This Management’s Discussion and Analysis of Financial Condition and Results of Operations (the “MD&A”) is designed to provide a reader of our consolidated financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. The MD&A is based upon, and should be read in conjunction with, our 2025 Annual Report on Form 10-K, Current Reports on Form 8-K and other filings with the Securities and Exchange Commission (“SEC”), and the consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q. The MD&A is presented in the following sections: - Cautionary Note Regarding Forward-Looking Statements - Executive Overview - Key Operating Metrics - Results of Operations - Regulation G Reconciliations of Non-GAAP Financial Measures - Liquidity - Capital Resources, including Material Cash Requirements - Off-Balance Sheet and Other Arrangements - Significant Accounting Policies - Critical Accounting Estimates - Recent Accounting Pronouncements Cautionary Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q, including the MD&A, contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Generally, forward-looking statements represent management’s beliefs and assumptions concerning current expectations, projections or trends relating to results of operations, financial results, financial condition, strategic objectives and plans, expenses, dividends, share repurchases, liquidity, use of cash and cash requirements, borrowing capacity, investments, future economic performance, and our business and industry. Such forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. These forward-looking statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “continue,” “may,” “will,” “short-term,” “target,” “outlook,” “forecast,” “future,” “strategy,” “opportunity,” “would,” “guidance,” “non-recurring,” “one-time,” “unusual,” “should,” “likely,” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. We derive many of our forward-looking statements from operating budgets and forecasts, which are based upon many detailed assumptions. While the Company believes that its assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors and it is impossible for the Company to anticipate all factors that could affect actual results and matters that are identified as “short term,” “non-recurring,” “unusual,” “one-time,” or other words and terms of similar meaning may in fact recur in one or more future financial reporting periods. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that are expected. Actual results could differ materially from those anticipated in the forward-looking statements due to a number of risks and uncertainties including, but not limited to the risks and uncertainties disclosed in Part I, Item 1A, Risk Factors, in our 2025 Annual Report on Form 10-K, and elsewhere here in this Quarterly Report on Form 10-Q. All forward-looking statements attributable to the Company, or persons acting on its behalf, are expressly qualified in their entirety by these cautionary statements, as well as other cautionary statements. A reader should evaluate all forward-looking statements made in this Quarterly Report on Form 10-Q in the context of these risks and uncertainties. Given the risks and uncertainties surrounding forward-looking statements, you should not place undue reliance on these statements. Many of these factors are beyond our ability to control or predict. The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as otherwise required by law. 20 ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES Executive Overview Who We Are. Founded in 1932, Ethan Allen is a leading interior design company, manufacturer and retailer in the home furnishings marketplace. We are a global luxury home fashion brand that is vertically integrated from product design through home delivery, which offers clients stylish product offerings, artisanal quality and personalized service. We are known for the quality and craftsmanship of our products as well as for the exceptional personal service from design to delivery. Our strong network of entrepreneurial leaders and interior designers provide complimentary interior design service to our clients and sell a full range of home furnishing products through a retail network of design centers located throughout the U.S. and internationally, as well as online at ethanallen.com. Ethan Allen design centers represent a mix of locations operated by independent licensees and Company-operated locations. At March 31, 2026, the Company operates 142 retail design centers, 137 located in the U.S. and 5 in Canada. We also have 44 independently owned and operated Ethan Allen design centers located in the U.S., Asia, the Middle East and Europe. We manufacture approximately 75% of our furniture in our North American manufacturing plants and have been recognized for product quality and craftsmanship since 1932. At March 31, 2026, we own and operate 11 manufacturing facilities, including four manufacturing plants, one sawmill, one rough mill and a kiln dry lumberyard in the U.S., three manufacturing plants in Mexico and one manufacturing plant in Honduras. We also partner with suppliers located in Europe, Asia, and other countries to produce and import various products that support the business. Business Model. Our vertical integration is a competitive advantage for us. Our North American manufacturing and logistics operations are an integral part of an overall strategy to maximize production efficiencies and maintain this competitive advantage. Our business model is to maintain continued focus on: (i) providing relevant product offerings, (ii) capitalizing on the professional and personal service offered to our customers by our interior design professionals, (iii) leveraging the benefits of our vertical integration including a manufacturing presence in North America, (iv) investing in new technologies across key aspects of our vertically integrated business, (v) maintaining a strong logistics network, (vi) communicating our messages with strong marketing campaigns, and (vii) utilizing our website, ethanallen.com, as a key marketing tool to drive traffic to our retail design centers. We aim to position Ethan Allen as a premier interior design destination and a preferred brand offering products of superior style, quality, and value to customers with a comprehensive, one-stop shopping solution for their home furnishing and interior design needs. We seek to constantly reinvent our projection and product offerings through a broad selection of products, designed to complement one another, reflecting current fashion trends in home furnishing. Talent. At March 31, 2026, our employee count totaled 3,105, with 2,158 within our wholesale segment and 947 in our retail segment. Our headcount is down 5.7% compared with a year ago and 39.4% less than at March 31, 2019. Fiscal 2026 Third Quarter in Review (1). Our fiscal 2026 third quarter results were impacted by a reduction in business with the U.S. State Department, lower international sales and sluggish demand from a challenging environment for home furnishings, which included weather disruptions and macroeconomic uncertainty. Consolidated net sales were $135.8 million, a 4.8% decrease from the prior year quarter primarily due to fewer contract sales, lower delivered unit volume, reduced available backlog and inclement weather partially offset by higher average ticket price, incremental designer floor sample sales and fewer sales returns. Retail segment written orders were flat to last year while our wholesale segment written orders declined 7.6% primarily due to macroeconomic challenges, reduced government activity and a slowdown in our international business. We maintained a strong consolidated gross margin of 59.4% due to a change in sales mix, selective price increases and lower headcount partially offset by incremental tariffs, delivering written orders that had higher promotional discounts and increased designer floor sample sales. Our operating margin was 4.8% compared to 7.7% a year ago while diluted EPS was $0.23 compared with $0.37 a year ago. Adjusted operating margin in the current year third quarter was 5.0% while adjusted diluted EPS was $0.24. Lower operating margin was driven by fewer contract sales, lower unit volumes, increased tariffs, elevated designer floor sample sales and increased occupancy costs partially offset by change in sales mix, reduced freight, lower headcount, disciplined spending and a higher retail average ticket price. We also continued our history of paying dividends to shareholders by paying a regular quarterly cash dividend of $10.0 million. Cash, cash equivalents and investments totaled $180.9 million at March 31, 2026 and we had no outstanding debt. We ended the quarter with 142 Company-operated and 44 independently owned and operated locations with new design centers to be opened in vibrant markets such as Rancho Cucamonga, California and Aventura, Florida later this year. (1) Refer to the Regulation G Reconciliations of Non-GAAP Financial Measures section within the MD&A for the reconciliation of GAAP to adjusted key financial metrics. 21 ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES Key Operating Metrics A summary of our key operating metrics is presented in the following table (in millions, except per share data): Three months ended March 31, Nine months ended March 31, 2026 % of Sales 2025 % of Sales % Chg 2026 % of Sales 2025 % of Sales % Chg Net sales $ 135.8 $ 142.7 (4.8% ) $ 432.7 $ 454.3 (4.7% ) Gross profit $ 80.7 59.4 % $ 87.4 61.2 % (7.6% ) $ 262.2 60.6 % $ 276.1 60.8 % (5.0% ) Operating income $ 6.5 4.8 % $ 11.0 7.7 % (41.1% ) $ 30.7 7.1 % $ 46.7 10.3 % (34.4% ) Adjusted operating income(1) $ 6.8 5.0 % $ 11.3 8.0 % (39.8% ) $ 30.9 7.1 % $ 47.3 10.4 % (34.7% ) Net income $ 5.9 4.4 % $ 9.6 6.7 % (38.2% ) $ 28.1 6.5 % $ 39.3 8.7 % (28.5% ) Adjusted net income(1) $ 6.2 4.6 % $ 9.9 6.9 % (37.1% ) $ 28.3 6.5 % $ 39.8 8.8 % (28.9% ) Diluted EPS $ 0.23 $ 0.37 (37.8% ) $ 1.10 $ 1.53 (28.1% ) Adjusted diluted EPS(1) $ 0.24 $ 0.38 (36.8% ) $ 1.10 $ 1.55 (29.0% ) Cash flow from operating activities $ 15.1 $ 10.2 47.9 % $ 30.1 $ 36.9 (18.5% ) Wholesale written orders (7.6% ) (11.0% ) Retail written orders (0.2% ) (4.5% ) (1) Refer to the Regulation G Reconciliations of Non-GAAP Financial Measures section within the MD&A for the reconciliation of GAAP to adjusted key financial metrics. Design center activity and geographic distribution of our retail network are as follows: Fiscal 2026 Fiscal 2025 Independent Company- Independent Company- retailers operated Total retailers operated Total Retail Design Center activity: Balance at July 1 45 142 187 45 142 187 New locations 1 4 5 2 4 6 Closures (2 ) (4 ) (6 ) (1 ) (3 ) (4 ) Balance at March 31 44 142 186 46 143 189 Relocations (in new and closures) 1 3 4 - 2 2 Retail Design Center geographic locations: United States 30 137 167 31 138 169 Canada - 5 5 - 5 5 Europe 1 - 1 1 - 1 Middle East and Asia 13 - 13 14 - 14 Total 44 142 186 46 143 189 Results of Operations For an understanding of the significant factors that influenced our financial performance during the three and nine months ended March 31, 2026 and 2025, respectively, the following discussion should be read in conjunction with the consolidated financial statements and related notes presented in this Quarterly Report on Form 10-Q. (in thousands) Three months ended Nine months ended March 31, March 31, 2026 2025 % Change 2026 2025 % Change Consolidated net sales $ 135,835 $ 142,695 (4.8% ) $ 432,735 $ 454,292 (4.7% ) Wholesale net sales $ 84,919 $ 98,990 (14.2% ) $ 250,951 $ 271,857 (7.7% ) Retail net sales $ 116,237 $ 117,622 (1.2% ) $ 379,148 $ 384,654 (1.4% ) Consolidated gross profit $ 80,686 $ 87,356 (7.6% ) $ 262,155 $ 276,062 (5.0% ) Consolidated gross margin 59.4 % 61.2 % 60.6 % 60.8 % Net Sales Consolidated net sales decreased $6.9 million or 4.8% for the three months ended March 31, 2026 compared with the same prior year period. The decrease was driven by fewer contract sales, a decline in delivered unit volume and inclement weather during January and February 2026 combined fewer incoming wholesale written orders, which led to lower available backlog and less manufacturing production. Backlog represents all written orders received that have not yet been delivered. The decline in consolidated net sales was partially offset by higher average ticket price, incremental designer floor sample sales and fewer sales returns. Consolidated net sales decreased 4.7% during the first nine months of fiscal 2026 as we had lower contract sales, a decline in delivered unit volume, lower backlog and reduced design center traffic. 22 ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES Wholesale - Wholesale net sales decreased $14.1 million or 14.2% for the three months ended March 31, 2026 due to lower contract sales, including shipments to the U.S. government General Services Administration (“GSA”), fewer international sales and a difficult prior year comparison. The first nine months of fiscal 2026 were impacted by fewer contract and international sales. Sales related to our contract business have been lower in the current fiscal year primarily due to fewer incoming orders from the GSA, primarily driven by the U.S. government shutdown and the change in administration during 2025. International sales represented 0.8% of total wholesale net sales during the third quarter of fiscal 2026 compared with 1.4% in the prior year quarter. For the first nine months of fiscal 2026, international sales were 1.0% of total wholesale net sales compared to 1.5% a year ago. Wholesale written orders, which represent undelivered orders booked through all of our channels, were down 7.6% for the three months ended March 31, 2026 compared to the same prior year period primarily from the decline in contract orders combined with fewer orders from our independent dealers. For the first nine months of fiscal 2026, wholesale written orders were down 11.0%, driven by declines across all our channels. Wholesale backlog was $42.0 million at March 31, 2026, down 23.1% from a year ago and 15.7% lower since the start of the fiscal third quarter due to lower incoming orders. The reduction in undelivered backlog helped us improve customer lead times, including lowering the number of weeks of wholesale backlog compared with a year ago. Retail - Retail net sales decreased $1.4 million or 1.2% for the three months ended March 31, 2026 compared with the same prior year period. The decrease was driven by lower starting retail backlog and less design center traffic due to inclement weather conditions partially offset by higher designer floor sample sales and an increase in average ticket price. Retail backlog on January 1, 2026 was 12% lower than the year prior, which led to fewer net sales during the fiscal 2026 third quarter. Retail net sales during the first nine months of fiscal 2026 decreased by 1.4% due to lower delivered unit volumes, fewer written orders and reduced traffic partially offset by increased designer floor sample sales and a higher average ticket price. Higher designer floor sample sales were driven by selling off discontinued floor product to make room for new 2026 inventory in the retail design centers. Retail written orders for the three months ended March 31, 2026 were flat compared to the same prior year period. The first nine months of fiscal 2026 saw a decrease of 4.5% in order intake. Demand remained sluggish during fiscal 2026 as it was hampered by a muted housing market, elevated interest rates, macroeconomic uncertainty, global unrest and the impact of widespread winter weather disruptions. There were 142 Company-operated design centers at March 31, 2026, down one compared with a year ago. During the just completed third quarter we relocated our Vancouver, British Columbia (Canada) design center and have plans to open new design centers in Rancho Cucamonga, California, and Aventura, Florida during 2026. Gross Profit and Margin Consolidated gross profit decreased $6.7 million for the three months ended March 31, 2026 compared with the same prior year period. The decrease in gross profit was driven by lower wholesale net sales, incremental tariffs and lower premier home delivery revenue partially offset by increased designer floor sample sales, lower inbound freight, reduced headcount and a higher average ticket price. Wholesale gross profit for the third quarter decreased 25.3% due to lower contract sales, a reduction in delivered unit volume and incremental tariffs partially offset by lower freight and employee compensation. Retail gross profit decreased 2.5% primarily due to lowered delivered unit volume and a reduction in home delivery revenue partially offset increased designer floor sample sales and a higher average ticket price. For the first nine months of fiscal 2026, consolidated gross profit decreased $13.9 million due to fewer consolidated net sales, increased promotional activity and incremental tariffs partially offset by a higher percentage of total sales coming from the retail segment, lower headcount and selective price increases. Consolidated gross margin was 59.4% for the three months ended March 31, 2026 compared with 61.2% in the prior year period. Our fiscal 2026 third quarter consolidated gross margin declined 180 basis points due to incremental tariffs, the impact of increased promotional activity, higher designer floor sample sales and reduced manufacturing production partially offset by a change in the sales mix, lower freight costs, reduced headcount and a higher average ticket price. Our sales mix, which represents the percentage of retail sales compared to total consolidated sales, increased to 85.6% in the current year, up from 82.4% in the prior year due to lower contract sales within our wholesale segment. Wholesale gross margin for the third quarter was down 460 basis points over the prior year period due to incremental tariffs, lower contract sales and unfavorable manufacturing variances from lower production. Retail gross margin declined 60 basis points compared with the prior year period due to higher designer floor sample sales that carry a lower average margin, lower premier home delivery revenue and the impact of increased promotional activity partially offset by higher average ticket price from selective price increases. For the first nine months of fiscal 2026, our consolidated gross margin decreased 20 basis points to 60.6% due to increased promotional activity, elevated designer floor sample sales, incremental tariffs and deleveraging from lower delivered sales partially offset by change in the sales mix, lower freight, lower headcount and a higher average ticket price. 23 ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES SG&A Expenses and Operating Income (in thousands) Three months ended Nine months ended March 31, March 31, 2026 2025 % Change 2026 2025 % Change SG&A expenses $ 73,883 $ 76,253 (3.1 %) $ 231,438 $ 228,999 1.1 % Restructuring and other charges, net of gains $ 329 $ 106 $ 48 $ 344 Consolidated operating income $ 6,474 $ 10,997 (41.1 %) $ 30,669 $ 46,719 (34.4 %) Consolidated GAAP operating margin 4.8 % 7.7 % 7.1 % 10.3 % Consolidated adjusted operating margin 5.0 % 8.0 % 7.1 % 10.4 % Wholesale operating income $ 7,733 $ 14,331 (46.0 %) $ 21,972 $ 35,823 (38.7 %) Retail operating (loss) income $ (785 ) $ 659 n/a $ 4,361 $ 14,800 (70.5 %) SG&A expenses decreased 3.1% for the three months ended March 31, 2026 compared with the same prior year period. When expressed as a percentage of sales, SG&A expenses for the quarter were 54.4%, up from 53.4% in the prior year third quarter primarily due to fixed cost deleveraging from lower delivered sales. For the nine months ended March 31, 2026, SG&A expenses increased 1.1% compared with the same prior year period as we invested in additional strategic marketing to further our brand. When expressed as a percentage of sales, SG&A expenses for the first nine months of fiscal 2026 were 53.5%, up from 50.4% in the prior year period primarily due to lower consolidated net sales combined with additional marketing, ongoing investments in technology and higher occupancy costs. Disciplined spending, cost control initiatives and lower headcount helped to offset these additional investments in our business. Consolidated selling expenses were down 5.0% during the third quarter of fiscal 2026 primarily due to the 4.8% reduction in consolidated net sales. Lower sales led to less variable expenses, including fewer delivery costs and commissions. Retail selling expenses were down 0.4% due to lower delivery and variable compensation from the 1.2% decrease in Retail net sales partially offset by increased digital advertising expenses. Wholesale selling expenses, which include our national logistics, decreased 16.8% due to lower distribution volumes, less outbound freight, reduced headcount, lower employee benefit costs and decreased fees associated with our contract business partially offset by incremental digital and web-technology spend. For the first nine months of fiscal 2026, consolidated selling expenses were up 0.4% primarily due to increased marketing, higher digital and web-technology spend and elevated employee benefit costs partially offset by reduced headcount and lower distribution volumes. Our consolidated advertising expenses during the third quarter of fiscal 2026 were up 0.7% compared to the prior year. Marketing expenses represented 3.6% of consolidated net sales in the fiscal 2026 third quarter, up from 3.4% in the prior year period. For the first nine months of fiscal 2026, consolidated marketing costs were up 21.0% primarily due to increased digital media spend, including paid search and social campaigns as well as higher direct mail and trade campaign costs. Consolidated general and administrative expenses during the third quarter of fiscal 2026 were down 0.6% compared to the prior year period primarily due to lower employee benefit costs and reduced headcount partially offset by higher occupancy costs from newly opened retail design centers. Wholesale general and administrative expenses were 9.1% lower than a year ago due to lower employee benefit costs and disciplined spending. Retail general and administrative expenses increased by 2.1% from incremental rent associated with newly added design centers partially offset by reduced headcount. For the first nine months of fiscal 2026, consolidated general and administrative expenses were up 1.9% due to higher occupancy and employee benefit costs partially offset by lower headcount. Compared to a year ago, our consolidated headcount is down 5.7%, including 6.4% lower at Wholesale and 4.1% less at Retail. Restructuring and other charges, net of gains A loss of $0.3 million was recorded within Restructuring and other charges, net of gains during the third quarter of fiscal 2026, compared to an expense of $0.1 million in the prior year period. Included in the current year third quarter were $0.1 million of costs related to repairing our sawmill located in Beecher Falls, Vermont. Fiscal 2026 year-to-date restructuring and other charges, net of gains was less than $0.1 million compared to $0.3 million in the prior year period. Consolidated Operating Income Consolidated operating income of $6.5 million and $30.7 million decreased by $4.5 million and $16.1 million for the three and nine months ended March 31, 2026, respectively, compared to the same prior year periods. As a percentage of net sales, consolidated operating income for the third quarter of fiscal 2026 was 4.8%, compared to 7.7% in the prior year quarter. Adjusted operating margin for the third quarter of fiscal 2026 was 5.0% compared with 8.0% in the prior year. Reduced operating income during fiscal 2026 was driven by lower contract sales, incremental tariffs, increased promotional activity, additional marketing spend and higher employee benefit costs partially offset by selective price increases and reduced headcount. 24 ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES Wholesale operating income was $7.7 million and $22.0 million for the three and nine months ended March 31, 2026, respectively, compared with $14.3 million and $35.8 million for the same prior year periods. As a percentage of net sales, wholesale operating income for the third quarter of fiscal 2026 was 9.1%, compared to 14.5% in the prior year. Adjusted wholesale operating margin was 10.0% compared with 14.8% in the prior year. For the first nine months of fiscal 2026 wholesale adjusted operating income was $21.9 million, or 8.7% of net sales compared with $36.5 million, or 13.4% of net sales in the prior year period. The decrease in wholesale operating income and margin during both periods presented was from a decline in contract sales and incremental tariffs. Retail operating loss was $0.8 million for the three months ended March 31, 2026 compared with operating income of $0.7 million in the year ago third quarter. For the first nine months of fiscal 2026, Retail operating income was $4.4 million compared with $14.8 million a year ago. As a percentage of net sales, the retail operating loss for the third quarter of fiscal 2026 was (0.7%) compared to operating income of 0.6% in the prior year quarter. For the first nine months of fiscal 2026, the retail operating margin was 1.2% compared with 3.8% in the prior year period. The decrease in Retail operating income and margin during the three and nine months ended March 31, 2026 was due to lower net sales, a decrease in retail gross margin and higher occupancy costs partially offset by less headcount and reduced variable costs from lower net sales. Other Income (Expense) (in thousands) Three months ended Nine months ended March 31, March 31, 2026 2025 % Change 2026 2025 % Change Interest and other income, net $ 1,413 $ 1,599 (11.6 %) $ 7,060 $ 5,826 21.2 % Interest and other financing costs $ 55 $ 60 (8.3 %) $ 174 $ 183 (4.9 %) Interest and other income, net includes interest income, foreign currency gains or losses and other income (expense), net. Interest and other income, net was $1.4 million for the three months ended March 31, 2026, down from $1.6 million a year ago due to lower interest rates combined with lower interest-bearing cash balances. Interest and other income, net was $7.1 million for the nine months ended March 31, 2026, an increase compared with $5.8 million a year ago due to a contract modification fee received during the first quarter of fiscal 2026. This fee was related to our former private label card provider. Income Tax Expense, Net Income and Diluted EPS (in thousands) Three months ended Nine months ended March 31, March 31, 2026 2025 % Change 2026 2025 % Change Income tax expense $ 1,898 $ 2,931 (35.2% ) $ 9,426 $ 13,034 (27.7% ) Effective tax rate 24.2 % 23.4 % 25.1 % 24.9 % Net income $ 5,934 $ 9,605 (38.2% ) $ 28,129 $ 39,328 (28.5% ) Adjusted Net income $ 6,203 $ 9,865 (37.1% ) $ 28,281 $ 39,765 (28.9% ) Diluted EPS $ 0.23 $ 0.37 (37.8% ) $ 1.10 $ 1.53 (28.1% ) Adjusted Diluted EPS $ 0.24 $ 0.38 (36.8% ) $ 1.10 $ 1.55 (29.0% ) Income Tax Expense Income tax expense was $1.9 million and $9.4 million for the three and nine months ended March 31, 2026, respectively, compared with $2.9 million and $13.0 million in the same prior year periods. Our consolidated effective tax rate was 24.2% in the current year third quarter compared with 23.4% a year ago. Lower income tax expense during fiscal 2026 was driven by the reduction in income before income taxes. Our effective tax rate varies from the 21% federal statutory rate primarily due to state taxes. Net Income Net income was $5.9 million and $28.1 million for the three and nine months ended March 31, 2026, respectively, compared with $9.6 million and $39.3 million in the same prior year periods. Adjusted net income was $6.2 million and $28.3 million for the three and nine months ended March 31, 2026, respectively, down 37.1% and 28.9% when compared with the same prior year periods. The decline in net income during both periods presented was driven by fewer net sales combined with a lower gross margin partially offset by decreased SG&A expenses and lower income tax expense. 25 ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES Diluted EPS Diluted EPS was $0.23 and $1.10 for the three and nine months ended March 31, 2026, respectively, compared to $0.37 and $1.53 in the same prior year periods. Adjusted diluted EPS was $0.24 and $1.10 for the three and nine months ended March 31, 2026, respectively, compared to $0.38 and $1.55 in the same prior year periods. The decrease in diluted EPS was driven by deleveraging from lower delivered net sales combined with gross margin erosion. Regulation G Reconciliations of Non-GAAP Financial Measures To supplement the financial measures prepared in accordance with GAAP, we use non-GAAP financial measures, including adjusted operating income and margin, adjusted wholesale operating income and margin, adjusted retail operating income and margin, adjusted net income and adjusted diluted EPS. The reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are shown in tables below. These non-GAAP measures are derived from the consolidated financial statements but are not presented in accordance with GAAP. We believe these non-GAAP measures provide a meaningful comparison of our results to others in our industry and our prior year results. Investors should consider these non-GAAP financial measures in addition to, and not as a substitute for, our financial performance measures prepared in accordance with GAAP. Moreover, these non-GAAP financial measures have limitations in that they do not reflect all the items associated with the operations of the business as determined in accordance with GAAP. Other companies may calculate similarly titled non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes. Despite the limitations of these non-GAAP financial measures, we believe these adjusted financial measures and the information they provide are useful in viewing our performance using the same tools that management uses to assess progress in achieving our goals. Adjusted measures may also facilitate comparisons to our historical performance. 26 ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES The following tables below show a reconciliation of non-GAAP financial measures used in this filing to the most directly comparable GAAP financial measures: (in thousands, except per share amounts) Three months ended Nine months ended March 31, March 31, 2026 2025 % Change 2026 2025 % Change Consolidated Adjusted Operating Income / Operating Margin GAAP Operating income $ 6,474 $ 10,997 (41.1% ) $ 30,669 $ 46,719 (34.4% ) Adjustments (pre-tax) * 360 350 204 588 Adjusted operating income * $ 6,834 $ 11,347 (39.8% ) $ 30,873 $ 47,307 (34.7% ) Consolidated Net sales $ 135,835 $ 142,695 (4.8% ) $ 432,735 $ 454,292 (4.7% ) GAAP Operating margin 4.8 % 7.7 % 7.1 % 10.3 % Adjusted operating margin * 5.0 % 8.0 % 7.1 % 10.4 % Consolidated Adjusted Net Income / Adjusted Diluted EPS GAAP Net income $ 5,934 $ 9,605 (38.2% ) $ 28,129 $ 39,328 (28.5% ) Adjustments, net of tax * 269 260 152 437 Adjusted net income $ 6,203 $ 9,865 (37.1% ) $ 28,281 $ 39,765 (28.9% ) Diluted weighted average common shares 25,610 25,629 25,616 25,624 GAAP Diluted EPS $ 0.23 $ 0.37 (37.8% ) $ 1.10 $ 1.53 (28.1% ) Adjusted diluted EPS * $ 0.24 $ 0.38 (36.8% ) $ 1.10 $ 1.55 (29.0% ) Wholesale Adjusted Operating Income / Adjusted Operating Margin Wholesale GAAP operating income $ 7,733 $ 14,331 (46.0% ) $ 21,972 $ 35,823 (38.7% ) Adjustments (pre-tax) * 724 350 (52 ) 706 Adjusted wholesale operating income * $ 8,457 $ 14,681 (42.4% ) $ 21,920 $ 36,529 (40.0% ) Wholesale net sales $ 84,919 $ 98,990 (14.2% ) $ 250,951 $ 271,857 (7.7% ) Wholesale GAAP operating margin 9.1 % 14.5 % 8.8 % 13.2 % Adjusted wholesale operating margin * 10.0 % 14.8 % 8.7 % 13.4 % Retail Adjusted Operating Income / Adjusted Operating Margin Retail GAAP operating (loss) income $ (785 ) $ 659 n/a $ 4,361 $ 14,800 (70.5% ) Adjustments (pre-tax) * (364 ) - 256 (118 ) Adjusted retail operating income * $ (1,149 ) $ 659 n/a $ 4,617 $ 14,682 (68.6% ) Retail net sales $ 116,237 $ 117,622 (1.2% ) $ 379,148 $ 384,654 (1.4% ) Retail GAAP operating margin -0.7 % 0.6 % 1.2 % 3.8 % Adjusted retail operating margin * -1.0 % 0.6 % 1.2 % 3.8 % * Adjustments to reported GAAP financial measures including operating income and margin, net income and diluted EPS have been adjusted by the following: Three months ended Nine months ended (in thousands) March 31, March 31, 2026 2025 2026 2025 Beecher Falls, Vermont fire, net of insurance recoveries (wholesale) $ 69 $ - $ (909 ) $ - Retail design center charges, net of insurance recoveries (retail) (398 ) - 152 - Severance and other charges (wholesale) 624 106 701 462 Severance and other charges (retail) 34 - 104 (118 ) Other non-restructuring charges (wholesale) 31 244 156 244 Adjustments to operating income $ 360 $ 350 $ 204 $ 588 Related income tax effects on non-recurring items(1) (91 ) (90 ) (52 ) (151 ) Adjustments to net income $ 269 $ 260 $ 152 $ 437 (1) Calculated using the marginal tax rate for each period presented. 27 ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES Liquidity Our sources of liquidity include cash and cash equivalents, short-term and long-term investments, cash generated from operations and amounts available under our credit facility. We believe these sources remain adequate to meet our short-term requirements and contractual obligations and fulfill other cash requirements for day-to-day operations for at least the next 12 months, as well as to meet long-term liquidity requirements and contractual obligations, finance our long-term growth plans and invest in capital expenditures for the foreseeable future. We are committed to maintaining a robust balance sheet and monitoring our liquidity closely. Our available liquidity is summarized below: March 31, June 30, (in thousands) 2026 2025 Cash and cash equivalents $ 66,567 $ 76,178 Investments, short-term 39,921 59,955 Investments, long-term 74,378 60,030 Availability under existing credit facility 121,202 120,952 Total Available Liquidity $ 302,068 $ 317,115 At March 31, 2026, we had working capital of $139.5 million compared with $157.1 million at June 30, 2025 and a current ratio of 1.9 at March 31, 2026, compared with 2.0 at June 30, 2025. Our working capital decreased by $17.6 million during the first nine months of fiscal 2026 primarily due to lower short-term investments, as we reinvested in long-term U.S. Treasury notes when U.S. Treasury bills matured during the period. Our non-U.S. subsidiaries held $5.6 million in cash and cash equivalents at March 31, 2026, which we have determined to be indefinitely reinvested. Summary of Cash Flows At March 31, 2026, we held cash and cash equivalents of $66.6 million compared with $76.2 million at June 30, 2025. Cash and cash equivalents aggregated to 9.2% of our total assets at March 31, 2026 compared with 10.3% at June 30, 2025. In addition to cash and cash equivalents, we had aggregated investments of $114.3 million at March 31, 2026 and $120.0 million at June 30, 2025. Our investments are in U.S. Treasury bills and notes, which we expect will further enhance our returns on excess cash. Our short-term U.S. Treasury bills totaled $39.9 million with maturities of less than one year while our long-term U.S. Treasury notes totaled $74.4 million with maturities ranging between one and two years. Our cash, cash equivalents and restricted cash decreased $10.2 million during the first nine months of fiscal 2026 due to $36.3 million in cash dividends paid, capital expenditures of $8.3 million and $1.8 million in taxes paid related to net share settlement of equity awards partially offset by $30.1 million of net cash provided by operating activities and $5.0 million of proceeds from the sale of investments, net of purchases. The following table illustrates the main components of our cash flows: Nine months ended (in millions) March 31, 2026 2025 Operating activities Net income $ 28.1 $ 39.3 Non-cash operating lease cost 24.7 24.5 Restructuring and other charges, net of gains 0.1 0.3 Payments on restructuring and other charges (2.8 ) (0.8 ) Depreciation and amortization 11.5 11.7 Proceeds from insurance recoveries 1.7 0.2 Other non-cash items 1.8 0.4 Changes in operating assets and liabilities (35.0 ) (38.7 ) Net cash provided by operating activities $ 30.1 $ 36.9 Investing activities Capital expenditures $ (8.2 ) $ (9.4 ) Proceeds from sales of investments, net of purchases 5.0 11.6 Proceeds from insurance recoveries 1.2 - Net cash (used in) provided by investing activities $ (2.0 ) $ 2.2 Financing activities Payment of cash dividends $ (36.3 ) $ (40.1 ) Taxes paid related to net share settlement of equity awards (1.8 ) (2.2 ) Payments on financing leases (0.2 ) (0.3 ) Net cash used in financing activities $ (38.4 ) $ (42.6 ) 28 ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES Cash Provided by Operating Activities We generated $30.1 million in cash from operating activities during the first nine months of fiscal 2026, a decrease compared with $36.9 million in the prior year period due to lower net income and incremental restructuring payments partially offset by $1.7 million in insurance recoveries. Restructuring payments made by the Company during the nine ended March 31, 2026 were $2.8 million, which were for Beecher Falls repair and restoration work, severance and other restructuring costs. Cash Provided by (Used in) Investing Activities Cash used in investing activities was $2.0 million during the first nine months of fiscal 2026 compared with cash provided of $2.2 million in the prior year. During fiscal 2026, we had $5.0 million of net proceeds received from the sale of investments, which related to $59.8 million of U.S. treasuries that matured and were subsequently reinvested for $54.8 million. In the prior year, we had $11.6 million of net proceeds from the sale of investments, which related to $46.8 million of short-term U.S. treasuries that matured during the year and the subsequent reinvestment was $35.2 million. Capital expenditures during the first nine months of fiscal 2026 were $8.3 million, down from $9.4 million in the prior year period. During fiscal 2026 we received an additional $1.2 million in insurance proceeds related to the reconstruction of the facility damaged by the Beecher Falls, Vermont fire. Cash Used in Financing Activities Cash used in financing activities was $38.4 million in the current year compared with $42.6 million a year ago. Total dividends paid were $36.3 million during the first nine months of fiscal 2026, a decrease from $40.1 million paid a year ago due to the reduction in the special cash dividend, which went from $0.40 per share last year to $0.25 per share in the current year. In addition, during the first nine months of fiscal 2026, a total of 62,627 shares valued at $1.8 million were repurchased from employees to satisfy their withholding tax obligations upon vesting of stock-based awards. This compared to $2.2 million repurchased for similar withholding tax obligations in the prior year period. Restricted Cash We present restricted cash as a component of total cash and cash equivalents on our consolidated statements of cash flows and within Other assets on our consolidated balance sheets. At March 31, 2026 and June 30, 2025, we held $0.2 million and $0.8 million, respectively, of restricted cash related to our insurance captive. Exchange Rate Changes Due to changes in foreign currency exchange rates, namely among the Mexican Peso, Canadian Dollar and Honduran Lempira against the U.S. Dollar, our cash and cash equivalents increased by $0.2 million during the first nine months of fiscal 2026 compared with a decrease of $0.4 million in the prior year period. These changes had an immaterial impact on our cash balances held in Mexico, Canada and Honduras. Capital Resources, including Material Cash Requirements Sources of Liquidity Capital Needs. On January 26, 2022, we entered into a Third Amended and Restated Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A. as administrative agent and syndication agent and Capital One, National Association, as documentation agent. The Credit Agreement amended and restated the Second Amended and Restated Credit Agreement, dated as of December 21, 2018, as amended. The Credit Agreement provides for a $125 million revolving credit facility (the “Facility”), subject to borrowing base availability, with a maturity date of January 26, 2027. The Credit Agreement also provides us with an option to increase the size of the Facility up to an additional amount of $60 million. Availability under the Facility fluctuates according to a borrowing base calculated on eligible accounts receivable and inventory, net of customer deposits and reserves. The Facility includes covenants that apply under certain circumstances, including a fixed-charge coverage ratio requirement that applies when excess availability under the credit line is less than certain thresholds. At March 31, 2026, we were not subject to the fixed-charge coverage ratio requirement, had no borrowings outstanding under the Facility, were in compliance with all other covenants and had borrowing availability of $121.2 million of the $125.0 million credit commitment. We incurred financing costs of $0.5 million during fiscal 2022, which are being amortized as interest expense over the remaining life of the Facility using the effective interest method. Letters of Credit. At March 31, 2026 and June 30, 2025, respectively, there were $3.8 million and $4.0 million of standby letters of credit outstanding under the Facility. 29 ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES Uses of Liquidity Capital Expenditures. Capital expenditures during the first nine months of fiscal 2026 totaled $8.3 million compared with $9.4 million in the prior year period. Current year capital expenditures were primarily for new retail design centers, reconstruction of our Beecher Falls, Vermont outbuilding, additional manufacturing equipment and investments in technology. Four new Company-operated design centers located in San Diego, California, Colorado Springs, Colorado, Concord, Ontario (Canada) and Vancouver, British Columbia (Canada) were opened during fiscal 2026 with more new openings planned for the future. We anticipate total capital expenditures to rebuild the structure damaged by the Beecher Falls, Vermont fire to be between $2.5 million and $3.5 million, of which we have incurred $1.0 million through March 31, 2026, with the remainder to be incurred over the next two fiscal quarters. We have no other material contractual commitments outstanding for future capital expenditures and anticipate that cash from operations will be sufficient to fund future capital expenditures at least for the next 12 months and foreseeable future. Dividends. Our Board of Directors has sole authority to determine if and when we will declare future dividends and on what terms. During the first nine months of fiscal 2026, we paid total cash dividends of $36.3 million, including a special dividend of $0.25 per share in addition to regular quarterly dividends of $0.39 per share. We have paid a special cash dividend in each of the past six fiscal years and paid a cash dividend every year since 1996. Although we expect to continue to declare and pay cash dividends for the foreseeable future, the payment of future cash dividends is within the discretion of our Board of Directors and will depend on our earnings, operations, financial condition, capital requirements and general business outlook, among other factors. Our credit agreement also includes covenants that set limitations on our ability to pay dividends. Share Repurchase Program. There were no share repurchases under our existing multi-year share repurchase program (the “Share Repurchase Program”) during the first nine months of fiscal 2026 or 2025. At March 31, 2026, we had a remaining authorization to repurchase 2,007,364 shares of our common stock pursuant to our Share Repurchase Program. The timing and amount of any future share repurchases in the open market and through privately negotiated transactions will be determined by the Company’s officers at their discretion and based on a number of factors, including an evaluation of market and economic conditions while also maintaining financial flexibility. Material Cash Requirements from Contractual Obligations Fluctuations in our operating results, levels of inventory on hand, operating lease commitments, the degree of success of our accounts receivable collection efforts, the timing of tax payments, the rate of written orders and net sales, levels of customer deposits on hand, the payment of cash dividends, and capital expenditures to support the growth of our operations will impact our liquidity and cash flows in future periods. The effect of our contractual obligations on our liquidity and capital resources in future periods should be considered in conjunction with the factors mentioned here. At June 30, 2025, we had total contractual obligations of $182.8 million, including $146.3 million related to operating and finance lease commitments and $21.0 million of open purchase orders. Except for $26.1 million in operating lease payments made to our landlords and $19.0 million of operating lease assets obtained in exchange for $19.0 million of operating lease liabilities during fiscal 2026, there were no other material changes in our contractual obligations as previously disclosed in our 2025 Annual Report on Form 10-K. Off-Balance Sheet and Other Arrangements As of March 31, 2026 and June 30, 2025, we had no off-balance sheet financing other than letters of credit incurred in the ordinary course of business. Refer to Note 12, Credit Agreement, to the consolidated financial statements included under Part I, Item 1 of this Quarterly Report on Form 10-Q for more information on our available and outstanding letters of credit. We do not utilize or employ any other arrangements in operating our business. As such, we do not maintain any retained or contingent interests, derivative instruments or variable interests which could serve as a source of potential risk to our future liquidity, capital resources and results of operations. Significant Accounting Policies We disclose our significant accounting policies in Note 3, Summary of Significant Accounting Policies, in the notes to our consolidated financial statements included in our 2025 Annual Report on Form 10-K. There have been no changes in our significant accounting policies during the first nine months of fiscal 2026 from those disclosed in our 2025 Annual Report on Form 10-K. 30 ETHAN ALLEN INTERIORS INC. AND SUBSIDIARIES Critical Accounting Estimates We prepare our consolidated financial statements in conformity with GAAP. In some cases, these principles require management to make difficult and subjective judgments regarding uncertainties and, as a result, such estimates and assumptions may significantly impact our financial results and disclosures. We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. We base our estimates on currently known facts and circumstances, prior experience and other assumptions we believe to be reasonable. We use our best judgment in valuing these estimates and may, as warranted, use external advice. Actual results could differ from these estimates, assumptions, and judgments and these differences could be significant. We make frequent comparisons throughout the year of actual experience to our assumptions to reduce the likelihood of significant adjustments and will record adjustments when differences are known. We disclose our critical accounting estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2025 Annual Report on Form 10-K. There have been no significant changes in our critical accounting estimates during the first nine months of fiscal 2026 from those disclosed in our 2025 Annual Report on Form 10-K. Recent Accounting Pronouncements See Note 3, Recent Accounting Pronouncements, to the consolidated financial statements included under Part I, Item 1 of this Quarterly Report on Form 10-Q for a full description of recent accounting pronouncements, including the expected dates of adoption.