Q1 2023 Live Ventures Inc Earnings Call

Good day, everyone and welcome to the first quarter 2023 earnings call. At this time, all participants are in a listen only mode.

You will have an opportunity to ask questions. During the question and answer session. You bet registered to ask a question by pressing star one and you touched on phone. Please note. This call may be recorded. It is now my pleasure to turn today's program over to Greg Powell Director of Investor Relations. Please go ahead.

Thank you Gretchen good.

Good afternoon, everyone and welcome to the White ventures fiscal 2023 first quarter conference call.

Joining us this afternoon for the call are John <unk>, Our Chief Executive Officer, and President David Barrett, Our Chief Financial Officer, and Eric <unk>, Our Chief operating officer.

Some of the statements we're making today are forward looking and are based on our best view of our businesses as we see them today. The actual results could differ materially due to the number of factors, including those outlined in our latest forms 10-K, and 10-Q as filed with the Securities and Exchange Commission.

We have no obligation to publicly update any forward looking statements. After this call whether as a result of new information future events changes in assumptions or otherwise you can find our press release and 10-Q referenced on this call in the Investor Relations section of the life interest website.

I will direct you to our website www, why adventures dot com or www SEC Gov for historical SEC filings.

I will now call turn the call over to David to walk through our financial performance.

Thank you, Greg and good afternoon, everyone.

Overall, the company delivered $69 million of revenue $1 8 million and net income and $7 5 million of adjusted EBITDA in spite of a challenging economic environment.

As evidenced by our acquisition of flooring liquidators, we continue to execute our multi lever.

I build hold strategic plan to maximize stockholder value in.

In addition, we repurchased 24710 shares of our common stock during winter.

Before we jump into the numbers, let's briefly discuss the flooring liquidators acquisition that we announced in January .

We are very excited about the flooring liquidators acquisition.

Flooring liquidators, as a leading retailer and installer of floors carpets, and countertops to consumers builders and contractors in California and Nevada.

Over the years, they have established a strong reputation for innovation efficiency and service in the home renovation and improvement market.

The transaction valued at approximately $84 million was financed through a combination of cash debt and the issuance of 116441 shares of our common stock representing a 378% dilution of live ventures fully diluted com.

Common stock.

Our expectation is that pulling liquidators will add a significant new revenue stream of approximately $125 million per year.

We believe there are strong growth opportunities in all three of flooring liquidators divisions retail builder and franchise mobile store model, we look forward to sharing the results with you beginning with our next earnings report.

Now I will discuss the financial results for our first quarter.

Total revenue for the first quarter decreased to $69 million down eight 2% as compared to $75 2 million in the prior year period.

The decrease in revenues is due to lower revenues in the flooring manufacturing retail and corporate and other segments.

Flooring manufacturing revenues of $26 4 million decreased approximately $6 4 million or 19, 6% as compared to the prior year period.

The decrease was primarily due to reduced demand as a result of general economic conditions.

Retail revenues of $23 3 million decreased approximately $2 9 million or 11, 2% as compared to the prior year period.

The decrease was primarily the result of reduced demand due to inflationary pressures supply chain issues and overall product sales mix.

Steel manufacturing revenues of $18 million increased approximately $5 6 million or 45, 4% as compared to the prior year period, primarily due to the acquisition of kinetic.

Corporate and other segment revenues decreased approximately $2 4 million, primarily due to the decreased revenues at SW financial.

Yeah.

Gross profit for the quarter was $21 9 million down from $27 6 million in the prior year period.

The gross margin percentage for the company decreased to 31, 8% from 36, 7% in the prior year. This decrease is primarily due to the tightening margins and our flooring and steel segments.

The flooring manufacturing segment's gross profit margin decreased to 17, 6% as compared to 27, 5% in the prior year.

This decrease was primarily due to increases in raw material costs and lower demand.

Retail segment gross profit margin increased to 52, 5% as compared to 51, 1% in the prior year. The increase was primarily due to fluctuations in product mix.

The steel manufacturing segment's gross profit margin decreased to 24, 4% as compared to 29, 2% in the prior year period.

The decrease in profit margins, primarily due to increases in raw material costs as well as the acquisition of kinetic.

General and administrative expense increased by three 1% to approximately $14 6 million as compared to the prior year period. The increase is primarily due to the acquisition of kinetic partially offset by decreases in professional fees and other general and administrative expenses.

Selling and marketing expense decreased by 9% to approximately $2 8 million as compared to the prior year period. The decrease was probably primarily due to a decrease in trade show and convention activity related to our flooring manufacturing segment.

Operating income decreased to $4 6 million for the first quarter of 2023 as compared to $10 4 million in the prior year period.

The decrease in operating income is primarily attributable to lower gross profits as a result of inflationary cost increases.

First quarter interest expense increased approximately $1 million as compared to the prior year period.

The increase was primarily due to increased debt balances as a result of the Connecticut acquisition and increased interest rates.

First quarter net income was $1 8 million as compared to net income of $6 5 million in the prior year period.

Diluted EPS for the first quarter was <unk> 60 per share as compared to $2 <unk> per share in the prior year period.

And adjusted EBITDA for the first quarter was $7 5 million a decrease of approximately $4 6 million as compared to the prior year period.

Turning to liquidity, we ended our first quarter with cash of $12 8 million in cash availability under our various lines of credit of $21 2 million for a combined total liquidity of $34 million.

I'd like to highlight our low level of leverage.

As of the end of our first quarter, our net debt to last 12 months adjusted EBITDA ratio was two three times.

We maintained a low level of leverage while purchasing two new businesses in the last 12 months repurchasing shares and making significant capital investments in our businesses.

Yeah.

We had working capital of approximately $78 1 million as of December 31, 2022, as compared to $78 4 million as of September 32022.

Total assets increased to $279 1 million as compared to $278 6 million as of September 32022.

In total stockholders equity increased $1 2 million to $98 4 million.

As a part of our capital allocation strategy, we may make share repurchases from time to time, we believe our stock repurchases represent long term value for our stockholders.

As previously disclosed the company announced a $10 million common stock repurchase plan in 2018.

During the first quarter, we repurchased 24710 shares of common stock at an average price of approximately $25 16 per share.

As of December 31, the company had approximately $3 4 million available for repurchases under this program.

In conclusion.

While we continue to face significant macroeconomic headwinds. We believe we are well positioned to continue to deploy our capital in a smart focused disciplined manner to create long term stockholder value.

We will now take questions from those of you on the conference call. Operator, Please open the line for questions.

At this time, we will open the floor for questions if you'd like to ask a question. Please press the star key followed by the one key on your Touchtone phone.

Any time, you would like to remove yourself from the question queue.

I'll start to again to ask a question. Please press star one.

And our first question comes from Theodore O'neill from Litchfield Hills Research.

Oh, Hi, Hello.

Sorry, guys.

Yeah, well congratulations on a good quarter despite the issues here.

Last quarter and this quarter both side is inflation as issues for the retail segment and the flooring segment do you see any abatement of that now that we're here in February .

We are seeing some abatement in that but we believe it is just going to take some time for it to really funnel through.

And be able to start driving up our margins.

And.

I know you talked about the flooring acquisition.

Paired remarks at the beginning is there any kind of guidance you can give us as to how that revenue might flow in over the subsequent quarters coming up.

Yes, we don't give guidance on yeah.

But I mean, we have noticed that we expect around 125 million per year. So I would just kind of pro rate that I think is a great start okay. That's fine.

None of the figures that you see in the Q here reflect anything from Florida liquid data because it was purchased after the end of the quarter.

So.

We should see revenues flowing from from Florida Liquidators.

We put in our press release that we expected about $125 billion year, it could be more could be less with just a high level.

Okay. Thanks, Dan Thanks.

In this in the steel manufacturing segment is there is there any.

Seasonality to that to that business.

Make a revenue maybe go up next quarter or future quarters here.

I don't think so now there.

There is a moderate seasonality, but not not significantly in the steel segment.

Thanks very much.

Thanks, Steve.

Once again star one to ask a question we will take our next question from Joseph Kowalsky.

Hi, gentlemen.

Thank you. Thank you for the hard work and a good quarter.

I have several questions. So I'll just stop me if I'm, taking up more than my fair share of time, if that's all right.

Go ahead. The first one first one is I'm not an accountant and I just wanted to understand the dilution compared to the increase in the asset value. I mean, we are getting a new asset for that dilution. So.

It sounds like since stockholders' equity is up does that mean that each share actually owns more even after the dilution given the new asset that has become part of the portfolio.

That dilution is just representative of the number of shares that we issued in connection.

With the deal and that so there's no. It's just strictly the number of shares that were outstanding how many did we add into what percentage of that.

The overall that I understand that I understand what I'm asking is that the actual assets that each share owns did that go up given the new <unk>.

Yes, yes, we will have asset allocate that towards that we've also noted that it does.

Valeant roughly $84 million, so we have $84 million.

Okay.

Got it.

Alright, My next question.

Looking forward, it's an accretive deal it is.

Thank you.

Thats exactly what I was looking for the shareholders. Because this is a very small share issuance valued at around $5 million for what we disclose.

So youll see equity shareholders equity rising and then youll see in the future the future cash flows hitting.

The return per share will be hopefully higher.

Thank you for pulling the word out that I was looking for I appreciate it and that is what I was looking for.

And I appreciate the elucidation.

That's what I thought from when I first read it but I just wanted to make sure that I was correct on that.

Why do you that as of fiscal year compared to a calendar year.

We've always been on that 930 for awhile so.

Honestly I mean is there a benefit to the company as their detriment or is just you know because you have.

I just don't know.

The company's list of good questions lots and lots of companies that have fiscal year ends that are not 12 31. Many of them I think Apple is Oh I know.

<unk> 30 or something.

I don't think that there is an actual preference.

I think our auditors prefer that we're not 12 31, because that's when they're super busy.

During the slower.

There is no real good answer for that Okay. Alright, that's fine I just didn't know if there was a business benefit and that's why it was done or not.

<unk>.

Okay, you mentioned macroeconomic headwinds.

Both mentioned it and I just wonder is that.

You expect that in all areas and all of your subsidiaries or in.

More in particular areas than in others.

Yes, I believe that the macroeconomic conditions really is going to impact everyone, but to different levels. I think right now we're kind of seeing more of it on the manufacturing side, particularly with respect to flooring, which they've got issues just with the housing market.

The increase in interest rates that will impact kind of the demand for flooring.

Thank you and then my last question, So I guess I made it through them all.

And Whitney.

Are you still planning to buy the remainder of the shares outstanding number one guest actually there are several questions related.

It seems to fit with the other purchases that you've made.

Yes.

Yes, there's a bunch of questions in there in terms of the go forward plan, we continue to review strategic alternatives in SaaS.

Makes the most sense in terms of the remainder of the ownership shares.

In terms of what we liked in the first place. It was an accretive acquisition and we saw a lot of opportunity for growth. So while we have historically been more focused on manufacturing and asset intensive businesses, we liked and like the ability to open up new offices and continue to grow through through investment we always look.

To be able to invest further continue to invest in the acquisitions, we make it look for ROI, there and we think that provides an attractive opportunity.

And then as far as their total assets under management.

Currently.

I don't know that I have that number off the top of my.

In my head.

But it hasnt been disclosed I can certainly try to look for the next quarterly earnings call Alright.

Alright, I appreciate that and the and the <unk>.

Last question about them.

Last time I asked you about you mentioned that there were.

It was a smaller focus on RIAA, then on brokerage and I wonder if thats changing or if that's still the case.

No.

And in fact I misspoke.

Early on the BD.

So I appreciate you actually bring that up because that was that was a miss statement Im sorry, youre, saying its entirely BD not not.

Did I get it correctly.

And is that intended to stay that way.

Entering <unk>.

Again, continuing to look at all opportunities, but the current focus is entirely on the BD on the broker dealer.

Okay.

Thank you very much.

Okay.

Any other question once again.

Appears we have no further questions at this time.

Okay, great. Thanks for thanks for joining us on the call. We look forward to speaking to you later thanks.

And thank you ladies and gentlemen, this does conclude today's conference you may now disconnect.

Okay.

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