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spk03: Thank you for joining us today.
spk02: This program will begin momentarily. Please remain on the line. Thank you for your patience. Thank you. Thank you. Thank you. Greetings and welcome to the Vinco Ventures conference call.
spk03: At this time, all participants are in a listen-only mode. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Mr. Chris Ferguson. Thank you, sir. You may begin.
spk04: Thank you, everyone, for joining. This is the
spk06: First Earnings Call of Ventures, Inc. I'm Chris Ferguson, CEO of Vinco Ventures, joined by Brett Broman, the CFO of Vinco. Thank you for joining and taking the time to hear the earnings call. I have a statement to read before we get underway. In this forward-looking statement and disclosures, certain statements in this announcement are forward-looking statements, which are based on the company's expectations, intentions, and projections. regarding the company's future performance, anticipated events or trends, and other matters that are not historical facts, including expectations regarding the company's long-term target goals and strategies, the expected benefits of the company's focus on digital monetization, the future impact of the preemptive actions the company took in response to COVID-19 pandemic coupled with, cash flow generation and balance sheet and liquidity profile, the company's strategies for each of its segments, including its focus on recurring revenue, its balance sheet and variable cost structure, and the opportunity in the industries the company serves, the company's positioning for future growth and its ability to optimize performance of existing businesses, pursue its disciplined acquisition strategy, and effectively manage its capital structure, the fragmentation of the markets in which the company operates, the acquisition opportunities in those markets, the company's intent to continue to explore opportunistic acquisitions and the company's capacity to absorb additional acquisitions. Certain expected 2020 financial results, including the company's updated guidance for 2020, the assumptions it made, and the drivers contributing to its guidance, the company's flexibility to capitalize on the current environment and invest in potential strategic opportunities and fix the impacts of the COVID-19 pandemic and future operating and financial performance of the company and its customers, the company's plans and strategies to adapt and respond to the pandemic, and we expect the expected impact of those plans and strategies. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from the express or implied. Such forward-looking statements, including economic conditions, competition, and other risks, may affect the company's future performance, including the impacts of COVID-19 pandemic on the company's business, market, supply chain, customers, and workforce. on the credit and financial markets, on the alignment of expenses and revenues, on the global economy generally, the ability to recognize the anticipated benefits of the company's acquisitions, including its ability to successfully integrate and make necessary capital investments to support additional acquisitions, and the company's ability to take advantage of strategic opportunities, changes in applicable laws and regulations, the possibility that the company may be adversely affected by other economic, business, and or competitive factors and other risks and uncertainties, Given the risks and uncertainties, prospective investors are cautioned to not place undue reliance on the forward-looking statements. Forward-looking statements speak only as of the date of such statements and accept those required by applicable law. A company does not undertake any obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. Okay, thank you. We will start by walking through the new investor deck, which is on the thinkoventures.com website. website that you can download a copy of the deck. To start, the strategy that we have and the mission we're undertaking as Vinco is summarized by what we call our buy, innovate, grow strategy. Acquisitions is our model. We will seek to acquire one significant brand or tool per quarter to continue to add to the Vinco portfolio. Our target will evolve with the market, but will remain focused on digital media and consumer product companies. There are millions of small to mid-sized consumer brands that are ripe for consolidation. Our mission will be to find those right opportunities and tuck them into the Vinco umbrella. On the innovate side, we not only will seek to innovate the product lines and the offerings by a particular brand, but the entire brand experience itself from a digital perspective. On the grow side, as we add brands to the Venco engine, we will drive a higher and more efficiency ad conversion to increase sales. We'll get into both the innovate and grow aspects of the strategy as we go through this investor deck. The problem Vinco Ventures seeks to solve. In today's marketplace, consumer product companies are seeing transformation never previously imagined. With the existing depletion of physical retail and the recent global pandemic, we are seeing consumer behavior change at an exceedingly rapid pace. This has increased the urgency of consumer product companies to identify new and effective distribution. This expensive endeavor has become a risky endeavor for these brands. due to the expanding and evolving digital marketplace. The solution we provide at Vidco, data. The solution to digital commerce is data. Through our acquisition of Honey Badger Media, we can provide brands the targeted traffic they need to grow. By leveraging this internal resource, we are able to acquire brands at value prices, while quickly and efficiently seeing scale come to those brands. We live to buy. Very simply, we are making an effort to consolidate this very fragmented marketplace. We have targeted to do one acquisition per quarter, and we have put those into three tiers. Our top tier is a brand that does $20 million in top line. It's cash flow positive, has full operations, and has a strong management team that will remain. That's our top tier one acquisition we'll look to do. Tier two are brands that generate between $10 and $19 million in top line. They are cash flow positive. They may have some operations, but not sort of the full operational capacity that we may want them to have, and they have certain intellectual property assets. The smallest, the tier three, is something less than $9 million in top line, could be cash flow neutral. We again look for it to have some level of intellectual property. We see it both being synergistic and scalable. Brands. Vinco has a set of core brands that it will focus on. to drive growth. Within our acquisition strategy, we will continue to add brands within the Vinco portfolio. The core brands that we are focused on driving, the recent addition of 911 Help Now. In the third quarter, we completed an acquisition of Human Earth, which is our set of different CBD and wellness products. The Four Keeps Roses brand, we continue to be excited about the opportunities that this brand has for growth. The addition of Honey Badger brings a compelling aspect as we can bring influencers and other celebrities in to help promote this brand. Purple Mountain Clean, our sanitizer brand that we recently took to market this year, it has had success. We continue to be excited about the overall sanitizer marketplace. Certainly the size of the market has grown significantly during the pandemic. We still believe post-pandemic there's a great opportunity for the sanitizer space. The Global Clean brand, which is our PPE and medical brand, it obviously has huge demand. The supply chain is a supply constrained environment. We feel our team can work through those issues and continue to make a Global Clean a thriving brand into 2021 and beyond. We do believe, obviously, some of the demand will be tied to the pandemic and the vaccine and those type of things could impact some of the large bulk demand orders we see. However, we do think that there's plenty of continued demand within that market and within that space. The smaller brands, which I think in past conversations we sort of said those little micro brands were like us hitting singles. Within the new Vinco strategy, we are going to create royalty streams related to those brands or otherwise find partners or licensors that will offset any working capital constraint that we would have by operating those brands within the Vinco portfolio and make them strictly a royalty stream back to us or other income stream back to us. As we can do that, that gives us the ability to create, quote unquote, more singles, more wins by finding those partners who will put up the capital necessary to launch and run those brands And we just receive an income stream back. So we're excited that that will open the door to continue to expand those different brands and those different innovations that come to Vinco that we find a way to monetize. The acquisition of Honey Badger has helped us formulate a platform that will drive traffic past the quote unquote digital shelf. Honey Badger is a full service content monetization company focused on brand specific messaging. By leveraging internal assets and long-term strategic partners, we are able to design digital campaigns from creation to monetization. Honey Badger will assist in growing the Vinco internal brands with a focus on high ROI from both product sales and traffic monetization. The Pop Nation arm of Honey Badger. Through our partnerships and the social media pages that we manage for our influencers and celebrities, we have a large digital traffic footprint, 371 unique visitors annually, 2 million video views per month. That will help us create that both organic and paid traffic that gets people to see the products on our digital shelf. The digital monetization slide illustrates how we monetize that traffic, how that traffic will help both our internal brands and for other ad revenue that we receive. Markets on Main is our B2B solution. There are a number of other brands and other relationships that we have that seek to use our platform, whether that's from a logistics perspective, a packaging perspective, helping them with Amazon solutions or other live shopping solutions. Allowing those brands to leverage our platform offsets our internal costs and we're excited about how that will ultimately drive earnings for us original content the strategic initiative we have is not only to have honey badger help us drive traffic to our digital shelves and our digital brands but also to create original content that helps create better conversion for those brands and for those opportunities that we have to drive sales all right under our revenue guidance for 2021 We have broken it out by brand and by our technology and our tools. Under the brand side, we expect for 2021, the 911 Health Now brand to produce 7.1 million of top line. Our Human Earth Wellness brand to create 3.8 million of top line. The Purple Mountain Global Clean brand combined will do 8.2 million. Within the 8.2 million, and we have this in our notes, We expect any of the large-scale PPU orders that we have to be recognized on a net basis. We have worked out to try to figure out how best to recognize those. Some potentially could be recognized fully top line. Some will be recognized net. This projection assumes that the large-scale opportunities will all be recognized on a net basis. The four keeps roses. Top line projection for 2021 is $1.6 million. And the royalty streams, which is that collection of sort of those micro brands or singles, is expected to drive about 1.1 million of top line, bringing our total brand sales for Vinco in 21 at 21.8 million. Under our tools, technology, and our B2B sales, which does include the recent transaction with Honey Badger, And with 911, there is a license agreement with a large telecom company to license our 911 technology and have it put into certain phones that they sell. Our projection top line for the license revenue is $2.8 million for 911 Help Now. The Honey Badger Media revenue is projected at $6.4 million. And all of the Edison B2B sales, including packaging, logistics, and other sales, we do for businesses and other services we do for businesses is projected at 7.1 million. The total media technology and B2B sales projection is 16.3 for 2021. Target for additional sales for 2021 via our buy, innovate, grow strategy of one acquisition per quarter, we are estimating to add 17 million of top line from the acquisition strategy. With that, I will turn it over to Brett Broman, our CFO, to go through the results of the quarter.
spk05: Thanks, Chris, and good morning, everyone. Please note that I will be referring to certain non-GAAP financial measures, such as adjusted EBITDA, which we believe may be important to investors to assess our operating performance. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our earnings release and the quarterly filings. We continue facing uncertainty due to the COVID-19 pandemic and are closely monitoring the resurgence of COVID-19 infections in markets around the world. Retail outlets have remained open and available to consumers with an ever increasing presence of sales to consumers through e-commerce portals. During the second half of the year, we were able to reestablish our legacy businesses and increase our revenues as well as continuing to reduce our SG&A cash spent during the quarter. We are optimistic about the upcoming year and the opportunity to execute on our new big strategy as we look to acquire new brands that can deliver significant growth potential to the company. We ended the quarter with $385,000 of cash, which was down $28,000 from the year end and $1.4 million sequentially from June 30, 2020. The decrease sequentially was related to repayments of debt of approximately $600,000 and payments made to factories for inventories. In Q3, revenues totaled $4.3 million, which was up 20% versus a year ago. The increase was a result of increases in our Ferguson Containers corrugated box operations being up 13% and our brand revenues being up 62%. We continue to see the fallout of the impacts of COVID-19 in our amusement park business, and those operations were down approximately 17% versus a year ago. Third quarter gross margin was 37.2% versus 28% a year ago. The increase in gross margin was due to the increase in our Ferguson containers business and the fixed costs included in the cost of goods sold that remained flat while our revenues increased. In addition, the company had favorable product mix of goods sold to customers related to increased sales in our higher margin Cloud B branded business versus the quarter from a year ago. STNA in the quarter came in at $3.5 million, an increase of approximately $179,000 versus the prior year. This was primarily the result of non-cash stock-based compensation of $1.2 million versus $200,000 in the prior quarter ended September 30, 2019. Our actual SG&A spend is down year over year when removing non-cash items. In 2020, the steps we took to reduce spend have reduced approximately $1.5 million of annualized cash spend related to headcount reductions throughout 2020 and the termination of lease spaces at various locations that were present in our 2019 spend. As a result of our continued cost-saving actions, including the workforce reductions, we anticipate that SG&A spend dollars in the fourth quarter of 2020 and first quarter of 2020 will be below our 2019 level. We continue to evaluate our spend and make changes where we feel we can reduce the cost while maintaining the same level of quality. From an earnings perspective, our adjusted EBITDA was a loss of approximately $183,000 for the quarter ended September 30, 2020. which was an improvement of approximately $1.1 million from the third quarter ended September 30, 2019. Included in adjusted EBITDA is approximately $181,000 of non-recurring costs, including restructuring and severance costs for headcount and rent reductions. In the fourth quarter, we will continue to include add-backs for restructuring and severance costs due to further headcount reductions and cost-saving measures. Moving over to the balance sheet. As mentioned previously, we ended the third quarter with total cash of $385,000. Total debt net unamortized discounts was $7.6 million. Inventory totaled $1.5 million, up 27% versus the previous quarter and 11% from year end. We continue to monitor and manage our debt portfolio as we close out the year. During the third quarter of 2020, We continued to take actions to cut costs and preserve cash. We completed our relocation of our warehouse in California to Florida. We will begin to see cash savings related to this in Q4 2020 and Q1 of 2021. This move resulted in a reduction of headcount related to the removal of a large majority of our headcount located on the West Coast. We continue to lower expenses across the organization and are proactively managing our working capital requirements. Due to continued cost-saving actions, we anticipate SG&A to continue to decline through 2021. COVID-19 has created both opportunities and a considerable amount of uncertainty across many markets, including the sourcing and sale of personal protective equipment. While we were initially excited regarding the confirmed orders that we have received in 2020, we have realized that the supply side of the industry is unable to keep up with the current global demand. While we still remain confident in our confirmed demand and our ability to supply PPE products, we have taken a different approach moving forward due to the uncertainty of the timing of production and transportation, which has caused delays in delivering products through our Edison Nation Medical Division. Due to the continued uncertainties and the fluid impacts of COVID-19, these expectations could be affected by heightened effects from the pandemic as the year progresses. We continue to manage cash and liquidity and continue efforts in controlling our costs. We believe the actions we are taking will enable us to continue navigating the effects of COVID-19. With that, I would like to turn it back over to Chris to close out.
spk06: Thanks, everyone. We're excited to be Vinco Ventures and the team that we've brought on.
spk04: We appreciate your continued support. We will talk to you soon.
spk02: Thank you for joining us today. This concludes today's conference. You may disconnect your lines at this time. Enjoy the rest of your weekend.
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