1847 Goedeker Inc. Commom Stock

Good afternoon, and welcome to 1847 Gettiker's Fiscal Year 2020 Conference Call. As a reminder, this call is being recorded and all participants are in listen-only mode. We will open the call for questions and answers following the presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. On the call today are 1847 Gettiker's CEO, Doug Moore, and CFO, Robert Barry. 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 Gettiker cautions that these forward-looking statements are subject to risks and uncertainties that may cause their 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, March 29, 2021, and 1847 Gettiker 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 Gettiker's website at www.gettikers.com. With that, I'd like to turn the call over to 1847 Gettiker CEO Doug Moore for opening comments. Please go ahead, Mr. Moore.

Thank you, Alex, and good afternoon to everyone on the call today. Thank you for joining us and taking the time to participate in our 2020 financial results call. I want to first thank my team at Getikers for their handling of record orders and customer interactions and doing most of that work from their home office environment while still helping us deliver a substantial increase in cash flow from operations in 2020. We asked our team to make a major pivot in how they work and the amount of work they do, and they met the challenge and exceeded all expectations. Let me state with conviction, I have never been more confident that Getacurs is on the path to becoming the nation's largest and most profitable online retailer of appliances in the U.S. as we change the way Americans shop for appliances. We are still in the early stage of addressing the $20 billion industry as the only pure play appliance online retail listed on a major exchange. We are executing on a proven DTC model of current investment driving scalable growth, Over the past year, we've been investing in people, processes, systems, while developing a best-in-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 Getters to be a billion-dollar revenue company over the next five years. While we initially intended to grow that billion-dollar size organically, we are in a position to accelerate that timeline through the pending acquisition of Appliances Connection. which remains on track to close in the second quarter. Both Appliances Connection and Getikers have shared parallel success in site sessions and order performance in the months since the acquisition agreement was announced, and we are excited for the expected rapid growth of our combined companies post-closing. Let me now 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, service, and value when shopping for nearly any home appliance product needed. We have built a large online selection of products, and we are able to offer this vast selection because our model requires minimal inventory and strong supplier relationships. And our logistics infrastructure is tailored to the unique characteristics of our market. The delivery experience and overall customer service we offer our shoppers are central to our business. We leverage our inventory and fulfillment assets through an efficient inventory acquisition strategy. About two-thirds of our appliances flow through our fulfillment center, while almost all furnitures drop ship straight from the manufacturer to the customer. We offer roughly 22,000 appliance SKUs from virtually all the leading brands, including Whirlpool, KitchenAid, Samsung, Bosch, GE, Maytag, LG, Sharp, and luxury brands on top of those premium brands. We sell all major home appliances, including refrigerators, ranges, ovens, dishwashers, microwaves, freezers, washers, and dryers. Sales of appliances account for more than 73% of our revenues in 2020. Overall, we generated a 15.8% net sales growth year-on-year in 2020. Pandemic-driven industry-wide supply interruptions and shortages significantly reduced product available to ship. The lack of available product meant that we were able to ship only 45% of our orders last year. This compares to an average rate of shipped orders of 80% for the three years prior to COVID. Had we shipped at historical rates, our total shipped orders would have increased by 42 million to 97.3 million for the year, which would have been up 104% compared to 2019. Written orders nearly doubled to 123.2 million last year, driven largely by our increased ad spend which helps to fuel nearly 10 million site sessions, up 57% from 6.3 million in 2019. The significant increase in orders requires us to use temporary staff to supplement our permanent staff in order processing, phone sales, customer service, and accounting. We believe as manufacturers return to normal levels of production and we receive 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 technologies and other processes to replace manual tasks. As manufacturers catch production up to consumer demand, we believe that Getters will quickly return to normal shipping trends, and our upcoming acquisition of Appliances Connection will further strengthen our ability to meet the increasing demand more efficiently, with a near-term look beyond supply constraints creating a clear path to profitability. I'll now hand the call over to Bob Berry, our CFO, for a more detailed review of our financial results. Bob?

Thanks, Doug, and good afternoon, everybody. First, I'd like to discuss the restatement we filed today. Like many other companies that sell their products almost exclusively online, we concluded that we should accrue a liability for potential sales taxes that might be payable to the states in which we sell our products. We made this choice upon further review of the US Supreme Court's decision in South Dakota versus Wayfair, which determined that states may require remote sellers to collect sales tax under certain circumstances. With this in mind, we restated our 2019 financial statements to reflect an accrual for sales tax that might be assessed by the states where we sell. We will also restate our 2019 and 2020 second and third quarter results to reflect the accruals. Overall, the changes resulted in accrued non-cash charges of $2.9 million in both 2019 and 2020. Now, turning to our full-year results, as Doug mentioned, our net product sales were $55.1 million in 2020 of 15.8% year-over-year driven primarily by increased ad spend and a sea chain shift in consumer buying preferences. As Doug also mentioned, we estimate that had product been available, we would have generated an additional $42 million in revenue last year, based on our historical rate of shipping 80% of what is ordered by our customers. That would have resulted in 104% increase in revenue in 2019. The industry-wide lack of supply significantly impacted our cost of goods sold, as well as operating expenses, which were higher relative to revenue. Lack of available product resulted in lower rebates and other financial incentives from suppliers. As product becomes more available at pre-COVID levels, cost of goods sold and operating expenses will be right-sized for our sales. The good news is our key manufacturers tell us that they expect production would be approaching near normal levels by the end of the second quarter. Cost of goods sold were 47.9 million for the year 2020 as compared to 39.6 for 2019. That's an increase of 8.3 million or 21%. Gross profit was 7.3 million and 20 versus or 13.2% of revenue compared to 8 million or 16.8% of revenue in 2019. Personnel costs were $6.6 million in 2020 versus $2.9 million in 2019. As a percentage of orders, though, personnel costs fell to 5.3% of orders versus 6.2% in 2019. Advertising expenses, which include the cost of marketing our products, were $4.9 million for the year end of 2020 as compared to $2.7 in 2019. Measuring our advertising expenses as a percentage of orders had a decline in 2020 to 3.9% compared to 4.4% in 2019. Banking credit card fees were 1.8 million versus 1.2 in 2019. As a percentage of orders, these fees were 1.5% of orders in 20 versus 1.9% in 19. Operational results in 20 showed a loss of $14.4 million. Our estimated operating loss would have been $1.4 million, adjusting $9 million for pre-COVID rates of shipping and gross profit and approximately $4 million in non-recurring SG&A. Including non-cash items totaling approximately $4.8 million, net loss before income taxes for the year ended December 31st, 20 was $20.9 million, and that's compared to a net loss before income taxes of 5.7 in 2019. Excluding non-cash charge and free tax losses for 20 would have been 17.6 million. As of December 31st, 20, we had 9.9 million of cash, including unrestricted of 0.9 million and restricted of nine. In advance of the pending acquisition of Appliances Connection, we chose to move quickly to buy more appliance inventory to meet the rising online demand and completed a $4.6 million financing in March to facilitate increased inventory. Finally, cash flow from operations improved to $5.4 million in 2020. That's a positive swing of $7.1 million from the negative $1.7 in 2019. Favorable cash flow included a $3.8 million increase in inventory. I'll now hand the call back to Doug.