Live Ventures Incorporated

Q2 2024 Earnings Conference Call

5/13/2024

spk03: Good day, everyone, and welcome to today's Live Ventures second quarter conference call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing the star and 1 on your telephone keypad. You may withdraw yourself from the queue at any time by pressing star 2. Please note this call is being recorded, and I will be standing by if you need any assistance. It is now my pleasure to turn today's conference over to Greg Powell, Director of Investor Relations.
spk00: Please go ahead, sir. Thank you, Travis. Good afternoon and welcome to the Blyde Ventures second quarter fiscal year 2024 conference call. Joining us this afternoon for the call are John Isaac, our chief executive officer and president, and David Barrett, our chief financial 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 materially due to a 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 forwarded statements after this call, whether as a result of new information, future events, changes in assumptions, or otherwise. You can find a copy of our press release referenced on this call in the Investor Relations section of the Investor Relations website. I direct you to our website, www.myvendors.com, or sec.gov for our historical SEC filings. And now I'll turn the call over to David to walk you through our financial performance for the quarter.
spk04: Thank you, Greg, and good afternoon, everyone. Let's jump right in and discuss the financial results for the second quarter ended March 31, 2024. Total revenue for the quarter increased 30.2% to approximately $118.6 million. The increase is primarily attributable to the acquisitions of PMW, which was acquired during the fourth quarter of fiscal year 2023, and flooring liquidators, which was acquired during the second quarter of fiscal year 2023, which collectively added $29.6 million in revenue. In addition, the flooring manufacturing segment contributed incremental revenue of approximately $3.8 million in the quarter. The increase was partially offset by decreased revenue of approximately $5.9 million in the company's other businesses due to general economic conditions. Flooring manufacturing revenue of approximately $34.2 million increased by $3.8 million, or 12.7%, as compared to the prior year period. The increase is primarily due to increased sales related to Harris Flooring Group Brands, which was acquired in the fourth quarter of fiscal year 2023. Retail entertainment revenue of approximately $16.8 million decreased $2.3 million, or 12.2%, as compared to the prior year period. The decrease in revenue is primarily due to reduced consumer demand and a shift in sales mix towards used products, which generally have lower ticket sales with higher margins. Retail flooring revenue for the quarter was approximately 32 million, an increase of 11.3 million or 54.2% compared to the prior year period. The increase is due to the acquisition of flooring liquidators in fiscal year 2023, as well as the acquisitions of CRO and Johnson in Q1 2024. Steel manufacturing revenue of approximately 35.5 million increased 15.6 million or 78.2% as compared to the prior year period. The increase is primarily due to increased revenue of approximately 18.3 million at PMW, partially offset by 2.7 million decrease in the company's other steel manufacturing businesses. Corporate and other revenue was approximately 100,000, a decrease of 800,000 compared to the prior year period. The decrease is primarily due to the closure of SW Financial in May 2023. Gross profit for the second quarter was $35.5 million, up from $31.6 million in the prior year period. The gross margin percentage for the company decreased to 29.9% from 34.7% in the prior year period. The decrease in gross margin is primarily due to the acquisition of PMW, which has historically generated lower margins, as well as overall decreased margins in the steel manufacturing segment due to general economic conditions impacting the industry. The decrease in gross margin was partially offset by the acquisition of foreign liquidators, which contributed a gross margin of 36.5% in the quarter. General and administrative expense increased approximately $7.2 million to $29.8 million. The increase is primarily due to the acquisitions of flooring liquidators and PMW, which collectively contributed an additional $6.4 million in general and administrative expense during the quarter. Sales and marketing expense increased approximately $2.4 million to $6.5 million. The increase is primarily due to increased sales personnel acquired in connection with the acquisition of Harris Flooring Group brands and increased convention and trade show activity in the flooring manufacturing segment. Interest expense increased by approximately $925,000 as compared to the prior year period. The increase is primarily due to incremental debt incurred in connection with the acquisitions of flooring liquidators and PMW. Net loss was approximately $3.3 million, and loss per share was $1.04, compared to net income of approximately 1.6 million and diluted EPS of 49 cents per share in the prior year period. This decrease is primarily attributable to the quarter's operating loss and higher interest expense. Adjusted EBITDA for the second quarter was approximately 4.5 million, a decrease of approximately 4.7 million compared to the prior year period. Turning to liquidity, We ended the quarter with total cash availability of 36 million consisting of cash on hand at 4.5 million and availability under our various lines of credit totaling 31.5 million. Our working capital was approximately 78.8 million as of March 31st, 2024 compared to 85 million as of September 30, 2023. Total assets were 433.9 million and total stockholders' equity was 95.9 million as of March 31st. As 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. During the quarter, we repurchased 11,849 shares of common stock at an average price of approximately $25.16 per share. As of March 31st, the company had approximately $2.9 million available for repurchases under our repurchase program. In conclusion, we are pleased that our second quarter revenue increased 30.2%. Despite some challenging industry-specific headwinds, we are committed to adapting to market changes, maintaining operational efficiency, and enhancing customer satisfaction. As we navigate the current market conditions, we're confident about our business prospects and are steadfast in our commitment to our long-term strategy of buy, build, hold. This approach underscores our belief in creating sustainable growth and value over time. We will now take questions from those of you on the conference call. Operator, please open the line for questions.
spk03: Yes, sir. At this time, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may remove yourself at any time by pressing star 2. Once again, that is star 1 to ask a question. We will pause for a moment to allow questions to queue.
spk05: Let's take the question from Joseph, please.
spk03: Yes, sir. We do have a question from Joseph Kowalski. Joseph Kowalski, JV Investment Partners.
spk02: Hello, and good afternoon. Thanks for the information. Nice talking to you guys. Well, I'm very happy to hear about the increased revenue. I like the idea of having the new products. Obviously, I'm not thrilled with losses as opposed to profits. But I have a couple questions specifically. Where do we stand on debt, and is there a timetable for the reduction of that debt? I mean, I know you said how much debt there was and so on, but I mean, what's your timetable, what's your thought on the timetable for reducing the debt?
spk04: Well, we'll reduce debt as, you know, as the companies perform, you know, provide cash and really their lines of credit that we borrow as we need for current needs, but absent any future acquisitions, I mean, we're going to constantly look at our leverage ratio and just make the best decisions based on the leverage ratio and what prospects we have out there in terms of acquisitions.
spk02: I love having share buybacks, but I just wonder if it would be more prudent to focus more on debt reduction as opposed to share buybacks for the foreseeable future until things become more profitable. Is that I mean, I presume that's part of the consideration.
spk04: It is part of the consideration. And actually, the share repurchase program ends at the end of May. So that's something that we'll look at.
spk01: We only repurchased 11,849 shares. Right. No, I saw that. Yeah, exactly. So as David stated, we will make the right money allocation decisions. as they come up. A lot of our debt is sub-market now anyway, so we are getting some favorable rates in some areas and others not so much. But yes, we're keenly focused on debt refinement as one of the places that we can invest our cash.
spk02: All right, cool. So then the other two questions that I had are, you mentioned that in the entertainment world there were more of the secondary sales, which were lower ticket sales with higher margins. Is it generally better, in your opinions, to have higher margins even if the ticket sales are lower, or would you rather see higher ticket sales even if the margins are lower? Or is that not something that you're directing yourself? Is it something that you just say, well, what's the market looking for and we have to do it?
spk04: That's probably the best case of what it is. I would characterize it, but higher margins is obviously preferable. But at the same time, we also have to offer the new products because they kind of go hand-in-hand.
spk01: We're focused on the bottom line, Joe, but as David stated, sometimes we have to sell the high-ticket items in order to – increase the momentum on the lower items. For example, vintage stock, I know when a new console comes out, we have to sell it even though we make very, very little. We make pennies on it. We offer it because when we sell it, people end up psychologically, they come back to the same place. They bought the console and they end up buying games and they end up buying other items. Then they end up selling it back to us. It's more of a service more than anything, but To answer your question, we're more focused, obviously, on what brings returns to shareholders and how do we maximize profitability. Revenue is a great number to have, a great headline to have, but at the end of the day, it's all about earnings per share and bottom line.
spk02: I'm suddenly reminded of the sales of razor blades. You see all these ads for Harry's and all these companies. They want to sell you their... holder so that they can then sell you the blades because that's where the money is. So it sounds similar. Do you plan to, when you're looking for new companies to acquire, are you looking more into areas that are like the companies that you have or in the areas of the companies that you have? Are you looking for any type of company that you think would be beneficial, or is there some goal to have a certain scale of the companies that you have, I guess is what I'm getting at?
spk04: Yeah, I don't know that we look for a particular industry. I think we look for what is out there and what makes sense. it happens that as we get into the carpet industry, we start getting a lot more opportunities that complement the business that we have. And to the extent that we can make our current investments even more profitable by adding on, I think that's also another positive. But I think we're industry agnostic. But to the extent it complements what we have, that's a bonus. All right.
spk02: Gotcha. I think... Oh, the last question I had is, and forgive me because I'm no accountant, but how does free cash flow play into all this? And do you have a timetable when you think profitability will be in hand? And then I'm done.
spk04: So, I mean... From an EBITDA standpoint, we like that we're positive. When you're looking at free cash flow, I think we're in good shape. Even in today's market, everybody is having a little bit of hardships. We look at our peers. We see that we're performing about the same, if not better, in certain circumstances as well. I think we like how We're positioned, and so when we start to see an uptick, I think that's going to just help across the board.
spk02: I don't know if it specifically answers my question. I mean, look, in my business, I don't look for profits. I look for doing the right things for customers, and the profits come along with that. And that's what I would expect that you guys would be doing as well. I certainly don't expect you to say, oh, yeah, we're going to profit at any cost because that's not profit in the long run as far as I'm concerned. But I was just wondering if you had a vision or an idea based on your knowledge of the markets as far as when it appears that things would turn from losses to profits. Maybe you do, maybe you don't. I don't know.
spk04: No, no, no. I think, I mean, we're in different industries that are all kind of, somewhat related, but also have its own unique aspects. But when you're looking at the flooring business, I mean, it's interest rates. Interest rates is what drives consumer decisions. And so that's one of the things we're kind of keeping an eye on. When people are moving, then they're replacing carpets. They're buying new carpets. When we're building new houses, then there's more carpets. getting sold. When, you know, a market is tight, interest rates are high, and liquidity is down on the consumers, we're going to see less spending, and that kind of even correlates even to the retail side, which will, you know, on the retail side, on the entertainment with vintage, we see that, well, people are spending less money because they have less free cash, but they're buying higher margin items for us, so we're making up for it a little bit on the back end. So, yeah, there are kind of various things, just I think in general, manufacturing, interest rates, and just consumer sentiment.
spk02: All right, so I'll go talk to Jay Powell. Thank you very much.
spk01: Let us know what he says. Thank you. We'll do.
spk05: We have no further questions in the queue at this time.
spk04: Okay, well, I'd like to thank everyone for calling in to the second quarter earnings call, and I look forward next quarter to talking with everyone. Thank you. Thank you.
spk03: This does conclude today's program. Thank you for your participation. You may disconnect at any time.
Disclaimer

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