Crown Crafts, Inc.

Greetings and welcome to the Crown Crafts Fiscal Fourth Quarter of 2026 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. 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'd now like to turn the conference over to your host, Olivia Elliott, Chief Executive Officer. Please go ahead.

Thank you, operator, and welcome everyone to this morning's call. We're glad you can join us. We generated solid quarterly results in an operating environment that continues to be challenging. This reflects the strength of our business model, the broad appeal of our brands, and of course, the hard work of our dedicated team. Despite global conflicts, fluctuating tariffs, higher gas prices, and consistently high inflation weighing on the American consumer, were able to hold net sales almost flat with the prior year at $22 million, bringing our full-year net sales to more than $80 million. In addition, our growth margin improved to nearly 23% during the fourth quarter, up 460 basis points versus the prior year period. The result was positive net income for the quarter and operating cash flow of more than $8 million for the fiscal year. An exciting fourth quarter highlight was our February announcement of the relaunch of Manhattan Toys Groovy Girls, which we kicked off at the North American International Toy Fair following a ceremonial ringing of the closing bell at NASDAQ. This iconic collection of soft-fashioned dolls has already been met with a strong reception since its official rollout to specialty retailers just last month, and it's perfectly time to tap into today's retro-inspired consumer markets. We're excited about the potential for this beloved brand and other opportunities as we continue to focus on innovative internal product development to expand our product offerings. In addition to driving revenue growth, another priority of ours is margin expansion and the resulting bottom line growth. We believe our growth margin of 22.9% for the quarter, while improved over the prior year's results, has further room to expand as we grow sales, improve operating leverage, and continue our spending discipline. This includes our continued efforts to execute on cost initiatives with our previously communicated plans, consolidate certain internal operations to eliminate redundant activities and create a leaner operating structure. Turning to our balance sheet and capital allocation, which Claire will provide further details on in a moment, as I mentioned, we generated more than $8 million of operating cash flow during fiscal 2026 despite the soft operating environment, and we continue to have sufficient liquidity to support our growth plan. Our capital allocation strategy is well balanced, and during the fourth quarter, we paid our regular dividend while continuing to invest in internal product development and marketing efforts to grow our market share over time. In closing, Crown Crafts is executing effectively. were focused on driving our long-term growth opportunities while managing inventories, tightly controlling costs, and strategically allocating capital toward growth initiatives, as well as returning capital to our loyal shareholders. Looking ahead, our foundation for success includes our strong brands and licenses, our valued retail and licensing partners, our solid balance sheet, and of course, the talented people who drive our success each day and will ultimately help us create meaningful shareholder value over time as a leading producer of infant, toddler and juvenile consumer products. With that, I'll turn it over to Claire to take us through additional financial details on our quarterly results.

Thank you, Olivia, and thanks everyone for being with us today. For the fourth quarter of our fiscal year, we generated net sales of $22.4 million despite continued softness in consumer spending. which compares to $23.2 million in the year-ago fourth quarter. Our gross profit of $5.1 million represented a 22.9% margin, which was up from 18.3% in the fourth quarter of 2025. As Olivia mentioned, this 460 basis point improvement was driven by our strategic pricing initiatives and more favorable mix of higher margin products. We were able to hold marketing and administrative expense almost entirely flat versus the prior year quarter at $4.6 million despite continued inflationary dynamics. We were also able to reduce interest expense at $194,000 for the fourth quarter of 2026 compared to $333,000 a year earlier, benefiting from a sizable reduction in debt. The bottom line result was positive net income for the quarter of $280,000, which improved from a loss of approximately $11 million the prior year fourth quarter due to a non-cash goodwill impairment charge in the year-ago period. Our basic and diluted earnings per share were $0.03, up from a loss of $1.04 per share the prior year. Moving on to our balance sheet, we ended the fiscal year with total assets of $70.7 million. Inventories were $28.4 million as of March 29th, up slightly from $27.8 million at the end of fiscal 2025. Our total debt balance was $14.1 million at year-end, a reduction from $18.5 million at the end of fiscal 2025. And we had $12.5 million of undrawn availability on our revolving credit facility. Lastly, as Olivia referenced, our net cash from operating activities was $8.3 million for the fiscal year, further supporting our solid financial foundation and the execution of our business plan. Wrapping up, we executed well during the final quarter of the fiscal year despite a less than robust macro environment as we were able to significantly improve our gross margin versus the year-ago quarter. We have the necessary competitive advantages, strategic plan, and financial strength for our skilled team members to continue their efforts day in and day out, grow the business, and enhance profitability as we move into fiscal year 2027. With that, operator, Olivia and I would be happy to take questions if you could please open the line.