[Management View]
Ethan Allen Interiors emphasized its vertically integrated model, debt-free balance sheet, and capital return as key differentiators. The company highlighted its focus on interior design, technology investments, and a strong retail network.

[Outlook]
The company remains cautiously optimistic, focusing on talent, service, marketing, technology, and social responsibility. They plan to continue investing in new product launches and marketing initiatives to drive future growth.

[Financial Performance]
Consolidated net sales totaled $147 million, with retail written orders growing by 5.2%. Wholesale orders decreased by 7.1%, and the wholesale backlog ended at $53.5 million. The consolidated gross margin was 61.4%, and adjusted operating margin was 7.2%. Adjusted diluted EPS was $0.43, with an effective tax rate of 25.4%. Cash and investments totaled $193.7 million with zero debt.

[Q&A Highlights]
Question 1: Did Apple Intelligence drive sales of the iPhone 16 series? Which features are most popular with users?
Answer: In markets where Apple Intelligence was introduced, the iPhone 16 series outperformed markets where the feature was not introduced. Users used features such as ‘Writing Tools,’ ‘Image Playground,’ and ‘Genmoji’ extensively, especially the ‘Clean Up’ feature. The ‘Clean Up’ feature received a lot of attention in Apple Store demos. Apple Intelligence is also continuing to expand language support, which is expected to further enhance user experience and demand.

Question 2: Can you provide more details on the cadence of retail written order trends during the quarter?
Answer: Despite challenges such as government shutdowns, the company saw lower traffic but more qualified customers who were buying. There were no major highs or lows during the quarter, with consistent increases in written orders.

Question 3: What are your expectations for promotional activity for the balance of the year or 2026?
Answer: The company has maintained its promotional activities without major changes. Special savings are offered every quarter, and financing is provided at consistent levels. This approach has helped maintain margins.

Question 4: How are tariffs impacting the industry and your pricing strategy?
Answer: Tariffs are ever-changing, but the company’s North American manufacturing base helps mitigate the impact. Price increases of 5%-10% have been implemented on non-furniture products, and some overseas partners have worked to manage costs.

Question 5: When will the positive written demand translate into growth for the retail segment?
Answer: The objective is to come close to last year’s performance despite lower traffic. Qualified customers and talented interior designers have helped mitigate the impact of lower sales.

Question 6: What is the outlook for government contract sales?
Answer: The outlook depends on the government reopening. New orders are not coming in due to the government shutdown, but there are pending orders that could be forwarded once the government reopens.

Question 7: Can you share more about the increased marketing spend and its impact?
Answer: The increased spend is focused on direct mail, paid search, and paid social campaigns. The benefit is expected to be seen in the current quarter and beyond as these are longer-term investments.

[Sentiment Analysis]
Analysts were generally positive, appreciating the company’s strong margins and strategic investments. Management maintained a cautiously optimistic tone, emphasizing their focus on controllable factors and long-term growth.

[Quarterly Comparison]
| Metric | Q1 2026 | Q1 2025 |
|---------------------------|---------|---------|
| Consolidated Net Sales | $147M | N/A |
| Retail Written Orders | +5.2% | N/A |
| Wholesale Orders | -7.1% | N/A |
| Wholesale Backlog | $53.5M | N/A |
| Consolidated Gross Margin | 61.4% | N/A |
| Adjusted Operating Margin | 7.2% | N/A |
| Adjusted Diluted EPS | $0.43 | N/A |
| Cash and Investments | $193.7M | N/A |

[Risks and Concerns]
- Decreased wholesale orders due to lower contract business and government spending.
- Retail delivered sales declined by 3.2% due to reduced traffic.
- Ongoing uncertainty around government contracts and tariffs.

[Final Takeaway]
Ethan Allen Interiors demonstrated resilience in a challenging environment, leveraging its vertically integrated model and strategic investments to maintain strong margins and positive financial performance. The company’s focus on qualified customers, technology, and marketing initiatives positions it well for future growth despite ongoing economic uncertainties.