Educational Development Corporation

Good afternoon everyone and thank you for participating in today's conference call to discuss Educational Development Corporation's financial and operating results for its fiscal 2026 first quarter results. As a reminder, this conference is being recorded. On the call today are Craig Weiss, President and Chief Executive Officer and Daniel Keefe, Chief Financial Officer. After the market closed this afternoon, the company issued a press release announcing its results for the fiscal 2026 first quarter results. Reviews will be available later today on the company's website at .edcpub.com. Before turning to the prepared remarks, I would like to remind you that some of the statements made today will be forward-looking and are protected under the Private Securities Statification Reform Act of 1995. As a resource, may be from maternity from those expressed or a bribe due to a variety of factors. We are praying to Educational Development Corporation's recent plannings with the SEC for a more detailed discussion of the company's financial condition. With that, I would like to turn the call over to Mr. Craig Weiss, the company's President and Chief Executive Officer. Craig?

Thank you, Operator, and welcome everyone to the call. We appreciate your continued interest. I wanted to quickly mention that Heather has taken time to be with family as there was a recent death in her family. I will start today's call with some general comments regarding the quarter, then I will pass the call over to Dan to run through the financials, after which I will provide an update on sales and marketing and finish up the call with an update on the progress of the sale lease back of our headquarters, the Healthy Complex. During the first quarter, we experienced decreased sales compared to the prior year first quarter. This was driven primarily by a reduced brain partner levels within our paper pie division, along with continued customer sales events offered to promote our paper pie sales division and generate cash to meet our lenders' requirements. We view these sales events as short-term tactics used to generate cash and to reduce our borrowings with our bank. Over the past year, we have seen our brain partner levels decline due to several factors, including the challenging sales environment with high inflation and reduced disposable income of families with small children. Further, the direct sales industry, especially those within the product sector, has experienced challenging pay for new consultants recruiting. While we have been through downturns in the industry before, the current environment is having a short-term impact on our operating levels. While we generated less sales during the quarter, our loss before taxes declined from last year, This reflects our continued focus on reducing expenses during this difficult environment. With that, I'll now turn it over to Dan O'Keefe to provide a brief overview of the features. Thank you, Craig. To our first quarter results compared to the prior first quarter last year, net revenues were $7.1 million compared to $10 million. Our average active brain partners for the quarter totaled $7,700 compared to $13,400 in the first quarter last year. Loss before income taxes totaled a negative $1.4 million compared to negative $1.7 million in the first quarter of fiscal 2025. Net loss totaled $1.1 million compared to $1.3 million loss last year. Loss per share totaled $0.13 compared to a loss per share of $0.15 on a fully-deleted basis. Now for an update on our working capital positions. Net inventories decreased $2.7 million from $44.7 million at February 28, 2025 to $42 million at May 31, 2025. Borrowings on our working capital line of credit totaled $4.2 million as of May 31, 2025, meeting the step-down required by our bank agreement to be under $4.5 million starting June 1, 2025. That concludes the financial update. I'll now turn the call back over to Craig White. Thanks Dan. As I mentioned earlier, we continue to make strategic changes to bring new initiatives for success to our brain partners. We've concluded a successful incentive challenge. We've launched our next incentive trip, which has gone very well so far. Our percentage fail to plan has been lessened. I've started going to more industry type events to just kind of get a perspective around the industry, which has been great. We've made some great connections from not only vendors but other companies. And so I'm going to continue to do that. From an IQ perspective, we've launched guest checkouts, which the goal of any IQ project is to make it easier to do business with us, whether it's our customers or our brain partners. And the guest checkout process has been received very, very well. We've had a successful partnership with Ticket to Dream, allowing us to place thousands of books into the hands of foster kids and families. So we've also concluded our summits, which took the place of conventions for this year. We had Dallas, Atlanta, Salt Lake City, Chicago, and Philly, and we just had Philly the last few weeks. We left there very encouraged, which gave me a lot of excitement. As each summit happens, we have more information as to our financial stability or our sales or our inventory levels and so on. In some of these more intimate size level meetings, I'm able to have -on-one conversations. It's things that I can't say from a stage without any kind of context or explanation that people who have been with us for 10, 15, 20 years, I can have conversations with. We've started promotions to encourage promotion to leadership, which in turn encourages recruiting. We've got to have new titles. So as we have a clearer picture of whether we're going to complete the sales transaction, we've already started coming up with our phase one, two, and three plan for purchasing new titles and refinishing best sellers. So all these things are necessary to make it look like we're thriving business to our sales force. Okay, that concludes our sales and marketing update. Now for our building sale update. In May, we executed an agreement to sell the healthy complex. This agreement outlined a 90-day due diligence period. Recently, we announced an amendment of this agreement extending the due diligence period as well as a shortened closed period. The purpose of this amendment was to give the buyer more time to perform their due diligence and structure the building acquisition financing. We continue to work with the buyer groups and provide requested information timely so they can perform their necessary work as quickly as possible. We continue to expect the sale to be completed before the end of September. The proceeds from the sale are expected to fully pay back the bank, leaving us with no debt, and we expect to have limited borrowing needs moving forward. Lastly, I want to thank all of our shareholders for their patience, our employees for their commitment to our mission, and our customers and brain partners for their loyalty during this difficult period. I am confident in our collective ability to emerge stronger and more resilient than ever before. And so I think I'll turn that over to the operator for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star 4 by the 1 on your telephone keypad. You will hear a prompt that your hand has been raised. And should you wish to cancel your request, please press star 4 by the 2. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question.