Educational Development Corporation
Q1 2020 Earnings Call Transcript

Published: 17 Jul 2019

[Operator:]

Good day, ladies and gentlemen, and welcome to the Educational Development, First Quarter Fiscal Year 2020 Results Conference Call.At this time all participants are in a listen-only mode. Later we will conduct the question-and-answer session and instructions will follow at that time. [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.

[Randall White:]

Thank you, Valarie. 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 are going to start with Dan. He’ll give you a highlight of the previous earnings release.

[Dan O'Keefe:]

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.Pre-tax 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.

[Randall White:]

Okay Dan, thanks. Well, investors this is a first quarter that I've had report reclined [ph] sales in a very long time. This is not an indication of where we're headed for the fiscal year beyond, I don't think, because we continue to expect grow in both divisions of the company actually.The decline, was in the – to explain what happened, the decline resulted from a very successful recruiting program in February of 2018 which was in the quarter we are comparing to and we had 8,800 new consultants that month and pretty much that resulted in the 10% of revenue built for the quarter.So we actually grew our average consultants between quarter four last year and quarter one of this year. So that big negative comparison in the first quarter is not likely in the remaining quarters. But as I told you guys before, the average number of active consultants is not exactly a firm number, but it is a guideline. But we’ll tell you that we've had a very successful current recruiting effort and so far halfway through the month we are up about, more like 400% over the same month last year, July. So we are 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 commission unit also this year, which we have it every year, we had attendance; it was up about 40% at 1,700 people here. That's pretty significant in the fact that of course they pay their way to come here, that’s all expense to the consultant to attend, so that’s 1,700 people who want to do better, apparently.So that’s very encouraging that that’s up 40% over last year, and again the recruiting special. 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 successful recurring effort.We are also really excited about the technology improvements that we are 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, it'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 are as excited as we are.But today, literally they want a punch a button on that drone delivery on the porch [ph] in about 30 minutes. We're not quite there yet of course, but certainly making your business mobile friendly where they can all – where they can translate their entire business on their phone, away from home.Here is some of the other changes we had in quarter one. 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, obviously there’s back in that, and the sales department, yes, we are already looking at some new accounts that we’re adding and we think we can return that back to levels that we previously had.The pre-tax profit of 6.7% reflects the strength of our business model, even when revenues declined. I think for the whole year last year, full year we did 7.7% and while 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 are still earning – we’re still profitable.We also used $300,000 in the quarter to repurchase shares. We have a buyback program and we are continuing the repurchase of shares into quarter two when it seems advantages to us. We’ve also declared our dividend for quarter one and quarter two, that if you annualize it, it’s returning over 3% today on stock prices, the current price around $6.50, $7 in that range. Clearly our stock is a pretty good value today for us and 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?

[Randall White:]

So I must have answered every question you ever want to know about the company in 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 a tough business, a lot tougher than it used to be. We have to fact 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 that may not operate as effectively as we do and that’s 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.

[Operator:]

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

[Randall White:]

Thank you, Valarie.

[Operator:]

You’re welcome. Have a great day!