Q4 2025 Educational Development Corp Earnings Call
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Operator: Good afternoon, everyone, and thank you for participating in today's conference call to discuss Educational Development Corporation's financial and operating results for its fiscal fourth quarter and fiscal 2025 results. As a reminder, this conference is being recorded.
Good afternoon, everyone and thank you for participating in today's conference call to discuss the educational development Corporation financial and operating results for its fiscal fourth quarter and fiscal 'twenty 25 results. As a reminder, this conference is.
<unk> recorded on the call today are take white, President and Chief Executive Officer, Heather Cobb.
Operator: On the call today are Craig White, President and Chief Executive Officer, Heather Cobb, Chief Sales and Marketing Officer, and Dan O'Keefe, Chief Financial Officer.
Speaker Change: Chief sales and marketing officer, and Dan O'keefe, Chief Financial Officer. After the market close this afternoon. The company issued a press release announcing its results for the fiscal fourth quarter and the fiscal 'twenty 25 results. The release will be available today on the company's website, our triple double your dog.
Operator: After the market closed this afternoon, the company issued a press release announcing its results for the fiscal fourth quarter and fiscal 2025 results. The release will be available today on the company's website at www.edcpop.com.
D D C pop dotcom before.
Operator: Before turning to the prepared remarks, I 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.
Before turning to the prepared remarks, I 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 1985 actual results may differ materially from those expressed or implied your job everybody gets your factories.
Operator: We refer you to Educational Development Corporation's recent filings with the SEC for a more detailed discussion of the company's financial condition.
Speaker Change: So a huge educational development corporations recent filings with the S. E C for a more detailed discussion of the company's financial condition.
Craig White: With that, I would like to turn the call over to Craig White, the company's President and Chief Executive Officer. Thank you, Chloe. And welcome everyone to the call. We appreciate your continued interest.
Speaker Change: With that I would like to turn the call over to Craig White, the company's President and Chief Executive Officer Craig.
Craig White: Thank you Chloe and welcome everyone to the call. We appreciate your continued interest.
Craig White: I will start today's call with some general comments regarding the quarter, then I will pass the call to Dan and Heather to run through the financials and provide an update on our sales and marketing.
Speaker Change: We'll start today's call with some general comments regarding the quarter, then I will pass the call to Dan and 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 cell leafback of our headquarters, the Hilti Complex, and provide some comments on our strategy for fiscal 2026. During the fourth quarter, we experienced decreased sales compared to the same period last year. This was influenced in part by a reduced number of active brand partners in our paper pie division. Across the broader marketplace, we continue to see fluctuations in consumer behavior driven by factors such as inflation and shifting discretionary spending among families with young children. These external pressures have impacted both customer purchasing habits and the pace of new brand partner acquisition.
Speaker Change: Finally, I will wrap up the call with an update on our progress of the sale leaseback of our headquarters the Hilton complex and provide some comments on our strategy for fiscal 2026.
Speaker Change: During the fourth quarter, we experienced decreased sales compared to the same period last year.
Speaker Change: This was influenced in part by reduced number of active brand partners and our paper Pie Division.
Speaker Change: The broader marketplace, we continue to see fluctuations in consumer behavior.
Driven by factors, such as inflation and shifting discretionary spending among families with young children.
Speaker Change: These external pressures have impacted both customer purchasing habits and the pace of new brand partner acquisition.
Craig White: That said, one of the unique strengths of the direct selling model is its ability to flex and adapt in response to changing economic conditions. We believe that by staying close to the field, listening to our community, and remaining agile in our approach, we are well positioned to navigate the current environment and build a more sustainable path forward. We believe another factor in the decrease in sales is the lack of new titles over the past year. Although we did not make any purchases during this quarter, we remain committed to doing so in a strategic and financially responsible manner.
Speaker Change: That said one of the unique strengths of the direct selling model is its ability to flex and adapt and respond to changing economic conditions.
Speaker Change: We believe that by staying close to the field listening to our community and remaining agile in our approach we are well positioned to navigate the current environment and build a more sustainable path forward we.
Speaker Change: We believe another factor in the decrease in sales is the lack of new titles over the past year, Although we did not make any purchases. During this quarter, we remain committed to doing so in a strategic and financially responsible manner.
Craig White: We continue to be presented with new content and product offerings and are excited for the opportunity to introduce those to our catalog soon. During the quarter, we continue to offer increased discounts to customers, which negatively impacted our gross margin and bottom line. Our increased discounting has been a tactical decision to bolster sales and turn excess inventory into cash to be used to pay down our bank debt. We see this as a short-term strategy and will continue to offer discounts and promotions until the sale of our building and we pay back all of our borrowing. While we generated less sales during the quarter, our loss before taxes declined from last year.
Speaker Change: We continue to be presented with new content and product offerings and are excited for the opportunity to introduce those to our catalog soon.
Speaker Change: During the quarter, we continued to offer increased discounts to customers, which negatively impacted our gross margin in Baltimore.
Speaker Change: Our increased discounting has been a tactical decision to bolster sales in terms of excess inventory into cash to be used to pay down our bank debt.
Speaker Change: We see this as a short term strategy and will continue to offer discounts and promotions until the sale of our building and we pay back all of our borrowings.
Speaker Change: While we generated less sales during the quarter our loss before taxes declined from last year. This reflects our continued focus on reducing expenses expenses during this difficult environment.
Craig White: This reflects our continued focus on reducing expenses during this difficult environment.
Dan O'keefe: With that, I'll now turn the call over to Dan Okeefe to provide a brief overview of the financials. Dan? Thank you, Craig. To our fourth quarter results compared to the prior year fourth quarter, net revenues were $6.6 million compared to $9 million. Average active PaperPi brand partners totaled $9,400 compared to $15,500. Lost before income taxes totaled $1.5 million compared to a loss of $2.2 million in the fiscal fourth quarter last year. Net loss totaled $1.3 million compared to a loss of $1.6 million, and loss per share for the quarter totaled $0.16 compared to a loss of $0.19 on a fully diluted basis.
Speaker Change: With that I'll now turn the call over to Dan O'keefe to provide a brief overview of the financials Dan.
Dan O'keefe: Thank you Craig.
Dan O'keefe: Two our fourth quarter results compared to the prior year fourth quarter net revenues were $6 6 million compared to 9 million average active paper Pie brand partners totaled 9400 compared to 15500 <unk>.
Dan O'keefe: Loss before income taxes totaled $1 5 million compared to a loss of $2 2 million in the fiscal fourth quarter last year net.
Dan O'keefe: Net loss totaled $1 3 million compared to a loss of $1 6 million and loss per share for the quarter totaled 16 cents compared to a loss of 19 cents on a fully diluted basis.
Dan O'keefe: Now on to our fiscal 2025 summary compared to the prior year. Year-to-date net revenues totaled $34.2 million compared to $51 million. Average active PaperPi brand partners totaled $12,300 compared to $18,300 last year. Lost before income taxes totaled $6.9 million compared to income before taxes of $700,000. Net loss after taxes totaled $5.3 million compared to income of $500,000. Lost per share totaled $0.63 compared to earnings per share of $0.07 on a fully diluted basis.
Dan O'keefe: Now onto our fiscal 2025 summary, compared to the prior year.
Dan O'keefe: Year to date net revenues totaled $34 2 million compared to 51 million average active paper Pie brand partners totaled 12300 compared to 18300 last year.
Dan O'keefe: Loss before income taxes totaled $6 9 million compared to income before taxes of 700000.
Dan O'keefe: Net loss after taxes totaled $5 3 million compared to income of 500000.
Dan O'keefe: Loss per share totaled <unk> 63, compared to earnings per share of seven cents on a fully diluted basis.
Dan O'keefe: Now for an update on our working capital positions. Net inventories decreased $10.9 million from $55.6 million at February 28, 2024 to $44.7 million at February 28, 2025. borrowings on our working capital line of credit totaled 4.2 million at the end of February 2025 with $600,000 of availability at the end of the fourth That concludes the financial update.
Dan O'keefe: Now for an update on our working capital positions net inventories decreased $10 9 million from $55 6 million at February 28 2024.
Dan O'keefe: To $44 7 million February 28, 2025.
Dan O'keefe: Borrowings on our working capital line of credit totaled $4 2 million at the end of February 2025 was $600000 of availability at the end of the fourth quarter.
Dan O'keefe: 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. Thank.
Heather Cobb: I will now turn the call over to Heather Cobb to talk about sales and marketing opportunities in further detail. Thank you, Dan. As Craig mentioned earlier, we continue to make strategic changes to bring fresh opportunities for success within PaperPi, especially related to our brand partners. One of the most visible examples during this fourth quarter was our Book Friday promotion, which offered deep discounts across our e-commerce platform and was met with strong engagement. In addition to the increase in customer activity, this event allowed us to move excess inventory, generate cash flow, and create energy within our community at a critical time of year.
Heather Cobb: Thank you Dan.
Heather Cobb: <unk> mentioned earlier, we continue to make strategic changes to bring fresh opportunities for success, but then taper pie, especially related to our brand partners. One of the most visible examples during this fourth quarter with our Black Friday promotion, which offer deep discounts across our E. Commerce platform and was met with strong engagement. In addition to the increase in customer activity. This event.
Heather Cobb: Allowed us to move excess inventory generate cash flow and create energy within our community at a critical time of year.
Heather Cobb: Another key initiative this quarter was the successful launch of our new shipping subscription program, The Pass. Designed to enhance the customer experience and encourage repeat purchases, The Pass offers members access to discounted or free shipping, exclusive perks, and special promotions throughout the year. We introduced two affordable tiers, Basic and Plus, to meet a range of customer needs, and early adoption was a success. Not only has The Pass driven strong customer loyalty, but it has also created new opportunities for brand partners to re-engage past customers and build ongoing relationships rooted in both convenience and value. We also concluded our Storyscape Travel Incentive, where top-performing grant partners could have earned a trip to Scotland.
Heather Cobb: Another key initiative this quarter with the successful launch of our new shipping subscription program. The path designed to enhance the customer experience and encourage repeat purchases. The pass offers members access to discounted or free shipping exclusive perks and special promotions throughout the year, we introduced two affordable tiers basic and plus.
Heather Cobb: To meet a range of customer needs and early adoption was a success not only has the past driven strong customer loyalty, but it has also created new opportunities for brand partners to reengage past customers and build ongoing relationships rooted in best convenience.
Heather Cobb: Yeah.
Heather Cobb: We also concluded our stories gaped travel incentives were top performing brand partners or can it could've earned a trip to Scotland. The qualification period officially ended on December 31, and we are thrilled to be celebrating those on our system.
Heather Cobb: The qualification period officially ended on December 31st, and we are thrilled to be celebrating those earners this summer. We immediately followed this by launching our next major sales incentive, called A Piece of the Story, which offered a wide and tiered range of rewards and has been structured to encourage consistent sales activity across a broader segment of the field. As we've shared in the past, we believe strongly in in-person connection and development. Our 2025 Storymakers Summit began during the fourth quarter and has us meeting brand partners in their neighborhoods, at least in some of them, as we travel to five regions across the country.
Heather Cobb: Summer we immediately followed this by launching our next major sales incentive how the piece of the story, which offered a wide and tiered range every words and had been structured to encourage consistent sales activity across a broader segment of the field.
Heather Cobb: As we've shared in the past we believe strongly in in person connection and development. Our 2025 storey makers summit's began during the fourth quarter and how this meeting brand partners in their neighborhoods at least in some of them as we traveled to five regions across the country.
Heather Cobb: Unlike our traditional national convention, these summits are intentionally designed as smaller, more intimate gatherings, allowing for richer conversations, deeper personal connection, and focused skill building. This structure not only provides attendees with more direct access to home office leadership and expert speakers, but also creates the space for meaningful peer-to-peer exchanges that inspire action and build confidence. We are already seeing how these more personal settings are fostering stronger community bonds, greater trust and lasting loyalty among those attending. These summits are more than just training, they are energizing touch points that remind brand partners that they are seen, supported, and part of something bigger.
Heather Cobb: Unlike our traditional National convention.
Heather Cobb: That's very intentionally designed as smaller more intimate gatherings, allowing for richer conversations deeper personal connection and focused still building. This structure not only provides attendees with more direct access to home office leadership and experts sneakers, but also create the space for meaningful peer to peer exchanges that inspire.
Heather Cobb: The action and build confidence we are already seeing how these more personal settings are fostering stronger community bonds greater trust and lasting loyalty among those attending.
Speaker Change: These summits are more than just trailer there energizing touch points that reminds brand partners that they have seen supported in part of something bigger. This concludes the sales and marketing update for the fourth quarter I'll now turn the call back over to Craig for his closing remarks, Greg.
Heather Cobb: This concludes the sales and marketing update for the fourth quarter.
Craig White: I'll now turn the call back over to Craig for his closing remarks. Thank you both, Heather and Dan.
Craig White: Thank you, both Heather and Dan.
Craig White: And now for an update on the Hilti complex building sale process. Over the past few months, we have been working with a prospective new buyer, and I'm pleased to announce that last week we executed a purchase sale agreement with the new buyer. This buyer has expressed interest since mid last year, and we hope to complete the sale within the next 120 days. Some of the positive items with this buyer is that they have a good understanding of the market as well as the healthy complex. Additionally, they have agreed to a more expedited due diligence with half their deposit going hard after 45 days.
Speaker Change: And now for an update on the Hilton Hilton complex building sale process over the past few months, we have been working with the perspective, new buyer and I'm pleased to announce that last week, we executed a purchase sale agreement with the new buyer aspires Express interest since mid last year, we hope to complete the sale within the next 120 days.
Craig White: Some of the positive items with this buyer is that they have a good understanding of the market as well as the Hilton complex.
Craig White: Additionally, they have agreed to a more expedited due diligence with half of our deposit going hard after 45 days I think just demonstrates a more.
Craig White: I think this demonstrates a higher level of commitment than our previous buyers. The agreement excludes the 17 acres of excess land which will remain under EDC's ownership and provide further strength to our balance sheet post-building settlement. The proceeds from the sale are expected to fully pay back the bank, leaving us with no debt and we expect to have limited borrowing needs moving forward. We continue to develop options for post-sale financing as well.
Craig White: A higher level of commitment in her previous buyers.
Craig White: The agreement excludes the 17 acres of excess land, which will remain under <unk> ownership and provide further strength to our balance sheet post building sale.
Craig White: The proceeds from the sale are expected to fully pay back the bank, leaving us with no debt and we expect to have limited borrowing needs moving forward. We continue to develop options for post sale financing as well.
Craig White: Lastly, 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 am confident in our collective ability to emerge stronger and more resilient than ever before.
Craig White: Lastly, 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.
Craig White: I am confident in our collective ability to emerge stronger and more resilient than ever before now.
Operator: Now that we have provided a summary of some recent activity, I will now turn the call back over to the operator for questions and answers. Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press the pound key. Again, if you would like to ask a question, please press start and the number 1 on your telephone keypad.
Craig White: Now that we have provided a summary of some recent activity I will now turn the call back over to the operator for questions and answers.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session. If you would like to have asked a question. Please press Star then the number one on your telephone keypad. If he would like so we enjoy a question. Please press the pound key.
Speaker Change: Again, if you would like to ask a question. Please press Star then the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.
Operator: We will pause for just a moment to compile the Q&A roster.
Speaker Change: Okay.
Paul Carter: Our first question comes from the line of Paul Carter from Capstone Acid Management. Your line is open. Thank you. Good afternoon, everybody.
Speaker Change: Our first question comes from the line of Paul Carter from Capstone asset management. Your line is open.
Paul Carter: Thank you good afternoon everybody.
Craig White: Can you, you mentioned there just about the buyer and the terms of the agreement, but can you disclose who is this TGOTC? Is that a local group? Is it a REIT? Is it, you know, any, any characteristics that you can provide about the buyer?
Paul Carter: Can you are you mentioned there just about the buyer and the terms of the agreement but can you.
Paul Carter: Disclose who is this T. G O T. C is that a local group is that a read through that you know any any characteristics that you can provide about the buyer.
Craig White: Yeah, I think I think we're choosing not to disclose at this time. We kind of want to get through the initial part of the due diligence period before we disclose. Who's the buyer? Can you disclose what price you've agreed upon? I believe that's in the, what's been filed today. Yeah, it's in the press release. $35,150,000. Oh, shoot, sorry, totally missed that. Okay, so that 35, that's quite a bit below what you sold, or what you had agreed upon with the previous buyer.
Paul Carter: Yeah, I think I think.
Speaker Change: We're choosing not to disclose at this time, we kind of want to get through the initial part of the due diligence period before we disclose.
Paul Carter: Okay.
Speaker Change: The virus.
Paul Carter: Can you disclose what price you are agreed upon.
Paul Carter: Okay.
Speaker Change: I believe that's in the what's been filed today, yes, it's in the press release $35 million 150000.
Speaker Change: Oh sure sorry totally missed that okay. So that 35 that was quite a bit below what you.
Speaker Change: You sold.
Speaker Change: Or what you had agreed upon with the previous buyer Oh can you describe a little bit about the just the local market. There in Tulsa has it weakened significantly or is this more a reflection of just your desire to to get this transaction completed as soon as possible.
Craig White: Can you describe a little bit about just the local market there in Tulsa? Has it weakened significantly? Or is this more a reflection of just your desire to get this transaction completed as soon as possible?
Craig White: Well, a couple things. Thanks for the question. That's not exactly true. With the last buyer. Well, the net proceeds are going to be higher with this this sale than they were going to be with the last buyer is what is what I'll say. So all of our offers are netting us around the same amount over over our last previous couple buyers. So we feel good about this. Okay, okay, that's great.
Speaker Change: Well a couple of things Joe Thanks for the question Thats not exactly true with the last.
Speaker Change: Buyer.
Speaker Change: Well.
Speaker Change: The net proceeds are going to be higher with this sale than where they were going to be with the last buyer as well as what I'll say so all of our offers are netting us around the same amount.
Speaker Change: Over over our last previous couple of buyers. So we feel good about this one.
Speaker Change: Okay. Okay. That's great and then just on the average sales consultants or brand partners. So I know obviously, you like 40 years ago that number was up around 60000, mark in it spend.
Paul Carter: Um, and then just on the average sales consultants or brand partners, so I know, obviously, like four years ago, that number was up around the 60,000 mark, and it's been a difficult last four years, for a variety of reasons. It, that number seems to be bottoming out in kind of the low teams number, but then this last quarter, Unknown Speaker 0 0 So a pretty, quite honestly, a pretty shocking reacceleration and that drop is now, like, just last quarter versus this quarter, it's down another 24% quarter over quarter. If I'm if my numbers are right, that's the biggest quarter over quarter drop that.
Speaker Change: Difficult last four years.
For a variety of reasons that.
Speaker Change: That number seems to be bottoming out in kind of a low teens number but then this last quarter.
Speaker Change: <unk> are pretty.
Speaker Change: Quite honestly, a pretty shocking reacceleration in that drop is now like just last quarter versus this quarter, it's down another 24% quarter over quarter I find if my numbers are right.
Speaker Change: The biggest quarter over quarter drop that.
Craig White: seen over the last four years and again I know it's a consumer the consumer environment is a little bit more difficult now than maybe it was a year ago but is there anything more that you can sort of talk through like why such a large drop quarter over quarter and is sort of the. Thoughts of sort of bottoming out it has that been kind of pushed aside for the moment and and we could see continued drops in the quarter ahead quarters ahead Yeah, good question. You know, we tend not to look at quarter over quarter numbers just because of how drastically our seasonality is.
Speaker Change: <unk> seen over the last four years and <unk>.
Speaker Change: Again, I know, it's a consumer the consumer environment is a little bit more difficult now than maybe it was a year ago, but is there anything more that you can.
Speaker Change: It's hard to talk through like why such a large drop quarter over quarter and.
Speaker Change: Is sort of that.
Speaker Change: Thought so sort of bottoming out or has that been kind of pushed aside for the moment and we could see continued drops into quarter ahead quarters ahead.
Speaker Change: Yeah. Good question, you know, we tend not to look at quarter over quarter numbers, just because of how drastically our seasonality is and there is all sorts of other factors and one of the biggest factors that we can attribute this dropped to you is we tend to run a recruit.
Craig White: And there's all sorts of other factors. One of the biggest factors that we can attribute this drop to is we tend to run recruiting specials at various different times of year. We ran a significant special in early summer of last year. And so what happens is the way that we calculate our active brand partner count would see those that potentially joined during that recruiting special and did not continue with activity or remain active would drop off during this quarter. And so I think that that's the main factor that we're seeing here is the difference in the numbers that you're seeing there, Paul.
Speaker Change: Specials at various different times of year, we ran a significant special.
In early.
Speaker Change: Early summer of last year, and so what happens is the way that we calculate our active brand partner count.
Speaker Change: I would see those that potentially joined during that recruiting special and did not continue with activity or remain active.
Speaker Change: Would drop off.
Speaker Change: During this quarter and so I think that that's the main.
Paul Carter: The main factor that we're seeing here is the difference in the numbers that youre seeing there Paul.
Paul Carter: Oh, I know that. Awesome.
Speaker Change: All right.
Speaker Change: Also.
Speaker Change: Yes.
Craig White: Sorry, Paul, I would also add that, you know, During this period of difficulty, I mean, we're throwing up red flags left and right to our field sales force. So I think they're kind of waiting to see what happens. Everyone's wanting this to see. The building sale complete, move on from our current lender and get back to business, back closer to business as usual. So and that includes buying new titles. Our lowest level of brand partner rely on new title releases to spur their activity to call customers and whatnot. So we've got to get back to where we can conservatively purchase new titles.
Speaker Change: Sorry, Paul I would also add that.
Speaker Change: During this period of difficulty I mean were thrown up red flags left and right to our field sales force. So I think they're kind of waiting to see what happens everyone's willingness to see.
Speaker Change: The building sale complete move on from our current lender and get back to business.
Speaker Change: Back closer to business as usual, so and that includes buying new titles.
Speaker Change: Our lowest level of brand partner rely on new title releases to spur their activity to call customers and whatnot. So we've got to get back to where we can.
Speaker Change: Conservatively purchased new titles.
Paul Carter: Okay, no, that's, that's fine.
Speaker Change: Okay, that's fine.
Paul Carter: And it just Last question.
Speaker Change: And then just.
Speaker Change: Last question Yeah, Yeah last question here, So your share count increase.
Dan O'keefe: Yeah, last question here. So your share count increased like $310,000 in the fourth quarter relative to the third. Was there anything unusual that happened in the fourth quarter that caused the share count to increase? We had a vesting tranche in our LTI plan, long-term incentive plan, that was Granted back in 2019 and 20 and vested on February 28th of 2025. And so that is the last. component of our equity incentive We have no current equity incentive plan.
Speaker Change: 310000 in the fourth quarter relative to the third was there anything unusual that happened in the fourth quarter that caused the share count to increase.
Speaker Change: We had a vesting.
Speaker Change: Tranche in our.
Speaker Change: Our LTI plan long term incentive plan that was.
Speaker Change: Granted back in 2000.
19, and 20 and vested on February 28 2025.
Speaker Change: And so that is the last.
Speaker Change: A component of our equity incentive plan.
Speaker Change: And we have no current equity incentive plan.
Dan O'keefe: in place. Okay, and I do remember Yeah, thanks for that. I do remember that. I don't remember the details of it. But I'm just going off memory here. I thought that was divesting was driven by revenue growth? Or was that not? part, or was it just time time best? The earning of it was based on hitting revenue and profitability targets. And then the vesting of it was a time vesting period. So it was earned back in 19 and 20 but There was a time vesting requirement. Okay, okay. No, that's great.
Speaker Change: In place.
Speaker Change: Okay, and I do remember yeah. Thanks for that I do remember that I don't remember the details of it but I'm just going off memory here I thought that was divesting was driven by.
Speaker Change: Our revenue growth or was that not.
Speaker Change: Part a like or was it just time time vaccine.
Speaker Change: Okay.
Speaker Change: The earning of it was based on hitting revenue and profitability targets and then the divesting of it was a time vesting.
Speaker Change: Okay. So it was earned.
Speaker Change: Back in 19 and 20, but.
Speaker Change: There was a time vesting requirement.
Speaker Change: Okay, Okay, no that's great.
Paul Carter: Excellent.
Paul Carter: Well, that's it for me. Thanks. Thanks, everybody. And best of luck with the closing of the transaction. Thank you. Thanks, Paul.
Speaker Change: Well that's it for me. Thanks, Thanks, everybody and best of luck with the closing of the transaction.
Speaker Change: Thank you.
Operator: Again, if you would like to ask a question, please press start and the number 1 on your telephone keypad.
Speaker Change: And then if you would like to ask a question. Please press Star then the number one on your telephone keypad. Our next question comes from the line of Daniel Kim Your line is open.
Daniel Bauchin: Our next question comes from the line of Daniel Bauchin. Your line is open. Hello, I hope you can hear me.
Daniel Kim: Hello, I have you can you can hear me.
Daniel Bauchin: So my first question was sort of thinking about the longer term future of these discounts that the company is offering. To what extent would you say that these discounts are... a combination of, you know, just a lack of demand for the product rather than rather than our own ability to actually not discount those products as in what I'm asking is are these discounts forced upon us rather than our own choice in order to reduce inventory. I mean, I think, I think a little bit of your answer is both. And it is something that we are choosing to do in order to continue to pay down inventory, generate cash, reduce inventory on hand.
Daniel Kim: So my first question was sort of thinking about the.
Daniel Kim: The longer term future of these discounts that the companies offering.
Daniel Kim: To what extent would you say that is discounts.
Daniel Kim: Sure.
Daniel Kim: A combination of you know.
Daniel Kim: It's just a lack of demand for the product rather than.
Daniel Kim: Rather than our own ability to actually not discount those products and then what I'm asking is are.
Daniel Kim: All of these discounts forced upon us rather than our own choice in order to reduce inventory.
I mean, I think I think a little bit of your answer is both and it is something that.
Daniel Kim: We are choosing to do in order to continue to pay down inventory and generate cash reduced inventory on hand.
Heather Cobb: I would say as far as demand for the product, it is definitely still there. We see that with all sorts of market numbers and different things like that. I'll refer back to what Craig said in one of the responses to Paul, talking about new titles. Sometimes that we see as more of a driver that people will come in excited about a new title. But as we know and we believe and we continue to see happen, Everything is a new title to a new customer. And so as long as babies and kids continue to be born and grow up each and every day, the demand will continue to be there.
Craig White: I would say as far as demand for the product. It is definitely still there we see that with all sorts of market numbers and different things like that I'll refer back to what Craig said in one of their responses to Paul talking about new titles, sometimes and that we see as more of a driver and that peak.
Daniel Kim: It will come in and excited about a new title.
Daniel Kim: As we know and we believe and we continue to see happen.
Daniel Kim: Everything has a new title to a new customer and so.
Daniel Kim: As long as babies and kids continue to be born and grow up each and every day and the demand will continue to be there and we intend to slow down that discount.
Heather Cobb: And we intend to slow down the discounts in the coming months so that we can get back to air quotes normal operations and don't have to see this as a factor that we're relying on any further.
Daniel Kim: In the coming months, so that we can get back to air quotes normal operations.
Daniel Kim: And don't have to see this as a factor that we're relying on any further.
Craig White: Okay, and in terms of the team's own understanding of Digital Pitch of the company in a year and a half. time. Yeah, that's a great question. Yeah, there'll be a little bit of excess funds from the sale of the building transaction in which we will start to purchase new titles. We're taking this opportunity to kind of define, redefine who we are and what we want to be. And Heather's been to, you know, Bologna, Italy, back in late March, where vendors and publishers present content to us, and there's several companies that want to offer their entire product line to us.
Daniel Kim: Okay and in terms of the teams one on this.
Daniel Kim: Understanding of.
Daniel Kim: The sort of the future of the company say looking a year and a few years down the line, what's the sort of gold the team has in mind revenue in.
Daniel Kim: You know the Leanness of the balance sheet for example, if we sell a hilton.
Daniel Kim: Hilton complex, then we have a significant cash inflow and not all of that will go to hang off the bank debt. So.
Daniel Kim: Some of that will obviously be used to buy inventory, but what are your thoughts surrounding sort of youll picture of the company in a year and a half.
Daniel Kim: John.
John: Yeah, that's a great question.
John: Yes, there'll be a little bit of excess funds from the sale of the building transaction in which we will start to see.
John: Purchase new titles, we're taking this opportunity to kind of define redefine who we are and what we want to be.
John: And.
Heather Cobb: Heather has been to.
Heather Cobb: Valonia, Italy back in late March where vendors and publishers.
Speaker Change: Content to us and there's several companies that want to offer the entire product line to US now we're not going to obviously do that but we're very excited about.
Craig White: Now, we're not going to obviously do that, but we're very excited about a couple of product lines that we want to bring on. But again, we've got to be conservative, we've got to get back to profitability, reducing our interest expense will go a long way. We're going to try to operate on our own cash flow, if not, that's very, very small borrowings from a new lender, and then rebuild this business.
Speaker Change: A couple of product lines that we want to bring on but again, we've got to be conservative we've got to get back to profitability and reducing our interest expense will go a long way, we're going to try to operate on our own cash flow is not a very very small borrowings from a new lender.
Speaker Change: And then rebuild this business.
Craig White: And what's your own, for all of you three, what are your personal views? on how the market is evaluating the company at the moment. Do you think that investors are missing something? Do you think investors have understood your plan correctly? Or do you think there's a misunderstanding? Well, no, I think they definitely understand. This has been a year to 15 months or so, and so the stock has held relatively steady between $1.20 and $1.50 for almost that entire period. So it's not like any more investors are jumping out. We may not be acquiring many new investors, but I think we're all pushing towards getting this building sold.
Okay.
Speaker Change: And what's your what's your own before all of you three what your personal views.
Speaker Change: On how the market is evaluating the company at the moment do you think that investors are missing something do you think investors.
Speaker Change: <unk> your plan correctly or do you think there's a misunderstanding.
Speaker Change: Well.
Speaker Change: No I think they definitely understand that this has been a year to 15 months or so and so the stock has held relatively steady between $1 20, and $1 50 for almost that entire period. So it's not like any more investors are jumping out we may not be acquiring many new investors, but I think.
Speaker Change: We're all.
Speaker Change: Pushing towards getting this building sold we've said it all along we believe that once we get out from under our current lender.
Craig White: We've said it all along.
Craig White: We believe that once we get out from under our current lender and get back to having a little more flexibility to run the company the way we see fit, that we could be back going again. Now, We're stressing that we're going to have to be conservative at the startup after we sell this building. So it's not going to be a quick fix. It's going to take some time. We've got to work through our excess inventory while bringing in some more inventory. So I mean, that implies. We're still going to be aggressively selling the inventory that we have now.
Speaker Change: Get back to having a little more flexibility to run the company the way, we see fit that we.
Speaker Change: We could be back back doing again now.
Speaker Change: Worse, we are stressing that we're going to have to be conservative. That's a startup. After we show. This building. So it's not going to be a quick fix it is going to take some time, we've got to work through our excess inventory, while bringing in some more inventory so I mean that implies.
Speaker Change: We're still going to be aggressively selling our inventory that we have now.
Craig White: But I don't think the investment community is missing anything. I just think we're all waiting to see what happens with this transaction.
Speaker Change: But I don't think the investment community is missing anything I just think we're all waiting to see what happens with this transaction.
Craig White: Okay, and the final question on my end. What is the deal with the undeveloped lands? I understand that CG, as the buyer, they want to maximize their return on their capital. But what is the plan for that land? Because of course, if we can... Reinvest capital much more efficiently in inventory or, or even say buying back shares. What's the use of this unoccupied, inefficient land? Yeah, so the, David, the land recently appraised for a value of about $2 million, but when you go to market with the Hilti complex, the buyer really doesn't value the land because he values the leases that are existing in the complex.
Speaker Change: Okay.
Speaker Change: And the final question from my end.
Speaker Change: Okay.
Speaker Change: Is the deal with the undeveloped land I understand that.
Speaker Change: He is the.
Speaker Change: The buyer that they want to maximize the return on that capital.
Speaker Change: What is the plan for that launch because of course, if we can.
Speaker Change: Reinvest.
Speaker Change: So we're much more efficiently and inventory.
Speaker Change: And say buying back shares.
Speaker Change: What's the use of this on occupies.
Speaker Change: Inefficient lamp.
Speaker Change: Yes.
Speaker Change: David the land recently appraised for a value of about 2 million that but when you go to market with the.
Speaker Change: The Hilton complex, the buyer really doesn't value the land because he values the leases that are existing in the complex. So.
Craig White: So, you know, for us, it's about, you know, just getting through the sale.
For us it's about.
Speaker Change: Getting through the sale and then what we decided to do with that land in the future is really kind of a multi path kind of option, we could sell it in the future we could.
Craig White: And then what we decide to do with that land in the future is really kind of a multi-path kind of option. You know, we could sell it in the future. We could, you know, right now, we have a lot of outside warehouse space that we're renting. You know, there's a thought process that, you know, if we... you know, grow back to where we were in the pre COVID days of 100 million, we're gonna need some more space than what we have just in the Hilton complex. And we might use that space to, you know, build a warehouse on it.
Speaker Change: Right now we have a lot of outside warehouse space that we're running.
Speaker Change: There's a thought process that.
Speaker Change: If we.
Speaker Change: Grow back to where we were in the pre COVID-19 days of $100 million, we're going to need some more space than what we have adjusted in the Hilton complex and we might use that space to build a warehouse on it.
Craig White: So just lots of different ideas on what we can do with it. But the key thing is that the buyer wasn't going to give us much value at all for it. So we're, our shareholders are better off with us holding on to it for a little bit, and determining the best way to maximize the value of the OK, that's great.
Speaker Change: So just lots of different ideas on what we can do with it but the key thing is that the buyer wasn't going to give us much value at all for it. So our shareholders are better off with us holding onto it for a little bit and determining the best way to maximize the value of the land.
Speaker Change: Okay, that's great well, yes, you've got my support so thank.
Daniel Bauchin: Well, you've got my support. So thank you for another year. Yeah, I appreciate you, Daniel. Thanks, Daniel.
Speaker Change: Thank you for another year.
Speaker Change: Okay.
Speaker Change: Yes, I appreciate you Danielle Thanks Danielle.
Operator: There are no questions at this time.
Craig White: There are no questions at this time I would like to hand, the conference over to Craig. Please go ahead.
Craig White: I would like to hand the conference over to Craig. Please go ahead. Oh, okay. Thank you. Another good call. I appreciate everyone's engagement and your continued support. We look forward to providing another update in July. Thank you.
Craig White: Okay. Thank you.
Craig White: Another good call I appreciate everyone's.
Craig White: Engagement.
Craig White: And.
Craig White: And your continued support and we look forward to providing another update in July. Thank you.
Operator: This concludes today's conference. Thank you for participating. You may now disconnect.
Craig White: This concludes today's conference. Thank you for participating you may now disconnect.
Okay.
Craig White: Yeah.
Craig White: Yeah.
Craig White: [music].