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Edited Transcript of EDUC earnings conference call or presentation 4-Jun-19 8:00pm GMT

Q4 2019 Educational Development Corp Earnings Call

Tulsa Jun 19, 2019 (Thomson StreetEvents) -- Edited Transcript of Educational Development Corp earnings conference call or presentation Tuesday, June 4, 2019 at 8:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Dan E. O’Keefe

Educational Development Corporation - Corporate Secretary & CFO

* Randall W. White

Educational Development Corporation - Chairman, President, Treasurer & CEO

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Educational Development Corporation Fourth Quarter and Fiscal Year 2019 Results Conference Call. (Operator Instructions) As a reminder, this conference call may be recorded.

I would now like to introduce your host for today's conference, Mr. Randall White, President and CEO of Educational Development Corporation. Mr. White, you may begin.

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Randall W. White, Educational Development Corporation - Chairman, President, Treasurer & CEO [2]

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Thanks, Josh. Welcome to our company investor call. Here with me today are Heather Cobb, our Chief Sales and Marketing Officer; Craig, our Chief -- Craig White, our Chief Operating Officer; and Dan O’Keefe, our Chief Financial Officer.

We're going to start. We have a pretty good report here for year-end, so we'll have Dan start and give us a brief review of the fiscal year.

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Dan E. O’Keefe, Educational Development Corporation - Corporate Secretary & CFO [3]

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Great. Thanks, Randall. Net revenues for the fiscal year grew $6.8 million or 6.1% from approximately $112 million reported in fiscal 2018 to $118.8 million recorded in fiscal 2019.

Earnings before income taxes grew approximately $1.4 million or 17.9% from approximately $7.8 million in fiscal 2018 to $9.2 million in fiscal 2019.

Net earnings after taxes grew approximately $1.5 million or 28.8% from approximately $5.2 million in fiscal 2018 to $6.7 million in fiscal 2019.

Earnings per share on a fully diluted basis increased $0.17 per share or 26.6% from $0.64 per share recorded in fiscal 2018 to $0.81 per share reported in fiscal 2019.

This concludes the fiscal 2019 earnings results, and I'll pass the call back to Randall.

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Randall W. White, Educational Development Corporation - Chairman, President, Treasurer & CEO [4]

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Okay. Well, that was short. Best year ever, could've done a little better job now, Dan. Come on. A couple of hoo-has or something.

Okay. Revenue is up 7.6%. Not bad, $120 million, just under $119 million. We continue to have growth in both divisions. In retail, those retail outlets increased the most, but again, it's a much smaller number. But we're excited to see that the revenue is growing there. A lot of it is one major customer, by the way, and has made up for the bulk of that. But we [didn't] see growth. It didn't meet our internal expectations. I'll tell you, when you've had [8%] growth, 6%, 7% certainly doesn't have anybody jumping up and down here.

But our fourth quarter revenues grew 5.2% on fewer active consultants, which is kind of interesting, less consultants than we had in the previous same quarter last year. This indicates that our active consultants sold more, made more commissions and were more successful. This, along with other changes in the organization, we still have confidence that the consultant count can still continue to grow.

The -- going to head count, I think every year, every call, I tell you that the head count is a soft number, and it really gets down to what people sell. We recently returned from [incentive] travel trip, and I was talking to different people on the trip, and we talked about head count. And we discussed things like we always know when someone starts because they send an application and [like to it]. We never know when they stop because sometimes they'll stop, and after 6 months, we kind of delete them. And then some of them come back and sell again. It is a soft number. The thing about it is we haven't had the type of growth, and that's what we are concentrating on as we go into the new year.

That's going to -- we hope accomplished by technology that we're developing to make it more mobile friendly to the consultants. I tell you, the world's changed out there in the last 4 or 5 years [guys] These people now, these young girls, unlike myself, they want to touch that phone and have a drone deliver to them in about 30 minutes. So it's getting -- we have to really stay on top of technology, and that's what we're doing, along with other [incentives].

The industry as a whole had a decline so we're outperforming the industry, which is not anything that we're pretty proud of, but we are ahead of other companies in the industry. We don't compare ourselves to them much anyway.

But we're constantly trying to build the business. I have extreme confidence in that we have the very best products and valued products in the industry. And we have people tell us every day of the benefit, it's been to them and their family. So it's a matter of finding those people out there who want to join our organization and be a part of an honest, ethical business and earn full- or part-time income.

So in addition to our revenue growth, we're also continuing to make operational improvements that increase our bottom line. Our pretax profits grew 17.9%, and thanks to the new tax laws, by the way, taxes after earnings increased by 28% over fiscal year 2018.

Now I want to open this up if anybody had any questions, but I've been around a long time, so I'm going to give you a little bit of history.

Well, I guess I had a few more things to talk about here. Let me say a couple of things before I get into that. You may notice that we've had some swings on the balance sheet, one of them was inventory, and our inventory increased $7 million, but let me tell you some of the breakdown and why that happened. $1.3 million of that inventory was new stock we brought in that's associated with the Spanish titles that I told you that we're launching in our product line. So we had to have inventory before we can launch it. So we're stocked up somewhat on Spanish titles. That's $1.3 million. And then the $2.5 million additional stock was actually brought in at the -- about the end of the year due to an incentive from our supplier. We've got a pretty nice cash incentive to purchase inventory. And when you look at it, what we got and what it actually cost us in carrying cost wasn't even close. So we did that. And it's inventory that we'll sell out in the next few periods, and it was certainly economical for us to do that. We do expect this inventory balance to -- the inventory turnover to -- the inventory to be back to [a whole] different level.

The -- from these earnings, we also distributed about $1.2 million to our shareholders. We used our excess cash after dividend payments primarily to expand on inventory and product, which we expect to bring in new revenues. And we also were in a buyback -- we bought some stock back this past year. It's -- we feel like we have cash and this adds value, what we think will value, we will continue to add on what (inaudible).

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Dan E. O’Keefe, Educational Development Corporation - Corporate Secretary & CFO [5]

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(inaudible)

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Randall W. White, Educational Development Corporation - Chairman, President, Treasurer & CEO [6]

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Well -- okay. I will say one more thing. I've been here a long time, as you know, and here's a little bit of history for you. 5 years ago, or not long ago, our pretax earnings for the year were $875,000. 5 years later today, we had just over $9 million pretax earnings. If anybody is disappointed with that, I'm sure some are, it's a pretty spectacular growth. And we feel like, I feel like, that the drive and enthusiasm here will continue that. It's as strong as it was 5 years ago. We're -- again, we're still investing in technology, and we expect to regain some sales growth.

And with that, if there was any particular thing at all that I didn't cover and you have a question on, just start now.

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Dan E. O’Keefe, Educational Development Corporation - Corporate Secretary & CFO [7]

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So Josh, let's turn it over to you for questions.

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Operator [8]

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(Operator Instructions) And I'm not showing any further questions at this time. I would now like to turn the call back over to Randall White for any further remarks.

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Randall W. White, Educational Development Corporation - Chairman, President, Treasurer & CEO [9]

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Okay. Well, I guess that's because it was such a good explanation and not your lack of interest. But though, either the case may be, thank you, guys, for coming on the call. We're looking forward to the year coming up and trying to regain growth. Thanks for being part of the call, guys.

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Dan E. O’Keefe, Educational Development Corporation - Corporate Secretary & CFO [10]

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Thank you, everyone.

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Operator [11]

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Thank you. Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program, and you may all disconnect. Everyone have a wonderful day.