Educational Development (EDUC) 7 Oct 212022 Q2 Earnings call transcript

Thank you for standing by. Welcome to the Educational Development Corporation Second Quarter Fiscal Year 2022 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speaker's presentation there'll be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded [Operator Instructions]. to Chief conference Executive like today, your now White, Craig Officer would hand over the speaker I and President. sir. ahead, go Please

Thank you, Norma.

over and to Chief White, Chief this our Dan As White. our Chairman O'Keefe, of to on name our my Heather Executive pass Marketing call CEO. Cobb, time, earnings Officer, Board; President Dan our the Randall Norma At me and announce And I'd Financial are is today it Officer. the like with Sales said, to I'm results. Craig and

Thank you, Craig.

in of earnings and reported quarter share XXXX NET representing per million Chris. a to a Pretax to for XXXX Now our a or in the per we're going $X.X to quarter for concludes the I announce XXXX. quarter results the decrease $XX $X.X million $XX.X approximately second the call quarter of compared second second pass of a second decrease $X.X per of decrease fiscal year, quarter of diluted in of from results. million, will decrease the $XX.X $X.XX million XX.X%. $X.XX totaled reported last share, XX.X% million, revenues $X.X XX.X%. quarter profits for quarter totaled million, from share basis to the $X.X representing XX.X%. second Earnings totaled or compared approximately of of the $X.X fiscal million, a the on This fully quarter decrease million were the fiscal back second in earnings a million, over Net second

Thanks, Dan.

businesses, last hugely COVID tell our you was year, positive no pandemic is or personality affected it like my negative to is. so company exception. and hugely The either most Okay,

strong and restrictions. are quarter last a strong. not school quarter, closures very due for historically last quarter in monster second second travel we year Sales in saw our year products increase the to this But Our the demand quarter. a was

model from with business we opportunity. quarter press comparison and The results And in Our on quarters, current the presented line that year why capitalized pre-COVID pre-COVID XXXX. second that year's release. more this the in fiscal our most consultants is is

While revenues XXXX. to significantly year, from We increased up see consultant over last primarily are they second two levels, the quarter our pre-COVID are sales our continuing drive consultants our down fiscal in quarter due count. to active

we're fiscal XXXX a what was unusual say So we And ready are we and been we've over difficult advantage it's talk to to that as opportunities. it. took see to the our is took we more still Heather going continued to We comparison sales year. poised an And saying, of growth. about trying it, and call very hand I'm

Thanks Craig.

experienced quarter, division. from in an During UBAM we a publishing sales our increase division and sales decrease in the second our

fiscal Our publishing fall sales, in over $X a division begun this the in growth net stores have continuing division their XXXX. see has this million next reopening as in steady and We've into trend year. restocking sales had a increase month experienced and we from the each And fiscal in shelves.

in sales to the UBAM was, year due demand Our overwhelming anomaly primarily our especially relation declined last that product. the for to

selling quarter sales a second us. high not Our the unusually quarter which is active last year, typically were average during strong consultant for

years. our in more During with active consultant this line quarter was average year's per second sales pre-pandemic previous

more, turn, successful, are that success number there's consultants. consultants and growing are while and them itself. existing active quarter, in recruit they the average And no that second maintaining help successful. active things a to saw builds we of magic several be sales consultants, when and formula on to the more doing During there we pullback are in And

friendly mobile our platform. e-commerce we items a that better out will rolling the This are is new at be our consultant experience. online shopping offer of and new customers looking One platform

several platform, that With bandwidth still new of will our consultants' in have on work to rollout additional projects easier. and as this also the will streamlined more that, team projects development job also to call leading I'll provide are much new IT These the make consultant a Craig. before, to but With stage, stated builds success. more I turn success. over experience back our will -- more the success And

impact capital. other our from our working you One is see increased Heather. financials recently published Thanks,

are rebalance increased over the we have increased borrowings. as inventory working temporary, few inventory We levels will turn next quarters. capital into These levels, cash and increased and

a be and benefit our shelves are for full the as while them season. announced As that a quarters companies next supply impact inventory already we have to sell. expect working to next is been capital several to have will currently holiday we've good several shortages will we the be we're saying on turns this expect What level through internally to cash, back products pay ready and within heavy down borrowings are normalized to our the And more we will inventory, year.

of strong the of quarter our levels. highlights One our second profit other was pretax

X.X%. net business our Our our management's and percentage of cost revenues pretax model a as much These the lower containment. our results, profits strength revenue pretax totaled of levels attention reflect to

we As are our tell, you are very probably headed can excited XXXX. accomplishments we into where about and fiscal

negatively $XX certain yet. year. school person impacted events. in sales fairs, back, rebound about but to excited channels two in of The which realized face haven't from the book that for through not are coming We're they're events million see by a and those completely pandemic, fully combined channels strange still including also business are were These to We sales back. the face sales we

we up. still coming could that that's see potential So

open historical and to current are it up our highlights. from and investors. information, provided questions I We've those want So our to

roster. Please [Operator Instructions]. while we you. Thank stand compile the Q&A by

Our Key Investors. first question comes from Tony Chiarenza Equity with

Your line is open. now

still a even but doing you're quarter, think Good good afternoon. it's though on still well. Congratulations down, I

expect to you now see stabilize to for point? average of at is Where average last you quarter. quarter, from of coming XX,XXX do down that down, obviously for First or the Obviously, stability? like number it it's the some on peak the XX,XXX the the question number Obviously, it's consultants. Where do pandemic. was so,

nearing Well, -- from count a the last count bottom months. active -- that in our I it's That the six count is they now. the comes our is sold definition active of hope something

is our softest So quarter of against next headcount, then the always quarter fall, Christmas, they after fall. for only second in our may the sell because consultants don't sell some and our

of of those the go going hit third and dropped a back into we time bottom up as So lot then the we we kind and have quarter. this about toward -- people off start

average. in I or XX,XXX bottom? XX,XXX as to somewhere Is words of you Okay, that it number's the hit so that -- your want mouth. don't I know know, would is stabilize you don't kind an I put you

what So it the end was it of quarter. doesn't at the reflect probably

people Well, not I a but I only for of picking but customers we bit opportunities. to damper that could quarter extra the wish to said, It's you. number. of kind third commit I hope I'm tell on, I up tell. hard back a income COVID -- is seeking we're a still Like can't

Understand.

you that high. Now levels are the mentioned inventory

color expected. came so intentional that developed. give is some up in built about just more why you than the sales or Can inventory that the something much? that lower you us has Was Now

was this to get I Thanks Absolutely. Tony. into anyway. going

XX% titles. we breaking Okay, were sales so our are them our of stock XXXX, that of of -- the fall despite we out of in calendar fall, record had last

So we little or while see XX% maybe we'd we thought modest even growth a see flat. didn't this year, being growth bit

So prepare for inventory we ordered to this fall.

in advance. order know, have that eight As six to you months to we probably

sales we are and bit growth, things for planning be of didn't were a we down out little of stock So fall. want the now. And to in

that's haven't much our I little So say, inventory will a purchased April. bit since why inventories high. we

down purchasing. kind kind of and slowed of So our we trends, saw we've some

to have titles. buy new We

this titles of are business. New the lifeblood

over So we new the purchasing through going will months. our aggressively those But inventory titles for next different six to work be seasons. we're levels

go expect Can level would objective Is your we expect the back $XX down or to And it so? you million? go to that million $XX down. to from so the or it

Absolutely, maybe even more?

okay. Okay,

of said fall. us competitors A be lot I out will for are shelves it like their our But the great in stock going a run and empty. in puts of script, to our position

great So have we are a poised and ready fall. to

out everybody's no, Yeah, now. inventory of

the that I'm at Every involved this that's company think with getting trouble inventory point. chains. I has with supply problem

So I you're right. absolutely think

with bit. How obviously, little up a come long liquidity has much -- inventory revolver debt? the long Now higher you left a that's built term at your both have and And on do debt. your your term on point this

O'Keefe. that, is I'll Tony. Dan take This

pay to ago $XX $XX building existing about and our an loan We got last a year debt. million we've some working actually that -- of we we of paying cash, were in paid down used million aggressive $XX But million. November, in we capital down So cash debt. had in of year the down

so raise additional a of we have reservoir there's still and So speak to in capital additional available there bank expect need we gunpowder, that. borrowing, -- of we to through be capacity our to a lot in do to still lot go if

given buy Okay, it of inventory that when have need, work you anticipating it down. some trying as needing but that the not but titles, you're you you your you're to

that additional correct? need point. this you're going Is I'm not So at liquidity assuming to

season Well, it our just we're on right two, now. busy selling depends hitting

to going So business. what's where no XX% is over which XX% we to our typically have for days, our there's XX crystal happen next ball will of

to how to borrow XX certainly trying lender. need days little make on balance So it these we is more, need a a borrow to depends our us to more, but point all that more strong enough borrow sheet existing we we'll allow with come, the if I was if next have

I purchased will April. and also said in that I Well, add to we

titles So now. coming in are all those

XX the got days, pay in inventory. to for next we So to that XXX

more the money. to we're right So reserving need

aggressively creates last year. -- lot use about to capital million of paid and inventory. our news as so working and with debt the a building of along year, paid last that Yeah, down our $XX assets debt available we good is did down We that

Right, right.

neighborhood So a $X you'd of something the the… in million additional off availability. million to in just making have number I'm $XX

At $XX million. least least at

million, after that And as kind good. go February. January the we go amount worked you season That up. sounds give should down of At into That oh, least and flexibility. selling get tremendous we through that'll And $XX worked again good. gets of then

Exactly.

Right.

for so and great. of question, you the answering through season. Christmas go as the Okay, you Thank best much luck

appreciate you, Tony. it. really I Thank

you. Thank

Walter with Shanker from [ph] question Our Mars comes Partners. next

line is open. now Your

two have I think questions. Hi. I

One April, does the and order it you do it point of A, the came does is question up? what sheet? This balance then up show doesn't on statements And show it? pay balance anywhere April for the and on pay delivered isn't on last it of up at income when answer, cash. order in if September, sheet actually show sheet. you inventory and you September B, So which to your your up till you or don't balance from when in movement get if question, till income

Walter, Dan again. this is

printing buying, once we it it So one typically ordering. control two. product control of some we're the we're of some the of once and as that either longer, we on of we it, that when that and China, complexity before, U.S. we mentioned the depends take the or the we on at and we're or point, it. Malaysia, print book hits some in depending can When print it, it to in inventory eight Craig We the shore, be And six months, payable. the Arab that buy, boat, But in passes. the sometimes, boards get book title Emirates, where

books a have handwork because long build our them. to of lead Some of take very they lot times

to typical months the of the eight time time it scenario. of take we order from is it to the six control but kind So we

Okay.

from order cash they Although your pay. generation associates sales a standpoint, when

get in before fall, comes the as So or even you sales you ship out, -- card effectively, credit if in, it whatever, they the cash correct?

Absolutely.

shipping said, XXX now. times shipping, you from we're right delayed like days means, which So are

So have XX premises it and on XX we between the days. may

we for can before start yes, pay So some of we it selling it.

doesn't it but it all. helps it cover So

in its credit the were And Okay, its define we too that few months, much you on over and might repeatedly, months, be a however you last went very a the that year, beneficiary comparison problem. out few out company a just a of COVID going last to was quarter point this to way cash, reported. difficult the to of it's not

That's a again. did fact. and it And we again

no secret. it was So

and We did again again. it

do again. you and it I heard again

call, I So this into you On seasonally okay, again. and did the period. going we're know stronger again it

know the fact, to year the not to making year, to concerns this just ended. the have season you listening would make I You year said it don't year. to you a and in you better. going the do is always not not strong, was without appear extraordinarily not And selling or last have it's you're the that answer. as would quarter call, selling and forecast, know be going do be well we the that could comparable to to forecast, very season But a as that last did so And possible this about difficult same expect had down it be you But next, substantially. it last

not would it substantially. we expect No, be to down

second selling crazy season whereas an was last fiscal fall a quarter year example increases XXXX. As was amount, modest the over

So season. help and warehouse. our our more we efficient in And with we're can pretax line we last hope whatnot, getting the selling be profits in to you margins, know, improving fall we're

We're from staff for been two Our running two selling for warehouse season. months new months fall up the in for last staffing the -- to we that. CapEx results now. about be project lines couple our the we're that to ready the has abandoned And great gearing seeing expansion

everything we're seeing positive. is So

and just Okay, last question.

Reserve Federal be. of may think may things inflation Lots transitory, is the a or may it lot. gone While up not have

a But going you are year? forward cost a cost titles seeing Your to year a pressure this I while next inventory ordered standpoint into additional lot realize you -- -- stuff getting new as ago you're new ordering of the look and and ordering it. from later you've

and volumes what Dan. last just spring. so we is we more, challenges -- some we're There and and key over those, really lot Yeah, discounts the because the that last had of paper The in volume period. offsetting this in time But backwards we have that happening early XX in were our can challenges shipping is of challenges things a started winter of were the saw days. shortages saw paper late Most much go that year. buying we the that the

big of in happened, the we ordered our majority and for in had purchases already bulk winter. Fortunately year, us, received that last a and fall the

of X the from lot in. have So But coming that that's still what understand the imbalance. demand demand XXXX, carriers ships to cargo new we shipping XX to the the they missed from have continuing are just over been and XX last until a online. next when containers supply know and vessel we the been the And unusual we What this products months is We vessels that shipping now. see craziness challenges handle happening this XX days. the shipping few big is imbalance that for come challenges

of we've Fortunately for us, got majority our inventory.

problem on timeframe So And come we will be hopefully will somewhat normalized cushioned from get vessels in the now. costs. can that right to shipping board the we the back

to the sales in are optimistic six to Okay, year comparable And next comparisons the reasonably months the are They the yourself, myself the with up for only better and modestly. before. comparisons make about the to months. again, more you six repeat just were next base inventory, you the the and economics, last year repeat

Monday. things. We short some seeing We're put term out optimistic. cautiously We're new titles

this a in we've October, release results We had and incredible week. have smaller

forecast. going all as far as say to [multiple the We're I'm that's speakers] So

no, understand. I No,

very you much. thank Okay,

Sure. Thank you, Walter.

Goodbye.

you. Thank

comes Our Joseph investor. next from Fuller, private question

line Your sir. open, is

late. the Hi, little I a call on apologize, I got bit

expect So that capital extension of sort what of I if How higher a much level sort already I do capital The remain to this. line apologize related little to remember extra expenditures, level back of was an usually has longer something I an or warehouse to very asked elevated you somebody or expenditures? level, and bit low something, if of get know,

time. to we to that $XXX levels further million We don't get can of our in increase $XXX think that addition, needing Well, further quite was any CapEx for warehouse anticipate million CapEx. some without capacity with sales We to fulfillment.

going a further this obviously, paying to be we're Now project little point. CapEx while, for but no this down large at

the can question And discussion inventory, had one more all actually the question. because ask the Appreciate, big that I I was of also. I appreciate

on, the of last about, So And inventory some I debt remember of hold assume sort temporarily, to conference flow long buildup soft was and presumably, the the given becomes so down on the dividend of how this once cash has talk stock more a business. again, [ph] pretty there because of call, sold, pay now and some that's high the or is inventory. use the and But extra cash? I increasing and buyback the term,

for only months. been to position Well, in time it. Give my two I've a me little think about

Fair enough. Sure.

not everything's of because increasing telling we're Everything everybody, right aggressive the or discussion, Obviously, our up now. but dividend is now the I'm kind stock not right inventory levels. table. and buying on But back I'm for of

you. Thank enough. Fair

you. Thank

Thank you.

from comes Hollywood question next Adam Kipling with Fitness. Our

open. Your line is

I of kind you trying was the I why choose $X.XX He up a chew yeah. ask share question just of guys going to to buyback. dividend ask. with asked pay the a was going to Hello, float to instead

think a that flow. comes when well. the pretty that then You price eating flow, have in, I guys pretty up that low would stock would and up the send demand

We don't disagree.

think a term problem. cash short flow I this is

changing than a the our message working sends negative think problem. dividend through I more down temporary

to So we've it. keep chosen

I'll And authorized they ago shares -- stock have of add that last Craig's to Directors we buy the XXX,XXX to months Board us of did. in comment XX the company

said, inventory the it. that is to sales have funnel investing growth. as for It's inventory, because we're really we So just Craig right do in now availability

work through cash shares. balance, buy flow ability capital And inventory so to the it. we and the we now. availability do more as right and we're we'll to heavy the in have larger But And we come working have inventory,

right. All

for you, good. That's guys. all I Sounds had you. Thank

Thank you, Adam.

you. Thank

private Marty comes investor. question Alexander, next Our from

is line open. Your

per Do to the And per that revenue going we would question. is Or that a XXXX are of revenue I it back to down to are so drop XXXX, going mentioned had that that that COVID as XX%. looking Do you do in XXXX, opportunity? you finding you looks good be, you per coming revenue as expect prior it to seeing Yeah, consultant's COVID, a kind levels? consultant, up a average the be COVID question your you the back your kind From COVID, kind -- are some a of about versus like count consultant you my second [ph] expect should and traction up? of not folks I that Do you some up? pan, cause. you that a think see looking go-forward to maybe even consultants, the of going had flash see being because that do catalyst see as sticking? of type total are have employment. consultant more at this that was the you on Or was a worker And job pre traditional

So little Thank add could color there? you a you.

overwhelming Sure. talk average this And consultant, per seeing bit to want we a to is the per in consultant Heather. revenue revenue that COVID about the due is that Marty, are inflated think demand I the what product. just I was during

I sales And -- then than been think they that bit that our more last it are and they generating control just effort. consultants pre-COVID on believe now. much we take in year those as while they or a sales, thrive have still years, quite fully just were energy they cruise didn't

really having refer than consultants, assess we the question, being been around the pandemic, different longer an But bit earlier, in absolutely that's where option your different our industry which end supplemental that that will are And sales Craig increase to various possibly of still income. survived country. be you but than things supplemental the situation. it's increase years, second business we day, viable we saying for to can we definitely that's around landing hard entire within bigger XX they've can to been it been think a kind our is have I of It's the levels. always a for at things over within with somewhere is of know, still pandemic, closer I in think in which But at industry hope that, this midst the a that that. little I'll what that happened what hope pre-COVID the which So to of was is it's goes recessions think that has economy looking the the number and and income. the in that heading

that different what the business is us. two like we their comes what are we've with homes and going think to have, sell, we that product I are back Not for as believe, to basics the getting things that we seen, only it in our having kids the that. but that especially have model things when we books people and big

might IT. I I'm Marty, Adam, love being I from IT. I add, is came Hey, might sorry, my over or first

hope our we with of working increase we're can per and that So that IT some new e-commerce I on. projects other consultant revenue the rollout

as So wanted that throw to I in just well.

Okay, thank you very much.

you. Thank

[Operator you. Instructions]. Thank

Wright Our David next Investment question comes from Henry with Trust.

open. is line Your

doing? you are all how Hi,

Great.

which want I take to I'll track at last back go to a it. restated, third Walter's he and question

year third The $XX million. last quarter revenues were

pie what in impossible outrageously commentary Your that to not the that suggests close that this year that. sky, Is it's revenues quarter get you're could saying? your third

You know, optimist. I'm an eternal

we just So like what saying. not unknowns. But I'm to would yet. There's still that's to many possible. too committing But I that. know I'm don't It's think

think… I

of last of David, year. saw second to we don't going the to the in and the see that, year quarter, disparity second quarter this think that between second the quarter we're the I opposite

the quarter last have similar think a year. not being year, last There delta a the that was more this than as significant. and a huge the is see it significant tiny, the Delta not as don't We see that demand the we second of delta don't I just the as second Whether year in two quarter. volume as nearly between quarter nearly or in quarters or being and delta tiny big we that that quarter caused what saw. of second second

add we've anomaly. more as an a It's hard year to David, whole just thing that. assess, to last one I'll called

can third selling the so if happened the in the And be to being attributed hard to be can know COVID, and it or season. the fall that to increase it's surge quarter attributed

we've available that like we said, ball to us crystal mid-season feel make we optimistic, really also that reception that to enough the still And Monday, early be releases our us the answer it's received really to able this feel to made but close question, to to? want your probably early, you so, as extent like Craig the is

I 'XX, revenues COVID, of that, the 'XX, pre-COVID, Well, earnings what's more were average it's going through you're the $XXX the I that think $XXX your come mean, to out other around million. you regardless. before going million were than is business. be ditto for COVID, And your significant years -- pretty clear on side three to And higher per share, are

great it's a So story.

a job. dividend, great like the I by doing You're way. And the

appreciate not we're lower case. We not pre-COVID much pretty that know We going necessarily that you to recognizing the that's certainty back or with numbers.

good it's yeah, that that across. see we're getting story So to

well, luck. luck Good going Yeah, forward. good

Thanks, David.

you, Thank David.

no questions the hand queue to comments. like to Mr. this the Thank Craig in showing I'm back time. you. conference currently for further And over any at I'd White closing

to mode. pretty We All to we're XX% doing not but again, XX% high trying growth Obviously, And compare the range. to in be beat we're want thank it it like XXXX. we're up in Norma. feel to you, back well we death, to right, to

not of that's we want years to. back-to-back get And two So growth XX% is back to where bad.

call. appreciate it. for I you thank being So on the

concludes participation. for This conference Thank call. today's you your

now Everyone day. have disconnect. You may wonderful a