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Edited Transcript of EDUC earnings conference call or presentation 16-Jul-19 8:00pm GMT

Q1 2020 Educational Development Corp Earnings Call

Tulsa Jul 18, 2019 (Thomson StreetEvents) -- Edited Transcript of Educational Development Corp earnings conference call or presentation Tuesday, July 16, 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 First Quarter Fiscal Year 2020 Results Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Randall White, Chief Executive Officer and President. Sir, you may begin.

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

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Thank you, Valerie. Welcome to the call, gentlemen and ladies. Here with me today, I want to introduce Craig White, our Chief Operating Officer; and also Dan O'Keefe, our Chief Financial Officer. And I think we're going to start with Dan. He'll give you a highlight of the previous earnings release.

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

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Thank you, Randall. As a recap of our earnings for the quarter, net revenues for the first quarter of fiscal 2020 were approximately $27.6 million, down $2.4 million or 8% from approximately $30 million reported in the first quarter of fiscal 2019.

Earnings before income taxes totaled approximately $1.8 million, a decrease of $0.6 million or 26% from approximately $2.5 million in the first quarter of fiscal 2019. Pretax profit as a percentage of net revenues were 6.7% in the first quarter of fiscal 2020 compared to 8.3% reported in the first quarter of fiscal 2019.

Net earnings in the first quarter of fiscal 2020 totaled approximately $1.4 million, a decrease of $0.4 million or 25% from approximately $1.8 million in the first quarter of fiscal 2019. Earnings per share on a fully diluted basis decreased $0.05 a share or 23% from $0.22 per share reported in the first quarter of fiscal 2019 to $0.17 per share reported in the first quarter of fiscal 2020.

This concludes our 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. Dan, thanks. Well, investors, this is the first quarter that I've had to report a decline in sales in a very long time. This is not an indication of where we're headed for the fiscal year and beyond, I don't think, but -- because we continue to expect growth in both divisions of the company, actually.

The decline is in the -- let me explain what happened. The decline resulted from a very successful recruiting program in February of 2018, which was in the quarter we're comparing to. And we had 8,800 new consultants that month, and pretty much that resulted in the 10% revenue growth for the quarter. So we've actually -- we actually grew our average consultants between quarter 4 last year and quarter 1 of this year. So that big negative comparison in this first quarter, not likely in the remaining quarters.

But I told you guys before, the average number of active consultants is not exactly a firm number but it is a guideline. And I will tell you that we've had a very successful current recruiting effort. And so far, halfway through the month, we're up about -- more of about 400% over the same month last year, July. So we're having another very nice surge in recruiting, and I think it's coming from the fact that we had a very successful national convention.

The convention in Tulsa this year, which we have at every year, we had attendance that was up about 40% at 1,700 people here. That's pretty significant in the fact that, of course, they paid their way to come here. That's all expensed to the consultant to attend. So that's 1,700 people who wanted to do better apparently. So it's very encouraging that that's up 40% over last year, and again, [there were recruiting specials]. We left them with encouraging reports from the company, and they've gone back, and halfway through the month of July, have had a very, very successful recruiting effort.

We're also really excited about the technology improvements that we're rolling out this summer and how that will affect our existing consultants and improve the experiences of our new recruits. We hear a lot about the industry. Probably not surprising to anybody on the call that the new young people are very impatient with any type of technology that's not just the most latest up-to-date. So we have rolled out our back-office platform on a test basis already, which offers that phone mobility, that mobility for the handset. They've been asking for this platform to be mobile-friendly, and we are delivering it. It's in the test phase right now, and it should be rolled out very soon. We're pretty excited about that. I hope they're as excited as we are.

But today, literally, they want to punch a button and they drone-deliver on the porch in about 30 minutes. We're not quite there yet, of course, but certainly making our business mobile-friendly, where they can all -- where they can transact their entire business on their phone away from home.

Here's some of the other changes we had in quarter 1. Our Publishing Division continued to grow a little bit, and we expect that to grow in the near future. We're picking up new accounts. I was just back in the sales department yesterday looking at some new accounts that we're adding, and we think we can return that back to levels that we previously had.

The pretax profit of 6.7% reflects the strength of our business model even when revenues decline. I think for the whole year last year, full year, we did 7.7%. And so -- well, 8.7% for the quarter a year ago, but the fact that we had that much decline shows that we do keep control of our costs and our model is good.

Our sales are down, but we're still earning profitable -- we're still profitable. We also used $300,000 in the quarter to repurchase shares. We have a buyback program, and we're continuing to repurchase some shares in the quarter 2 when it seems advantageous to us. We've also declared our dividend for quarter 1 and quarter 2 that if you annualize it, it's returning over 3% today on stock prices of -- current price of around $6.57, in that range. Clearly, our stock is a pretty good value at today's price, if we can resume our growth, which we expect to do.

So this concludes the business update, and let's open it up for questions. Who's got a question?

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Operator [5]

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(Operator Instructions)

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

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So I must have answered every question you ever want to know about the company and the quarter and where we're headed. Okay. I hope that's the answer and not lack of interest. We're optimistic here, guys. It's tough business, a lot tougher than it used to be. We have to face things that have nothing to do with us like other companies in the industry that have had different problems than we do, and we don't have those kind of problems. There are other companies in the industry who may not operate as ethically as we do and that are having effects on us. But when you're in the direct selling industry, sometimes we get painted with the same brush.

So apparently, there's no questions. So guys, thank you very much for listening, and we'll report on our next quarter.

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Operator [7]

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Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you for your participation. You may all disconnect.

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Randall W. White, Educational Development Corporation - Chairman, President, Treasurer & CEO [8]

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Thank you, Valerie.

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Operator [9]

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You're welcome. Have a great day.