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 second quarter and year-to-date 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 second quarter and year-to-date results. The release will be available later today on 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?

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 the rest of fiscal 2027. First, I would like to remind everyone that our second quarter is typically our softest quarter of the year, and our quarters cannot be analyzed sequentially. During the quarter, we saw progress in the execution of our turnaround strategy. This is most evident by a reduction in our sales decline. Over the past quarters, we have reported sales declines of 30% or more, and our forecasts have been for 35% down. During the second quarter, our sales declined decreased to 11%. This shows that our strategies and turnaround plan is working. During the quarter, we were able to replenish some existing best-selling titles that rattled stock as well as introduce several new titles, both energizing our sales force. The overall 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 progress we've made in the second quarter, which, as I said, is our softest period of the year. Heather will talk more about this progress 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 Daniel O'Keefe to provide a brief overview of the financials.

Thank you, Craig. Our fiscal 2027 second quarter results compared to the second quarter last year included net revenues were $4.1 million compared to $4.6 million, a decrease of approximately 11%. Average active brand partners totaled 5,100 compared to 5,800 at the end of August 2025. our average brand active brand partners increased from 4,300 at the end of February 2026 to 5,100 at the end of August 2026, an increase of approximately 19%. Our loss before income taxes were 1.6 million compared to a loss in the second quarter last year of 1.8 million. Net loss totaled 1.6 million in the second quarter compared to 1.3 million in the second quarter last year. lost per share total $0.19 compared to a loss of $0.15 on a fully diluted basis. Now for an update on our working capital. Inventory levels have decreased from $37.7 million at the beginning of the fiscal year to $34.9 million at the end of August, generating $2.8 million of cash flow from inventory reductions. Our cash balance decreased slightly from $1.3 million at the end of February 2026 to $1.1 million at the end of August. We had no borrowings under our $2 million line of credit during the quarter. I would also like to mention an unusual accounting adjustment that continues through the second quarter. Due to our historical losses and operational expectations during our turnaround period, we evaluated the need for a valuation allowance for our net deferred tax assets. Based on this evaluation, we continue to recognize a valuation 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 on our tax expense, net earnings, and earnings per share. When the company shows sign of returning to profitability, this valuation adjustment will be reversed. The reversal will have no cash flow impact, but it will have a direct impact to our tax expense, net earnings, and earnings per share. That concludes the financial update. I'll now turn the call back over to Heather Cobb for a sales and marketing update. Heather?