Live Ventures Incorporated

Good day, everyone, and welcome to the first quarter 2023 earnings call. At this time, all participants are in a listen-only mode. Later, you will have an opportunity to ask questions during the question and answer session. You may register to ask a question by pressing star and one on your touchtone phone. Please note this call may be recorded. It is now my pleasure to turn today's program over to Greg Powell, Director of Investor Relations. Please go ahead.

Thank you, Gretchen. Good afternoon, everyone, and welcome to the Live Ventures Fiscal 2023 First Quarter Conference Call. Joining us this afternoon for the call are John Isaac, our Chief Executive Officer and President, David Barrett, our Chief Financial Officer, and Eric Althoffer, our Chief Operating Officer. Some of the statements we are making today are forward-looking and are based on our best view of our businesses as we see them today. The actual results could differ material due to the number of factors, including those outlined in our latest forms, 10-K and 10-Q. as filed with the Securities and Exchange Commission. We have no obligation to publicly update any forward-looking statements after this call, whether as a result of new information, future events, changes in assumptions, or otherwise. You can find our press release and 10-Q referenced on this call in the Investor Relations section of the Live Ventures website. I will direct you to our website, www.liveventures.com or www.sec.gov for historical SEC filings. I will now turn the call over to David to walk through our financial performance.

Thank you, Greg, and good afternoon, everyone. Overall, the company delivered $69 million of revenue, $1.8 million in net income, and $7.5 million of adjusted EBITDA in spite of a challenging economic environment. As evidenced by our acquisition of Flooring Liquidators, We continue to execute our multi-level buy, build, hold strategic plan to maximize stockholder value. In addition, we repurchased 24,710 shares of our common stock during the course. Before we jump into the numbers, let's briefly discuss the Flooring Liquidators acquisition that we announced in January. We are very excited about the Flooring Liquidators acquisition. Flooring Liquidators is a leading retailer and installer of floors, carpets, and countertops to consumers, builders, and contractors in California and Nevada. Over the years, they have established a strong reputation for innovation, efficiency, and service in the home renovation and improvement market. The transaction, valued at approximately $84 million, was financed through a combination of cash debt, and the issuance of 116,441 shares of our common stock, representing a 3.78% dilution of LiveVenture's fully diluted common stock. Our expectation is that flowing liquidators will add a significant new revenue stream of approximately $125 million per year. We believe there are strong growth opportunities in all three of Flooring Liquidator's divisions, retail, builder, and franchise mobile store model. We look forward to sharing their results with you beginning with our next earnings report. Now, I will discuss the financial results for our first quarter. Total revenue for the first quarter decreased to $69 million, down 8.2% as compared to $75.2 million in the prior year period. Decrease in revenues is due to lower revenues in the flooring manufacturing, retail, and corporate and other segments. Flooring manufacturing revenues of $26.4 million decreased approximately $6.4 million, or 19.6%, as compared to the prior year period. The decrease is primarily due to reduced demand as a result of general economic conditions. Retail revenues of 23.3 million decreased approximately 2.9 million or 11.2% as compared to the prior year period. The decrease is primarily the result of reduced demand due to inflationary pressures, supply chain issues, and overall product sales mix. Steel manufacturing revenues of 18 million increased approximately 5.6 million or 45.4% as compared to the prior year period primarily due to the acquisition of Kinetic. Corporate and other segment revenues decreased approximately $2.4 million, primarily due to the decreased revenues at SW Financial. Gross profit for the quarter was $21.9 million, down from $27.6 million in the prior year period. The gross margin percentage for the company decreased to 31.8%, from 36.7% in the prior year. This decrease is primarily due to the tightening margins in our flooring and steel segments. The flooring and manufacturing segments' gross profit margin decreased to 17.6% as compared to 27.5% in the prior year. This decrease was primarily due to increases in raw material costs and lower demand. Retail segments gross profit margin increased to 52.5% as compared to 51.1% in the prior year. The increase is primarily due to fluctuations in product mix. Steel manufacturing segments gross profit margin decreased to 24.4% as compared to 29.2% in the prior year period. The decrease in profit margin is primarily due to increases in raw material costs as well as the acquisition of kinetic. General and administrative expense increased by 3.1% to approximately $14.6 million as compared to the prior year period. The increase is primarily due to the acquisition of Kinetic, partially offset by decreases in professional fees and other general and administrative expenses. Selling and marketing expense decreased by 9% to approximately $2.8 million as compared to the prior year period. The decrease is primarily due to a decrease in trade show and convention activity related to our flooring manufacturing segment. Operating income decreased to $4.6 million for the first quarter of 2023 as compared to $10.4 million in the prior year period. The decrease in operating income is primarily attributable to lower gross profits as a result of inflationary cost increases. First quarter interest expense increased approximately 1 million as compared to the prior year period. The increase is primarily due to increased debt balances as a result of the kinetic acquisition and increased interest rates. First quarter net income was 1.8 million as compared to net income of 6.5 million in the prior year period. Diluted EPS for the first quarter was 60 cents per share as compared to $2.04 per share in the prior year period An adjusted EBITDA for the first quarter was $7.5 million, a decrease of approximately $4.6 million as compared to the prior year period. Turning to liquidity, we ended our first quarter with cash of $12.8 million and cash availability under our various lines of credit of $21.2 million for a combined total liquidity of $34 million. I'd like to highlight our low level of leverage. As of the end of our first quarter, our net debt to the last 12 months adjusted EBITDA ratio was 2.3 times. We maintained a low level of leverage while purchasing two new businesses in the last 12 months, repurchasing shares, and making significant capital investments in our businesses. We had working capital of approximately $78.1 million as of December 31, 2022. as compared to $78.4 million as of September 30, 2022. Total assets increased to $279.1 million as compared to $278.6 million as of September 30, 2022. And total stockholders' equity increased $1.2 million to $98.4 million. As a part of our capital allocation strategy, we may make share repurchases from time to time. We believe our stock repurchases represent long-term value for our stockholders. As previously disclosed, the company announced a $10 million common stock repurchase plan in 2018. During the first quarter, we repurchased 24,710 shares of common stock at an average price of approximately $25.16 per share. As of December 31st, the company had approximately $3.4 million available for repurchases under this program. In conclusion, While we continue to face significant macroeconomic headwinds, we believe we are well positioned to continue to deploy our capital in a smart, focused, disciplined manner to create long-term stockholder value. We will now take questions from those of you on the conference call. Operator, please open the line for questions.