the old beige and white anymore. So you have to make sure you get in front of the customer with creative content inspiration.

So when you heard in our prepared remarks, we're doing a better job of that in our website content and some of our new advertising initiatives going forward, it's really speaking to the customer and making sure we have what they want. But when you think about trends, they're still buying natural stone. They're still buying ceramic and porcelain, mosaics. It's exciting to where the fashion is going within our industry. It makes it a lot more fun. But the demand is good.

Okay. And just building on that point, who determines what they're buying? Is that like a contract that's handling the tile install? Or is the actual customer coming into the store?

It's a good question. The customers come to the store. The customers make that decision. We can do selection sheets, quotes, and then what we do is we work with the contractor to make sure the measurements, the setting materials, everything is correct. In that way, the contractor can either pick it up or we can deliver it to the job site. But the customer is the primary driver.

Now we also focus very hard on the pros because if a customer is going to be thinking about a project, a remodel or new construction, first thing they're going to do is get inspiration online, but then they have to find that pro. What is this going to cost, right? So then that Pro is going to direct them to a local shop to do their selections. That's why we really want to be that destination for all pro customers.

We've really added a lot of SKUs to our back shelf and setting materials that entices that pro customer to make the tile shop their destination. And our Pro loyalty program has really grown with the pros this past year. We're pretty excited with the results there as well.

So the Tile Shop has to focus more -- not more on both segments. We have to make sure we're aligned with the retail customer. We can speak to the retail customer, be credible and trustworthy with design knowledge and with fashion knowledge. But then we also have to be able to speak to that pro. We have to know current installation guidelines. We have the right products, industry-standard products that meet their standards because they have to warranty the work, not us. So we have to make sure we have everything here for every customer segment.

That's incredibly helpful. And then just my last question on that. Is there an impact at all from a shortage of tiling contractors? And have you seen any impacts to that? Obviously, there is a shortage of materials in building products. And we constantly hear in the community about just slowdown on permitting slowdown on development.

Yes, John, it's industry-wide, and it's all trades. It's not just tile installers. It's electrician, plumber is everywhere you look. It's -- yes, there is definitely a shortage in our industry, which drives the installation price higher.

So again, we focus on installation videos, classes, things to educate customers if they want to get in the DIY market. I believe that we'll see a resurgence of DIY in the coming years due to virtual learning.

Obviously, the pandemic forced a lot of people to work virtually. And they're looking at projects online. Maybe I can do it myself. So we have to be prepared for that. And we always have been. If you look at tile class online, it's me, when I was a store manager. We'll check out the video. You'll learn a lot, all right? So it's -- we got to make sure we have the content.

I just got the Tilefast e-mail. I thought that was impressive. To that point, did you see your customers actually like having their own tile saws and really doing -- cut tile? Or do you expect them to be doing like to peel and stick?

No. People who want tile will get tile. There's definitely a difference in the customer that wants peel and stick and the customer that wants ceramic or a nice marble mosaic. We offer tile cutting in our stores. We have websites set up if they want a few pieces cut, no problem.

We sell wet saws. So if they want to purchase wet saws, they can do that as well. And we have a little do-it-yourself for wet saws. And someone can buy and bring home and knock out a project. Obviously, they're not meant for commercial installation, but we offer the tools necessary for any customer to be able to get their projects completed.

That was very helpful. I appreciate your time and congrats on the quarter. And just my last question, is there a seasonality in the business? Because I'm just looking at that Q1 of '20 quarter where you guys reported $94 million of revenue compared to December '19 of $79 million.

Yes, absolutely, there's seasonality. Q1 as always -- typically have been strong for us over the last -- as long as I've been here. People have been stuck in their homes. It's tax return season. It's graduation season. A lot of people are looking to update certain aspects of their home after being stuck in it all year. And we benefit from that, absolutely.

It's dog days of summer, I call, July. Everyone takes a vacation. They're outside. We still -- it's not as big of a swing as like electronics retailer, where it's all Christmas. We just don't see as strong of demand through the summer months. But then when kids go back-to-school, that demand picks back up.

I'm showing no further questions. I will now turn the call back over to Mark Davis for any closing remarks.

Thank you for listening to our earnings conference call. We anticipate filing our Form 10-K later today. We look forward to providing our next update in May. Thank you for the interest in the Tile Shop, and have a great day.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.