1847 Goedeker Inc. Commom Stock

Good afternoon and welcome to 1847 Gettaker's third quarter 2000 conference call. Sorry, 2020 conference call. As a reminder, this call is being recorded and all participants are in a listen-only mode. We will open the call for questions and answers following the presentation. On the call today are 1847 Gettaker's CEO, Doug Moore, and CFO, Robert Berry. I would also like to remind everyone that various remarks about future expectations, plans, and prospects constitute forward-looking statements for purposes of safe harbor provisions under the Private Securities Litigation Reform Act of 1995. 1847 Getters cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated, including risks described in the company's filings with the SEC. Any forward-looking statements made on this conference call speak only as of today's date, Monday, November 16, 2020. An 1847 getter does not intend to update any of these forward-looking statements to reflect events or circumstances that occur after today. A webcast replay of the conference call will be available on the Getters website at www.getters.com. With that, I'd like to turn the call over to 1847 Gettiker's CEO, Doug Moore, for opening comments. Please go ahead, Mr. Moore.

Doug Moore Thank you, and good afternoon to everyone on the call today. Thank you for joining us and taking the time to participate in the third quarter financial results call. First, I want to thank my team at Gettiker's for their contribution to an outstanding quarter of strong year-over-year growth and a substantial increase in cash flow from operations and revenues. Just as importantly, processing record orders, having record number of consumer interactions, and doing most of this work from their home office environment. We asked them to make a major pivot in how they work. They met the challenge and exceeded my expectations. It is appropriate for me to state with conviction that I have never been more confident that Gettysburg is on the path to becoming the nation's largest and most profitable online retail of appliances in the U.S., Record orders that continue through today's call point to the sea change occurring as consumers' preference to buy household appliances online is growing each day. We are addressing a $20 billion industry as the only pure play appliance online retailer listed on a major exchange. Over the past year, we have been investing in people, processes, and systems. while developing a world-class advertising and marketing platform in order to continue to drive significant revenue growth and dramatically increase our market share. My vision is this, to grow Getacur to a billion-dollar revenue company over the next five years, and in that process, become the largest, most profitable online retailer of appliances in the U.S. We intend to grow that billion-dollar size organically. We intended to grow it organically. We are in a position to accelerate that timeline upon the completion of the pending acquisition of appliances connection. We will provide more details on this acquisition on a special update call later this week at the close of market on Wednesday. Let me make a few points on this call to set the proper framework for our bullish view of Getikers. Through our e-commerce business model, we offer an online marketplace for consumers looking for top brands, for service and value when shopping for nearly any household appliance product needed. We have built a large online selection of products and we were able to offer this vast selection because our model requires minimal inventory and our logistics infrastructure is tailored to the unique characteristics of our market. We enjoy a strong relationship with most national and global appliance suppliers and we have built a technologically advanced online sales and infrastructure platform It gives us the capacity to scale for enormous growth. The delivery experience and overall customer service we offer our shoppers are central to our business. We tightly manage our inventory and warehouse space by primarily purchasing inventory only after sales have been made through our website. This allows us control over the entire process while still providing customers timely delivery times. About 90% of our appliances flow through our warehouse. Almost all furniture is drop shipped to the customer. We offer roughly 22,000 appliance SKUs from all mainline original equipment manufacturers. These include Bosch, Whirlpool, GE, Maytag, LG, Samsung, Sharp, KitchenAid, among others. We sell all major home appliances, including refrigerators, ranges, ovens, dishwashers, microwaves, freezers, washers, and dryers. And these appliances account for 80% of our revenues. Overall, In this past quarter, we generated 10% net sales growth rate year-over-year in the third quarter, with constrained supplier inventories preventing the doubling of that revenue number achieved at $13.4 million. Tracking with our increased ad spend, the third quarter site sessions were up 80% to 2.7 million sessions, while written orders grew 143% to 36.9 million. The lack of available product meant we were only able to ship 37 percent of our orders in the third quarter. This compares to the normal rate of ship sales to orders of 80 percent, which represents a three-year average of revenues to orders. The significant increase in orders required us to use temporary staff to supplement our permanent staff in a number of areas, including order processing, phone sales, customer service, and accounting. We believe strongly as manufacturers return to normal levels of production, and we've received more product our operating expenses will be in line with normal levels for the increased orders and revenue. Investments in logistics are already speeding up order processing time as we utilize EDI and other automated processes to replace manual tasks. We also saw continued strong improvement to free cash flow, with cash flow from operations improving to 7.4 million for the nine months ended September 30 this year, up from a negative 700,000 in the year-ago period. At this time, I'd like to hand the call over to Bob Berry for a more detailed review of our third quarter results. Bob?

Bob Berry Thanks, Doug, and good afternoon, everyone. As Doug mentioned, our net product sales were $13.4 million for the third quarter, which is an increase of 10.1% year-over-year, driven primarily by increased ad spend. Our cost of goods sold was $11.3 million for the three months, as compared to $10.2 million in the three months of 2019. That's an increase of $1.1 million, or 10.6%, in line with our net sales growth. Our cost of goods sold consists of the cost of the product, plus the cost of delivery, and where applicable, installation and haul-away, net of promotional rebates, and other incentives from vendors. Gross profit was $2.2 million for the third quarter, were 16.2 percent of total revenue, basically in line with the 16.5 percent margins in the third quarter of 2019. We estimate that revenue for the quarter would have more than doubled had we shipped at the historic rate of 80 percent of orders versus the actual rate of 37 percent. And at a constant gross margin percentage, gross profit would have also more than doubled to 4.8 million. We believe we will have continuing improvement in product availability in 2021 and expect that the ratio of shipped sales to orders will improve as the year progresses. In Q3, we increased personnel expense in product ordering, customer service, sales, and accounting to deal with 143% increase in orders. We supplemented our own personnel with temporary employees at a higher cost which we estimate are $500,000 to $750,000 for the quarter. Significant progress is underway in reducing personnel and other expenses that were created because of the record increase in orders. We estimate that we will have very few temporary employees by year end. Advertising expense was $1.4 million for the three months ended September 30, 2020, compared to $697,000 for the three months of 2019. That's an increase of $735,000, or 105%. The increase in spending primarily focused on driving traffic to our website. And as Doug noted earlier, with site visits increasing 80% and orders increasing 143% in the quarter, we're seeing improved advertising to sales results from this period. We had non-recurring expenses in Q3 for enhancement to our operations, such as our electronic data interchange project and logistics. both of which will greatly improve operations in future periods, including non-cash items, which have totaled approximately $1.6 million. Net loss before income taxes for the quarter ended September 30 was $4.5 million, compared to a net loss before income taxes of $0.9 million in the three months of 2019. Excluding non-cash charges, re-tax net loss for the quarter would have been $3.1 million. For the nine months ended September 30, including non-cash items totaling $4.7 million, net loss before income taxes was $10.9 million, as compared to a net loss before income taxes of $2.1 million for the nine months of September 2019. Excluding the non-cash charges, net loss for the nine months ended September 2020 would have been $6.2 million. Because of supply chain issues for the nine months, we shipped 47% of orders versus 79%. We had non-recurring expenses in the quarter period from enhancement to operations, such as the EDI project I mentioned, a new phone system, an upgraded shopping cart, and accrual of contractual liabilities due to a terminated employee. Such expenses also included the temporary employees in Q3 that we needed to handle the spiking orders As I mentioned, we are reducing temporary staffing. We expect to have very few at year end. In the nine months, had we shipped at the normal shipping rates, the same gross margin, our gross profit for the nine months would have been approximately $10.8 million. As of September 30, we had cash and cash equivalents of $12.4 million. As Doug mentioned, our cash flow improved to $7.4 million for the first nine months from a positive swing from the negative $700,000. in the prior year period. I'll now hand the call back to Doug.