Summer Infant, Inc.
Q1 2021 Earnings Call Transcript

Published: 19 May 2021

[Operator:]

Good day, and welcome to the SUMR Brands Fiscal 2021 First Quarter Conference Call. All participants will be in a listen-only mode. After today’s presentation there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Chris Witty, Investor Relations Advisor. Please go ahead.

[Chris Witty:]

Hello, and welcome to the SUMR Brands 2021 First Quarter Conference Call. With me on the call today is the Company's CEO, Stuart Noyes; and Interim CFO, Bruce Meier. I would now like to provide a brief safe harbor statement. This call may include forward-looking statements that relate to SUMR Brands’ outlook for 2021 and beyond, provide a brief safe harbor statement. This call may include forward-looking statements that could cause actual results and events to differ materially from these statements. Please refer to the risk factors contained in the Company's annual report on Form 10-K, its quarterly reports on Form 10-Q and in our other filings with the Securities and Exchange Commission.

[Stuart Noyes:]

Thanks, Chris, and good morning, everyone. We appreciate you joining our first quarter conference call today. I'll start by providing an overview of recent developments, after which Bruce will go through our financial results in detail. As discussed on our last earnings call, we continued to face operating challenges this quarter due to logistical issues, which hindered our ability to get product to market in a timely manner. The same headwinds, mainly shipping constraints, trucking bottlenecks and general supply chain issues hampered industry expansion, even as demand rose in response to the favorable economic conditions as well as ongoing federal stimulus. We were glad to see some of our key product categories grow year-over-year, including our tried and true gates and potties. But, the ability to get goods to market depended on a variety of factors related to how, where and when the items were ordered and manufactured. Just one look at our balance sheet shows our inventory levels fell, probably lower than we would liked, but clearly indicative of the mismatch of supply and demand during this tumultuous period. If it weren't for such logistics constraints, overseas and production challenges in North America and to some extent, the fact that certain countries are still under COVID lockdown, I believe revenue would have actually been up over 2020. Let me add, however, that even in the midst of so many moving pieces from pandemic restrictions to container availability and manufacturing bottlenecks, our people rose to the challenge, keeping costs down and managing the supply chain as best they could. While sales were not where we would have liked, we posted positive EPS, grew EBITDA sequentially versus quarter four and paid down additional debt. This shows a focus on bottom line results and operating execution. Going forward, the good news is that demand should continue to be robust, improving economic conditions and the pending child tax credit will likely fuel consumer spending in the months and quarters to come. It then comes down to our ability to get product to market, and we're doing everything under our control to make that happen. We're managing our supply chain daily, making adjustments where possible, planning fathering in advance and raising prices where possible to offset increasing commodity costs and shipping rates.

[Bruce Meier:]

Thanks, Stuart, and good morning, everyone. As a reminder, our 10-Q and related press release were issued yesterday. In addition to listening to this conference call, I encourage you to review our filings. Now to the results. First quarter net sales were $36.2 million compared with $40.3 million in the first quarter of fiscal 2020. While revenue was in line with the fourth quarter of 2020, it was down year-over-year due to the reasons previously discussed, ongoing supply chain constraints and logistical bottlenecks. As Stuart mentioned, these issues more than offset increasing product demand and a generally improving economic environment, helped by lower pandemic-related restrictions. Revenue rose by double digits across certain categories, including potties, gates and boosters, even as other areas saw reduced shipments and sales. Going forward, as Stuart discussed, we are doing everything possible to manage through these supply chain issues and believe end-user demand will continue to be strong due to the economic outlook as well as a forthcoming child tax credit. Gross profit was $10.7 million for the first quarter of fiscal 2021 versus $12.5 million in 2020. And our gross margin as a percentage of sales was 29.4% versus 31.0% last year. The year-over-year margin decline primarily reflects certain items no longer receiving tariff exclusions that were granted in 2020. As Stuart mentioned earlier, we are managing price, increasing them where possible to mitigate increasing costs and ongoing margin pressure. Selling expense was $2.4 million in the first quarter versus $3.4 million in the prior year period, and as a percentage of net sales was 6.6% this year versus 8.5% in 2020. The decrease year-over-year and as a percentage of sales, was primarily due to lower freight and advertising costs. General and administrative expenses were $7.0 million in the first quarter versus $8.1 million in the prior year period. And G&A as a percentage of sales was 19.4% this year versus 20.2% in 2020. The year-over-year change reflects lower labor and other costs due to various restructuring initiatives.

[Operator:]

[Stuart Noyes:]

Great. Thank you very much. Thank you all for joining us today for the call. We look forward to speaking with you next quarter. Have a nice day.

[Operator:]

The conference has now concluded. Thank you for attending today’s presentation, and have a nice day.