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Edited Transcript of LIVE earnings conference call or presentation 14-Aug-19 8:30pm GMT

Q3 2019 Live Ventures Inc Earnings Call

LAS VEGAS Aug 24, 2019 (Thomson StreetEvents) -- Edited Transcript of Live Ventures Inc earnings conference call or presentation Wednesday, August 14, 2019 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jon Isaac

Live Ventures Incorporated - President, CEO & Director

* Virland A. Johnson

Live Ventures Incorporated - CFO & CAO

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Presentation

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Operator [1]

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Good day, everyone, and welcome to today's call. (Operator Instructions) Please note, today's call will be recorded, and I will be standing by should you need any assistance.

It is now my pleasure to turn today's program over to Chief Financial Officer, Virland Johnson, for an opening statement. Please go ahead, sir.

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Virland A. Johnson, Live Ventures Incorporated - CFO & CAO [2]

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Good afternoon, and welcome to the Live Ventures Inc. Third Quarter Fiscal Year 2019 Conference Call. This afternoon, the company filed its Form 10-Q for the third quarter ending June 30, 2019, for fiscal year 2019 with the SEC. This filing can be found on our website, www.liveventures.com, in the Investor Relations section as well as on our SEC website at www.sec.gov.

Joining me today is Jon Isaac, Chief Executive Officer, Live Ventures Inc. Please note that some of the remarks you will hear today may contain forward-looking statements about the company's performance. As well there may be forward-looking statements made during the Q&A session that follow our prepared remarks. These statements are neither promises nor guarantees, and there are a number of risks and uncertainties that could cause actual results to differ materially from those set forth in these forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in these forward-looking statements is contained in our filing and periodic reports filed with the SEC, copies of which are available on our website or may be requested directly from the company. Forward-looking statements are made as of today's date, and we do not undertake any obligation to update any forward-looking statements made during today's call.

Thank you everyone for joining us today for our third quarter fiscal year 2019 call. During our call today, we will briefly cover our company's operating and financial results for the quarter, and then answer your questions at the end of our comments.

The company reported quarterly revenue of $47.0 million, representing a decrease of 13.9% over the same period last fiscal year and third quarter fiscal year 2019 earnings per basic share of $0.78. For the quarter, gross profit was $19.2 million, which is up 2.3% from the same period last fiscal year. In addition, our operating income was $3.8 million compared to the same period last fiscal year of $898,000. And net income was $1.5 million compared to $2.1 million same period last fiscal year.

Net income last year for the quarter included a $3.6 million bargain purchase fee. For the quarter, our gross profit margin percent was up to 40.9%, and operating income margin percent was up to 8.1%. This compares to the same period prior fiscal year when our gross profit margin percent was 34.4%, and our operating income margin percent was 1.6%. Cost of new product, sales levels and mix of products positively affected gross margins realized in year-to-date results for Vintage ApplianceSmart and Marquise. Interest expense decreased to $1.6 million for the third quarter from $2.7 million for the same period prior fiscal year due to pay down in revolving term debt.

As of June 30, 2019, the company reported $2.4 million of cash on hand plus an additional $15.8 million of available credit into the company's consolidating revolving lines of credit, a record. Net cash provided from operating activities for the 9 months ended June 30, 2019, was $15.5 million, an increase of 60% or $5.8 million over the same period last fiscal year. Stockholders' equity increased approximately 7.5% to $42.4 million for the 9 months ended June 30, 2019.

Total liabilities decreased $19 million for the 9 months of fiscal year 2019. This decrease was largely a decrease in revolving term debt. For additional financial information and details, I invite you to review our press release filed this morning and view our SEC filings on either our website or on the SEC's website. Thank you very much in advance for your participation on this call and your continued interest in Live Ventures.

At this time, Jon has some additional comments, and then we will welcome any questions that you may have.

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Jon Isaac, Live Ventures Incorporated - President, CEO & Director [3]

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Well put, Virland. We'll always open it up to anyone who has questions. But overall, it was a pretty good quarter. I think it's important to note that EPS was down, but as a result of the bargain purchase gain that we had last year that we don't have this year. But I believe from an operational standpoint that we're up. I'm very excited and happy about the reduction in the debt that we -- that we're seeing and the company liabilities down, too, quite significantly. In 9 months, we've been able to decrease liabilities by -- to the tune of about $19 million.

Let's open it up for any questions that anyone may have.

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Questions and Answers

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Operator [1]

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(Operator Instructions)

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Jon Isaac, Live Ventures Incorporated - President, CEO & Director [2]

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We'll take the question from [Philip], please.

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Unidentified Analyst, [3]

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Can you just fill us in on what's happening with the store closures that are going on with one of the subsidiaries? And what's fully happening with that company? Or maybe (inaudible) ApplianceSmart.

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Jon Isaac, Live Ventures Incorporated - President, CEO & Director [4]

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Yes. I do know ApplianceSmart has been contributing -- as we've said in prior quarters, ApplianceSmart was contributing losses to our numbers. And we've been taking a very, very active role in managing that subsidiary. We've recently shut down some stores, and we've moved things around. But it is definitely in the mode where we're restructuring some things and moving things around in order to turn it around so that it is a net contributor to our income. We, obviously, weren't pleased with the losses that it contributed, I believe, last -- this quarter here for June -- ending June. It contributed around 3/4 of $1 million or maybe a little bit less than that. So our EPS, our earnings would have been higher without that. But it's a process. And Virland has very good experience in turnarounds, and I have experience in turnarounds as well. But there are some stores that will close and some that will remain open. I mean that's what I can say at this point. There was an article that was written by somebody in some paper that says that we're closing all of our stores, and I don't think that's factual. But that's what I could say. Virland, do you want to add?

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Virland A. Johnson, Live Ventures Incorporated - CFO & CAO [5]

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Historic performance was clearly better this quarter over the prior quarter. But it's a complex and moving situation right now. There are a number of leases that have to be looked at and operating results and products. Sales were down for the quarter with regards to ApplianceSmart. But losses were also curtailed this quarter. So overall, quarter-to-quarter, an improved result out of ApplianceSmart, but we're currently not out of the woods yet. There's still a lot of work to be done.

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Unidentified Analyst, [6]

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As a follow-up, are there any costs associated with those closures that'll happen in third quarter or next quarter?

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Jon Isaac, Live Ventures Incorporated - President, CEO & Director [7]

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Possible. We have been dealing and accruing those costs as we go. I don't necessarily know that there will be any new costs. We're accepting that, though. There may be. For example, cost of moving inventory to highly performing stores, I mean that'll be a cost but that's probably minimal. But we are negotiating with landlords on leases that aren't very favorable to us. And if you read the newspaper, I mean it's not something that is -- that we're only -- everyone is going through that, and I think it's a tenants' market which is good. But there's a lot of negotiation going on with a lot of retailers nowadays. But we still stand behind ApplianceSmart, we like ApplianceSmart. ApplianceSmart, in my belief, is pretty e-commerce friendly. People don't buy $1,000 or $2,000 fridge on Amazon. They need to see it, they need to have a relationship with the sales rep, with the retailer or somebody needs to come in and install it. So from that perspective, we're -- I think we're good. But we need -- there's still some cleaning to do. But we think that we'll be able to get it done.

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Operator [8]

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(Operator Instructions)

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Jon Isaac, Live Ventures Incorporated - President, CEO & Director [9]

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We did buy, I believe, is a record in share repurchases. 41,000 shares repurchased in the quarter, which we're very happy about. One thing is the stock is sort of working enough. I guess we view it as a good price. So we'll keep buying back shares. I believe we're down to 1.050 million in basic shares.

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Operator [10]

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(Operator Instructions)

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Jon Isaac, Live Ventures Incorporated - President, CEO & Director [11]

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Well, if there's no questions, we'll end the call. Actually, two questions came up here quickly. [Roberto]?

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Unidentified Analyst, [12]

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Can you hear me?

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Jon Isaac, Live Ventures Incorporated - President, CEO & Director [13]

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Yes.

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Virland A. Johnson, Live Ventures Incorporated - CFO & CAO [14]

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Yes.

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Unidentified Analyst, [15]

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Great. Jon, I know you spoke before that -- on the stock price that you're not concerned about the stock price, you're focusing on book share value. Where do you attribute the stock dropping? Where -- what do you attribute that to?

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Jon Isaac, Live Ventures Incorporated - President, CEO & Director [16]

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I really don't know. I mean the stock price is the stock price. It's whatever the market thinks our company is worth. I personally believe that we're undervalued. If not, I wouldn't be buying shares whenever I can, and the company wouldn't be buying shares whenever it can. So we're trading at what I believe is a ridiculous valuation. We're trading at 1/3 of book value. And at these levels, we'll continue to buy back stock, and we'll do it aggressively. And we've made the public aware in many -- in numerous filings and numerous earnings calls that we are doing that. So whoever is holding shares and wants to sell to us, we're not buyers on the open market. But in terms of why it is down today versus yesterday, I mean today, the market is down 800 points so that doesn't help.

But if you ask me, again, we're happy buying stock at these levels. And I think we've bought as much as we could. We do have rules and regulations that we have to abide by, securities rules. We can't just buy any amount we want, anytime we want, at any price we want. We have to follow rules. And I think we're able to buy as much as we can in last quarter, and we'll continue to do that. I think in the long run, I think a large share price will do just fine. Operationally, as you know, we're doing great. Debt is -- we're paying down debt very quickly. Our companies are doing well. ApplianceSmart is, of course -- needs some attention, but it will turn around, it will be -- on a positive, it will be a profitable operation in the near future. But we're just plugging away and making sure that we bring value to shareholders. And as our balance sheet grows and our income grows, we are confident that the stock price will react in the long run. So I don't know what day and what month, but hopefully soon.

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Operator [17]

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(Operator Instructions)

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Jon Isaac, Live Ventures Incorporated - President, CEO & Director [18]

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[Luigi]?

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Unidentified Analyst, [19]

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Yes. Congratulations. Fantastic quarter, really, really amazing. It's great. You're doing a great job, guys. Beautiful. Keep going like this and next quarter, we're going to be out of the woods.

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Jon Isaac, Live Ventures Incorporated - President, CEO & Director [20]

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Okay. Thank you.

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Unidentified Analyst, [21]

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You're welcome. I just have a question. Do you have anything on the horizon? Anything that you're laying your eyes on, on some new purchase, new buy or a new company, anything?

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Jon Isaac, Live Ventures Incorporated - President, CEO & Director [22]

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We're always -- the answer is always -- as I answered in the past, we're always looking at deals, always looking at potential transactions. We're also always looking at ways to invest cash flow and maybe even our existing subsidiaries. Sometimes we may pass on an acquisition because we may get a greater return on our money by investing in Marquis, for example; or in Vintage, for example. So our eyes are always open. We get deals all the time across our desk. But until something is signed in ink, and we have to, by law, announce it to you, we'll definitely do that. But right now, we're just looking at lots of different investment opportunities. And as soon as we have something, I promise it will be put out for everyone to see.

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Operator [23]

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(Operator Instructions)

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Jon Isaac, Live Ventures Incorporated - President, CEO & Director [24]

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If there are no other questions, we'll end the call for this quarter, and we'll reconvene towards our year-end. So sometime around the end of December. Thank you very much, everyone, for joining the call. Thank you for following us.

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Virland A. Johnson, Live Ventures Incorporated - CFO & CAO [25]

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Thank you. Bye.

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Operator [26]

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Thank you. This will conclude today's program. Thank you, again, for your participation. You may now disconnect, and have a wonderful day.