1847 Goedeker Inc. Commom Stock

Good morning and welcome to the 1847 Gettiker First Quarter 2022 Earnings Call. 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 and Chief Financial Officer Maria Johnson. First, 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 May 16, 2022, and the company assumes no obligation to update any of these forward-looking statements to reflect events or circumstances that occur after today. Second, we had a few special items in our first quarter results, which we excluded from our trends for non-GAAP purposes, and we will reference these non-GAAP results in our remarks today. So please see our press release from this morning and our investor relations website for more information and our cautionary statement, which cover these topics in more detail. A replay of the conference call will be available on the 1847 Gettiker Investment Relations website this week. At this time, I'll turn the call over to Albert Fuerte for opening comments. Please go ahead, Mr. Fuerte.

Good morning, and thank you for joining today's call. I am excited to discuss our financial results for the first quarter in addition to providing updates on key initiatives that we believe will drive long-term growth and value creation. I will begin by touching on our financials for the quarter, which Maria will discuss in further detail shortly. Despite widespread macroeconomics challenges, I am proud of the results our team has delivered at the start of the year. we achieved sales of $152.8 million, representing a more than 23% increase over combined performance sales for Q1 2021, a gross margin of 23.5% and a net income of $5.9 million and adjusted EBITDA of $13.5 million. In the first quarter of 2022, we also continued executing in key initiatives to strengthen our underlying business and its capital structure. The macroeconomics environment does not change the fact that we have tremendous opportunity in the home appliance market. We are going to lean into expertise, technology, capabilities, and scale to seize this opportunity. Here are a few key updates. First, I would like to provide an update on our rebranding process. I am excited to share that we have selected a new name, logo, and brand ethos that we plan to announce in the coming weeks. As I noted on our last call in March, last year was very much a year of transition and transformation for our business. This rebrand marks an important milestone in our journey. bringing legacy Gettiker and appliances connection under one single unified name and brand. The name and ethos we've selected reflect our vision to be more than just a retailer, but to become a home and appliance platform that empowers customers throughout the entire purchasing journey, from inspiration to installation. It is important to note that continuity remains a top priority during this rebrand, as we are keenly aware of the name recognition we carry with Appliances Connection in particular. This is why our marketing and branding team will be working diligently over the next several months to build brand equity and ensure a smooth rollout of our new brand. Second, with respect to our B2B solution offering, as we previously stated, we had approximately $20 million of new projects in the pipeline at the end of Q1, And we are already seeing some exciting projects in the pipeline for Q2, such as a new $1.2 million project for 859-unit residential building remodel that we have been recently awarded. We are pleased with the early progress we have made and we are working to build on the pipeline throughout the remainder of the year with a similar pace we have seen in Q1. As previously noted, These are longer-term projects that may take six to 18 months to come to fruition. This said, we expect this pipeline will materialize into significant B2B revenue growth in 2023. Third, we continue to be optimistic about bringing new warehouses online in the right location at the right time when pricing and supply chain becomes more normalized. Tied supply is a factor we must consider as we want to ensure that any new warehouses that we bring online could be stocked with the proper inventory at the right cost. We remain focused on identifying opportunity to expand our fulfillment network, including throughout affordable and targeted M&A. Before handing the call over to Maria, I would like to address our recently announced $140 million credit agreements with Bank of America. We appreciate the overwhelming positive feedback we have received from shareholders, and we are glad that you share the excitement for what this strategic capital means for our business. We view this credit agreement as a testament to the strength of our business and its long-term trajectory. We secured this affordable, non-dilutive capital to support our key strategic and corporate initiatives, including building out our B2B model through strategic partnership, expanding our fulfillment capabilities and enhancing our technology stack. Additionally, we are well positioned to continue optimizing our capital structure, including by executing on our previously announced share repurchase program and any programs authorized in the future. I will now conclude my initial remarks and turn it over to Maria Johnson to provide an overview of financial performance.

Thanks, Albert. Good morning, everybody. Net product sales for the quarter were 152.8 million compared to 142.7 million sales for the last quarter and 123.7 million performer sales for the first quarter 2021. Gross profit for the quarter was 35.9 million. And while our gross margin has increased 60 basis points from the last quarter, from 22.9% to 23.5%. Increased freight costs due in part to higher energy costs continued causing some margin compression, with Q1 shipping costs approximately 40 basis points higher than we saw throughout 2021 on a performer basis. Operating expenses for the quarter were approximately 25%. with the largest expense items being personnel costs of $7 million, reflecting our investment in top talent and $0.2 million severance costs, bank and credit card fees of $6.2 million, general and administrative expenses of $5.6 million, reflecting a more normalized level, an almost 21% reduction versus Q421, which was impacted by unpaid historical invoices. and advertising expense of $4.3 million. Net income for the quarter was $5.9 million or $0.06 per diluted common share compared to a loss of $3.5 million or $0.57 per diluted common share for the first quarter of 2021. Net income was up 56% versus last quarter. Adjusted EBITDA for the quarter was $13.5 million with a margin of 9% compared to $11.3 million EBITDA with an 8% margin last quarter. As of the end of the first quarter, the company had working capital of $24.9 million and incurred negative cash flow from operations of $3.7 million, which reflected $8.2 million of additional investment in inventory during this quarter. as we continue facing supply chain challenges. Additionally, the company had cash and cash equivalents of $25.8 million at the end of the quarter, roughly flat to the prior quarter. With respect to our outlook, we are reaffirming our previously articulated full-year guidance provided on our fourth quarter earnings goal. We forecast high teens to low 20s sales growth. for the year compared to 2021 performer sales and gross margins and adjusted EBITDA margins relatively flat to our 2021 full-year performer results, which were 23.3% and 9% expected. While we continue to face uncertainty caused by sustained supply chain disruptions, significant inflation, and geopolitical uncertainty, We hope to refine our outlook over the course of the year if those macroeconomic headwinds ease. Now, I will hand the presentation back to Albert for closing comments. Albert?