Educational Development Corporation

Good afternoon, ladies and gentlemen. Welcome to the Decisional Development Corporation Second Quarter Fiscal Year 2024 Earnings Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press the star zero for the operator. This call is being recorded on Thursday, October 12, 2023. Before beginning the call, we would like to remind you that some of the statements made today will be forward-looking and are protected under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those expressed or implied to a variety of factors. We refer you to Educational Development Corporation's recent filings with the SEC for a more detailed discussion of the company's financial condition. I would now like to turn the conference over to Stephen Hoser. Investor Relations, please go ahead.

Thank you, Operator, and good afternoon, everyone. Thank you for joining us today for Educational Development Corporation's second quarter earnings call. On the call with me today are Craig White, President and Chief Executive Officer, Heather Cobb, Chief Sales and Marketing Officer, and Dan O'Keefe, Chief Financial Officer. After the market closed this afternoon, the company issued a press release announcing its results for the fiscal second quarter. The release is available on the company's website at www.edcpub.com. As the operator mentioned, today we will make forward-looking statements and offer that you should look at the company's SEC filings for more details on those forward-looking statements. With that, I'd now like to turn the call over to Craig White, the company's President and Chief Executive Officer. Craig?

Thank you, Steven, and welcome everyone to the call. I will start today's call with some general comments regarding the quarter, then I will pass the call over to Dan and Heather to run through the financials and provide an update on sales and marketing. Finally, I will wrap up the call with some comments on strategy and fiscal 2024 outlook. During the second quarter, our sales continued to be impacted by high inflation, which directly impacts our active brand partners. As I have said before, this is our key indicator that reflects current sales levels and where we expect them to trend in the future. I am delighted to see that, as expected, our brand partner level stabilized during the second quarter. The ripple effect of the rebrand process that we rolled out in January of this year has diminished, and every active brand partner through the end of August has either joined as a Paper Pie brand partner or made a sale this calendar year as a Paper Pie brand partner. We expect this summer to be an inflection point for our brand partner headcount, as we have already seen an increase in brand partner counts starting in August. The sales in our publishing division were also lower this quarter due to the stoppage of selling Esborn products. Under our previously announced updated distribution agreement with this vendor, sales to retail customers are being supplied by another distributor. The decrease in Esborn sales was partially offset by strong orders of our Kane Miller books, and from our learning wrap ups and smart lab toys product lines. We are excited about the continued growth opportunities of these product lines with our existing and new retail customers. We have also made several changes recently in the Paper Pie division that Heather will talk further about later in the call to not only make our brand partners more successful but also entice new brand partners to join Paper Pie. Brand partner success generates additional brand partners and that continues to be our number one focus. With that, I'll now turn the call over to Dan O'Keefe to provide a brief overview of the financials. Thank you, Craig. Our fiscal second quarter results compared to the second quarter of last year. Net revenues of $10.6 million, a decrease of $8.8 million, or 45%, compared to $19.4 million. Average active Paper Pie brand partners for the quarter totaled $18,100, compared to $26,800 in the second quarter last year, a decrease of 8,700, or 33%. Earnings before income taxes totaled $1.5 million, an increase of $2.6 million, compared to a pre-tax loss of $600,000 in the second quarter last year. After-tax income totaled $1.1 million, compared to an after-tax loss of $800,000 in the second quarter last year. income per share for the quarter was 13 cents compared to a loss per share of 10 cents on a fully diluted basis to update everyone on our inventory and working capital levels net inventories decreased 5.7 million from 67.6 million at august 31st 2022 compared to 61.9 million on august 31st 2023 now for a working capital update our borrowings on our Working capital line of credit totaled $9.7 million at the end of August. During the quarter, the company extended the working capital line of credit agreement and amended the company's credit agreement with our bank. Under the terms of the new agreement, the fixed charge covenant ratio was removed along with the debt acceleration with default, resulting in the company reclassing our existing mortgage-secured term loans back to long-term debt. Under the terms of the new agreement, the line of credit includes monthly step-downs from $10.5 million at August 31, 2023 to $4 million at maturity on January 31, 2024. Also during August, our credit card processor that processes our payments from our customers began to hold a cash reserve. The reserve held at the end of August was $1 million and is listed as restricted cash on our balance sheet. The cash reserve was increased to $1.5 million in September and is scheduled to increase again to approximately $2 million in October. That concludes the financial update and I'll now turn the call over to Heather Cobb to talk about sales and marketing opportunities in further detail. Heather?