Q1 2025 Educational Development Corp Earnings Call
Okay.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Educational Development Corporation's first quarter fiscal year 2025 earnings call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press R0 for the operator.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Educational Development Corporation's first quarter fiscal year 2025 earnings call. This time, all lines are in listen-only mode.
Good afternoon, ladies and gentlemen, and.
Speaker Change: And welcome to the educational Development Corporation first quarter fiscal year 2025 earnings call.
Speaker Change: At this time all lines are in listen only mode.
Operator: Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, July 11th, 2021. 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.
Speaker Change: Following the presentation, we will conduct a question and answer session.
Speaker Change: If at any time during this call if you require immediate assistance.
Speaker Change: Press Star zero for the operator.
Operator: This call is being recorded on Thursday, July 11th of 2024.
Speaker Change: This call is being recorded on Thursday July 11th if 2024.
Operator: 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 defer materially from those expressed or implied due to a variety of factors.
Speaker Change: Before beginning of the call we would like to remind you that some of the statements made today will be forward looking.
Speaker Change: Are protected under the private Securities Litigation Reform Act of 90 95.
Speaker Change: Actual results may differ materially from those expressed or implied uhm variety of factors.
Operator: We refer you to Educational Development Corporation's recent filings with the FEC for a more detailed discussion of the company's financial condition.
Operator: We refer you to Educational Development Corporation's recent filings with the FEC for a more detailed discussion of the company's financial conditions. I would now like to turn the conference over to Jon Beisler, Investor Relations. Please go ahead.
Speaker Change: We refer you to educational development Corporation. Some recent filings with the S. E C for a more detailed discussion of the company's financial condition.
John Beisler: I would now like to turn the conference over to John Beisler, Investor Relations. Please go ahead.
Speaker Change: I would now like to turn the conference over to John Beisner Investor Relations. Please go ahead.
Jon Beisler: Thank you, Operator. With the Safe Harbor statement in red, I'll turn the call over to Craig White.
Craig White: Thank you, operator. With the safe harbor statement read, I'll turn the call over to Craig White.
Speaker Change: Thank you operator with the Safe Harbor statement read I'll turn the call over to Craig.
Craig M. White: Okay, thank you. I want to introduce a couple of the people joining me on the call. We have myself, Craig White, President and Chief Executive Officer, Heather Cobb, Chief Sales and Marketing Officer, and Daniel OKeefe, Chief Financial Officer. After the market closes this afternoon, the company will issue a press release announcing its results for the third quarter, which will be on our company's website at edcpub.com. Welcome everyone to the call. We appreciate your continued interest.
Craig White: Okay, thank you.
Speaker Change: Okay. Thank you.
Craig White: I want to introduce a couple of the people joining me on the call. We have myself, Craig White, President and Chief Executive Officer, Heather Cobb. She sells a marketing officer and Dan O'Keefe, Chief Financial Officer.
Speaker Change: I want to introduce a couple of the people joining me on the call. We have myself, Craig White, President and Chief Executive Officer, Heather Cobb, Chief sales and marketing officer, and Dan O'keefe Chief Financial Officer.
Speaker Change: After the market closed this afternoon the company issued a press release announcing its results for the third quarter, which will be on our company's website at.
Craig White: After the market closes afternoon, the company issued a press release announcing its results for the third quarter, which will be on our company's website at edcpub.com. Welcome everyone to the call. We appreciate your continued interest. I will start today's call with some general comments regarding the quarter. Then I will pass the call over to Dan and Heather to run through the financials and provide an update on our sales and marketing.
Speaker Change: EDC pub dot com.
Speaker Change: Welcome everyone should call. We appreciate your continued interest.
Craig M. White: I will start today's call with some general comments regarding the quarter, then I will pass the call over to Dan and Heather to run through the financials and provide an update on our sales and marketing. Finally, I will wrap up the call with an update on our progress on the cell leaseback of our headquarters, the Hilti Complex, and provide some comments on strategy and fiscal 2025 outlook.
Craig M. White: We'll start today's call with some general comments regarding the quarter, then I will pass the call over to Dan Heather to run through the financials and provide an update on our sales and marketing.
Craig White: Finally, I will wrap up the call with an update on our progress of the sell lease back of our headquarters, the Healthy Complex, and provide some comments on strategy and fiscal 2025 outlet. Our first quarter, as well as previous quarters of fiscal 2024, were driven by strategic decisions to prioritize cash flow over profitability. During the quarter, we ran several promotions to energize our current sales force and customers by offering discounts on our products as well as the freight we charge on shipments. These decisions were necessary in these difficult economic times when high inflation is eating at the discretionary spending of our customers, coupled with our higher than normal inventory levels.
Heather N. Cobb: Finally, I will wrap up the call with an update on our progress of the sale leaseback of our headquarters the healthy complex and provide some comments on strategy in fiscal 2025 outlook.
Heather N. Cobb: Our first quarter as well as previous quarters of fiscal 'twenty, three four were driven by strategic decisions to prioritize cash flow over profitability.
Craig M. White: Our first quarter, as well as previous quarters of fiscal 2024, were driven by strategic decisions to prioritize cash flow over profitability. During the quarter, we ran several promotions to energize our current sales force and customers by offering discounts on our products as well as the freight we charge on shipments. These decisions were necessary in these difficult economic times when high inflation is eating away at the discretionary spending of our customers, coupled with our higher than normal inventory levels.
During the quarter, we ran several promotions to energize, our sales force and customers by offering discounts on our products as well as the freight we charged on shipments.
Heather N. Cobb: These decisions were necessary in these difficult economic times with high inflation is eating into discretionary spending of our customers.
Heather N. Cobb: Yeah.
Heather N. Cobb: Coupled with our higher than normal inventory levels were.
Craig White: We are continuing to evaluate and implement cost-kitting measures as well as leverage IT to provide new tools to energize the field sales force, as well as contribute to the bottom line. While I'm not pleased to report a loss, we are actively working on the long-term strength of our business model.
Craig M. White: We are continuing to evaluate and implement cost-cutting measures as well as leverage IT to provide new tools to energize the field sales force as well as contribute to the bottom line. While I'm not pleased to report a loss, we are actively working on the long-term strength of our business model. With that, I would like to turn the call over to Daniel OKeefe to provide a brief overview of the financials. Thank you, Craig.
Speaker Change: We are continuing to evaluate and implement cost cutting measures as well as leverage I E to provide new tools to energize the field sales force as well as contribute to the bottom line.
Speaker Change: While I'm not pleased to report a loss we are actively working on the long term strength of our business model.
Craig White: With that, I would like to turn the call over to Dan O'Keefe to provide a brief overview of the financials.
Speaker Change: With that I would like to turn the call over to Dan O'keefe to provide a brief overview of the financials. Thank you Craig.
Daniel OKeefe: Thank you, Craig. To our first quarter, summary, compared to the prior first quarter, net revenues were 10 million compared to 14.5 million. Our average active brand partners totaled 13,400 compared to 15,000 at the end of our last fiscal year.
Speaker Change: Sure.
Daniel E. OKeefe: In comparing our first quarter summary compared to the prior first quarter, net revenues were $10 million compared to $14.5 million. Additionally, our average active brand partners totaled $13,400 compared to $15,000 at the end of our last fiscal year.
Speaker Change: First quarter suddenly compared to the prior first quarter.
Daniel E. OKeefe: Net revenues were 10 million compared to $14 5 million in our average active brand partners totaled 13400 compared to 15000 at the end of our last fiscal year.
Daniel OKeefe: Loss before income taxes were 1.7 million compared to a loss of 1.2 million in the first quarter last year. here.
Daniel E. OKeefe: Loss before income taxes was $1.7 million, compared to a loss of $1.2 million in the first quarter last year. The net loss totaled $1.3 million compared to $0.9 million, and the loss per share totaled $0.15 compared to a loss of $0.11 on a fully diluted basis. To update everyone on our inventory and working capital levels, net inventories decreased 2.9 million from 55.6 million at the end of February 28 2024 to February 29 2024 to 52.7 million at May 31 2024.
Daniel E. OKeefe: Loss before income taxes were $1 7 million compared to a loss of $1 2 million in the first quarter last year net loss totaled $1 3 million compared to <unk> 9 million and.
Daniel OKeefe: Net loss totaled 1.3 million compared to 0.9 million, and loss per share totaled 15 cents compared to a loss of 11 cents on a fully diluted basis.
Daniel E. OKeefe: And loss per share totaled <unk> 15 cents compared to a loss of 11 cents on a fully diluted basis.
Daniel OKeefe: To update everyone on our inventory and working capital levels, net inventory is decreased 2.9 million from 55.6 million at the end of February 28, 2024, to February 29, 2024, to 52.7 million at May 31, 2024. Now for working capital update, a working capital line of credit borrowed was 5.5 million at the end of February 2024, and 5.6 million at the end of May 2024, with 1.4 million of availability at the end of the first quarter.
Date, everyone on our inventory and working capital levels net inventories decreased $2 9 million from $55 6 million at the end of February 28, 2024 to February 29 2020.
Daniel E. OKeefe: Four to $52 7 million at May 31, 2024.
Daniel E. OKeefe: Now for the working capital update. The working capital line of credit borrowed was 5.5 million at the end of February 2024 and 5.6 million at the end of May 2024 with 1.4 million of availability at the end of the first quarter. That concludes the financial update, and I'll now turn the call over to Heather Cobb to talk about sales and marketing opportunities in further detail.
Daniel E. OKeefe: Now for working capital Lactate update our working capital line of credit borrowings was $5 5 million at the end of February 2024, and $5 6 million at the end of May 2024, with $1 4 million of availability at the end of the first quarter.
Daniel OKeefe: That concludes the financial update.
Daniel E. OKeefe: That concludes the financial update I will now turn the call over to Heather Cobb to talk about sales and marketing opportunities in further detail Heather Thanks, Dan.
Heather Cobb: I'll now turn the call over to Heather Cobb to talk about sales and marketing opportunities in further detail.
Heather Cobb: Heather? Thanks, Dan. As Craig mentioned earlier, we continue to make strategic choices and changes to bring a new initiative for success to our paper pie brand partners. We had a May site-wide sale promotion where we hosted an exciting week-long site-wide sale that seemed to capture the attention of our customers. It was definitely a hit.
Heather N. Cobb: As Craig mentioned earlier, we continue to make strategic choices and changes to bring new initiatives for success to our paper pie brand partners. We had a May site-wide sale promotion where we hosted an exciting week-long site-wide sale that seemed to capture the attention of our customers. It was definitely a hit.
Heather N. Cobb: As Craig mentioned earlier, we continue to make strategic choices and changes to bring new initiatives for success to our paper up high brand partners.
Heather N. Cobb: We had amaze site wide sales promotion, where we hosted an exciting week long sale whitesell it seem to capture the attention of our customers. It was definitely a hit.
Heather N. Cobb: In June, we hosted attendees here in Tulsa at the Cox Business Convention Center, during which we had over 50 presenters, including three of our Kane Miller authors and creators from both England and Australia, as well as keynote presentations on the science of hope and the importance of early literacy by our newest board member, Dr. Amy Emerson. Response to all that was presented was overwhelmingly positive, and the excitement and energy that our brand partners left with was palpable.
Heather Cobb: Our June Convention, we hosted attendees here in Tulsa at the Cox Business Convention Center, during which we had over 50 presenters, including three of our cane miller authors and creators from both England and Australia, as well as keynote presentations on the science of hope and the importance of early literacy by our newest board member, Dr. Amy Emerson. Response to all that was presented was overwhelmingly positive, and the excitement and energy that our brand partners left with was palpable. That was evidenced as we held our next promotion the week after we returned a one-day account activation special offer.
Speaker Change: Our June convention, we hosted attendees here in Tulsa at the Coxbusiness Convention Center during which we had over 50 presenters, including three of our Kane Miller authors and creators from both England, and Australia as well as keynote presentations on the science of health and the importance of early literacy by our newest board member Dr. Amy Emerson.
Speaker Change: Response to all of that was presented with overwhelmingly positive and the excitement and energy that our brand partners left with with palpable that was evidenced as we held our next promotion the week. After we returned a one day account activation special offer as a result of this we saw over 3700, new brand partners join us.
Heather N. Cobb: That was evidenced as we held our next promotion the week after we returned, a one-day account activation special offer. As a result of this, we saw over 3,700 new brand partners join us, keeping us around the 15,000 active brand partners count. We have already seen success for many of them who are sharing our mission and our products with their networks, bringing in new customers, just in time to lead us into the fall selling season. This excitement is fueled by the introduction of new products, which we have been doing through the month of June, and that will continue through the summer.
Heather Cobb: As a result of this, we saw over 3,700 new brand partners join us, keeping us around the 15,000 active brand partner count. We have already seen success for many of them who are sharing our mission and our products with their networks, bringing in new customers just in time to lead us into the fall selling season. This excitement is fueled by the introduction of new products, which we have been doing through the month of June, and that will continue through this summer. Both our paper prize sales division and our retail division see an increase of activity around the launch of new titles.
Speaker Change: Thing is around the 15000 active brand partner count we've already seen success for many of them who are sharing our mission and our products with their networks, bringing in new customers just in time to lead us into the fall selling season. This excitement is fueled by the introduction of new products, which we have been doing through the month of June and that will.
Speaker Change: Continue through the summer, but it's our paper Pi sales division and our retail division see an increase of activity around the launch of new titles are retail customers continue to delight and our offerings finding new theories to lead for Kane Miller educational manipulative <unk> based kits and products from Smart lab twice that concludes our.
Heather N. Cobb: Both our paper pie sales division and our retail division see an increase in activity around the launch of new titles. Our retail customers continue to delight in our offerings, finding new series to love from Kane Miller, educational manipulatives from Learning Wrap-Ups, and STEAM-based kits and products from Smart Lab Toys. That concludes our sales and marketing update. I'll turn the call back over to Craig for closing remarks. Craig? Thank you.
Heather Cobb: Our retail customers continue to delight in our offerings, finding new series to live from Cane Miller, educational manipulatives from Learning Wrap-Ups, and STEAM-based kits and products from Smart Lab Toys.
Heather Cobb: That concludes our sales and marketing update.
Speaker Change: Sales and marketing update I'll turn the call back over to Craig for closing remarks, great.
Craig White: I'll turn the call back over to Craig for closing remarks. Thank you both, Heather and Dan.
Craig M. White: Thank you both, Heather and Dan. One of, if not the biggest event in fiscal 2025 is the anticipated sale and leaseback of our headquarters building, the Hilti Complex. The proceeds from this sale will not only bring savings from reduced interest expense but allow us to build a positive cash position as we continue to work down our excess inventory level, which was approximately 30 million a year in. On June 6, we executed our sale-leaseback agreement for the Healthy Complex, totaling $35.5 million.
Craig M. White: Thank you, both Heather and Dan.
Craig M. White: The proceeds from the sale are expected to pay off our borrowings with the bank. With our new amendment, we will also have a line available to us post-sale with our bank of $4.5 million. The building sale agreement calls for a 60-day due diligence period with an additional 30 days to close the transaction.
Craig White: One of, it's not the biggest event in fiscal 2025 is the anticipated sale and lease back of our headquarters building, the Healthy Complex. The proceeds from this sale will not only bring savings from reduced interest expense but allow us to build a positive, build positive cash position as we continue to work down our excess inventory level, which was approximately 30 million at year end. On June 6, we executed our sale-leaseback agreement for the Healthy Complex totaling 35.5 million. The proceeds from the sale are expected to pay off our borrowings with a bank. With our new amendment, we will also have a line available to us post-sale with our bank of 4.5 million.
Craig M. White: It's not the biggest event in fiscal 2025 is the anticipated sale leaseback of our headquarters building the Hilton complex the.
Craig M. White: The proceeds from this sale will not only bring savings from reduced interest expense, but allow us to build a positive build positive cash position as we continue to work down our excess inventory level, which was approximately $30 million at year end.
Speaker Change: On June six we executed our sale leaseback agreement for the Hilton complex totaling $35 5 million.
Speaker Change: The proceeds from the sale are expected to pay off our borrowings with the bank.
Speaker Change: With our New Amendment will also have a line available to us post sale with our bank a $4 5 million.
Craig White: The building sale agreement caused for a 60-day due diligence period with an additional 30 days to close the transaction, so we expect the building sale will be complete by the end of the 2nd fiscal quarter or the start of the 3rd fiscal quarter. Additionally, starting July 1st, 2024, we have leased approximately half of our 220,000 square feet to a new tenant in a triple-mat lease structure. The initial term of the lease is for 5 years and includes a 5-year extension. This lease improves our monthly cash flow and further positions asked to return the profitability.
Speaker Change: The building sale agreement calls for a 60 day due diligence period with an additional 30 days to close the transaction. So we expect the building sale will be complete by the end of second fiscal quarter or the start of the third fiscal quarter.
Craig M. White: So we expect the building sale to be complete by the end of the second fiscal quarter or the start of the third fiscal quarter. Additionally, starting July 1, 2024, we have leased approximately half of our 220,000 square feet to a new tenant in a triple net lease structure. The initial term of the lease is for five years and includes a five-year extension.
Speaker Change: Additionally, starting July one 2024, we have leased approximately half of our 220000 square feet to a new tenant in a triple net lease structure.
Speaker Change: The initial term of these of the leases for five years and includes a five year extension.
This lease improves our monthly cash flow and further positions us to return to profitability.
Craig M. White: This lease improves our monthly cash flow and further positions us to return to profitability. I want to reiterate that everything that we've done in the last 15 months is to meet the bank's requirements, which we have done so. All of our efforts are beginning to come to fruition, and once they fully do, we will start to see the fruits of our efforts. From reduced interest expense, lease income, which reduces our lease commitment, our cost cutting, and capitalizing on the goodwill received from charging less for our products and shipping.
Craig White: I want to reiterate that everything that we've done in the last 15 months is to meet the bank's requirements, which we have done so. All of our efforts are beginning to come to fruition, and once they fully do, we will start to see the fruits for effort. From reduced interest expense, lease income, which reduces our lease commitment, our cost cutting and capitalizing on the goodwill received from charging West for our products and shipping.
I want to reiterate that everything that we've done in the last 15 months are to meet the banks' requirements, which we have done so.
Although our efforts are beginning to come to fruition and once they fully do we will start to see the fruits of our effort from.
Speaker Change: From reduced interest expense lease income, which reduces our lease commitment or cost cutting and capitalizing on the goodwill received from charging less for our products and shipping.
Craig White: Our sales force is grateful and excited, coming off convention, heading to incentive trip to the end of next week and working toward next year's trip to Scotland. There are a lot of reasons to be positive as we head into our fall-selling season.
Craig M. White: Our sales force is grateful and excited coming off the convention, heading to an incentive trip to Vienna next week, and working toward next year's trip to Scotland. There are a lot of reasons to be positive as we head into our fall selling season. I want to thank all of our shareholders for their patience, our employees for their commitment to our mission, and our customers and brand partners for their loyalty during this difficult period. I'm confident in our collective ability to emerge stronger and more resilient than ever before. With that, I will hand it back over to the operator for questions and answers. Thank you. Ladies and gentlemen,
Speaker Change: Our sales force is grateful and excited coming off conviction heading to incentive trip to be in the next week and working toward next year's trips to Scotland.
Speaker Change: There are a lot of reasons to be positive as we head into our fall selling season.
Craig White: I want to thank all of our shareholders for their patience, our employees for their commitments, for our mission, and our customers and brand partners for their loyalty during this difficult period. I'm confident in our collective ability to emerge stronger and more resilient than ever before.
Speaker Change: I want to thank all of our shareholders for their patience our employees for their commitment to our mission and our customers and brand partners for their loyalty during this difficult period.
Speaker Change: I'm confident in our collective ability to emerge stronger and more resilient than ever before.
Craig White: With that, I will hand it back over to the operator for questions and answers. Thank you.
Speaker Change: With that I will hand it back.
Speaker Change: Back over to the operator for questions and answers.
Speaker Change: Thank you.
Operator: Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question? Please press star one in your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process? Please press star two. If you're using a speaker phone, please lift the handset before pressing any keys. One moment, please, for your first question.
Operator: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star 1 on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star 2. If you're using a speakerphone, please lift the handset before pressing any keys.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session.
Speaker Change: Should you have a question. Please press star one on your Touchtone phone.
Speaker Change: You'll hear a prompt that your hand, that's been raised.
Speaker Change: Should you wish to decline from the polling process. Please press star two.
Speaker Change: If you are using a speaker phone please lift the handset before pressing any keys one moment. Please for your first question.
Operator: One moment, please, for your first question. If you tell us how we're going to get you today, do you want to tell us? Our first question comes from Paul Carter of Capstone Asset Management. Your line is already open.
Speaker Change: Yes.
Speaker Change: Right.
Paul Carter: The first question comes from Paul Carter of Capstone Asset Management. Your line is already open. Thank you.
Speaker Change: Our first question comes from Paul Carter of Capstone asset management.
Speaker Change: Line is already open.
Paul Carter: Thank you. Good afternoon, everybody.
Speaker Change: Yeah.
Speaker Change: Thank you good afternoon everybody.
Paul Carter: Good afternoon, everybody. Hi, Paul. Just a start. The 10 million of net revenue. How is that split between Paper Pie and your publishing division? About 85-15, Paul. Similar to pretty much every other quarterhand. Great. And then you added over 3,700 brand partners thus far, which is great. Was that just during the month of June, or was that post convention up till today, I guess? No, that's a great question. That was just during the promo in the month of June. Okay. Great. Excellent.
Unknown Speaker: Just to start, so the $10 million in net revenue, how is that split between PaperPi and your publishing division?
Bob: Hi, Bob.
Bob: Dart.
Bob: So the 10 million of net revenue how is that split between paper pie and you're publishing division.
Unknown Speaker: About 85-15, Paul.
Paul Carter: About $85 15, Paul.
Unknown Speaker: Similar to pretty much every other quarter here.
Paul Carter: Similar to pretty much every other quarter here.
Unknown Speaker: Okay, great. And then you added over 3,700 brand partners thus far, which is great. Was that just during the month of June? Or was that post-convention up till today, I guess?
Bob: Okay, Great and then you added over 3700 brand partners.
Bob: As far which is a which is great was that just during the month of June or was that.
Post convention up till today I guess.
Unknown Speaker: No, that's a great question. That was just during the promo during the month of June.
Bob: No. That's a great question that was just during the that promo in the month of June.
Unknown Speaker: Okay, great. Excellent.
Bob: Okay, great excellent.
Craig White: And then, so how confident are you? I know this is a tough question to answer, but how confident are you at stabilizing your brand partner count at those 15,000 level? It sort of seems like it's, you know, is stabilizing somewhat. And I know the macro employment picture is getting slightly worse, which I think that might encourage more people to sign on as part-time brand partners. But are you, I guess, getting incrementally more confident in stabilization? That's a great way to put it, Paul. Incriminately more confident is exactly what we should say. I think we'll put that on a T-shirt.
Bob: And then so how confident are you I know this is a tough question to answer but how confident are you at stabilizing your brand partner count at the 15000 level it sort of seems like it's stabilizing.
Unknown Speaker: And so, how confident are you? I know this is a tough question to answer, but how confident are you at stabilizing your brand partner count at this 15,000 level? It sort of seems like it's, you know, stabilizing somewhat. And I know the macro employment picture is getting slightly worse, which I think might encourage more people to sign on as part-time brand partners. But are you, I guess, getting incrementally more confident in stabilization?
Bob: Is stabilizing somewhat and I know the macro.
Bob: Employment picture is getting slightly worse, which I think that might encourage more people to sign on as part time brand partners, but are you I guess getting incrementally more confident and stabilization.
Unknown Speaker: That's a great way to put it, Paul. Incrementally more confident is exactly what we should say. I think we should put that on a t-shirt. But yes, you know, I think that as we see things start to stabilize in the market as a whole, it makes us more reassured that we are heading in the direction of, you know, what we want the future of our brand partner base to look like.
Speaker Change: That's a great way to put it all incrementally more company is exactly what we should say I think we'll put that on a T shirt, but yes.
Craig White: But yeah, you know, I think that as we see things, you know, start to stabilize in the market as a whole, it makes us more reassured that we are heading in the direction of, you know, what we want the future of our brand partner base to look like. OK. All right. Thanks for that.
Speaker Change: I think but I think that as we see things start to stabilize in the market as a whole.
Speaker Change: It makes us more reassured that we are heading in the direction as you know what we want the future of our brand partner base to look like.
Unknown Speaker: Okay. All right. Thanks for that. And then, just switching gears, talking about your building. So I guess this new buyer, Rockford Holdings, is that associated with the same group of investors as the original ones that bowed out, Blue Ledge Group, or is it a different group?
Speaker Change: Okay, alright, thanks for that and then just switching gears.
Paul Carter: And then just switching gears, talking about your building. So I guess is this new buyer Rockford Holdings is that associated with the same group of investors as the original ones that bowed out Blue Blue Ledg Group, or is it a different different group. Yeah, thank you. It is associated with the prior group. There's brothers involved, one with each group. And so it was kind of a fairly seamless handoff from one group to the other. But yet it is a new group. So they're still going through their due diligence. OK, because yeah, that's what I was just going to ask about. Is I know that I guess the first group would have done their due diligence, right.
Speaker Change: Talking about your building.
So I guess is this new buyer Rockford holdings is that associated with the same group of investors as the original ones.
Speaker Change: <unk> bowed out Blue Blue match group or is it a different a different group.
Craig M. White: Yeah, thank you. It is associated with the prior group. There are brothers involved, one with each group, and so it was kind of a fairly seamless handoff from one group to the other. But yet, it is a new group, so they're still going through their due diligence.
Speaker Change: Yes. Thank you it is associated with the prior group Theres brothers involved one with each group and so it was kind of at a fairly seamless handoff from one group to the other.
Speaker Change: But yet it is a new group, so they're still going through their due diligence.
Craig M. White: Okay, because yeah, that's what I was just going to ask about. I know that I guess the first group would have done their due diligence, right? I think they had 60 days of due diligence. And just curious why the second group, if they're associated, if they also need that sort of 60 day window. Is there something? Something that they didn't, I guess, learn in the first due diligence period.
Okay. Yeah, that's what I was just going to ask about is I know the I guess the first group would have done their due diligence I think they had 60 days of due diligence.
Craig White: I think they had 60 days of due diligence, and just curious why the second group, if they're associated, if they also need that sort of 60-day window. Is there something something that they didn't, I guess, learn in the first due diligence period? Well, I said they're, they're closely related, but still it is yet a different group. One of the principles from blue ledg, maybe wasn't comfortable, but one was still very comfortable to he handed it off to rockford, which is actually a brother. So yeah, we're confident nothing has changed. It's just a new group, and they still need to get through their due diligence and have their own lending partner.
Speaker Change: Just curious why the second group if their associated if they also need that sort of 60 day window is there something.
Speaker Change: Something that they didn't I guess learn in the first a due diligence period.
Craig M. White: Well, I said they're closely related, but still, it is yet another different group. One of the Prince artists from Blue Ledge maybe wasn't comfortable, but one was still very comfortable, so he handed it off to Rockford, which is. (inaudible)
Duluth: Well I said there are closely related but still it is yet a different group one of the principles for Duluth.
Speaker Change: Maybe it wasn't comfortable but one was still very comfortable to he hated it off.
Speaker Change: Two Rockford, which is.
Speaker Change: Actually a brother so.
Speaker Change: Yes, we're confident nothing has changed it's just a new group and they still need to go through their due diligence and have their own lending partner.
Craig M. White: Fair enough. And so, assuming that gets done as you anticipate, including commission costs, what do you think the total cost of selling the building is going to be? I don't know what the sort of typical commission is for a commercial building down there.
Paul Carter: Fair enough.
Speaker Change: Fair enough and so.
Paul Carter: And so, assuming that gets done as you anticipate, including commission costs, what do you think the total cost of selling the building is going to be? I don't know what sort of typical commission is for commercial building down there. Well, we think we'll net, you know, 34 and a half million after commissions and expenses. So that'll be sufficient to pay off of Orange with their bank. That's great. Okay.
Speaker Change: Assuming that gets done as you anticipate.
Speaker Change: Including Commission costs, what do you think the total cost of selling the building is going to be I don't know what sort of typical commission is for a commercial building down there.
Craig M. White: Well, we think we'll net, you know, $34.5 million after commissions and expenses, so that'll be... sufficient to pay off our borrowings with our bank.
Well, we think will net.
$34 5 million after commissions and expenses that'll be.
Speaker Change: Sufficient to pay off our borrowings with our bank.
Speaker Change: Oh, that's great. Okay, and then so your revolver with our bank I know it steps down after you sell the building.
Craig M. White: That's great. Okay.
Craig White: And then so you're revolver with the bank. I know it steps down after you sell the building, but it matures on October 4. I know you're going to be hopefully generating some pretty good free cash flow. Do you intend on operating without a line of credit after October 4, or are you looking for a different banking relationship? That's that's a complex question. The good news is that when I said the 34 and a half million pay off the bank, that includes paying off the letter of credit. So the bank is offering us a 4.5 million dollar letter credit post sale, which is a very positive thing.
But it matures on October 4th.
Speaker Change: Youre going to be hopefully generating some pretty good free cash flow do you intend on operating without a line of credit. After October 4th are you looking for a different banking relationship.
Unknown Speaker: And then so your revolver with the bank, I know it steps down after you sell the building, but it matures on October 4. I know you're going to be hopefully generating some pretty good free cash flow. Do you intend to operate without a line of credit after October 4? Or are you looking for a different banking relationship?
Unknown Speaker: That's that's a complex question. The good news is that when I said that $34.5 million would pay off the bank, that includes paying off the letter of credit. So the bank is offering us a $4.5 million letter of credit post-sale, which is a very positive thing. We're still evaluating what the right financing solution is, and we have several different options. But the good news is that DOK has offered us an operating line post-close that will allow us to continue.
Speaker Change: That's a complex question.
Speaker Change: We are.
Speaker Change: Yes.
Speaker Change: The.
Speaker Change: The good news is is that when I said, the $34 5 million of pay off the bank that includes paying off the letter of credit.
Speaker Change: So the bank is offering us a $4 $5 million letter of credit post sale, which is a very positive thing.
Craig White: You know, we're still evaluating, you know, what the right financing solution is, and we have several different options. So, you know, we, but the good news is that the OK has offered us an operating line post close that will allow us to operate. You know, we've got some vendors that we need to catch up that are we've kind of delayed a little bit. And so, you know, we'll have availability of 4.5 million to fund operations going into the fall, which, you know, is our busy season. Which, you know, if we're turning a lot of inventory into cash during that period, you know, hopefully will be, you know, without a line, you know, by the end of the fall.
Speaker Change: We're still evaluating what the right financing solution is and we have several different options.
Speaker Change: So you know.
Speaker Change: We.
Speaker Change: But the good news is is that okay has offered US an operating line post close that will allow us to operate.
Unknown Speaker: We've got some vendors that we need to catch up with that we've kind of delayed a little bit. And so we'll have availability of $4.5 million to fund operations going into the fall, which you know is our busy season, and if we're turning a lot of inventory into cash during that period, hopefully, we'll be without a line by the end of the fall.
Speaker Change: Got some vendors that we need to catch up that we've kind of delayed a little bit.
Speaker Change: So we will have availability of $4 5 million to fund operations going into the fall, which you know is a busy season, which.
Speaker Change: No.
Speaker Change: Turning a lot of inventory into cash during that period hopefully will be.
Speaker Change: Without a line by the end of the fall.
Speaker Change: Yes.
Paul Carter: Okay, great.
Unknown Speaker: Okay, great. And I suspect you don't want to count your chickens before they've hatched, but it looks like you'll end up having a book value per share somewhere in the neighborhood of like 6 to $7 once the building is sold and the bank is paid off. I know, and you'll be generating significant free cash flow as you kind of work through your inventory, you did reference dividends in your press release, but why have you thought or has the board thought about, like, maybe buying a big chunk of stock back, you know, through a Dutch auction tender offer or something, which would boost the value of each remaining share pretty meaningfully, even if you buy back stock at, you know, a premium to what the stock price is right now?
Speaker Change: Okay great.
Paul Carter: And I suspect you don't want to count your chickens before they've hatched, but it looks like you'll end up having a book value per share somewhere in the neighborhood of like six to seven dollars once the building is sold and the bank is paid off. I know, and you'll be generating significant free cash flow as you kind of work through your inventory. You did reference dividends in your press release, but why have you thought, or is the board thought about, like maybe buying a big chunk of stock back, you know, through a Dutch auction tender offer or something, which would boost the value of each remaining share pretty meaningfully.
Speaker Change: Suspect you don't want to count your chickens before they hatch, but it looks like you'll end up having a book value per share somewhere in the neighborhood of like.
Speaker Change: 6% to $7 once the building is sold in and the bank has paid off.
Speaker Change: I know and you'll be generating significant free cash flow as you kind of work through your inventory you did reference dividends in your press release, but.
Speaker Change: Why have you thought or has the board thought about like maybe buying a big chunk of stock back through a Dutch auction tender offer or something which would boost the value of each remaining share pretty meaningfully I like even if you buy back stock at a premium to what the stock prices right now.
Craig White: I like even if you buy back stock at premium to what the stock price is right now. Yeah, we have, just like we've said in past quarters, we have all those tools that are at our disposal, whether it's while we're reducing debt by, you know, this transaction, but stock buyback, dividends. Yeah, we have options; we haven't, like you said, we're not counting any chickens before they've hatched, so that will remain to be seen, which direction we give.
Unknown Speaker: Yeah, we have, just like we've said in past quarters, we have all those tools at our disposal, whether it's well, we're reducing debt by this transaction, but stock buyback, dividends. Yeah, we have options. We haven't, like you said, we're not counting any chickens before they've hatched. So that will be, it remains to be seen in which direction we go.
Speaker Change: Yes, we have just like we've said in past quarters, we have all of those tools at our disposal, whether it's while we're reducing that by this transaction, but stock buyback.
Speaker Change: Dividends.
Speaker Change: Yes, we have options, we haven't like you said, we're not counting on any.
Speaker Change: Chickens before they hatch so.
Speaker Change: That will be.
Speaker Change: It remains to be seen what which direction that we gave.
Unknown Speaker: And then just lastly, curious, just curiosity more than anything, the undeveloped land that you're retaining, do you have any sort of long-term plan for that? Or is it just you're going to hold on to that for the foreseeable future? And it's just sort of an option for somewhere down the road?
Craig White: Okay, and then just lastly, curious, just curiosity more than anything, the undeveloped land that you're retaining. Do you have any sort of long-term plan for that, or is it just you're going to hold on to that for the foreseeable future and it's just sort of an option for somewhere down the road? Yeah, so bring the tenant; they're moving into space that was not part of our operations, but we still have needs for storage, and you know, I hate to use land just for storage, but that's a possibility. Or, you know, once we get this thing right-sized again and get going again, maybe it's further operations.
Speaker Change: Okay, and then just lastly, I was curious.
Speaker Change: Just curiosity more than anything the undeveloped land that you're retaining do you have any sort of long term plan for that or is it just youre going to hold onto that for the foreseeable future and just sort of an option for somewhere down the road.
Unknown Speaker: Yeah, so bringing in this tenant, they're moving into space that was not part of our operations, but we still have needs for storage. And, you know, I hate to use land just for storage, but that's a possibility. Or, you know, once we get this thing right sized again,
Yeah. So.
Speaker Change: Tenant and they are moving in this space that was not part of our.
Speaker Change: Not part of our operations, but we still have needs for storage and <unk>.
Speaker Change: To use leave just for storage, but that's a possibility or you know.
Speaker Change: Once we get this thing right sized again and get going again, maybe it's.
Speaker Change: Further operations.
Paul Carter: Okay, so it sounds like you don't have plans to liquidate that at any point in the future. That's more. Yeah, okay, okay, great.
Unknown Speaker: Okay, so it sounds like you don't have plans to liquidate that at any point in the future. That's more. Yeah. Okay. Okay, great. Well, listen, that's, that's it for me.
Speaker Change: Okay. So it sounds like you don't have plans to liquidate that at any point.
Martin: In the future Thats Martin Yeah, Okay, Okay, great well listen that's a that's it for me. Thank you very much for taking my questions.
Paul Carter: Well, listen, that's it for me. Thank you very much for taking my questions. Thanks, Paul.
Martin: Thanks, Paul Thanks, Paul.
Martin: Yes.
Operator: Ladies and gentlemen, as a reminder, if you have a question, please press star 1. Your next question comes from Frank Hayer, Private Investor. Please go ahead.
Frank: Ladies and gentlemen, as a reminder, if you have a question, please press R1. Your next question comes from Frank, Hayer, private investor. Please go ahead.
Martin: Ladies and gentlemen, as a reminder, if you have a question. Please press star one.
Martin: Yes.
Martin: Yes.
Sure.
Martin: Your next question comes from Frank Payor Private Investor. Please go ahead.
Frank: Hi everybody. My question is I have got two questions, maybe three. When the promotion that increased the brand partners was announced, or as a result of that, did the partners, were they added through people recruiting to their downside, existing partners recruiting people, or are they fresh with no, with no upside person?
Frank Payor: Hi, everybody.
Frank Hayer: My question is... I have I've got kind of two questions, maybe three. When the promotion that increased the brand partners was announced, or as a result of that, did the partners... Were they added through people recruiting to their downside, existing partners recruiting people, or are they fresh with no upside person?
Speaker Change: My question is.
Speaker Change: I have two questions maybe three.
Speaker Change: When the.
Promotion that increase the brand partners.
Speaker Change: Was announced or as a result of that.
Speaker Change: Did the partners.
Speaker Change: Were they added through people recruiting to their downside existing partners recruiting people or are they a fresh with no.
Speaker Change: No upside person.
Heather N. Cobb: That's a great question, Frank. We actually don't do any direct recruiting. We count on our brand partners to spread the word, spread our mission, and make that opportunity available. We did see some come in initially without somebody that they were wanting to sign up under as a sponsor, but as is part of our protocol, we automatically assign those to a sponsor just because that's how our structure works.
Frank: That's that's a great question. Frank, we actually, we don't do any direct recruiting; we count on our brand partners to spread the word, spread our mission, and make that opportunity available. We did see some come in initially without somebody that they were wanting to sign up under as a sponsor, but as is part of our protocol, we automatically assign those to a sponsor, just because that's how our structure works. Okay, if I would summarize it, I would maybe conclude that your promotion was inspiring to the existing brand partners, and then went out and got some new folks.
Speaker Change: That's a great question, Frank we actually we don't do any direct recruiting we count on our brand partners and to spread the word spread our Michigan and make that opportunity available.
We did see some come in.
Speaker Change: Initially without somebody and that they were wanting to sign up under as a sponsor, but as a part of our protocol we automatically assign those to you as sponsor and just because that's how our structure works.
Heather N. Cobb: Okay, if I were to summarize it, I would maybe conclude that your promotion was inspiring to the existing brand partners, and they went out and got some new folks.
Speaker Change: Okay, if I would summarize that or maybe conclude that your promotion. It was inspiring to the existing brand partners and they went out and got some new folks.
Heather N. Cobb: That's absolutely correct. Perfect.
Frank: That's absolutely correct. Perfect.
Speaker Change: That's absolutely correct perfect.
Unknown Speaker: Okay, um... The previous caller had mentioned buying back shares of stock or dividends, and I've been a shareholder for quite a while, and I did appreciate the dividends.
Speaker Change: Okay.
Frank: Okay, the previous caller had mentioned buying back shares of stock or dividends, and I've been a shareholder for quite a while, and I did appreciate the dividends. It was very attractive. I guess I'm wondering what is your banker think about starting to buy back stock or pay dividends at this point of time? Well, yeah, we didn't commit to doing it at this point in time. They would not yet be in favor of that. It's just once we are out of debt with our current lender and potentially moving to a different lender or whatever our future may be, then we would look at it.
Speaker Change: The previous caller had mentioned.
Speaker Change: I am back shares of stock or dividends.
Speaker Change: I've been a shareholder for quite a while and I did appreciate the dividends.
Unknown Speaker: Unknown Speaker, Unknown Attendee, Unknown Speaker, Unknown Attendee,
Speaker Change: Very attractive.
Speaker Change: Well I guess I'm wondering what is your what is your bank or think about starting.
Speaker Change: Starting the buyback stock or pay dividends at this point of time.
Unknown Speaker: Well yeah, we didn't commit to doing it at this point in time. They would not yet be in favor of that. It's just once we are out of debt with our current lender and potentially moving to a different lender or whatever our future may be, then we would look at it. But it's not going to be before we execute this sale transaction.
Speaker Change: Well, yes, we didn't commit to doing it at this point in time.
Speaker Change: They would not yet be in favor of that once we are out of that with our current lender and potentially moving to different lender or whatever our future may be then we would look at it it's not going to be before.
Unknown Speaker: Okay, thank you. One more thing. If I took my notes correctly, you think you have $30 million of excess inventory?
Frank: It's not going to be before we execute this fail transaction.
Speaker Change: We execute this.
Speaker Change: Sale transaction.
Frank: Okay. Thank you, one more. One more is that if I took my nose correctly, you think you have $30 million of excess inventory? Unfortunately, yes.
Speaker Change: Okay. Thank you.
Speaker Change: One more is that.
Speaker Change: If I took my notes correctly you have you think you have $30 million of excess inventory.
Unknown Speaker: Unfortunately, yes.
Speaker Change: Unfortunately, yes.
Unknown Speaker: Oh, OK. Any great ideas on how to get rid of things that you haven't thought of?
Speaker Change: Oh, Okay, any any great ideas on how to get rid of that but do you ever thought of.
Frank: Okay. Any great idea on how to get rid of that? What do you have a thought of? Well, yeah. There's been a lot of people that try to advise us. Now, it's very delicate. We don't want to do anything that would damage our current business model. So we're using tactics like discounting and things like that. And we've done, you know, on decreased sales, we've still moved a lot of inventory. So it's working well. We're staying within the confines of our, you know, the restrictions put on us by the bank within our line of credit. So everything we're doing so far is working.
Unknown Speaker: Well, yeah, there have been a lot of people that try to advise us. Now it's very, it's very delicate.
Speaker Change: Well, yeah, theres been a lot of people that try to advise US now it's very it's very delicate we don't want to do anything that would damage. Our current business model. So we're we're using tactics like discounting and things like that and we've done.
Unknown Speaker: We don't want to do anything that would damage our current business model, so we're, you know, using tactics like discounting and things like that. And we've done, you know, on decreased sales, we've still moved a lot of inventory. So it's working well. We're staying within the confines of our, you know, the restrictions put on us by the bank within our line of credit. So everything we're doing so far is working. But yeah, we're going to get into the fall, which is normally at a higher rate. We're just going to turn it into cash and... get more, get stronger.
Speaker Change: On decreased sales, we still moved a lot of inventory so.
Speaker Change: It's working well, we're staying within the confines of the restrictions put on us by the bank within our line of credit. So everything we're doing so far is working.
Frank: But yeah, we're going to get into the fall, which is normally at a higher selling time. So that should reduce inventory. But like we said before, this is all good inventory. It's not; it doesn't need to be written off or written down or anything like that. It's still very, very salable products. So we're just going to turn it into cash and get more, get stronger.
Speaker Change: But yes, we're going to get into the fall, which is normally at a higher.
So in time, so that should reduce inventory, but like we've said before this is all good inventory, it's not it doesn't need to be written off or written down or anything like that.
Speaker Change: Still very very saleable products so.
Speaker Change: You can turn it into cash.
Speaker Change: Get more get stronger.
Frank: Sounds great. Thank you, folks. Keep up the good work.
Speaker Change: Sounds great. Thank you folks keep up the good work.
Unknown Speaker: Sounds great. Thank you, folks. Keep up the good work. Thanks, Frank.
Frank: Thanks, Frank.
Frank Payor: Thanks Frank.
Craig M. White: There are no further questions at this time. I would hand over the call to Craig White for closing comments. Please go ahead.
Operator: There are no further questions at this time.
Frank Payor: There are no further questions at this time I would hand over the call to Craig White for closing comments. Please go ahead.
Craig White: I would hand over the call to Craig White for closing comments. Please go ahead. Thanks, everyone, for joining us on our call today. Just as a heads up, because of the timing of the Fourth of July holiday, we will be filing our 10-Q on Monday. So again, I appreciate your continued support and look forward to providing an additional update in October. Thank you.
Craig M. White: Thank you everyone for joining us on our call today. Just as a heads up, because of the timing of the 4th of July holiday, we will be filing our 10-Q on Monday. So, again, I appreciate your continued support and look forward to providing an additional update in October.
Craig M. White: Thanks to everyone for joining us on our call today, just as a heads up because of the timing of the fourth of July 4th of July holiday, we will be filing our 10-Q on Monday.
So again appreciate your continued support and look forward to providing an additional update in October. Thank you.
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect. Thank you.
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and you may now disconnect.
Speaker Change: Yes.
Speaker Change: Okay.