Q1 2021 Summer Infant Inc Earnings Call

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Good day and welcome to the summer brands fiscal 2021 first quarter conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero.

After todays presentation, there will be an opportunity to ask a question to ask a question you May Press Star then 1 on your Touchtone phone to withdraw your question. Please press Star then 2 please note. This event is being recorded I would now like to turn the conference over to Chris witty Investor Relations adviser. Please go ahead.

Hello, and welcome to the summer brands to 2021 first quarter conference call.

Moving on the call today is the company's CEO, Stuart Noyes and interim CFO Bruce Meyer.

I would now like to provide a brief safe Harbor statement.

This call May include forward looking statements that relate to summer brands outlook for 2021 and beyond provide a brief safe Harbor statement that's.

This call May include forward looking statements that could cause actual results and events to differ materially from these statements.

Please refer to the risk factors contained in the company's annual report on form 10-K, its quarterly reports on form 10-Q and in our other filings with the Securities and Exchange Commission.

During the call management may make references to adjusted EBITDA.

Net income and adjusted earnings per share.

These metrics are non-GAAP financial measures, which the company believes help investors gain a meaningful understanding of changes in summer brands operations.

For more information on non-GAAP financial measures. Please see the table for a reconciliation of GAAP results to non-GAAP measures included in the company's financial release issued yesterday evening.

And with that I'd like to turn the call over to Stuart Noyes Stuart.

Thanks, Chris and good morning, everyone. We appreciate you joining our first quarter conference call today I'll start by providing an overview of recent developments after which Bruce will go through our financial results in detail.

As discussed on our last earnings call. We continued to face operating challenges this quarter due to logistical issues, which hindered our ability to get product to market on a timely manner.

The same headwinds, namely shipping constraints trucking bottlenecks in general supply chain issues hampered industry expansion, even if demand rose swatch and favorable economic conditions as well as ongoing federal stimulus.

We were glad to see some of our key product categories grow year over year, including our tried and true gates and parties, but the ability to get goods to market dependent on a variety of factors related to how where and when the items were ordered and manufacture.

Just 1 look at our balance sheet.

Our inventory levels fell probably lower than we would like but clearly indicative of the mismatch of supply and demand. During this tumultuous period, if it weren't for such logistics constraints overseas and production challenges in North America and to some extent the fact that certain countries, we're still under COVID-19.

Walk down I believe revenue would've actually been up over 2020.

Let me add however that even in the midst of so many moving pieces from pandemic restrictions to container availability in manufacturing bottlenecks are people rose to the challenge keeping cost down in managing the supply chain as best they could.

Sales were not where we would have liked.

Posted positive EPS grew EBITDA sequentially.

Quarter, 4 and pay down additional debt. This shows the focus on bottom line results and operating execution.

Going forward. The good news is that demand should continue to be robust improving economic conditions and the pending child tax credit will likely fueled consumer spending in the months and quarters to come a day.

It comes down to our ability to get product to market and we're doing everything under our control to make that happen.

We're managing our supply chain daily, making adjustments, where possible planning father, Aragon advance and raising prices where possible to offset increase in commodity costs and shipping rates.

Cautiously optimistic that these challenges will lessen as people come back to the work force and shipping companies increased product throughput.

But the timing here is not something easily estimated by us or any other consumer products company. All I can promise to our listeners is that we're doing everything possible to meet demand fell waters and manage costs in tandem ever.

Every day is a bit different than the laughs, but we feel confident given the overall positive trends as the year progresses with that I'll turn it over to Bruce to review our financial results in detail.

Rus.

Thanks, Stuart and good morning, everyone. As a reminder, our 10-Q and related press release were issued yesterday and in addition to listening to this conference call I encourage you to review our filing.

Now to the results first quarter net sales were $36 2 million compared with $40 3 million in the first quarter of fiscal 2020, while revenue was in line with the fourth quarter of 2020, it was down year over year due to the reasons previously discussed.

Ongoing supply chain constraints and logistical bottlenecks.

Stuart mentioned these issues more than offset increasing product demand and a generally improving economic environment helped by lower pandemic related restrictions.

Revenue rose by double digits across certain categories, including party gate and boosters.

Even as other areas saw reduced shipment and sales growth.

Going forward as Stuart discussed we are doing everything possible to manage through the supply chain issues and believe end user demand will continue to be strong given the economic outlook as well as the forthcoming child tax credit.

Gross profit was 10 7 million from first quarter of fiscal 2021 versus $12 5 million in 2020.

And our gross margin as a percentage of sales was 29, 4% versus 31.0% last year.

Year over year margin decline, primarily reflects certain items no longer receiving tariff exclusions that were granted in 2020.

As Stuart mentioned earlier, we're managing price, increasing them, where possible to mitigate increasing costs and ongoing margin pressure.

Selling expense was $2 4 million in the first quarter versus $3 4 million in the prior year period.

And as a percentage of net sales was 6.6% this year versus 8 5% in 2020.

The decrease year over year.

And as a percentage of sales was primarily due to lower freight and advertising costs.

General and administrative expenses were $7.0 million in the first quarter versus $8 1 million in the prior year period.

And G&A as a percentage of sale was 19, 4% this year versus 22% in 2020 a.

The year over year change reflects lower labor and other costs due to various restructuring initiatives.

Interest expense was zero point $3 million in the first quarter of 2021.

Lowest level in years versus $1 4 million in 2020, reflecting lower outstanding debt levels and more attractive interest rates following the company's refinancing of its credit facilities.

The company.

Ported net income of <unk> 3 million or 12 cents per share in the first quarter of 2021 compared with a net loss of $1 2 million.

Or a negative <unk> 57 per share in the prior year period.

The company recorded a tax provision of 0.1 million in fiscal 2021 first quarter versus the tax benefit of zero point $3 million in the comparable period of fiscal 2020.

Adjusted EBITDA for the first quarter of 2021 was $2 1 million versus 1.8 million in the first quarter of 2020.

Adjusted EBITDA in 2021 income.

Zero point $8 million in bank permitted add back charges compared with 0.9 million in the prior period year.

And adjusted EBITDA as a percentage of net sales was 5 7% in fiscal 2021.

Versus 4 6% last year.

Turning to the balance sheet.

As of April 3.

2021 summer infant had approximately zero point $4 million of cash and $29 7 million of bank debt compared with zero point $5 million on cash and $39 million of bank debt at the beginning of fiscal 2021, we can.

To focus on reducing debt and strengthening the balance sheet wherever possible.

Inventory at the end of the first quarter was $16 6 million compared with $25 1 million as of January 2 2021.

Our inventory turns were 6 2 versus 4.0 turns at the beginning of the year.

Trade receivables.

As of April 3 2021 were $28 6 million compared with 26.0 million at the beginning of fiscal 2021.

Day sales outstanding or Dsos were 71.

Compared to 66 debt to start the year.

Accounts payable and accrued expenses were $28 2 million as of April 3 2021, compared with $34 1 million at the beginning of the fiscal year.

With that I'll turn the call over to the operator and open it up for questions.

Thank you we will now begin the question and answer session to ask a question you May Press Star then 1 on your Touchtone phone.

If you are using a speakerphone. Please pick up your handset before pressing the keys if at anytime your question has been addressed.

To withdraw your question. Please press Star then 2 at this time, we will pause momentarily to assemble our roster.

Yeah.

Okay.

Again, if you would like to ask a question that is star then 1 to enter the question queue.

As a reminder, it is star then 1 to ask a question and Star then 2 if you would like to remove yourself from the question queue.

At this time there are no questions on the question queue and I would like to turn the conference back over to Mr. Noyes for any closing remarks.

Great. Thank you very much. Thank you all for joining us today for the call. We look forward to speaking with you next quarter have a nice day.

The conference has now concluded. Thank you for attending today's presentation and have a nice day.

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