Good day, and welcome to the Escalade Inc. Second Quarter 2025 Results Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Patrick Griffin, Vice President, Corporate Development. Please go ahead, sir.

Today's discussion contains forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the SEC. Except as required by law, we undertake no obligation to update our forward-looking statements. At the conclusion of our prepared remarks, we will open the line for questions. With that, I would like to turn the call over to Armin.

Thank you, Patrick, and welcome to everyone joining us on today's call. Our second quarter results reflect the strong operating leverage our team has built over the past few years. Despite a $1.6 million tariff-related headwind, we delivered a solid margin profile. Excluding this impact, our gross margin would have been approximately 28% for the quarter. Net sales declined approximately 13% year-over-year, which was in line with our expectations. However, we expanded gross margin by nearly 60 basis points, driven by lower manufacturing and logistics costs, supported by our recent facility consolidations and cost rationalization initiatives. The decline in our sales for the quarter was preliminary due to delayed customer orders driven by changing tariff landscape, shifting consumer behavior due to the uncertain macroeconomic environment and a slow start to the seasonal demand in some of our regions due to unfavorable weather conditions. Additionally, we faced an approximately $900,000 year-over-year headwind from exiting certain categories over the past year. Importantly, I'm proud of how effectively our team has responded to the dynamics surrounding tariffs. Thanks to the sharp focus of our team, we have successfully minimized the impact of tariffs on our business. We have executed our tariff mitigation playbook with discipline, tactically managing supplier orders and inventory levels to limit cost exposure during this transitional period. Consistent with our inventory optimization efforts, we reduced inventory by approximately $14 million in the second quarter compared to the prior year quarter, enhancing our flexibility in navigating a complex sourcing landscape while driving working capital efficiencies. Looking ahead to quarter 3, we expect a slightly lower seasonal inventory build ahead of the holiday season compared to prior year. We believe this current flow of goods will provide sufficient inventory levels to service our retail partners for the balance of the year. Tariff-related…

Thank you, Armin. For the 3 months ended June 30, 2025, Escalade reported net income of $1.8 million or $0.13 per diluted share on net sales of $54.3 million. For the second quarter, the company reported gross margins of 24.7% compared to 24.2% in the prior year period. The 56 basis point increase in gross margin was primarily the result of lower operational costs driven by our facility consolidation and cost rationalization program. Our gross margin for the second quarter of 2025 also reflects approximately $1.6 million of expenses associated with tariffs, which negatively impacted gross margin percentage by approximately 200 basis points. Selling, general and administrative expenses during the second quarter decreased by 1.8% or $0.1 million compared to the prior year period to $10.2 million. This decrease in our SG&A expense during the quarter was partially offset by approximately $400,000 of nonrecurring executive transition expenses. Earnings before interest, taxes, depreciation and amortization decreased by $1.9 million to $3.9 million in the second quarter of 2025 versus $5.8 million in the prior year period. Total cash provided by operations for the second quarter of 2025 was $13.3 million, which was flat compared to the prior year period. Cash used for working capital purposes was lower during the second quarter of 2025 compared to the prior year period, primarily due to lower inventory and AR levels. As of June 30, 2025, the company had total cash and equivalents of $10.4 million. At the end of the second quarter of 2025, net debt outstanding or total debt less cash was 0.5x trailing 12-month EBITDA. As of June 30, 2025, we had $22 million of total debt outstanding. With that, operator, we will open the call for questions.

[Operator Instructions] And your first question today will come from Rommel Dionisio with Aegis.

Just with regards to new product cadence over the next several quarters. I wonder if you could just talk about -- not necessarily specific new products, but just does the tariff situation and the retail situation -- retail inventory situation change or push out your new product launch plans for the next several months or quarters?

Thank you, Rommel, and good morning as well to you. Good question on that side. We are working very, very close with our customers at that moment in time. We are really working in lockstep with our key accounts planning for a strong holiday season. Preorder volume is very stable and our joint marketing plans at this moment in time are all discussed. We have a very strong assortment lineup and will launch impactful product innovations in the second half of the year. We will not make any changes to our product launch cadence. On the contrary, we were actually leaning in, in terms of product innovation, working over the last 3 months very, very close with our accounts and actually are accelerating our product -- our new product introduction frequency on that side. While doing that, we will also watch the market, of course, pricing and the promotion dynamics that are out there with diligence. And at once replenishment orders will depend really on consumer behaviors and how they will react on the overall price increases on the market. But again, I want to underline that we are leaning in, in terms of product innovation, and we are even increasing our bringing new product to the marketplace.

Great. That's very helpful. Just a quick follow-up, if I may. Obviously, you saw significant progress in gross margins despite pretty significant headwinds on tariffs and cost absorption from reduced sales. I did note it was in the 10-Q or the press release, unfavorable product mix being a headwind on gross margins in the quarter. I wonder if you could just maybe just provide a little more granularity on specifically what categories resulted in that unfavorable product mix on gross margin?

Well, so last quarter, what we have seen in 2 areas was we were impacted on one side really by weather. I hate to say that, but it was absolutely true for us. I mean we are loading up for spring/summer season. So the heavy rains that we have seen in the storms and the late start of the summer, in particular, impacted our basketball and outdoor recreational product on one side. On the other side, obviously, working very close with our key accounts, while all of a sudden the tariffs exceeded, I mean, raised up. We stopped actually with our retailers also all shipping at that time because we wanted to avoid the extremely high tariff situation at that time. And then started again floating once the tariffs didn't normalize, but they were less exorbitant. So that had an impact on our shipments actually, and you see that in our quarter 2 results.

This concludes our question-and-answer session. I would like to turn the conference back over to Patrick Griffin for any closing remarks.

Thank you, operator. Once again, thank you for your interest in Escalade and joining our call. Should you have any questions, please feel free to contact us at ir@escaladeinc.com, and a member of our team will follow up with you. This concludes our call today. You may now disconnect.