Educational Development (EDUC) 7 Jan 222022 Q3 Earnings call transcript

Thank you for joining the Educational Development Corporation's Third Quarter Earnings Call.

Before beginning the call, we would like to remind you that some of the statements made today will be forward-looking and are protected under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those expressed or implied due to a variety of factors. We refer you to Educational Development Corporation’s recent filings with the SEC for a more detailed discussion of the company's financial condition. With that, I would like to turn the call over to Craig White, the company’s President and Chief Executive Officer.

everyone, call. welcome, and you, to the Thank With of Sales the are Randall Financial and Executive Chairman White, our Officer. Chief Board; our Officer; Dan me and today Marketing O'Keefe, Heather Cobb, Chief

and warehouse to to miss over like staffing staffing EDC. in here with the safe probably better. better have didn't team proud I'd of what get mostly very challenges office, it turn had a the recognize team challenging EDC I the Dan We really go as perspective. We handled and and financial environment most mostly to have has over year here well, predominantly challenging have of staffing in that at to healthy the a any from environment we results, the a the at the been, out continues so there. didn't outbreaks really Before beat a I'm

to recognize that So I want first.

to the O'Keefe, I'd Now financials. to provide Financial the Officer, Dan Chief our turn brief of to like a overview call over

Craig. you, Thank

a third quarter financials. for brief our overview Now of

quarter the last and to financial the totalled now XX.X% in $XX.X $X.X third per quarter million million, for for a XX.X% Earnings to Net quarter a $X.XX, compared quarter compared totalled or last over million XX.X% call reported of million $X.X to third $X.X $XX.X third compared I'll quarter or or XX.X% back third results, That diluted decrease $X.X a basis. on totalled earnings Earnings fiscal year. -- compared Craig. taxes turn the $X.X of a income for Our net the $X.XX down share in the concludes fully million $X.X $XX.X from report revenues XXXX. compared million of to of million, XX.X% decrease year. the to quarter third before totalled million, to million the the third decrease of reported

with whatnot. us. Fiscal conferences begin in either couple surge and may different. from heard XXXX like was last affected increased drove the our demand year of at streams. to supplement I businesses in pre-COVID pandemic have we positive with the non-traditional record from levels were couple income COVID pandemic-related or Thanks, Dan. Along today last items from sales experienced These negative and initial that summer, me The would company the year. parents looking to no world, to our or and last year, A last for was for pandemic calls the most income in you replace opportunities or normal factors that an revenues issues quarterly

presented to pre-COVID typically we've business. Our sales were most fiscal why year seasonality pre-COVID quarter This of years, more due today's with release. year the and the third quarter that's year's is in comparison third the sales line largest quarter our in current press of our

these While down quarter our the our up they to sales consultant fiscal XXXX continuing third of We in and count. our due publishing and significantly from the both third UBAM to over fiscal impact pre-COVID quarter increased contributors revenues XXXX. primarily are year, sales division's of increased see levels, division are into last drive

and the So challenging in had to year, still in compare we work and not It's said we unusual quarterly to. and and things. of in couple pandemic incredible, this unusual those while incredibly calls, all out had last out the just an facing an school, of of we're year gone, factors, I kind is of

Cobb, Sales Heather next it over So Chief our Marketing to turn our Officer, and let discuss sales. to me

Thanks, Craig.

sales division and pandemic. of sales the a to our our throes from an During the quarter in experience UBAM in our in last third we increase continued compared division when to year, decrease Publishing

the million from return in division closed published Publishing increased customers authorities. were sales last local year primarily that $X.X guidelines to to to of by due third business the due XX% Our the temporarily quarter

new growth division experienced in added sales our Publishing fiscal has addition, division several record with XXXX. customers are existing In to levels and driving customers this that

Our 'XX, primarily fiscal last anomaly UBAM million third XX% to that in $XX.X quarter was. declined the sales the due of to year

to having still year the per pre-pandemic commissions of certainly of sales, as fiscal XXXX. sales 'XX. 'XX, the These first without The benefiting and During third This of the last children's unusual in year. evidenced active the consultants November their consultant levels increased in the consultant around are success the quarter on as in growth earning our obstacles the our pandemic, in work continued and count levels fiscal began to this to demand impact year, as quarter a active to consultants Craig consultants we've we us similar their fiscal consultant to during growth support the record run -- at occurred XX,XXX above revenues business. XXXX navigating and experiencing and active of in consultant new declined, to that of Throughout their business. most with building the in But pandemic active full-time time our and our count of success, counts consistent sales summer that give from our our during while of 'XX. drove due third experienced they third decline mentioned quarter last returning that are peaked fiscal seen results pandemic commission noticeably quarter pre-pandemic school. they recurring returning time and consultants' days second commission existing associated our and drain and early that our level achieved consultants have parents was strains generated available of generating available the are This consultants that last

rolling successful out business as expand introduce We well to our months reaching include and will In new our the addition, platform to improve will recruiting X experience consultant new new next platform as to this internal that retain in sales both third as that year that period our the platform to customers over in earned I'll to new our current consultants call have additional experience, positive delayed we to their top enhancements experience that Two commissions more turn features better. with as this make well upgrade as as recruit efforts. e-commerce With and have business. to upcoming we and new in continue input those consultant well tools new new people that, of with by as help the because we e-commerce consultants as We a our back initial consultants new their during the leaders impact well the company. on platform. that building valuable our to be believe technology-based out the Craig. fiscal the customer These expected help team expect roll quarter level even technologies are had

of see recently high Heather. published our levels other our you is Thanks, One capital. from financials continued working impact

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

is good the challenges As given replacement we costs the working cost inventory and cash, capital of are this pay shipping to inventory is expect that more unusual current the And to year. back turns will within less that to occurring. the news a ocean down next borrowings be carrying normalized the than our

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

lower levels reflect net totalled the last quarter strength the as revenues a These revenue X%. management's results percentage business profit pretax of than pretax of containment. third model the attention to Our our cost and on year

including that pandemic, negatively sales through We sales fairs. are impacted by booth certain excited the channels to see were the rebound from school

has about they virus bit. return quarters. variants. While impacted of also us returning we new year, X the a come the shut this this These for will back the of expect COVID-XX kind the stream, were evidence new those of fair with channels started little return to to kind starting versions combined COVID-XX $XX business sales income stalled million back this We and of again and down future booths, be that things this which of saw to then variant by of return in that booth to be the new continue the

I expand points. we at any open to it point, But up of can on to questions investors. want our So those this from

Wright question the David first Investment. Your Henry comes from Instructions] line of [Operator from

you'd inventory be to Is higher like it right now? than your

I've glad have you you I'm follow-up do -- that Absolutely. answer -- a No well, one? asked I had question question. or can

do. Please

been -- asked I've investor with was is investors, every inventory little asked phone every conference, I high. bit a So call absolutely, our

third While was quarter maybe to as XX%, last far levels. we a didn't XX% sales this expect to disaster as even year, XX% inventory or increase XX%

purchased up the we September, are inventory frame. that So levels, January, now November time October, March. in our which in receiving we ramped we just And February,

in made title as title backlist is of The actively are that have the months. inventory the months we've sales purchases know, in not new inventory, only X last organization. We inventory a new purchased people which, lifeblood X any

some that, from $XX,XXX the that coming to to our So as missed silver the mentioned China container but while is lining all is I not we $X,XXX supply We -- saw costs largely the script, right a mostly chaos we completely, now. chain from there go in container. sometimes

and And so coming while we from all the of largely China. increase in delays that missed were cost over-inventoried, we

shape cash, we're sell next that it over-inventoried. summer next by we will of be It none get or X, It quarter. sell. the but in months, yes, is time, X we'll And and to turn tough great it So over us helped obsolete. into a all third through expect down,

Right.

better. your quarter and a -- quarter little your well, with and fourth historically, first is slowest fourth quarters just is your So first -- typically your looking quarter only your

at So what been on -- November current where to based would conditions? inventories have XX like you business

Yes.

more $XX sales current million been level. would the have For a to million levels, probably $XX appropriate

at just of peaked $XX or north $XX million. we think slightly million I

million we'll quarters. too the except about titles, next for couple that inventory. $XX million new purchasing sell again, of So to we actively have and But not $XX down we're much over

first thing wanted fourth $XXX.X operations? cash the Cash to ties the And other operations from X in with million million, -- positive it's here in that quarter negative it's you million, think third the Okay. $XX.X generate cash flow. is the to from flow was going which the then do now means flow through positive ask What $X.X months quarter. I

want do to me you Craig, address that?

great. would That be

Yes, Okay. that's good David, a question.

be -- going quarter biggest of quarter not as going cash at the the As not we operations, look be to don't -- flow fourth we're really -- things we to things our increase -- to typically X do from as year inventory. it. the we sales. expect X But you When there's is driving first far mentioned,

income are And AP inventory payable, drivers in operations. major the some that X will to going in change coming that. going to from you're accounts which quarter in that -- down your see we're so don't inventory of payables flow due, there going little to impact your coming have and have be You're from shouldn't other then negatively we element And the fourth because though, to the and in other only which going the is be still have month be positive. business, your be the a do change it. increasing our of first cash bit, that so we would

So typically are it. really going to make those not cash I positive. fourth started don't said biggest our when David, to mean that X you question, the commitment are of quarter the to it's I your is drive be as going that a But And only kind want the of, you flow year. elements

the quarter quarter that's activities going and our associated with of dropping. holiday, a because We see being the April that a lot involves -- year. of next of second impact have on March, So first May largest when that May. in in inventory to bigger see of Easter it's lot March, -- April, year quarter quarter really That we the we the school April our have and not of

in So and bigger saying. see in our quarter second and third quarter that we down inventory first also fiscal quarter, fiscal as in dent the expect coming fiscal was to Craig a then

the positive higher our fact million months, over as earlier, much now. a Craig than mentioned cost had right elements more XX little carrying there's but $XX So cost that last some now is And the in inventory inventory. right be replacement more inventoried being we're predictable of that's than normally

will so a quarters. we're And over little it the next and corrected X our be but we here like on heavy inventory working feel position, capital

support solid have Thanks, business our seems relationship also to an that time strong. mention Dan. and with we involvement is their and very like It our very bank, of appropriate

well. a that's as So positive

line of RL [Operator Instructions] Your next the question from from comes Capital. Freed Randy

consultants reconcile talked I'm be and net number profit to, then either table not about the I'm the sure it's or probably I'm but you cost percentage. the the and average that of bit the trying of looking made happy you or made you're statements couple that after where said earnings And revenue who my you strong directed Craig this question containment. in next beginning happy pretax statements the and this to at Dan. the very announcement little you and own mind could a near where in some tax level call, a earnings the you're of net paragraph past X in the on the with with profit

sales up of I'm one earnings this see slightly So the the when down ago, were years I'm current was the year comparing ago, versus I years XX%. after-tax looking just for it from ago X And X.X% here one at X even the to profit quarter about to net table margin and I the X.X%. from compared see though very

in I an having sort maybe quarter, happened there something, or if expense unusual my reconciling wondering let something problem you quiet, talk. I'm going that's So was what's mind and I'll was on. of this the

Yes. okay, Craig, one. that if take it's I'll

Yes, to add some have ahead. go to, I go things but ahead.

Okay.

question, a So good Randy.

quarter year costs, fixed your and revenue obviously, profit bigger over our quarter you're base. of the of the because Third year percentage spreading highest typically a biggest

a impact. you And cost the at really freight our is between biggest profitability is with those now freight different outbound percentages look pre-COVID so -- the if on a dealing difference little

holiday a one top just have layers started season And our carrier. occurred We of implementing the -- X an with surcharge the small and on a surcharges. was other season unusual surcharge. peak parcel a last One season of COVID they peak was year, contract different

place of we've kind bear here some line so and in to pre-COVID. our quarter And bottom third the costs, had of this they've those of that hit in year weren't

see. that's so you And what

see thing to were the at like numbers this point tax look I pre-COVID can the you for numbers current are other and X.X%. after our numbers, The you X.X% year-to-date is year-to-date you out to the can table if there, year would then in that

peak while some year we've helped And year-to-date. have surcharges us. last So even we've us X.X% holiday after-tax of generate season peak year, and the had season this hurt that this year overall, the surcharges some increases margin haven't actually implemented rate

Yes.

kind internally use to KPI. profit Let that, of me add we pretax as a

were to pandemic out coming a had work. to the September of kind related we We going as going challenging actually. seemed be so seemed people And very to it to chaotic That back most as to the school. pandemic the with be back kids of

there still I chaos. pretax October a and profit. little of some then profit not then followed it with So years. November, things, was lot September solid And best in was was that free our a And with promotions we we bit with a of good. remember that pretax shippings but up did very

but considerably quarter So not we're quarter, we're maintaining over, are third level. third saying, third we're pretax or way -- sales like they're way the good over over XXXX quarter and than -- profit last lower

this XX% versus the added ago X.X%, sales fiscal the like you X X to if months, this question, up. notice for versus years was the from year, you or it the X.X% looks first the first it I look but ago year-to-date X of from about brings about it year me quarters Okay. that the years at up what was for XX%. XX% too, about the did X for said, sort up But

too. that, notice did I So

as mean high So percentage. looks year it are they're higher, in a like fiscal sales as but the -- I whole not the

X.X% more Well, not XX% XX%. like that's the X.X% accurate. exactly on or is

about it's So or XX%, it's XX%. not XX%

that the still was the I about is sorry, -- in revenue No, I same table. was about, talking net talking sales I'm I'm what

thought you were profit, after-tax Okay. the about talking I'm I sorry.

fine. That's No.

question. last one ask just me Let

pretax at table look this X.X% profit at X.X% the strong you next see best, the to of right, or whole be are guess really or If mean project levels, I at about this just think consistent, you you a and So know here, profit they're XX at what between about that. talking things Or do can't no that do and there. that. sort project idea looking can matter sort for columns pretty different levels But future? the which you there's that at et But the have about, and do we're you year, I you've about after-tax like talking consistent? you going I cetera, worst of table, this you're you or could March months any this all. same? potentially as roughly know talking efficiencies Do of the pretax after the fiscal lot I being which think the talked year in increase X

Yes.

and recognize we kind our our you XX% business. of probably have model, I think to

we're So higher changes of pretax that much north bit to profit, of challenging. XX% but maybe a little XX% a hitting on and X% are getting the than

we consistent. third it's because I more about roughly were the be going will I add XXX quarter them What crazy. could is of year XX been starched. this think people, very and hired to We have that efficient staffing challenges this

train people of come So even day for more back little third been efficient that never second effort a or time the leave or this factors, lunch this to come those them to and and at not could all year, we quarter. back have

expect to I -- consistent. but So remain Yes. still, them

what this said with what peak of then back. was the and bit into with what just people quarter. freight a about you you'd That's said, of surcharges. little that I And already was coming you season the Okay. challenges get and And a costs Dan there not staffing hoping like talked lot

So thank you for that information.

Presenters, this continue. may further questions time. are you no There at

Great. Okay.

the in XX% were X very the to we're year. not we're period we our to growth mode, XX% unusual growth far and years non-normal normal has last over that -- of about encouraged We've time same are pattern this still year, calendar ourselves So We're the about been while comparing in considering had ecstatic so happy. what if XXXX.

forecasts. we but looking We're nothing have year. forward this next So good to

not accomplished. with still we're While what we've pleased we're ecstatic,

appreciate Thank you joining all you. us, we So next to time. and you talk

This concludes today's call. for conference Thank participating. you

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