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 fourth quarter and full year results. As a reminder, this conference is being recorded. On the call 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 2026 fourth quarter and year-end results. The release will be available after today on the company's website at www.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 litigation reform act of 1995. Actual results may differ materially from those expressed or implied due 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. With that, I would like to turn the call over to Craig White, the company's president and chief executive officer. Craig, please go ahead.

Thank you, Alan, and welcome everyone to the call. We appreciate your continued interest. 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 Heather will provide an update on sales and marketing and IT projects, and then I will provide an update on our plans for fiscal 2027. Much of our fourth quarter was focused on our turnaround plan of selecting and ordering critical inventory. During the quarter, we began a conservative purchasing plan to replenish some of our best-selling out-of-stock items, as well as purchase new titles. To remind everyone, it takes anywhere from four to six months from the time we issue a purchase order until the product is received and available for sale. I am pleased to report that we have received some of these replenishment and new titles, and I've seen the excitement this has created in both our sales divisions. We are still expecting most of these new titles over the next few weeks and plan to showcase them at our annual convention in June. Heather will talk more about this in her marketing update. As I've said before, our turnaround plan is not an overnight change, but a carefully developed plan for growth over the next few quarters and years. With that, I'll now turn the call over to Dan O'Keefe to provide a brief overview of the financials. Thank you, Craig. To start, a fourth quarter summary compared to the prior year fourth quarter, net revenues for the quarter were $4.2 million compared to $6.6 million. Average active paper pie brand partners totaled $4,500 compared to $9,400. Lost before income taxes were $2.1 million, a $600,000 decline over the prior fiscal fourth quarter. Income tax expense for the quarter was $1 million due to a one-time valuation allowance of $1.5 million. Net loss for the quarter totaled $3.1, a decline of $1.8 million over the prior year fiscal fourth quarter. Loss per share totaled $0.37 compared to a loss per share of $0.16 on a fully diluted basis. Next to the fiscal year summary compared to the prior year, net revenues of $22.9 million compared to $34.2 million. Average active PaperPrior brand partners totaled $5,800 compared to $12,300. Earnings before income taxes totaled $5.3 million, excluding the gain on the building sale of $12.2 million. The loss before income taxes were $6.9 million. Income tax expense was $3 million with an effective tax rate of 56.5% due to a one-time valuation allowance of $1.5 million. Net earnings totaled $2.3 million. Earnings per share totaled $0.27 compared to a loss of $0.63 last year on a fully diluted basis. Now for an update on our working capital. Inventory levels decreased from $44.7 million at the beginning of the fiscal year to $37.7 million at the end of the fiscal year, generating $7 million of cash flow from inventory reductions. At the end of the fiscal year, the company had approximately $1.3 million of cash on her balance sheet. I would also like to mention some unusual accounting adjustments made during the fourth quarter. First, due to our accounting policy surrounding classification of long-term inventory, Coupled with our decline in sales, we made a 3.6 million reclass of inventory during the fourth quarter from current inventory to long term inventory. The reclass had no P&L impact as it only means that we have a longer term supply of titles we continue to sell each month based on current sales volumes. As sales increase, we expect more and more inventory to be reclassed from long term inventory to current inventory. Secondly, Due to our historical losses prior to the fiscal 2026 and our operational expectations during our turnaround period, we evaluated the need for evaluation allowance offsetting our net deferred tax assets. Based on this evaluation, we recognized a one-time valuation adjustment of $1.5 million to offset our net deferred tax assets. This adjustment had no cash flow impact, but had a direct impact on our fourth quarter tax expense, net earnings, and earnings per share. When the company returns to profitability, this valuation adjustment will be reversed. The reversal will have no cash flow impact, but will have a direct impact to our tax expense, net earnings, and earnings per share. This concludes the financial update. I'll now turn the call over to Heather Cobb for a sales, marketing, and IT update. Heather?

Thanks, Dan. While our current results reflect the challenges of the past two years, we remain confident in both the direction of our strategy and the opportunity ahead of us. One of the clearest drivers of future growth for our business is growth on our paper pie size through the brand partner community. As our active brand partner count increases, we count on that momentum to positively impact sales, customer engagement, and overall business performance. For that reason, much of our sales and marketing focus in fiscal 2027 is centered on attracting, onboarding, and retaining new brand partners, while also continuing to engage existing leaders and teams. We were encouraged by the response to our March Join Special, which produced meaningful engagement, adding almost 1,400 new brand partners, showing that there is still strong interest in our opportunity when paired with the right timing, messaging, and product excitement. We have additional strategically timed initiatives planned throughout the year that are designed to support both recruiting and sales activities. At the same time, we are being intentional about protecting the long-term value of our products and our brands. We believe there is an important balance between offering thoughtful promotions or sales that meet consumer expectations and while avoiding excessive discounting that can weaken our overall brand perception over time. Our strategy moving forward is focused on creating excitement and urgency in purposeful ways while continuing to reinforce the quality, educational value, and uniqueness of our product offering. We also believe we are well positioned within a growing cultural shift toward more intentional and analog experiences. Parents and families are increasingly looking for opportunities to disconnect from constant screen time and reconnect through hands-on learning, reading, creativity, and meaningful interaction. That trend aligns directly with who we have always been as a company. Our mission of creating the story of tomorrow through people, purpose, and products continues to resonate, and we believe our educational books, games, and learning resources meet an important need in today's marketplace. As Craig mentioned earlier, the arrival of new titles and replenishment inventory has already generated renewed excitement across both of our sales channels. Combined with our continued investment in technology and enterprise-level initiatives, we believe we are building a stronger foundation for long-term growth. Our IT and marketing teams are actively developing tools and platform enhancements designed to simplify how brand partners share our product while also creating a more seamless and enjoyable customer experience. Upcoming initiatives include a variety of platform enhancements focused on improving product discovery, streamlining and personalizing the customer journey, expanding functionality for both brand partners and customers, and supporting long-term engagement and retention. While we continue to adapt to changes in consumer behavior and the direct selling landscape as a whole, our overall strategy remains consistent. Increase our retail presence, strengthen the brand partner experience, provide exceptional products that support literacy and learning, and create sustainable growth through community connection and product sharing. And one of the best ways that we do that, and Craig referenced it earlier, is through our national convention that happens each year. Next month, we will have Several hundred brand partners come into Tulsa to hear from speakers like Rory Vaden, two of our Kane Miller author and creators, and will spend an entire weekend focusing on solving the problem of disconnection with a way to connect with both their customers, new hosts, and next team member. We understand that turnarounds take time, and we are encouraged by the progress that we are making and confident in the path ahead. Our team remains deeply committed to the mission of this company, and we believe that that commitment, combined with strategic execution and renewed sales force growth, positions us to build momentum throughout fiscal 2027 and beyond. Now, I will turn the call back over to Craig.