Live Ventures Incorporated

Good day, everyone, and welcome to the LiveVentures Fiscal Year 26 Q2 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session. Now, I'll turn the call over to your host, Greg Powell, Director of Investor Relations. Please go ahead, Greg.

Thank you, Elvis. Good afternoon, and welcome to the LiveVentures second quarter Fiscal Year 2026 Conference Call. Joining us this afternoon are John Isick, our Chief Executive Officer and President, and David Barrett, our Chief Financial Officer. Some of the statements we're 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 financials, Forms 10 and Forms 10Q, as filed with the Securities and Exchange Commission. And, as a matter of fact, our 10Q will be filed here in a few minutes for this quarter. We have no obligation to publicly update our 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 referenced on this call in the Investor Relations section of the Live Ventures website. I direct you to our website, liveventures.com, or sec.gov for our historical SEC filings. I will now turn the call over to David to walk us through our financial performance. David?

Thank you, Greg. Good afternoon, everyone. Before discussing our financial results, I'd like to touch on a few key highlights from the quarter. During the quarter, our retail entertainment and flooring manufacturing segments delivered strong operating income growth of 32.8% and 24% respectively. However, these gains were offset by a $1.9 million increase in operating loss in the retail flooring segment and a non-cash goodwill impairment charge of approximately $4 million in our steel manufacturing segment. Excluding the impairment charge, consolidated operating income would have been approximately $2 million, essentially in line with the prior year period. Let's now discuss the financial results for the second quarter ended March 31, 2026. Revenue decreased approximately $4.1 million, or 3.8%, to $102.9 million, compared to a revenue of $107 million in the prior year period. The decrease in revenue primarily reflects a decline of approximately $7.2 million in the retail flooring segment, partially offset by an increase of approximately $2.7 million in the retail entertainment segments. Retail entertainment segment revenue increased approximately 2.7 or 14.8% to $21.2 million, compared to $18.5 million in the prior year period. The revenue growth was driven by strong consumer demand across all product lines. Retail flooring segment revenue decreased approximately 7.2 million, or 26.2%, to 20.2 million, compared to 27.4 million in the prior year period. The decline was primarily driven by lower retail and contractor sales due to the continued headwinds in the new home construction and home refurbishment markets. Flooring manufacturing revenue decreased approximately $1 million or 3.2% to $30.3 million compared to $31.3 million in the prior year period. The decline was primarily attributable to continued softness in the housing market. Net of intercompany eliminations revenue decreased approximately $600,000 compared to the prior year period. Steel manufacturing segment revenue increased approximately $1.1 million, or 3.4%, to $32.5 million compared to the prior year period. The increase in revenue was primarily driven by higher sales volumes in the fabricated, hardened wear, tool, and dye businesses, partially offset by lower revenue in the metal forming, assembly, and finishing solutions business. Net of intercompany eliminations revenue increased approximately $900,000 compared to the prior year period. Gross profit decreased approximately $600,000 or 1.6% to $34.6 million compared to $35.1 million in the prior year period. The decrease in gross profit was driven primarily by the lower revenues in the retail flooring segment. Gross margin decreased increased 80 basis points to 33.6%, compared to 32.8% in the prior year period, reflecting improved margins in the steel manufacturing, floor manufacturing, and retail flooring segments, as well as a more favorable revenue mix as the higher margin retail entertainment segment represented a larger share of consolidated revenue. General and administrative expense decreased 2.3%, to approximately $27.7 million. The decline was driven primarily by targeted cost reduction initiatives in our retail flooring and our flooring manufacturing segments, including lower compensation expense and reduced professional fees, partially offset by increased compensation and occupancy costs in our retail entertainment segment. Sales and marketing expense increased 3.4%, to approximately $4.9 million, primarily reflecting higher sales and marketing activity in the retail flooring segment. Operating loss was $2 million compared to operating income of $2.1 million in the prior year period. The decrease was primarily driven by a non-cash goodwill charge of $4 million in the steel manufacturing segment, excluding The non-cash goodwill impairment charge consolidated operating income would have been $2 million compared to $2.1 million in the prior year period. Interest expense remained consistent at approximately $3.9 million as compared to the prior year period. Net loss was approximately $2.4 million and diluted loss per share was $0.80 compared with net income of approximately $15.9 million and diluted EPF of $5.05 in the prior year period. The net loss for the quarter ended March 31st, 2026 includes the goodwill impairment charge as well as a $1.4 million gain related to employee retention credits in the retail flooring segments. The prior year period benefited from a $22.8 million gain related to the modification of the flooring liquidators seller note. Adjusted EBITDA was $5.9 million, a decrease of approximately $600,000 or 8.8% compared to the prior year period. The decrease in adjusted EBITDA was primarily due to the lower gross profits. Turning to liquidity, we ended the second quarter with total cash availability of approximately $39.8 million, consisting of cash on hand of $15.2 million and availability under our various lines of credit of $24.6 million. Our working capital was $74.4 million as of March 31, 2026, compared to $62.1 million as of September 30, 2025. As of March 31, total assets were $392.5 million, and total stockholders' equity was $92.9 million. In conclusion, this quarter demonstrated both the resilience of our business model and the ongoing challenges in the retail flowing market. We are focused on reducing costs and improving operations across our businesses, and we are pleased with the operating improvements in our retail entertainment and flooring manufacturing segments. We remain committed to building on that progress in the second half of the fiscal year while driving further efficiencies in our retail flooring business. We will now take questions from those of you on the conference call. Operator, please open the line for questions.

If you'd like to ask a question, please press star 1 on your phone now, and you'll be queued in order. Again, star 1 for a question, and we'll pause briefly to form our queue. First up, we have Joseph Kowalski of JD Financial Planners.

Hello, Joe. Hi. Good afternoon, and thank you for the information. I hope there's not an echo here. I have to actually step out to a different room, and I have to leave the other phone. I'm just curious about the goodwill impairment. I generally understand accounting, but when it comes to things like goodwill, I always find it a little bit confusing. Could you go into just what exactly that refers to, please?

Sure. So for accounting purposes, you know, there's an annual goodwill test. Ours is in Q4. But if there's ever a triggering event that happens before that or outside of that testing period, then you're required to do kind of an impromptu test. And essentially, because of some of the loss in production that we're seeing, really stemming from decline in the market, you know, namely, you know, this has to do with in our steel industry with our stamping and metal forming business. And a lot of what they do relates to appliances and automobiles and things like that. And then as we're seeing our customers pull back because sales are lagging on their end, we're coming in lower than what we expected to produce in the period because they're adjusting their volume as they go. So really it's all stemming just from just continued uncertainty in the market. Okay.

Is that a paper loss, but you still have the revenues coming in?

That is correct. It is all just a paper loss, so it has no impact on EBITDA. There is no cash aspect related to it. It is just a charge that kind of wipes out the goodwill. In the old days, you used to amortize goodwill down over 15 years for book purposes, but GAAP had changed that where you do not amortize it. So the only way it ever comes off the book is if, I guess, you run into an impairment.

I understand. Thank you for that. Has the company been considering acquiring anyone at this point, or is the focus on paying down the debt from prior acquisitions?

Yeah, I think our strategy has remained the same. I think if there are good opportunities that are coming up, we're absolutely interested in looking at those. And while there isn't anything out there, we are taking advantage of that time and paying down our debt. I believe our debt was paid down about $8 million from March of last year to the current year.

Thank you. And then the final question is, when you are looking for other potential acquisitions, and this is similar to a question I've asked in the past, but maybe I'm looking at it a little differently, do you tend to look in the same areas that you currently have companies? or are you looking more to diversify the portfolio into other areas, or does that just depend on what comes up in the market?

I think it depends on what comes up in the market, but I think what we're seeing is as we begin to establish a presence in a certain market, i.e., like in the steel industry, we start to see more of opportunities just from our presence in that space. But we will diversify it. If there's something that kind of meets our criteria, then it doesn't matter, the industry.

And there is actually one final question. You've had a couple of missteps in the past, and I just wonder what you can say you've learned from those missteps as far as acquiring companies in the future. And then I will be quiet and listen. Thank you very, very much.

Yeah. Well, that's kind of a tough one. I just think really it's all just around due diligence, and every time there may be a little nuance related to an acquisition that we'll kind of pick up on and then try to fine-tune that kind of going forward. So, I mean, after every acquisition, I believe we get better. We get a little bit more knowledgeable, and so all we do is kind of, kind of look at, you know, what has happened, do a post-mortem type of assessment on acquisitions and find out what worked and what didn't work and just trying to build on the positives and mitigate those negative aspects.

Okay, fair enough. Thank you very much.

Thank you.

Once again, everyone, press star 1 for a question. We have no further questions at this time. David, back over to you for any closing comments. Thank you.

I want to thank everyone for joining our Q2 earnings call. We look forward to seeing you next quarter. Thank you.

That concludes our meeting today. You may now disconnect.