Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2025

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 1: Summary of Significant Accounting Policies

Nature of Business

The Tile Shop, LLC (“The Tile Shop”) was founded in 1985 and Tile Shop Holdings, Inc. (“Holdings,” and together with its wholly owned subsidiaries, including The Tile Shop, the “Company”) was incorporated in Delaware in June 2012. The Company is a specialty retailer of man-made and natural stone tiles, luxury vinyl tiles, setting and maintenance materials, and related accessories in the United States. The Company’s assortment includes over 6,000 products from around the world. Natural stone products include marble, travertine, granite, quartz, sandstone, slate, and onyx tiles. Man-made products include ceramic, porcelain, glass, cement, wood look, metal and luxury vinyl tile. The majority of the tile products are sold under the Company's proprietary Rush River and Fired Earth brand names. The Company purchases tile products, accessories and tools directly from its network of suppliers. The Company manufactures its own setting and maintenance materials, such as thinset, grout and sealer, under the Superior brand name, as well as works with other suppliers to manufacture private label products. As of December 31, 2025, the Company operated 140 stores in 31 states and the District of Columbia, with an average size of approximately 20,000 square feet.

Delisting and Deregistration

On December 3, 2025, the Company held a special meeting of its stockholders (the “Special Meeting”). At the Special Meeting the holders of the Company’s issued and outstanding shares of the Company’s common stock, par value $0.0001 per share (the “common stock”), entitled to vote approved, by a majority of the votes cast at the Special Meeting, an amendment to the Company’s certificate of incorporation, as amended (the “Certificate of Incorporation”) to effect a reverse stock split of the common stock, a ratio not less than 1-for-2,000 and not greater than 1-for-4,000 (the “Reverse Stock Split”), followed immediately by a forward stock split of the common stock at the same ratio, but inverse (the “Forward Stock Split,” and together with the Reverse Stock Split, the “Stock Splits”). The Company’s Board of Directors (the “Board” or “Board of Directors”) determined to effectuate (i) the Reverse Stock Split at a ratio of 1-for-3,000 and (ii) the Forward Stock Split at a ratio of 3,000-for-1 (collectively, the “Stock Split Ratios. At the direction of the Board, on December 15, 2025, the Company filed the certificates of amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware to effect the Reverse Stock Split at 5:01 p.m., followed immediately by the Forward Stock Split at 5:02 p.m., respectively, on that day.

As a result of the Reverse Stock Split, each share of common stock held by a stockholder of record owning immediately prior to the effective time fewer than the minimum number of shares, which, based on the Stock Split ratio chosen by the Board is 3,000 shares (the “Minimum Number”), was converted into the right to receive $6.60 in cash, without interest (the “Cash Payment”), per whole share and such stockholders are no longer stockholders of the Company. Stockholders owning a number of shares of common stock equal to or greater than the Minimum Number immediately prior to the effective time of the Reverse Stock Split (the “Continuing Stockholders”) were not entitled to receive any cash for their fractional share interests resulting from the Reverse Stock Split, if any. The Forward Stock Split, which immediately followed the Reverse Stock Split, reconverted whole shares and fractional share interests held by the Continuing Stockholders back into the same number of shares of the common stock held by such Continuing Stockholders immediately prior to the effective time. As a result of the Forward Stock Split, the total number of shares of common stock held by a Continuing Stockholder did not change as a result of the Reverse Stock Split. Following the completion of the Reverse Stock Split, the Company paid an aggregate of approximately $32.2 million to the Cashed-Out Stockholders, including stockholders who held fewer than 3,000 shares of common stock through banks and brokers.

The Reverse Stock Split reduced the number of record holders of the Company’s common stock to a number below 300 (i.e., the level at or above which the Company was required to file reports with the Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). The actions the Company took to suspend, and the events that occurred as a result of such actions that had the effect of suspending, the Company’s reporting obligations under the Exchange Act, including effectuating the Stock Splits, delisting the Company’s common stock from trading on The Nasdaq Stock Market LLC (“Nasdaq”), terminating the registration of the Company’s common stock under Sections 12(b) and 12(g) of the Exchange Act and suspending the Company’s reporting obligations under Section 15(d) of the Exchange Act, are collectively referred to as the “Transaction.” The Stock Splits were undertaken as part of the Company’s plan to give effect to the Transaction.

As a result of the Transaction, the Company is no longer subject to the reporting requirements under the Exchange Act or other requirements applicable to a public company, including requirements under the Sarbanes-Oxley Act of 2002 and the listing standards of any national securities exchange. Following the filing of this Annual Report on Form 10-K for the year ended December 31, 2025, therefore, the Company will cease to file annual, quarterly, current, and other reports and documents with the SEC.

Basis of Presentation

The consolidated financial statements of Holdings include the accounts of its wholly owned subsidiaries and variable interest entities for which the Company is the primary beneficiary. All significant intercompany transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. The Company’s estimates and judgments are based on historical experience and various other assumptions that it believes are reasonable under the circumstances. The amount of assets and liabilities reported on the Company's balance sheets and the amounts of income and expenses reported for each of the periods presented are affected by estimates and assumptions, which are used for, but not limited to, the accounting for revenue recognition and related reserves for sales returns, useful lives of property, plant and equipment, determining impairment of property, plant and equipment and right of use assets, accounting for leases, valuation of inventory, and income taxes. Actual results may differ from these estimates.

Cash and Cash Equivalents

The Company had cash and cash equivalents of $10.1 million and $21.0 million at December 31, 2025 and 2024, respectively. The Company considers all highly liquid investments with an original maturity date of three months or less when purchased to be cash equivalents. The payments due from banks for debit and credit card transactions are generally received, or settled, within 24 to 48 hours of the transmission date. The Company considers all debit and credit card transactions that settle in less than seven days to be cash and cash equivalents. Amounts due from the banks for these transactions classified as cash and cash equivalents totaled $1.8 million and $1.9 million at December 31, 2025 and 2024, respectively.

Trade Receivables

Trade receivables are carried at original invoice amount less an estimate made for doubtful accounts. Management determines the allowance for credit losses on a specific identification basis and by leveraging information on historical losses, current conditions, and reasonable and supportable forecasts of future conditions. Trade receivables are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received. The allowance for doubtful accounts was $0.4 million and $0.3 million as of December 31, 2025 and 2024, respectively. The Company does not accrue interest on accounts receivable.

Inventories

The Company’s inventory consists of manufactured items and purchased merchandise held for resale. Inventories are stated at the lower of cost (determined using the moving average cost method) or net realizable value. The Company capitalizes the cost of inbound freight, duties, and receiving and handling costs to bring purchased materials into its distribution network. The labor and overhead costs incurred in connection with the production process are included in the value of manufactured finished goods.

Inventories were comprised of the following as of December 31:



	2025		2024
	(in thousands)
Finished goods	$	87,596	$	84,255
Raw materials		1,803		2,012
Total	$	89,399	$	86,267

The Company provides provisions for losses related to shrinkage and other amounts that are otherwise not expected to be fully recoverable. These provisions are calculated based on historical shrinkage, selling price, margin and current business trends. These estimates have calculations that require management to make assumptions based on the current rate of sales, age, salability and profitability of inventory, historical percentages that can be affected by changes in our merchandising mix, customer preferences, rates of sell through and changes in actual shrinkage trends. The provision for losses related to shrinkage and other amounts was $0.7 million and $1.2 million as of December 31, 2025 and 2024, respectively.

Income Taxes

The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax liabilities and assets are determined based on the difference between the financial statement basis and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company estimates the degree to which tax assets and credit carryforwards will result in a benefit based on expected profitability by tax jurisdiction. A valuation allowance for such tax assets and loss carryforwards is provided when it is determined to be more likely than not that the benefit of such deferred tax asset will not be realized in future periods. If it becomes more likely than not that a tax asset will be used, the related valuation allowance on such assets would be reduced.

The Company records interest and penalties relating to uncertain tax positions in income tax expense. As of December 31, 2025 and 2024, the Company has not recognized any liabilities for uncertain tax positions nor has the Company accrued interest and penalties related to uncertain tax positions.

Revenue Recognition

Revenues are recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration received in exchange for those goods or services. The Company recognizes service revenue, which consists primarily of freight charges for home delivery, when the service has been rendered. The Company is required to charge and collect sales and other taxes on sales to the Company's customers and remit these taxes back to government authorities. Total revenues do not include sales tax because the Company is a pass-through conduit for collecting and remitting sales tax. Sales are reduced by an allowance for anticipated sales returns that the Company estimates based on historical returns.

The Company generally requires customers to pay a deposit when purchasing inventory that is not regularly carried at the store location, or not currently in stock. These deposits are included in other current accrued liabilities until the customer takes possession of the merchandise.

Sales Return Reserve

Customers may return purchased items for an exchange or refund. The process to establish a sales return reserve contains uncertainties because it requires management to make assumptions and to apply judgment to estimate future returns and exchanges. The customer may receive a refund or exchange the original product for a replacement of equal or similar quality for a period of two months from the time of original purchase. Products received back under this policy are reconditioned pursuant to state laws and resold. The Company records a reserve for estimated product returns, based on historical return trends together with current product sales performance.

Cost of Sales and Selling, General and Administrative Expenses

The primary costs classified in each major expense category are:

Cost of Sales

Materials cost;

Shipping and transportation expenses to bring products into the Company's distribution centers;

Customs and duty expenses;

Customer shipping and handling expenses;

Physical inventory losses;

Costs incurred at distribution centers in connection with the receiving process; and

Labor and overhead costs incurred to manufacture inventory

Selling, General & Administrative (sometimes referred to as “SG&A”) Expenses

All compensation costs for store, corporate and distribution employees;

Occupancy, utilities and maintenance costs of store and corporate facilities;

Shipping and transportation expenses to move inventory from the Company's distribution centers to the Company's stores;

Depreciation and amortization; and

Advertising costs

Stock Based Compensation

The Company recognizes expense for its stock based compensation based on the fair value of the awards on the grant date. The Company may issue incentive awards in the form of stock options, restricted stock awards and other equity awards to employees and non-employee directors. Compensation expense is recognized on a straight-line basis over the requisite service period, net of actual forfeitures. Certain awards are also subject to forfeiture if the Company fails to attain its Adjusted EBITDA or Pretax Return on Capital Employed targets. The Company adjusts the cumulative expense recognized on awards with performance conditions based on a probability of achieving the performance condition.

Concentration of Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and bank deposits. By their nature, all such instruments involve risks, including credit risks of non-performance by counterparties. A substantial portion of the Company's cash and cash equivalents and bank deposits are invested with banks with high investment grade credit ratings.

Supplier Concentration

The Company purchases merchandise inventories from approximately 200 different suppliers worldwide. Significant suppliers are those that account for greater than 10% of the Company’s annual purchases.

During the year ended December 31, 2025, the Company purchased materials from one significant supplier which represented a total of 12.7% of the Company’s total purchases. As of December 31, 2025, the accounts payable balance due to the significant supplier was $0.7 million. During the year ended December 31, 2024, the Company purchased materials from one significant supplier which represented a total of 11.4% of the Company’s total purchases. As of December 31, 2024, the accounts payable balance due to the significant supplier was $0.6 million. During the year ended December 31, 2023, the Company purchased materials from two significant suppliers which represented a total of 25.5% of the Company’s total purchases. As of December 31, 2023, the accounts payable balance due to the significant suppliers was $0.6 million.

Segments

The Company’s operations consist primarily of retail sales of natural stone, man-made and luxury vinyl tiles, setting and maintenance materials, and related accessories in stores located in the United States. The Company’s chief operating decision maker only reviews the consolidated results of the Company and accordingly, the Company has concluded it has one reportable segment.

Advertising Costs

Advertising costs were $8.7 million, $8.3 million and $9.1 million for the years ended December 31, 2025, 2024 and 2023, respectively, and are included in selling, general and administrative expenses in the consolidated statements of operations. The Company’s advertising consists primarily of digital media, direct marketing, events, traditional print media and mobile advertisements and is expensed at the time the media is distributed.

Pre-opening Costs

The Company’s pre-opening costs are those typically associated with the opening of a new store and generally include rent expense, compensation costs and promotional costs. The Company expenses pre-opening costs as incurred which are recorded in selling, general and administrative expenses. During both the years ended December 31, 2025 and 2024, the Company did not record any pre-opening costs. During the year ended December 31, 2023, the Company recorded pre-opening costs of $0.1 million.

Property, Plant and Equipment

Property, plant and equipment and leasehold improvements are recorded at cost. Improvements are capitalized while repairs and maintenance costs are charged to selling, general and administrative expenses when incurred. Property, plant and equipment are depreciated or amortized using the straight-line method over each asset’s estimated useful life. Leasehold improvements and fixtures at leased locations are amortized using the straight-line method over the shorter of the lease term or the estimated useful life of the asset. The cost and accumulated depreciation of assets sold or otherwise disposed of are removed from the accounts and any gain or loss thereon is included in other income and expense.



	Asset life (in years)
Buildings and building improvements		40
Leasehold improvements		20
Furniture and fixtures	5	–	7
Machinery and equipment		5
Computer equipment and software	3	–	5
Vehicles		5

The Company evaluates potential impairment losses on long-lived assets used in operations at the individual retail store level, which is the lowest level at which cash flows can be identified, when events and circumstances indicate that the assets may be impaired, and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. If impairment exists and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets, an impairment loss is recorded based on the excess of the carrying value of the asset group over its fair value. Fair value is measured using discounted cash flows or independent opinions of value, as appropriate. During the fiscal years ended December 31, 2025, 2024 and 2023, the Company recorded asset impairment charges of $0.3 million, $0.9 million and $1.0 million, respectively, which were classified in selling, general and administrative expenses.

Internal Use Software

The Company capitalizes software development costs incurred during the application development stage related to new software or major enhancements to the functionality of existing software that is developed solely to meet the Company’s internal operational needs and when there are no plans to market the software externally. Costs capitalized include external direct costs of materials and services and internal compensation costs. Any costs during the preliminary project stage or related to training or maintenance are expensed as incurred. Capitalization ceases when the software project is substantially complete and ready for its intended use. The capitalization and ongoing assessment of recoverability of development costs requires judgment by management with respect to certain external factors, including, but not limited to, technological and economic feasibility, and estimated economic life. As of December 31, 2025 and 2024, $1.2 million and $1.3 million was included in computer equipment and software, respectively. The internal use software costs are amortized over estimated useful lives of three to five years. There was $0.7 million, $1.8 million and $1.6 million of amortization expense related to capitalized software during the years ended December 31, 2025, 2024 and 2023, respectively.

The Company licenses software for internal use from third parties. The Company accounts for costs associated with software contracts considered cloud computing arrangements as operating expenses. If a software contract gives the Company the right and it is feasible to take possession of the software, the Company recognizes an asset for the entire contractual cost and recognizes a liability for future payments under the license agreement.

The Company has contractual obligations related to software service arrangements with suppliers for fixed or minimum amounts. Future minimum payments at December 31, 2025 for purchase obligations were $2.7 million. Amounts due under these arrangements in 2026, 2027, and 2028 total $1.2 million, $1.1 million, and $0.4 million, respectively.

Leases

The Company determines if an arrangement is a lease at inception. Operating leases are included in right of use assets and lease liabilities on the consolidated balance sheets. The right of use assets and lease liabilities are recognized as the present value of the future minimum lease payments over the lease term at commencement date. As most of the leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The right of use asset is also adjusted for any lease incentives received pursuant to the lease agreement. The Company’s lease terms may include options to extend or terminate the lease typically at its own discretion. The Company regularly evaluates the renewal options and when such options are reasonably certain of exercise, the Company includes the renewal period in its lease term. The Company does not apply the recognition requirements to short term leases.

Certain lease arrangements contain provisions requiring the Company to restore the leased property to its original condition at the end of the lease. The fair values of these obligations are recorded as liabilities on a discounted basis, which occurs at the time the Company enters into the lease arrangement. In the estimation of fair value, the Company uses assumptions and judgements regarding such factors as the existence of a legal obligation for an asset retirement obligation, estimated amounts and timing of settlements, discount rates and inflation rates. The costs associated with these liabilities are capitalized and depreciated over the lease term and the liabilities are accreted over the same period. Asset retirement obligations attributable to leases with a remaining lease term of 12

months or less are presented as other accrued liabilities. As of both December 31, 2025 and 2024, asset retirement obligations classified as other accrued liabilities was $0.1 million. Asset retirement obligations attributable to leases with a remaining lease term of 12 months or more are presented as other long-term liabilities. As of December 31, 2025 and 2024, asset retirement obligations classified as other long-term liabilities were $4.6 million and $3.5 million, respectively.

Self-Insurance

The Company is self-insured for certain employee health and workers’ compensation claims. The Company estimates a liability for aggregate losses below stop-loss coverage limits based on estimates of the ultimate costs to be incurred to settle known claims and claims not reported as of the balance sheet date. The estimated liability is not discounted and is based on a number of assumptions and factors including historical trends, and economic conditions. As of December 31, 2025 and 2024, an accrual of $0.6 million and $1.1 million related to estimated employee health claims was included in other accrued liabilities, respectively. As of both December 31, 2025 and 2024, an accrual of $1.4 million related to estimated workers’ compensation claims was included in other accrued liabilities.

The Company has standby letters of credit outstanding related to the Company's workers’ compensation and employee health insurance policies. As of both December 31, 2025 and 2024, the standby letters of credit totaled $1.2 million.

Contingencies

The Company is at times subject to various legal actions, claims, and proceedings arising in the ordinary course of business, which may include claims related to general liability, workers’ compensation, product liability, and employment-related matters resulting from its business activities. As with most litigation actions, an estimation of any possible liability cannot always be determined. The Company establishes reserves for specific legal proceedings when it determines that the likelihood of an unfavorable outcome is reasonably probable, and the amount of loss can be reasonably estimated. If the Company determines the probable estimate is a range of losses, if no point in the range is more probable, the low end of the range is recorded as a liability on the date the loss is considered probable.

New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this ASU improve the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. The Company adopted ASU 2023-09 prospectively for the year ended December 31, 2025. The standard did not have a material impact on the Company’s consolidated financial statements. Prior-period disclosures have not been retrospectively adjusted.

Recently Issued Accounting Pronouncements

In November 2024, the FASB issued ASU No. 2024-03 “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” This ASU requires public business entities to disclose, for interim and annual reporting periods, additional information about certain income statement expense categories. The requirements are effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027. ASU 2024-03 applies only to public business entities. Because the Company is no longer a public business entity following its voluntary delisting and deregistration, the guidance is not applicable to the Company.