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 2027 first quarter 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 2027 first quarter results. The release will be available later today on the company's website at www.ebctobb.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 unprotected under the Private Securities Litigation Reform Act. Craig White, the company's President and Chief Executive Officer. Craig?

Thank you, Chloe, 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 the rest of fiscal 2027. So, during March, we ran a recruiting special surrounding our March 14th Pi Day, which yielded better than expected results. We added over 1,300 new brain partners which brought our active brain partner numbers above 5,200 and we have maintained this level of brain partners to this day. This was a 20% growth in brain partners numbers since the end of last year and continuing our brain partner growth is a key focus. At the beginning of the quarter, we made several expense reductions which are expected to exceed $1.2 million in savings for the fiscal year. These savings, which include decreases in pay for our executive team, were made to improve our cash flow and give us the ability to continue to execute our conservative purchasing plan to replenish some of our best-selling titles as well as bring in new titles. bringing in new titles energizes our brain partners and gives our retail reps some new products to present. I'm happy to say that many of these new titles came in throughout the last several months and we have introduced them with much very early success. That is some confirmation that our strategy is on point. The results for the quarter were driven by our lower revenue levels offset by lower expenses. The focus of our fiscal 2027 turnaround plan remains on growing our revenue and brand partner levels back to pre-pandemic levels, and I'm happy with the initial progress our team has achieved. Heather will talk more about this progress in her marketing update. As I have 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 financials. Thank you, Craig. Our 2027 fiscal first quarter results compared to the first quarter last year included net revenues were 4.8 million compared to 7.1 million. Our average active brand partners for the quarter totaled 5,300 compared to 7,700 last year. Loss before income taxes were 1.4 million in both quarters. Net loss totaled 1.4 million for the quarter compared to a net loss last year of 1.1 million in the first quarter. lost per share totaled 16 cents compared to a loss per share of 13 cents on a fully diluted basis. Now for an update on our working capital. Inventory levels decreased from 37.7 million at the beginning of fiscal year 2027 to 36.2 million at the end of May, generating 1.5 of cash flow from inventory reductions. Our cash balance increased from 1.3 million at the end of February to 1.8 million at the end of the first quarter. I would also like to mention an unusual counting adjustment we continue to make. Due to our historical losses and operating expectations during the turnaround period, we evaluated the need for evaluation allowance for our deferred tax assets. Based on this evaluation, we continue to recognize evaluation adjustment offsetting the deferred tax asset and eliminating the tax benefit on our income statement. This adjustment has no cash flow impact but had a direct impact to our tax expense Net Earnings, and Earnings Per Share. When the company returns to profitability, this evaluation adjustment will be reversed. The reversal will have no cash flow impact. It will have a direct impact to tax expense, net earnings, and earnings per share. This concludes the financial update. I will now turn the call back to Heather Cobb for a sales and marketing update. Heather?

Thanks, Dan. As Craig mentioned, our Paper Friday celebration in March delivered positive results across the business. The promotion generated strong recruiting activity, drove sales through our site-wide offer, increased engagement with our newly created account credits program, and helped introduce several new titles to customers. It was a great example of how coordinated initiatives can create engagement across multiple areas of the company at the same time. In April, members of our team attended the Bologna Children's Book Fair, the premier event in children's publishing. The fair provides an important opportunity to discover new content, strengthen relationships with our publishing partners, and evaluate future additions to our catalog. We also had the privilege of then traveling and celebrating many of our top performers during our incentive trip to Bermuda, recognizing those who continue to share our products and build thriving businesses, helping to expand our reach and impact. May brought the announcement of our next StoryScape incentive trip, which will take earners to Zion National Park in 2027. These experiences continue to be a powerful way to recognize achievement while inspiring future growth across the field. While brand partners were focused on serving customers and building their businesses throughout the spring, our home office team was busy preparing for Enfold, our annual convention. The event generated tremendous energy and optimism as attendees explored new product releases, participated in recruiting focus initiatives and received an early look at several technology enhancements currently in development. These include our new AI-assisted book buddy named Read, which launched this week, as well as our upcoming projects like our wish list and registry options and the ability to identify and market to specific audiences with targeted offers. The response to all of this reinforced what we're seeing throughout the organization. a strong belief in where we're headed and excitement about what lies ahead. Throughout this time period, our retail team was attending trade shows and showrooms, highlighting the new titles that we have available as well as our vast backlist offerings. As we move forward through the summer months, our attention is centered on our well-read summer campaign. We're leaning into the growing consumer interest in analog experiences, Thank you, Heather and Dan. As I mentioned before, we are happy with the initial results of our turnaround plan.