Q1 2026 Educational Development Corp Earnings Call
Yes.
Good afternoon, everyone and thank you for participating in today's conference call to discuss educational development Corporation financial and operating results for its fiscal 2026 first quarter results.
As a reminder, this conference is being recorded.
Speaker Change: On the call today, I think light, but then and Chief Executive 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 2021st quarter results.
These will be available later today on the company's website at Www Dot E D C Pablo dotcom.
Before turning to the prepared remarks, I would like to remind you that some of the statements made today will be forward looking and I 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: We have faced two educational development corporations recent filings with the S. E C for a more detailed discussion of the company's financial condition.
Speaker Change: With that I would like to turn the call over to Mr. Craig White, the company's President and Chief Executive Officer Craig.
Speaker Change: Yes.
Speaker Change: Thank you operator, and welcome everyone to the call. We appreciate your continued interest I want to quickly mention that Heather it's taking time to be a family as she is there was a recent definitely her family.
Speaker Change: I will start today's call with some general comments regarding the quarter, then I will pass the call over to David to run through the financials, after which I will provide an update on sales and marketing and finish up the call with an update on our progress of the sale leaseback of our headquarters the Hilton complex.
Speaker Change: During the first quarter, we experienced decreased sales compared to the prior year first quarter. This was driven primarily by a reduced brand partner levels within our paper Pie Division along with continued test ourselves that's offered to promote our paper power sales division and generate cash to meet our lender's requirements.
Speaker Change: We view. These shows it is a short term tactics used to generate cash and to reduce our borrowings with our bank.
Speaker Change: Over the past year, we have seen our brand partner levels declined due to several factors, including the challenging sales environment.
Speaker Change: With high inflation and reduced disposal, where each of them are families with small children.
Speaker Change: This direct sales industry, especially does within the product sector has experienced a challenging period for new consulting recruiting.
Speaker Change: While we have been through downturns in the industry before the current environment is having a short term impact on our operating levels.
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 during this difficult environment.
Speaker Change: With that I'll now turn the call over to Dan O'keefe to provide a brief overview of the financials Dan. Thank you Craig.
Dan O'keefe: Through our first quarter results compared to the prior first quarter last year net revenues were $7 1 million compared to $10 million. Our average active brand partners for the quarter totaled 7700 compared to 13400 in the first quarter last year.
Dan O'keefe: Loss before income taxes totaled a negative $1 4 million compared to negative $1 7 million in the first quarter of fiscal 2025 net loss totaled $1 1 million compared to $1 3 million loss last year.
Dan O'keefe: Loss per share totaled 13 cents compared to a loss per share of <unk> 15.
Dan O'keefe: On a fully diluted basis now.
Dan O'keefe: Now for an update on our working capital positions net inventories decreased $2 7 million from $44 7 million at February 28, 2000 $25 million to $42 million at May 31, 2025.
Dan O'keefe: Borrowings on our working capital line of credit totaled $4 2 million as of May 31, 2025 meeting the step down required by our bank.
Dan O'keefe: Agreement to be under $4 5 million starting June one 2025.
Speaker Change: That concludes the financial update and I will now turn the call back over to Craig White great.
Dan O'keefe: Thanks, Dan as I mentioned earlier, we continue to make strategic changes to bring new initiatives in niche.
Dan O'keefe: Bring new initiatives for success to our brand partners.
Dan O'keefe: We concluded a successful incentive challenge we've launched our next two incentive trips, which has been has gone very well so far.
Dan O'keefe: Our percent of sales decline has been lessened.
Dan O'keefe: I've started going to more industry type of dance to.
Dan O'keefe: I'm, just trying to get a perspective around that around the industry, which has been great. We've made some great connections from not only vendors, but other companies and so that's I'm going to continue to do that.
Dan O'keefe: And from an it perspective, we launched guest checkout.
Dan O'keefe: Which the goal of any project is to make it easier to do business with us whether it's our customers or our brand partners and the guest checkout process has been received very very well.
Dan O'keefe: We've had a successful partnership with ticket to dream, allowing us to place thousands of books into the hands of Foster Kids Kids and families.
Dan O'keefe: So we've also concluded our summits, which.
Dan O'keefe: Took the place of convention for this year.
Dan O'keefe: We had Dallas Atlanta, Salt Lake City, Chicago in Philly and we just had to leave in the last few weeks and we left there very encouraged there would seem to be a lot of excitement.
Dan O'keefe: As each summit happened.
Dan O'keefe: We have more information as to our financial stability or our sales our inventory levels and so at some of these more intimate sized level meetings I'm able to have.
Dan O'keefe: One on one conversations it's things that I can't.
Dan O'keefe: Can't say from a stage without any kind of context or explanation that people that have been with us for 10, 15 20 years I can have conversations with.
Dan O'keefe: We started promotions to encourage promotion to leadership, which in turn encourages recruiting.
Dan O'keefe: But we've got to have new titles so.
Dan O'keefe: We have a clearer picture of whether we're going to complete a sale transaction we've already started.
Dan O'keefe: Coming up with our phase one two and three plan for purchasing new titles and replenishing best sellers. So all these things are necessary.
Dan O'keefe: <unk>.
Dan O'keefe: To make it look like we're thriving business to our sales force.
Dan O'keefe: Okay that concludes our sales and marketing update now for a building sale update.
Dan O'keefe: In May we executed an agreement to sell the Hilton complex. This agreement outlined in 90 day due diligence period recently, we announced an amendment of this agreement extending the due diligence period as well as a shortened close period. The purpose of this amendment was to give the buyer more time to perform their due diligence and structure of the building acquisition.
Dan O'keefe: Financing.
Dan O'keefe: We continue to work with the buyer group and provide requested information timely. So they can perform their necessary work as quickly as possible. We continue to expect to sell to be completed before the end of September.
The proceeds from the sale are expected to fully payback to bake, leaving us with no debt and we expect to have limited borrowing needs moving forward.
Dan O'keefe: Lastly, I want to thank all of our shareholders for their patients our employees for their commitment to our mission and our customers and brand partners their loyalty during this difficult period.
Dan O'keefe: Confidence in our collective ability to emerge emerge stronger and more resilient than ever before.
Dan O'keefe: And so I think I'll turn it back over for the operator for questions.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by one on your telephone keypad.
Speaker Change: But here's a problem that Johanna has been raised and should you wish to cancel your request. Please press star followed by the tier if you're using a speaker phone. Please lift the handset before pressing any keys.
Speaker Change: One moment. Please for your first question.
Paul: Hey, Paul you there.
Speaker Change: And your first question comes from the line of Paul Carter from Capstone asset management. Please go ahead.
Speaker Change: Hi, Good afternoon, Craig Good afternoon, Dan.
Speaker Change: So I know the.
Speaker Change: Healthy complex sale has obviously taken.
Speaker Change: A lot longer than expected.
Speaker Change: But at this point, it's clear that the viability of the business hinges on getting that done so brand partner count is down another 18% this quarter and there is no clear sign of stabilization and you explained why that is.
Speaker Change: But if this latest transaction falls through and hopefully it doesn't but if it does what is the board's contingency plan and would you be prepared to hire an advisor and formally explore strategic alternatives for the business because I don't I don't think you can afford to just try again and then push that.
Speaker Change: Resolution are pushed that pushed the resolution.
Speaker Change: This transaction down the road, another five or six months.
Speaker Change: Yeah. Good question and yes, certainly to the point, we have not only do we have other offers and again I understand your point is not going through another 90 to 100 days to 120 day process and I agree with you that's not necessarily where we want to go.
Speaker Change: So anything that we do.
Speaker Change: Obviously has to have bank input if not final approval.
Speaker Change: But we have a plan b.
Speaker Change: Variable plan B or plan a is to sell the building, which brings us the most proceeds but our plan B also gets us out of bank debt and.
Speaker Change: And we can move forward so.
Speaker Change: My intention is that one way or another we will have executed plan, a or plan b and havent finalized by the end of September.
Speaker Change: Can you share anything about this plan b.
Speaker Change: We've had.
Speaker Change: Well, it's other offers.
That are have a a quick close contingency.
Speaker Change: There is a couple of pieces to it that we've kind of I'm sure.
Speaker Change: Curated if you will over the last six months and again theyre not quite as good as plan, a but they are definitely better than not having any playing at all.
Speaker Change: So there is some smaller loans.
Speaker Change: And things like that that would get us out so.
Speaker Change:
Speaker Change: I don't anticipate that.
Speaker Change: I actually feel pretty good about this and I've said this multiple times you can take that with a grain of salt, but this group is from Oklahoma. They understand the environment. They understand the area they've known about this building for a long time there are several.
Speaker Change: Multiple groups kind of coming together is kind of in a total investor group. So.
I feel good about it but again ive learned over the last 15 months or so that.
Speaker Change: That's just not good enough. So we've we've.
Speaker Change: Developed a plan b that we feel very good about and.
Speaker Change: If it comes to items that'll be known pretty quickly as well.
Speaker Change: Okay, and I think I mentioned or I asked last quarter. If you were able to share anything more about this.
Speaker Change: Buyer group, it's T G OTC I think it is.
Speaker Change: Are you able to share any more about them or is this just sort of a group of.
Speaker Change: Individual investors or is it a real estate.
Speaker Change: Read or something like that.
Speaker Change: It isn't real estate company, they've kind of reached out.
Speaker Change:
Speaker Change: Sure advice from friends, if you will that may become partial investors in the group, but I would feel a lot more comfortable.
Speaker Change: <unk>.
Speaker Change: After this initial due diligence period is closed since we gave them a 30 day extension I think it closes in.
Speaker Change: July 30th 28, 28 slide 28 as the end of this initial due diligence period in which case passed our deposit goes hard. So we will know a lot more.
Speaker Change: You know by the end of July whether we're moving forward plan a or.
Speaker Change: Pivoting to plan B.
Speaker Change: Okay.
Speaker Change: Great and then just my second question. This is just a governance question.
Speaker Change: But so apart from you Craig's nobody on the board holds a material stake or a material equity stake in the company.
Speaker Change: Has the board considered implementing minimum ownership requirements just to better align.
Speaker Change: Like director incentive us with long term shareholder value and I know, that's generally considered good governance, especially in small cap situations like that so just wondering if that's something that's been discussed or is being considered.
Speaker Change: Yes, we're kind of over this last couple of years.
Speaker Change: <unk> been focused on.
Speaker Change: Growing the business back.
Speaker Change: <unk>.
Speaker Change: Board makeup and governance has been.
Speaker Change: Near the front of my mind as well, though we are kind of been transitioning.
Speaker Change: To make it.
Speaker Change: More my board in the previous.
Speaker Change: My predecessors aboard.
Speaker Change: So.
Speaker Change: Board members don't make much money for being here on our board we have started.
Speaker Change: Giving them small amounts of stock.
Speaker Change: So we're trying to make it more.
Speaker Change: Right.
Speaker Change: Like a big Company Board. If you will now we've got some strides to make and we're not there yet.
Speaker Change: There's still going to be some changes over the next nine to 12 months, we know hopefully partially the compensation and partially with board makeup.
Speaker Change: Okay. Okay. That's good to hear okay, well, that's great well good luck and wall I'm, just I guess hope hope her plan plenty here coming through.
Speaker Change: Yes, I appreciate you Paul Alright.
Speaker Change: Alright, thanks very much.
Speaker Change: Thank you once again should you have a question. Please press Star then the number one on your telephone keypad.
Speaker Change: Once again that is star and want to ask a question.
Speaker Change: And your next question.
Speaker Change: Comes from the line of Neil Malkin. Please go ahead.
Speaker Change: Hi, Hi, Bert.
Speaker Change: My question is surrounding.
Speaker Change: These three phases of buying new titles.
Speaker Change: What do you think.
Speaker Change: Why why do you think this strategy would work when we've got such significant levels of inventory already.
Speaker Change: Okay.
Speaker Change: Well, we have to have new titles Thats, what energizes the sales force.
Speaker Change: All of our inventory is still selling and selling through that.
Speaker Change: At a rate, but we have to have new titles and phase one two and three are very conservative, they're not adding much to the inventory.
Speaker Change: Each phase is made up of half new titles, which may be 15, or 20, new titles and then replenishment of some good sellers, which may be another 10 to 15 titles. So it's a very conservative approach its not going to.
Speaker Change: Increased inventory levels that much but that's the first.
Speaker Change: Green flag, if you will that shows our salesforce that hey, we're still a viable business and we've got new product coming in and we want you to reach out to your customers.
Speaker Change: And kind of energizes them.
Speaker Change: I see.
Speaker Change: And what was the selling prices for the remainder going to chew once that's new.
Speaker Change: Hi exclusive come through.
Speaker Change: Well, we won't have to drastically change prices of older inventory I mean, as a return of said earlier in the call.
Speaker Change: We've had strategic sales, but that's just to try to bring in infusions of cash to pay down bank debt, but we know that strategies as short term I mean, if we continue drag.
Speaker Change: Drastically reducing the sale of our product we diminish the value of our products and that's just not a long term strategy at all we're trying to break that cycle, where.
Speaker Change: Where we don't have to discount so all of our products cells of course, there's some that's getting a little bit longer older.
Speaker Change: And length of time that we've had it in so we may discount stuff.
Speaker Change: A little bit, but that's always been the case, we've always done that as a strategy.
Speaker Change: Reduce older inventory, but on a on a <unk>.
Speaker Change: Big scale, we're trying to get away from that going forward.
Okay.
Speaker Change: With this normalization what sort of.
What's the sort of target that revenue run rate, what's the sort of.
Speaker Change: Average brand partners.
Speaker Change: What's this normalization really look like.
Speaker Change: Taylor.
Speaker Change: Sure.
Speaker Change: It takes some time and we go slow it down and then we got to start rebuilding that we're starting to put the pieces in place we're very strong.
Speaker Change: From an it perspective, we're making it easier to do business with this we're coming out with new projects that excite the field all the time so all of these things lead to.
Speaker Change: Recruitment of new salespeople, if our current salespeople are happy then theyre going to bring more people into the business. So.
Speaker Change: Darts with making it easy to do business with us having new titles.
Speaker Change: They're making more money so it's going to be a slow gradual build and then hopefully that.
Speaker Change: No.
Speaker Change: I wouldn't say, absolutely not saying hockey stick, but once things kind of get rolling again, they kind of start compounding that what's the goal.
Speaker Change: You know, we have to do forecast for different entities banker investors or or.
Speaker Change: Potential buyers and things.
Speaker Change: So we've we've targeted.
Speaker Change: A low medium and high expectation and they're all conservative it's going to take some time.
Speaker Change: Mhm.
Speaker Change: Has there been any discussion in terms of.
Speaker Change: Similar.
Speaker Change: Some of that set of businesses, which might be interested in some sort of small acquisition of educational development.
Speaker Change:
Speaker Change: We I get requests occasionally and we vet them for how serious they really are we use our IR firm or are our previous alright.
Speaker Change: IR Rep, who is now on our board to kind of that any of these offers and most of them are not very serious.
Speaker Change: But.
Speaker Change: You know, we havent seriously and received any serious center offers right.
Speaker Change: Right, what why do you think that would be.
Speaker Change: We'll probably because we havent wide out there.
Speaker Change: And there are many orphans.
Speaker Change: To to buy a company.
Speaker Change:
Speaker Change: Yes, as I've been here for eight years.
Speaker Change: Daniel we've never had.
Speaker Change: An unsolicited offer to buy the company that I'm aware of.
Speaker Change: And who knows why that is maybe we're not on many people's radar I really don't know.
Speaker Change: I can't even speculate on that but.
Speaker Change: No.
Speaker Change: We would entertain I mean, that's not our first start right now at all we want to get through this transaction and grow the business back to where we know it can be.
Speaker Change: Just a final question.
Speaker Change: What's the sort of the.
Speaker Change: The banking relationship with I mean, obviously they've continued to.
Speaker Change: Give us some sort of flexibility do you what is that.
Speaker Change: What is your personal relationships.
How does your personal relationship play into that.
Speaker Change: Is it likely to be that once we.
Speaker Change: We're tired.
Speaker Change: <unk> outstanding debt balances that will still be felt.
Speaker Change: That relationship with the working capital.
Speaker Change: The facility without continue.
Speaker Change: That's probably not the goal I'll never say never.
Speaker Change: But so far our relationship has been good I mean, obviously each amendment gets a little more restrictive and that's just to make sure. We're completely focused on bringing in whatever cash is necessary to pay them back, but they've they've understood every step of this process they've supported us through every step of the process.
Speaker Change:
Speaker Change: Now.
Speaker Change: There is a sense of urgency to be paid back but again they agree with every step that we've taken.
Speaker Change: They're involved with every step and so it's been good so far.
Speaker Change: Okay.
Speaker Change: The next SKU when is the next piece of our earnings release.
Speaker Change: It will be in October.
Speaker Change: We haven't announced the earnings call date.
Speaker Change: The Corp second quarter earnings call will be in October probably around that 10 services timeframe.
Speaker Change: So should be after.
Speaker Change: Completion of this sale process.
Speaker Change: Yes, hopefully well thank you Craig and thank you Doug.
Speaker Change: Yes, I appreciate it.
Speaker Change: Thank you and there are no further questions at this time I will now hand, the call back to Mr. Craig White for any closing remarks.
Craig White: Thank you.
Speaker Change: Thanks to everyone for joining us on the call I. Appreciate your continued support and expect to provide additional updates from the healthy complex sale progress prior to the next scheduled meeting in October we will file.
Speaker Change:
Speaker Change: As the 8-K 10-K 8-K, eight cases necessary, so you'll probably know before the next board meeting.
Speaker Change: Before the next earnings call, but anyway good questions I appreciate everyone's support thank you.
Speaker Change: Thank you. Thank you.
Speaker Change: And this concludes today's call. Thank you for participating you may all disconnect.