Live Ventures Incorporated

Everyone, and welcome to the Live Ventures Fiscal Year Q3 2025 Conference Call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session. Now, I'd like to turn the call over to Greg Powell, Director of Investor Relations. Please go ahead, Greg. Thank you, Elvis. Good afternoon, and welcome to the Live Ventures Third Quarter Fiscal Year 2025 Conference Call. Joining us this afternoon are John Isaacs, 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, Form 10-K and Form 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 a copy of our press release that was referenced on today's call in the Investor Relations section of the LiveVentures website. I direct you to our website, liveventures.com, or sec.gov, for historical SEC filings. I will now turn the call over to David to walk through our financial performance.

Thank you, Greg. Good afternoon, everyone. Before discussing our financial results, I'd like to touch on a few key highlights from the quarter. We are pleased to report that all four of our operating segments delivered improved performance in the third quarter, with each achieving higher operating income and operating margin compared to the prior year period. These results were delivered despite continued softness in the new home construction and home refurbishment market. which remain a headwind for our retail flooring and flooring manufacturing segments. As noted last quarter, in response to the challenges in our retail flooring segment, we appointed a new executive leadership team. The new team is actively implementing operational cost-saving initiatives focused on top-line growth and improving efficiency. During the quarter, our targeted cost-saving initiatives are having a significant impact in generating considerable savings in the retail foreign segment. In addition, our other segments are also benefiting from the cost-saving measures implemented during the quarter. Now let's discuss the financial results for the third quarter ended June 30, 2025. Total revenue for the quarter decreased $11.2 million, or 9.2%, to approximately $112.5 million. The decrease is primarily attributable to the retail flooring and steel manufacturing segments, which collectively decreased by approximately $12 million. The retail entertainment segment revenue increased $2.5 million, or 15.2%, to approximately $19 million as compared to the prior year period. The increase in segment revenue is primarily due to increased consumer demand for new products, which typically have higher selling prices. Retail flooring segment revenue decreased $6.6 million, or 17.9%, to approximately $30.4 million as compared to the prior year period. The decrease is primarily attributable to the disposition of certain Johnson Flooring Home carpet 1 stores in May 2024 and reduced consumer demand due to the weakness in the housing market. Flooring manufacturing segment revenue decreased $1.8 million, or 5.7%, to approximately $31.3 million as compared to the prior year period. The decrease is primarily due to reduced consumer demand as a result of the ongoing weakness in the housing market. Steel manufacturing segment revenue decreased $5.4 million, or 13.8%, to approximately $33.6 million as compared to the prior year period. The decrease was primarily driven by lower sales volumes of certain business units, partially offset by incremental revenue of $5 million at Central Steel, which was acquired in May 2024. Gross profits for the quarter increased $1.2 million, or 3.4%, to $38.3 million. Gross margins increased by 410 basis points to 34%, from 29.9% in the prior year period. The increase was primarily driven by higher margins in our steel manufacturing and flooring manufacturing segments. The increase in growth margin in the steel manufacturing segment is primarily due to improved efficiencies and the May 2024 acquisition of Central Steel, which has historically generated higher margins. The increase in growth margin in the flooring manufacturing segment is primarily due to improved efficiencies and more favorable product mix. General and administrative expense decreased approximately 3.8 million or 12.6% to 26.3 million. The decrease was primarily due to lower compensation and other operating expenses resulting from targeted cost reduction initiatives in the retail flooring and flooring manufacturing segments. Sales and marketing expense decreased approximately 1.8 million or 31.5% to 4 million. The decrease was primarily due to lower compensation and marketing expenses resulting from targeted cost reduction initiatives and the retail flooring and flooring manufacturing segments. Interest expense decreased 9% to $3.9 million. The decrease was due to lower average debt balances as compared to the prior year period. Net income was approximately $5.4 million for the quarter, and the rate of EPS was $1.24, compared with a net loss of approximately $2.9 million and a loss per share of $0.91, in the prior year period. That eighth term for the third quarter includes a $1.5 million gain on employee retention credit and a $1.3 million gain on the settlement of a holdback liability related to the precision marshal acquisition. Adjusted EBITDA for the quarter was approximately $13.2 million, an increase of approximately $7.1 million compared to the prior year period. The increase in objectives for the improved operating performance during the third quarter of 2025 reflecting the targeted cost reduction initiatives in the retail flooring and other segments. Turning to liquidity, we ended the quarter with total cash availability of $37.1 million, consisting of cash on hand of $7.6 million and availability under various lines of credit totaling $29.5 million. Our working capital was approximately $65.9 million as of June 30, 2025, compared to $52.3 million as of September 30, 2024. As of the end of the quarter, total assets were $387.5 million, and total stockholders' equity was $94.3 million. As part of our capital allocation strategy, we may make share purchases from time to time. We believe our stock repurchases represent long-term value for our stockholders. During the quarter, we repurchased 12,695 shares of the company's common stock at an average price of $8.83 per share. In conclusion, we are pleased that all four of our operating segments delivered improved performance in the third quarter of fiscal 2025, with each reporting higher operating income and operating margins compared to the prior year period. Our third quarter results reflect the impact of our strategic pricing actions, and continued focus on operational excellence. These outcomes underscore the success of our disciplined cost management and efficiency initiatives across our diversified portfolio. We believe these results affirm our ability to enhance profitability and generate strong cash flow, even in challenging market environments. We will now take questions from those of you on the call. Operator. please open the line for questions.

Certainly. If you'd like to ask a question, please press star 1 on your phone now, and you'll be placed into the queue in the order received. Again, press star 1 for a question, and we'll pause for a moment to form our queue.

And our first question comes from Joseph Sawalsky.

Please go ahead.

Gentlemen, very nice. I like what I read and what I heard. Sounds Generally very good. I appreciate it.

Thank you. We're excited.

A couple questions, and I'll throw them all out there, and then you can do with them if you wish. Generally, my understanding is that your goal was to acquire companies and leave the management to those companies while you take care of, you know, the headaches and whatever overhead there is. In this particular case where you've, I think it was you said with flooring, where you've taken a more active role, is that indicative of something that you intend to do in general with your companies? Is that particular to that area? I'll wait for the answer. Yeah. And then I'll give you the answer afterwards because they're all related.

Yeah. I would say our strategy remains the same. Our intention is always keep the management teams in place. as long as they're delivering the operating performance that we expect. And if we're, you know, if we see that there's a gap, we'll step in and make sure that we put the right people, the right resources in order to generate the, you know, return for our shareholders.

John, we prefer not to intervene, but we will when we have to. And in this case here, if you look at our historical financials, we have to intervene and make changes. This is what you see today, and we're very pleased now with the changes. What's your next question?

I appreciate that, and I think that that's a great way to act. I was just curious to know if it indicated a change, which you're telling me it doesn't. So that I appreciate very much, all of that. Okay. These couple questions all kind of are related to, When you're looking now for companies to acquire, are you looking largely in the same general areas that you have companies already, or are you looking to expand the footprint into different areas and build? That is, do you think you have a solid core of the companies you have within those areas and it's time to look outside of that, or do you think it's better to look for more to fill out those core areas, or are you doing both? The second question is, do you have a committee that looks for these things, or is it just one or two individuals? And then the third question is, do you wait to have a certain amount of cash on hand to determine whether it's time to buy another company? And then finally, what do you think about the marijuana space? I know it's kind of oversaturated, and there's questions of government regulation, but I was just curious to know if that's something that's on your radar screen.

I'll cut off the... The short answer, Joseph, is we will look at anything and everything. Obviously, if it's something that could be perceived as a bolt-on acquisition and we feel that we have a management team that knows the space very well, then we will likely focus on that more. But we will look at everything and the team is the C3 team. We look at all acquisitions together and we discuss them as they mature. And regarding the marijuana space, as you know, we don't have any marijuana space. I think it's totally not legal yet. So there are many other opportunities out there for us, you know, that low-ranking crews and other potential acquisitions. We don't have to go that far yet. So, yeah, we'll look at anything and everything, though.

So will there come a point, do you think, where you have enough in a particular – business area and you say you know what we're full on this we're good and we'll just move up elsewhere or do you think it'll just be whatever you think you know at that moment and you don't know if there will ever be a time you'll have enough in a particular sphere or particular area we'll look at opportunities as they arise you know and what our opportunity costs are and what are you know what we're looking at at the moment if we find you know that something's

delivers a return of X, you know, give or take another acquisition that will give us a return of 2X, then we will look at both and evaluate what's, you know, best for shareholders, what delivers the most return, what would be lowest amount of risk. I mean, everything, this is what we do at the live level is evaluate and allocate capital as much as possible.

And then the last question was, do you wait for a particular amount of cash on hand before you start

thinking about doing something else or is it just if you find something you'll you know borrow if needed to do it and the cash on hand is not as relevant we're always looking at deals and looking at opportunities uh you know it's a slow process so we're always looking at opportunities we're not looking at you know we need to have you know and the banks will be able to make it happen. We're always looking at deals, and we always have come up with creative ways to finance them, whether it be bank financing, seller financing, any other type of financing.

Thank you. Thank you very much for basically keeping everything open, which is, I guess, the best way to be. And I really appreciate you taking the time to address my question.

Thank you for your support.

Thank you.

Our next question comes from Todd St. Mary.

Gentlemen, I wasn't going to comment on this, but listening to the last set of questions, I feel compelled to do so. I'm actually a retired executive from a company called U.S. Filter, and we grew by acquisition in the 1990s. We actually did 150 deals in two years. So I know something about this, and I would have... Two suggestions. The first one is I would recommend you continue to focus on running your business and improving it the way you have this last quarter. Because I think if you do that, there's a good chance that you can get your earnings on a consistent basis to $2 or $3 or maybe even more per share. That would drive your share price up to $30 or $40 or $50 again. And then what you can do from there is is use your stock as currency for deals. So that's a far more efficient way to grow my acquisitions than cash or debt in general. If you can run to your set share price. And that was kind of the magic of what we did back in the 90s. So I'm just throwing that out there. I did have a series of questions on the quarter. And the first question I have is in regard to... the improvements you made with margins and with your cost cutting, do you see any additional improvements coming, or have you done everything that you've targeted?

No, we're not done yet. And so I think when we look at the retail flooring segment, we feel like there's still more work to do. We're doing, you know, much better than where we were a year ago. but I think we still have room for improvement, and there are still initiatives like lease negotiations and things like that that we're working on in that segment that are yet to yield, you know, haven't closed the numbers yet, so there's still more to come, and we're continuing to focus, you know, and so right now, even in the retail scoring segment, there's still room to go, but It's just a continuous process. We're always looking, and especially during the times when the market is down, I guess it makes us stronger coming out of that, out of a soft market.

Okay, so as I'm thinking about this going forward then, I can reasonably expect that the margin improvement we saw this quarter And the cost savings in FG&A will continue or even improve over time.

We will always be evaluating these things, Todd, whether we're in a good market, in a bad market, you know, in a good economy, bad economy. This is the jobs of the CEOs of our subsidiaries. We're always evaluating for more and more efficiencies. But, yes, some of our operating subsidiaries have more opportunities than others within our portfolio. And so what David said was correct. We believe there's more room for improvement, and our heads of our subs are working very, very hard on taking those and extracting those for our shareholders.

Okay, thank you. My next question is, are any of your business segments seeing material impacts from tariffs, either good or bad?

the answer, I guess the short answer is no. There's been a little bit, but it's all been very minor, not even really noticeable. We have been taking a lot of actions because, you know, you never know what's going to happen if this space is pretty volatile. So, we have been diversifying our vendors in different countries as well as in the U.S., making sure we have those relationships so that way we can act if it were to become The other thing I would just say is I think we are as well positioned as any of our peers, such that if it ultimately had to turn out that we need to increase prices, it would be more of a market thing, not a live thing.

Do you think you might have an opportunity in the steel manufacturing business because of the steel tariffs, where it could actually be a plus for you?

It is in the steel because if those prices go up, you know, some of our subsidiaries carry a decent amount of steel on hand. So as those prices go up, we're sitting on inventory that's at a lower cost, which could provide for better margins and more profitability if the space goes that way.

Okay. Thank you for that. My next question is on revenue. Obviously, revenue has been pressured here for the reasons you stated. I'm wondering if you could give us a feel on what you see going on in the next three to six months to 12 months. Have we bottomed out or is it going to get worse?

You know, we typically don't provide speculation on kind of our, you know, these types of things, but I think what I'll say is what I think we all see. I think it's been pretty volatile. There's There's reasons why we get some hope and optimism. I mean, some of those would be, you know, a lot of our subsidiaries are impacted by the interest rates, specifically in the housing market. The interest rate prices have just slowed down the housing market quite a bit. That cycles renovations and things like that for new flooring, which impacts our flooring manufacturer and our retailer. also in our fuel industry some of our providers make parts that use as raw materials in the manufacturing of other items like appliances and automobiles so those are things that are typically financed so that's another thing that the consumers look at and with them being a big ticket item not only is it just interest rates but it's also I think the disposable income of the consumers So I think there's reason for optimism in that it seems like now the general sense is that I'm hearing is that it sounds like rates may be going down here in September. But at the flip side of that also looks like the jobs and market is a little bit more softer. So how all that's going to play out, we'll see. But I think we've positioned ourselves as well as any of our peers.

Okay.

There's a lot of unknown factors, interest rates that David mentioned, you know, wars, what's happening in the world. But as you saw, I mean, we've been hyper-focused on the bottom line in our, you know, earnings this quarter. And you can see from our numbers, revenues were down, adjusted even to a double. So, you know, we've been focused on efficiencies. And we'll continue to focus on efficiencies. And we'll see what happens with revenue, what happens with the economy, what happens with the fiscal policies.

Well, you did it. You've done a great job this quarter with the improvements. There's no question. I was really excited when I saw the report. So I compliment you guys on that. And I honestly feel if you can get any kind of revenue growth, your bottom line is going to surge. I mean, it'll be great.

Exactly.

This might be a stupid question because I'm not an expert at all in your business. But is there any opportunity for your flooring businesses to take advantage of what is happening with the manufacturing build-out in this country to actually do it like an office building and things like that?

I'm not sure I follow.

Well, I mean, your flooring businesses are concentrated, if I understand it correctly, in the residential markets.

We have residential and commercial.

Are you seeing an opportunity on the commercial side? I mean, I'm assuming with all this money coming in to increase manufacturing in the U.S., that there's got to be a great opportunity there for Florence.

Yeah, we haven't seen any of that trickle through yet. I mean, I think there's a couple of areas, right? I mean, another one of the areas that I was thinking about was, Central Steel does all the racking and stuff like that for data centers. And with the AI that's out there, they're actually doing pretty well in all the acquisitions that we had last year. So I think there's going to be different opportunities that come up just with the different things that we're seeing in the market, such as what you're talking about, more manufacturing here. So We'll take advantage of them as we can. But, yeah, we do some commercial as well as residential.

One more thought just off the top of my head. And, again, I wasn't planning on talking about this at all. So when the acquisition conversation came up, it probably triggered for me. You might want to think about maybe trying to target a company that has access to the markets that you want to get into. Maybe not. a great manufacturer, per se, you know, but somebody that has access to those markets that you can buy basically is almost like a sales arm for your manufacturing. Right, right. You know, that might be a really good acquisition for you guys. Yep. I guess that's it. Oh, I did have one more. Have you ever talked about if the business gets, and I know this is probably a year or two out, but You guys are doing share buybacks right now, small ones. But if you get to where the business is consistently generating earnings of $2 or $3 or $4 or more, would you ever consider doing a dividend?

I don't know that we've kind of gotten far enough along to consider that. I think at this point, one of the things that we're focused on is paying down our debt and driving shareholder value by decreasing our debt. Okay. But, I mean, I think that's another avenue. You know, once we start seeing some of these improved, consistent, improved performance, then those are things we'll have to be thinking about.

Well, if I just go to the last comment, and I will just repeat it, but I think it's important. If you have more acquisition targets and that's the direction you want to go, I strongly encourage you to keep doing what you're doing and take the actions needed. to focus on your business and drive that share price up and really consider using your shares as currency. I think it could be great for you. Of course, it adds a lot of liquidity to the stock.

I agree. You just got to get that stock price higher.

All right, guys. Well, I appreciate your patience with me.

Thank you, Tony. Thank you for your questions. Thank you. If you have no further questions at this time, that concludes our meeting today. You may now disconnect.

Thank you.

The host has ended this call. Goodbye.