1847 Goedeker Inc. Commom Stock

Good morning and welcome to the 1847 Getteker conference call for the company's third quarter of fiscal year 2021. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. On the call today are Chief Executive Officer Albert Fuerte, Chief Financial Officer Maria Johnson, and Executive Chairman Ellery Roberts. Please note that various remarks about future expectations, plans, and prospects constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. The company 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 of November 15, 2021, and the company assumes no obligation to update any of these forward-looking statements to reflect events or circumstances that occur after today. Please note there will be an opportunity to ask questions after the prepared remarks. To ask a question, you may press star then 1 on your telephone keypad. To withdraw, please press star then 2. A replay of the conference call will be available on the 1847 Gettiker Investor Relations website this week. At this time, I'll turn the call over to Albert Forti for opening remarks. Please go ahead, Mr. Forti.

I want to begin by thanking the many stockholders who have provided encouragement and support to me since I took the CEO role in September of this year. I also want to thank our employees for their dedication, and our customers for their trust in us. Before getting into the quarter and going over to our outlook, I want to discuss the massive opportunity in front of us. We have a very unique opportunity to become the undisputed e-commerce leaders in the U.S. home appliance market. Our market remains extremely fragmented and lacks a premier online destination for homeowners as well as builders and contractors. I agreed to step into the CEO role because I have long-term vision for filling that white space and seizing massive opportunity. With this context in mind, I need to stress that truly great e-commerce businesses are built over a course of years rather than quarters. This means it's going to take discipline, patience, and ongoing investment to fully realize our opportunity. This also means we're not going to take shortcuts during what I deem our current foundation building phase. I feel we can maintain this type of operating philosophy because we have the right pillars for long-term growth. First and foremost, we already have a distinct ability to offer customers core premium and luxury appliance brands through one point and click experience. Second, we have a differentiated product expertise that exceeds what other retailers and online marketplaces could provide to consumers and B2B customers. Third, We now have an online leadership team with decades of collective experience in e-commerce and home appliance world. And lastly, we have an existing growth trajectory that could be built upon. When my brother and I started Appliances Connections 20 years ago, we did not have any of these tailwinds that Gettiker has today. Yet, we still manage to scale, constantly grow revenue, Each year we ended up expanding from approximately $155 million in annual sales to approximately 400 million in annual sales over the last five years. And as a standalone business, this track record at appliances connection is one of the main reasons why I'm so confident about our path forward. Now we've built a standalone business that had superior value proposition relative to the competition. With respect to our go-forward strategy, I have been working with the board and the rest of the management team to put in place a new plan to solidify our foundation for long-term growth. We are an e-commerce company that specializes in home appliances and providing great content. Not a hardline merchant and not an omni-channel retailer, our priorities must reflect this reality. In the quarters to come, we are going to be focused on initiatives that include Building a best-in-class tech stack and digital marketing presence. The backbone of our success will be our fulfillment and logistics systems, as well as the other technologies in our supply chain. This is why we are investing in our tech stack while also constantly optimizing our consumer-facing digital platforms. The legacy Getikr systems do not seamlessly plug into the appliance connection platform, but you can trust that the combined entity back end and front end tech will be much more cohesive when the new brand is rolled out in the first half of 2022. Another priority is recruiting world-class talent to the management team. We are interviewing executives with background in analytics, e-commerce, marketing, logistics, and supply chain. Many of these individuals are from leading brands and companies. Over the next couple of quarters, We plan to make several senior hires and introduce compensation plans that align pay with performance. Another focus area is ensuring expansive product selection. We're also focused on constantly providing customers access to vast catalog of core premium and luxury brands. Our catalog will also start to feature more upgraded and environmentally friendly models, as well as more private label offering in 2022. Private label can be a major opportunity spot because of the attractive margins and opportunity to sell private labels across a variety of channels. To the extent it makes sense for us, we believe offering a vast selection is a major competitive advantage that can constantly set us apart from brick-and-mortar retailers and large e-commerce companies. We are equally committed to building the best-in-class supply chain. We are working to expand our fulfillment network to provide cost-effective, quicker, and more dependable shipping. Given our expanding customer base in the southeast and the southwest, we are identifying well-positioned fulfillment centers in states such as Texas and California. Our analysis leads us to believe establishing facilities in these locations will limit delivery transfer and touches on orders, thereby reducing our shipping costs and minimizing product damage. Although we are taking extra time to negotiate the best deals, the best possible deals, this is an area we expect to make major headways by the end of Q2 2022. A final piece of the puzzle for us is strengthening customer service. We are replicating the appliance connection customer care model of Getacur. This means building a team that is accommodative and very well versed when it comes to product. Our team is already cutting down on call wait times and improving online response time. As we expand our fulfillment network and encounter fewer supply chain delays, we expect customer satisfaction to be on the rise in 2022. I recognize that some of these initiatives were discussed under the previous management team, but they are now being pursued by leadership with sizable stock holding and strong e-commerce track records. We are going to continue populating the company with people and processes who can help us grow while meeting all these foundation building goals by the end of 2022. Before handing it over to Maria, I also want to take the opportunity to acknowledge the challenges and headwinds we worked to address over the past quarter. First, the CEO transition announced in late August was a difficult decision for the board, but the size of action was taken that will hopefully make us stronger in years to come. I intend to lead the company to great things and aggressively recruit top talent willing to align themselves with the performance. We are very focused on strengthening our employee base by adding new skill sets and reconciling redundancies. As you can probably tell, I am bringing a new culture of intensity and rigor to the business. Second, the public concerns conveyed by certain shareholders created unrest, but they also provided management an opportunity to reflect on some of the company's needs. The settlements ultimately reached with Canaan Wealth Management complemented our ongoing board refresh efforts. And while we were disappointed that recently appointed director, Celine Basul stepped down because of unforeseen time constraints, we have a pipeline of excellent director candidates in place. We will be adding multiple directors with additive expertise in the coming quarters. Last, we continue to receive shareholder feedback regarding our capital structure, including our outstanding warrants. And finally, prospect of a highly dilutive transaction. On the first topic, I can share that we had begun exploring strategies for optimizing and simplifying our capital structure, and we are interviewing financial advisors to support the process. On the second topic, our proxy statement proposal for an increase in shares was a normal course request, nothing more. We want to be opportunistic, When it comes to small acquisitions, such as our accretive purchase of a client gallery in Florida, we have no plans to explore any dilutive transactions. I will now conclude my initial remarks and turn it over to Maria Johnson to provide an overview of our financial performance.

Thanks, Albert. Good morning, everybody. Net sales for the quarter were $141.9 million. an increase of $39.7 million over performer sales for the third quarter 2020. On a year-to-date basis, performer net sales were $405 million, which is an increase of $144.5 million over performer sales for the same nine-month period in 2020. Performer gross profit for the quarter was $31.4 million, and the margin was 22.1%. up from 21 million with a 20.5% margin for the third quarter 2020. We did, however, see our gross margin deteriorate roughly 100 basis points on a quarter-over-quarter basis due to lower volume rebates, heightened freight costs, and prior period adjustments for the Legacy Gallagher business. Performer gross profit for the nine-month period was 96.1 million with a 23.7% margin. up from $52.4 million and a margin of 20.1% for the 2020 period. GAAP gross profit for the third quarter was $31.4 million compared to $2.2 million for the prior year third quarter. Reformer operating expenses for the quarter were approximately $24 million, with the largest expense items being personnel costs of $8.5 million, which includes certain severance Advertising expense of $3.7 million to avoid generating orders that cannot be filled quickly. Bank and credit card fees of $4.9 million and general and administrative expenses of $4 million. PerformaNet income for the quarter was $3.9 million and for the nine-month period it was $32.1 million. Third quarter PerformaNet income reflects an income tax expense of $2.3 million. versus a $7.3 million tax benefit in the second quarter, and the roll-off of the $3.7 million employee retention tax credit. GAAP net income was $3.3 million for the quarter, compared to a net loss of $4.2 million for the same period in 2020. Performa adjusted EBITDA for the quarter was $11 million, with a margin of 7.7%. And nine months pro forma adjusted EBITDA was 43.9 million with a 10.8% margin. Third quarter pro forma EBITDA is roughly on par with the reported second quarter pro forma EBITDA after accounting for the opening balance sheet audit adjustments for appliances connection that reduced second quarter gross margin by 0.7 million, as well as the 3.7 million employee retention tax credits. For the nine months ended September 30, 2021, the company had working capital of 20 million and incurred negative cash flow from operations of 18.3 million, mainly as a result of additional investment in inventory required to fuel our continuing top-line growth and switch to the credit card authorization model for Gallagher's business. Additionally, the company had cash and cash equivalents of 27.2 million at the end of the quarter. down from $45.2 million on June 30, 2021, and up from $1.3 million on March 31, 2021. The quarter-over-quarter decrease in cash reflects the company's strategic and purposeful focus on obtaining inventory to fill anticipated customer orders and help offset ongoing global supply chain headwinds. With respect to our outlook, we are reaffirming our full-year guidance previously articulated in our second quarter earnings call. This includes full year revenue on a performer basis of between $520 million and $550 million, full year gross margin on a performer basis between 22.5 percent to 24.5 percent, and full year performer adjusted EBITDA margins of between 9.5 percent and 11 percent. As new management continues to evaluate the industry landscape, and implement our e-commerce growth strategy. We will be assessing what the most appropriate metrics should be for potential future guidance. Now I'll hand the presentation back to Albert for closing comments. Albert?