Luvu Brands Inc

Greetings, ladies and gentlemen, and welcome to LuLu Brands, Inc.' 's fiscal fourth quarter and full year 2020 conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce Ron Scott, the company's chief financial officer. Mr. Scott, you may begin.

Thank you, Christine, and thank you to everyone who has joined us today for Lubu Brand's fourth quarter fiscal 2020 conference call. Joining me today is Louis Friedman, our founder, president, and chief executive officer. Yesterday afternoon, we filed our annual report on Form 10-K for the year ended June 30, 2020, and issued an earnings release that highlighted the company's fourth quarter and full year performance. There are a number of items that we look forward to discussing with you this morning, including Lubu Brand's financial results for the fourth quarter and year end at June 30, 2020, recent developments in Lubu Brand's operational activities, as well as the company's near-term plans for the future. At the conclusion of this call, we will be answering questions during the brief Q&A session. Before we begin, I'd like to remind you that today's call contains forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including Without limitation, statements regarding our preliminary unaudited net sales for the three months ended September 30, 2020, statements made with respect to our ability to continue as a going concern, the impact of the COVID-19 pandemic on our company, our ability to continue to generate revenues and report profitable operations, our ability to repay outstanding promissory notes, our ability to pay our operating expenses, and lack of access to additional capital, our ability to effectively compete, and the lack of an active trading market for our common stock. you are urged to carefully review and consider any cautionary statements and other disclosures within our filings with the Securities and Exchange Commission. All forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, many of which are generally outside the control of the Lubu Brands and are difficult to predict. Louisville Brands does not undertake any duty to update any forward-looking statements, except as may be required by law. Also during our call today, we may discuss non-GAAP financial measures which adjust our GAAP results to eliminate the impact of certain items. You'll find additional information regarding these non-GAAP financial measures and a reconciliation of these non-GAAP to GAAP measures in our form 10-K and press release filed yesterday. Now, with that long paragraph out of the way, I'd like to start the call with a few words from Lubu Brands founder and CEO, Louis Friedman. Louis? Louis Friedman Hi.

Yes. Good morning, everyone. And thank you, Ron, and thank you, everyone, for joining us this morning. We hope that each of you, your families, and your loved ones continue to be healthy and safe during these times of pandemic and uncertainty. I'm pleased to open today's call by reporting that everyone at Louvre Brands is doing well. In our manufacturing facilities where remote work isn't feasible, we continue with robust safety protocols per the CDC guidelines. As many of you know, Luvu has three distinct brands advertised and promoted to consumers. These include Liberator, Jaxx, and Avana. These brands are sold directly on our websites and through Amazon, mass market web retailers, specialty retail stores, and to wholesale distributors worldwide. We also manufacture collections for Wayfair, school specialty, room and board, and rooms to go. Fortunately, the majority of our products is vacuum compressed, flat packed, and efficiently ships through e-commerce. As a result, we experienced strong demand during the fourth quarter of fiscal 2020, as many consumers were working from home, staying at home, and sheltering in place. As of this time, we have a robust schedule of new product development in the works across all brands and channels. Information on this activity will follow as soon as new collections are introduced. Also worth noting is that our current emphasis with PPE will be directly with the DLA on a per solicitation and contract basis. More information on this too will be available shortly. While it's difficult to predict the longer term implications of manufacturing and marketing of consumer products, For now, at least, there seems to be a fairly consistent and strong demand across all of our brands and channels of distribution. Starting our first quarter, from July 1st through September 30th, our net sales are 30% ahead of the same period last year. Now I'll turn this call over to Ron Scott, Luva Brands' Chief Financial Officer, to summarize some of the financial highlights of the fourth quarter and a full year of fiscal 2020. Ron, please go ahead.

Thank you, Louis. I'll briefly touch on some of the financial highlights from the fiscal fourth quarter of 2020. Net sales increased 37% to 5.5 million compared to 4 million in the same year-ago quarter. Sales of Liberator products increased 12% to 1.7 million from 1.5 million in the prior year. Jack's product sales totaled 1.6 million, up 30% from 1.1 million in the fourth quarter of the prior year. And Ivana product sales increased 127% to 1.8 million from 0.8 million in the prior year. And that increase in Ivana product sales was due to approximately 780,000 in PPE product sales in addition to other sales of the other Avana products. Gross profit for the fourth quarter totaled $1.8 million compared to $865,000 in the prior year Q4. Gross profit as a percentage of net sales increased to 33% from 22% in the prior year, primarily driven by a shift to greater sales through our e-commerce websites. Operating expenses during Q4 were $880,000, decrease of 16% or approximately $162,000 from the prior year fourth quarter, and the decrease included approximately $272,000 capitalized software costs relating to the e-commerce website upgrade. Net income for the quarter was 796,000 or one cents per share compared to a net loss of 321,000 or zero cents per share in the prior year fourth quarter. Adjusted EBITDA for the three months ended June 30, 2020 was 962,000 compared to negative 130,000 in the prior year period. Turning now to full year fiscal 2020 results. Net sales increased 8% to $18.4 million compared to $17 million in fiscal 2019. Sales of Jaxx and Avana branded products, the combination of those two, increased 32%, offset in part by an 8% decrease in sales of Liberator products and an 11% decrease in sales of products purchased for resale. Total gross profit for the year was $5.5 million, up 25% from $4.4 million in fiscal 2019. And our gross profit margin increased to 30% from 26% in the prior fiscal year, due primarily to selling price increases and production cost reductions from outsourcing the sewing of approximately 10% of certain high-volume Jackson-Ivana products to Mexico. Operating expenses were $4.1 million compared to $4 million in fiscal 2019, and this 2% increase from the prior year was primarily due to higher advertising and promotion expenses and slightly higher G&A costs. Net income for the year was $860,000, or one cent per share compared to a net loss of 157,000 or zero cents per share in fiscal 2019. And adjusted EBITDA for the year was 1,622,000 compared to 598,000 in the prior fiscal year. Cash and cash equivalents on June 30, 2020 totaled 1.2 million compared to 600,000 at June 30, And I should point out the company has a PPP loan of approximately $1.1 million, and we expect to apply for and receive full loan forgiveness based on the current regulations. Turning now to our first quarter that just ended on Wednesday, due to our diversity of brands, Preliminary internal unaudited net sales for the first quarter of fiscal 2021 were over 30% higher than the first quarter of fiscal 2020. And in terms of dollars, that's $5.3 million compared to $4.1 million in the first quarter of fiscal 2020. Now, I'd like to turn the call back to Louis for some additional comments regarding current developments. Louis?

Yes. Thank you, Ron. I am certainly very pleased with the preliminary increase in sales of our brand divisions during our first quarter of fiscal 2021. This 30% increase was accomplished with less than 1% in medical PPE during that same quarter. Our brand collections continue to attract new customers, and as a result, I expect to see continued strong demand across all three brands, Liberator, Jax, and Havana, as we approach the holiday selling season. To support our brands and new product rollouts, we will be enhancing our presence on social media and through public relations. We continue to pursue additional sales opportunities for masks and medical gowns, both direct to consumers and through the DLA solicitations. As we secure significant orders for those products, we will issue business updates. We appreciate the recent strong support we've received from shareholders and look forward to keeping you updated on our progress and developments as we work through the second quarter. That wraps up our formal presentation. Operator, we'll now open the call for Q&A. After the Q&A, we'll provide some closing comments.

Thank you.

Thank you.

Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please type your question on the webcast link. One moment please while we poll for questions. As a reminder, if you would like to ask a question you may type your question on the webcast link.

Well, Christine, I'm not seeing any questions. So perhaps if any shareholders have any other questions, they can feel free to give either of us a call after this conference call.

Thank you, gentlemen. Would you like to make some additional or closing comments?

Sure. Thank you, operator. As mentioned, we are certainly pleased with the fourth quarter of 2020 results. and the preliminary net sales results for the first quarter of 2021. We believe we are building upon a solid foundation for Luvu Brands' future growth, and we're well-positioned to capitalize on our growing markets. Thank you for your time, and we look forward to updating you on further developments at www.luvubrands.com. On behalf of the entire Luvu Brands management team, I want to thank you again for joining us.

Thank you. Ladies and gentlemen, this concludes today's conference. You may disconnect from the webcast at this time. Thank you for your participation.