Q3 2020 Vinco Ventures Inc Earnings Call
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Greetings and welcome to the single Ventures Conference call at this time.
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As a reminder, this conference is being recorded I would now like to turn this conference over to your host Mr., Chris Ferguson. Thank you Sir you may begin.
Thank you everyone for joining this is the first earnings call Ventures, Inc.
Hi, Chris Ferguson, CEO think ventures joined by Bret from in the CFO of Banco.
Thank you for joining and taking the time to hear the earnings call I have a statement.
Statement to read before we get underway in this forward looking statement disclosures certain statements. In this announcement are forward looking statements, which are based on the company's expectations intentions and projections.
Regarding the company's future performance anticipated events or trends and other matters that are non historical facts, including excess.
Expectations regarding the company's long term target goals and strategies the expected.
Benefits of the company's focus on digital monetization be future impacts.
The preemptive actions the company took in response to COVID-19 pandemic coupled with.
Cash flow generation and balance sheet and liquidity profile, the companys strategies for each for its segments, including its focus on recurring revenue its balance sheet and variable cost structure and the opportunity in the industries. The company serves the company's positioning for future growth and its ability to optimize for much of existing businesses pursue its debt.
Acquisition strategy and effectively manage its capital structure.
Each of the markets in which the company operates the acquisition opportunities in those markets. The company. Some debt to continue explore opportunistic acquisitions from a couple just capacity to absorb additional acquisitions certain expected 2020 financial results from could they can be updated guidance for 2020, the assumptions that made and the drivers contributing to EPS guidance the company's flexibility.
Capitalize on the current environment and estimate central strategic opportunities and fix the impacts for the COVID-19 pandemic in future.
Moving a financial parts for the company and its customers the Companys plans.
Strategies to adapt and respond to the pandemic and we expect the expected impact of those plans and strategies. These statements are not guarantees of future performance from our subject to known and unknown risks uncertainties and other factors that could cause actual results to differ materially from the expressed or implied by such forward looking statements, including a current conditions competition than other.
Risk may affect the company's future performance, including the impacts of COVID-19 pandemic other companies.
This market supply chain customers from work force.
On the credit international markets on the line net of expenses from revenues on the global economy generally the ability to recognize the anticipated benefits for the companys acquisitions, including its ability to successfully integrate and make necessary capital investments to support additional acquisitions and the company's ability to take advantage of strategic opportunities changes in the political laws regulations the possibility.
The company may be adversely affected by other economic business into a competitive factors and other risks uncertainties, given the risks and uncertainties prospective investors are cautioned to not place undue reliance on the forward looking statements forward looking statements speak only as of.
As of the date of such statements, except as required by a quick walk up to this not undertake any obligations to update or revise publicly any forward looking statements whether as a result of new Hampshire future events, where other.
Okay. Thank you we will start by walking through the new Investor deck, which is Oh I need think he'll ventures dot com website that you can download a copy of the deck to start the strategy that we have been and the mission for undertaking at Spinco is summarized.
By our what we call our by innovate growth strategy acquisitions is our model, we will seek to acquire one significant brand were true per quarter to continue to add to the bank portfolio.
Our target will evolve with the market, but we remain focused on digital media and consumer product companies.
There are millions of small to mid size consumer brands that are ripe for consolidation our mission will be to find those right opportunities and tuck them into the big cornbread.
On the innovate side, we not only will seek to innovate the product lines and and the offerings by particular brand, but the entire brand experience itself from a digital perspective.
On the growth side as we add brands to the Banco engine, we will drive.
The higher and more efficiency bad conversion to increase sales will get into book, he innovate and growth aspects of the strategy as we go through this investor day.
The problem think co ventures seeks to solve today's marketplace consumer product companies are seeing transformation never previously match it with the existing depletion of physical retail.
And the recent global pandemic, we're seeing consumer behavior change other than exceedingly rapid pace there.
This increase the urgency of consumer product companies to identify new and effective distribution network.
It's expensive endeavor has become a risky endeavor for these brands due to the expanding and evolving digital marketplace. The solution. We provide I think all day.
Yeah.
The solution to digital Commerce is data through our acquisition of Honey Badger media, which will provide brands for the targeted traffic they need to grow by leveraging this internal resource we're able to acquire brands at value price is what quickly and efficiently think scale come to those brands.
We live to buy very simply we are making an effort to consolidate this very fragmented marketplace. We have targeted to do one acquisition per quarter and we have put those into three tiers are top tier. It's a brand that does 20 million in topline it's cash flow positive.
That's full operations, that's a strong management team that will remain that's our top tier one acquisition, we'll look to do here to our brands that generate between 10 and 19 million in top line. They are cash flow positive.
They may have some operations, but not sort of the full operational capacity that that we may want them to have and they have certain intellectual property assets. The smallest the tier three is something less than 9 million in topline could be cash flow neutral began look for it have some level of intellectual property, we see it both being synergistic.
And scalable Brad.
Brad I think it's a set of core brands that it will focus on to drive growth within our acquisition strategy. We will continue to to add brands within the income portfolio. The core brands that we are focused on driving.
For the recent addition of 911 help now.
In the third quarter, we completed the acquisition of human error, which is our set of different CBD and wellness products.
For keeps Roses brand, we continue to be excited about the opportunities that this brand has for growth for the addition of honey Badger brings a compelling aspect that we can bring influencers and other celebrities and to help promote this brand.
Purple batting clean art Sanitizer brand that we recently.
Look to market. This year. It has had success we continue to be excited about the overall sanitizer marketplace certainly the size of the market has grown significantly during the pandemic, we still believe post pandemic, there's a great opportunity for the sanitizer space.
The global clean brand, which is our P. and medical brand. It obviously has huge demand.
The supply chain is it's a supply constrained environment, we see our team can work through those issues and continue to make a global clean a thriving brand into 2021 and beyond we do believe obviously in some of the demand will be tied to the pandemic and in other vaccine and those type of things could impact.
Some of the large bulk demand orders, we see how we do think that there's plenty of continued demand within that market and within that space.
The smaller brands, which I think in past conversations we sort of said, there's little micro brands for like us hitting singles.
Within the new Vanco strategy, we are going to create royalty streams related to those brands or otherwise fine partners or licensed stores that will offset any working capital constraint that we would have by operating those brands within the bank portfolio and make them strictly a royalty stream back.
To us or other income stream back to us as we can do that that gives us the ability to create quote unquote more singles more wins by finding those partners, who will put up the capital necessary to launch it run those brands and we just received an income stream back. So we're excited that that will open the door to continue to.
Expand those different brands and there's different innovations that come to think how that we find a way to monetize.
The acquisition from Honey Badger has helped us formulate a platform that will drive traffic past the quote unquote digital shelf Honey Badger is a full service content monetization company focused on brand specific messaging by leveraging internal assets and long term strategic partners, we are able to theirs.
<unk> digital campaigns from creation commodity station Honey Badger will assist in growing the finco internal brands when they focus on the high ROI for both product sales and traffic monetization.
The combination arm of honey badger through.
Through our partnerships and the social media pages that we manage for our Influencers and celebrities we have a large digital traffic footprint.
371 unique visitors annually two.
2 million video views per month.
That will help us create that both organic and paid traffic that gets people to see the products on our digital shelf.
The digital monetization slide.
Illustrates how we monetize that traffic how that traffic will help both our internal brands and for other AD revenue that we receive.
Markets on Maine is our b to B solution.
There are a number of other brands and other relationships that we have that seek to use our platform whether that's from a logistics perspective, a packaging perspective, helping them with Amazon solutions or other life shopping solutions.
Allowing those brands to leverage our platform offsets our internal cost and we're excited about how that will ultimately drive earnings for us.
Original content.
The strategic initiative, we have is not only to have honey badger help us drive traffic to our digital shelves and our digital brands, but also to create original content that helps create better conversion for those brands and for those opportunities that we have to drive sales.
All right under our revenue guidance for 2021.
We have broken it out by brand and by our technology and our tools.
Under the brand side, we expect for 2021, the 911 help now brand.
For $7.1 million of topline.
Our human Earth wellness brand to create 3.8 million of topline.
The Purple Mountain Global clean brand combined will do 8.2 million.
Within the 8.2 million and we have this in our note.
We expect any of the large scale pp orders that we have to be recognized on a net basis. We have worked out to try to figure out how best to recognize those some potentially could be recognized fully topline. Some will be recognized net this projection assumes that the large scale opportunities.
For all be recognized on a net basis for keeps roses topline projection for 2021 is 1.6 million and the royalty streams, which is that collection of sort of those micro brands are singles is expected to drive about 1.1 million of topline, bringing our total brand sales for Finco and 21 at 21.
8.8 million.
Under our tools technology, and IP to be sales, which doesn't see the recent transaction with honey Badger.
And with 911, there is a license agreement with a large telecom company to license, our 911 technology and habit put into certain phones that they sell.
Our projection topline for the license revenue is 2.8 million for 911 help though the honey Badger media revenue is projected at 6.4 million and all of the Edison B to b sales, including packaging logistics and and other sales we do for businesses and other services, we do for businesses.
Projected that 7.1 million the total media technology and B to B sales projection, it's 16.3 for 2021.
Target for additional sales for 2021 via our bite innovate growth strategy of one acquisition per quarter, we are estimating to add 17 million of topline.
From the acquisition strategy.
With that I will turn it over to Brett Roman our CFO to go through the results for the quarter.
Thanks, Chris and good morning, everyone. Please note that I will be referring to certain non-GAAP financial measures such as adjusted EBITDA, which we believe may be important to investors to assess our operating performance.
Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our earnings release and the quarterly violent.
We continue facing uncertainty due to the COVID-19 pandemic and are closely monitoring the resurgence of COVID-19 infections in markets around the world.
Retail outlets have remained open and available to consumers with an ever increasing presence of sales to consumers through E Commerce portal.
During the second half for the year, we were able to reestablish our legacy businesses and increase our revenues as well as continuing to reduce our SGN a cash spent during the quarter we.
We are optimistic about the upcoming year and the opportunity to execute on our new big strategy as we look to acquire new brands that can deliver significant growth potential to the company.
We ended the quarter with 385000 of cash which was down 28000 from the year end and 1.4 million sequentially from June Thirtyth 2020 the.
The decrease sequentially it was related to repayments of debt of approximately 600000 and payments made the factories for inventory.
In Q3 revenues totaled 4.3 million, which was up 20% versus the year ago. The increase was the result of increases in our Ferguson containers corrugated box operations being up 13% and our brand revenue is being up 62%. We continue to see the fallout of the impacts of COVID-19 in our amusement park business and those operations were down a proxy.
At least 17% versus a year ago.
Third quarter gross margin was 37.2 per cent versus 28% a year ago. The increase in gross margin was due to the increase in our Ferguson containers business and the fixed cost included in the cost of goods sold that remained flat while our revenues increase in.
In addition, the company had favorable product mix of good sold to customers related to increased sales in our higher margin cloud be branded business versus the quarter from a year ago.
That's DNA in the quarter came in at three and a half million an increase of approximately 179000 versus the prior year. This was primarily the result of non cash stock based compensation of 1.2 million versus 200000 in the prior quarter ended September Thirtyth 2019.
Our actual SGN a spend is down year over year, when removing non cash items in 2020. The steps we took to reduce spend have reduced approximately one and a half million net annualized cash spend related to head count reduction throughout 2020, and the termination of lease spaces at various locations that were present in our 2019 spread.
As a result of our continued cost saving actions, including the workforce reduction we anticipate that SDMA spend dollars in the fourth quarter of 2020, and first quarter of 2020 will be below our 2019 level.
We continue to evaluate our spend to make changes where we feel we can reduce the cost while maintaining the same level of quality.
From an earnings perspective, our adjusted EBITDA was a loss of approximately 183000 for the quarter ended September 32020, which was an improvement of approximately 1.1 million from the third quarter ended September 32019.
Included in adjusted EBITDA is approximately 181000 of nonrecurring costs, including restructuring and severance cost per head count in Red production.
In the fourth quarter, we will continue to include add backs for restructuring and severance costs due to further head count reductions and cost saving measures.
Moving over to the balance sheet as mentioned previously we ended the third quarter with total cash of 385000 total debt net of unamortized discounts was 7.6 million inventory totaled 1.5 million up 27% versus the previous quarter and 11% from year end we.
We continue to monitor and manage our debt portfolio as we close out the year.
During the third quarter of 2020, we continue to take actions to cut cost and preserve cash we completed our relocation of our warehouse in California and Florida.
We will begin to see cash savings related to this in Q4 2020 and Q1 of 2021. This move resulted in a reduction of headcount related to the removal of a large majority of our head count located on the West Coast, We continue to lower expenses across the organization and are proactively managing our working capital requirements due to continued.
Cost saving actions, we anticipate SGN eight to continue to decline through 2021.
COVID-19 has free to both opportunities and a considerable amount of uncertainty across many markets, including the sourcing and sale of personal protective equipment.
While we were initially excited regarding to confirmed orders that we have received in 2020, we have realized that the supply side of the industry is unable to keep up with the current global demand, while we still remain confident in our confirmed demand and our ability to supply P. D products, we've taken a different approach moving forward due to the uncertainty of the timing of production.
And and transportation, which has caused delays in delivering products through our Edison Nation Medical Division.
Due to other continued uncertainties and the fluid impact the Pope at 19, these expectations could be affected by high didnt effects from the pandemic as the year progresses, we continue to manage cash and liquidity and continue efforts in controlling our costs. We believe the actions. We are taking will enable us to continue navigating the effects of coated Nike.
With that I would like to turn it back over to Chris to close out.
Thanks, everyone, we're excited to be.
Think of ventures and the team that we brought on we appreciate your continued support we will talk to you soon.
Thank you for joining US today. This concludes today's conference you may disconnect. Your lines at this time and drive the recipe for weekend.
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