Financial Data and Key Metrics Changes - Net revenues for the first quarter were $7.1 million, down from $10 million in the prior year [6] - Average active brand partners decreased to 7,700 from 13,400 year-over-year [6] - Loss before income taxes improved to a negative $1.4 million from a negative $1.7 million [6] - Net loss decreased to $1.1 million compared to a loss of $1.3 million last year [6] - Loss per share improved to $0.13 from $0.15 on a fully diluted basis [6] - Net inventories decreased by $2.7 million from $44.7 million to $42 million [7] Business Line Data and Key Metrics Changes - The decline in sales was primarily driven by reduced brand partner levels in the paper pie division [4] - Customer sales events were implemented to promote paper pie sales and generate cash [4] Market Data and Key Metrics Changes - The company faced a challenging sales environment due to high inflation and reduced disposable income among families with small children [4] - The direct sales industry, particularly in the product sector, has experienced difficulties in recruiting new consultants [4] Company Strategy and Development Direction - The company is focusing on strategic changes to support brand partners and has launched new incentive programs [7] - A successful partnership with Ticket to Dream has allowed the company to distribute thousands of books to foster children [9] - The company is planning a phased approach to purchasing new titles and replenishing best sellers to energize the sales force [10][41] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the current downturn in the industry but expressed confidence in emerging stronger and more resilient [13] - The company is working on a sale leaseback of its headquarters, with expectations to complete the sale before September [12] - Management is optimistic about the ongoing sale process and has developed a contingency plan (Plan B) in case the primary sale does not go through [22][23] Other Important Information - The company has executed an agreement to sell the Hilti Complex, with a 90-day due diligence period [12] - Proceeds from the sale are expected to fully pay back the bank, leaving the company with no debt [13] Q&A Session Summary Question: What is the contingency plan if the sale of the Hilti Complex falls through? - Management has a viable Plan B that includes other offers with quick close contingencies, which would also help eliminate bank debt [22][23] Question: Can you provide more details about the buyer group for the Hilti Complex? - The buyer group is a real estate company, and management is optimistic about the ongoing due diligence process [26][27] Question: What is the strategy behind buying new titles given the current inventory levels? - The strategy involves a conservative approach to introduce new titles to energize the sales force without significantly increasing inventory levels [40][41] Question: What is the target net revenue run rate and average from partners during normalization? - Management indicated that rebuilding will take time, and they are implementing various strategies to improve sales and recruitment [44][45] Question: Has there been any serious interest in acquiring the company? - Management has not received any serious unsolicited offers for acquisition, but they would entertain such discussions in the future [47][50] Question: What is the current relationship with the bank? - The relationship has been good, with the bank supporting the company through the process, although amendments have become more restrictive [51][53]

Financial Data and Key Metrics Changes - Net revenues decreased to $7.1 million from $10 million in the prior year first quarter, representing a 29% decline [6] - Average active brand partners fell to 7,700 from 13,400, a decrease of 43% [6] - Loss before income taxes improved to a negative $1.4 million from a negative $1.7 million [6] - Net loss decreased to $1.1 million compared to a loss of $1.3 million last year [6] - Loss per share improved to $0.13 from $0.15 on a fully diluted basis [6] Business Line Data and Key Metrics Changes - The decline in sales was primarily driven by reduced brand partner levels in the paper pie division and ongoing customer sales events [4] - The company has seen a decline in brand partner levels due to high inflation and reduced disposable income among families with small children [4] Market Data and Key Metrics Changes - The direct sales industry, particularly in the product sector, is experiencing challenges in new consultant recruiting [4] - The company is facing a short-term impact on operating levels due to the current sales environment [4] Company Strategy and Development Direction - The company is focusing on strategic changes to support brand partners and has launched new incentive programs [7] - A sale leaseback of the headquarters is in progress, with expectations to complete the sale before September [13] - The proceeds from the sale are anticipated to fully pay back the bank, leaving the company with no debt [14] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging sales environment and the need for short-term tactics to generate cash [4] - There is confidence in executing either Plan A (sale of the building) or Plan B (alternative offers) by September [20] - Management is optimistic about the buyer group and believes they understand the local environment [22] Other Important Information - The company has launched a guest checkout feature to improve customer experience [9] - A successful partnership with Ticket to Dream has allowed the company to distribute thousands of books to foster children [10] Q&A Session Summary Question: What is the contingency plan if the building sale falls through? - Management has a viable Plan B that includes other offers with quick close contingencies, ensuring they can move forward without further delays [20][21] Question: Can you elaborate on the plan for new titles given the existing inventory levels? - The strategy involves a conservative approach to introducing new titles while replenishing best sellers, aimed at energizing the sales force without significantly increasing inventory [31] Question: What is the current banking relationship and future expectations? - The banking relationship has been supportive, with amendments becoming more restrictive to ensure cash flow for debt repayment, but there is no intention to maintain the same level of borrowing post-debt retirement [41]

Financial Performance - Net revenues for the three months ended May 31, 2025, decreased by $2.9 million, or 29.0%, to $7.1 million compared to $10.0 million for the same period in 2024[93]. - Gross margin for the PaperPie segment decreased by $2.2 million, or 37.9%, to $3.6 million for the three months ended May 31, 2025, with gross margin as a percentage of net revenues dropping to 59.3% from 65.3%[99]. - Operating income for the PaperPie segment decreased by $0.3 million, or 37.5%, to $0.5 million during the three months ended May 31, 2025[101]. - Net revenues for the Publishing segment decreased by $0.1 million, or 9.1%, to $1.0 million during the three-month period ended May 31, 2025[103]. - Gross margin for the Publishing segment decreased by $0.1 million, or 16.7%, to $0.5 million during the three-month period ended May 31, 2025[104]. Operating Expenses - Total operating expenses for the PaperPie segment decreased by $1.9 million, or 38.0%, to $3.1 million during the three-month period ended May 31, 2025[100]. - Total operating expenses for the Publishing segment decreased by $0.1 million, or 25.0%, to $0.3 million during the three-month period ended May 31, 2025[105]. Active Brand Partners - The average number of active Brand Partners decreased by 5,700, or 42.5%, to 7,700 during the three months ended May 31, 2025, from 13,400 in the same period a year ago[98]. - Approximately 15.4% of active Brand Partners maintained consignment inventory, totaling $1.2 million at May 31, 2025[134]. Cash Flow and Debt Management - The Company experienced positive cash inflows from operations of $1,396,500 during the first three months of fiscal year 2026[107]. - As of the end of the first fiscal quarter of 2026, the revolving bank credit facility loan balance was $4.2 million with $0.6 million in available capacity[106]. - The Company plans to reduce debt by selling the Hilti Complex, with proceeds expected to pay off Term Loans and the Revolving Loan[123]. Loan Agreements and Amendments - The Company executed the Second Amendment to the Loan Agreement, waiving the fixed charge ratio default and reducing the revolving commitment from $15 million to $14 million, effective May 10, 2023[112]. - The Third Amendment extended the Revolving Loan maturity date to January 31, 2024, and introduced a stepdown to the Revolving Commitment from $13.5 million to $4 million by January 31, 2024[113]. - The Fourth Amendment increased the Revolving Loan commitment to $8 million and extended the maturity date to May 31, 2024, while allowing additional purchase orders up to $2.1 million[115]. - The effective interest rate on the Revolving Loan was 10.31% at May 31, 2025, with a borrowing rate of SOFR + 6.00%[121]. Inventory Valuation - The Company has estimated a valuation allowance for both current and noncurrent inventory of $1.2 million as of May 31, 2025[135]. - Noncurrent inventory balances prior to valuation allowances were $17.6 million at May 31, 2025, with valuation allowances of $0.8 million[133]. - The Company has an allowance for credit losses estimated at $0.1 million for both May 31, 2025, and February 28, 2025[131]. Management Plans - Management's plans include reducing inventory to generate free cash flows and building the active PaperPie Brand Partners to pre-pandemic levels[123].

Financial Results Announcement - Educational Development Corporation announced its fiscal 2026 first quarter financial results on July 7, 2025[5] - A press release detailing the financial results is included as Exhibit 99.1[7] Earnings Call - The earnings call for fiscal 2026 is scheduled for July 7, 2025, at 3:30 PM CT (4:30 PM ET)[6]

Core Viewpoint - Educational Development Corporation (EDC) reported a decline in net revenues for the fiscal first quarter of 2026, while also managing to reduce losses compared to the previous year [1][2]. Financial Performance - Net revenues for the first quarter ended May 31, 2025, were $7.1 million, down from $10.0 million in the same quarter of the previous year [4]. - Loss before income taxes was $(1.4) million, an improvement from $(1.7) million year-over-year [4]. - The net loss for the quarter was $(1.1) million, compared to $(1.3) million in the prior year [4]. - Loss per share was $(0.13), an improvement from $(0.15) in the same quarter last year [4]. Strategic Initiatives - The company implemented product discount promotions to increase cash flow, which negatively impacted gross margins [2]. - EDC is focused on reducing excess inventory to strengthen its financial position and pay down debts [2]. - An amendment to the Hilti Complex Purchase Sale Agreement was executed to allow more time for due diligence, which is expected to help retire outstanding debt and provide flexibility for future operations [2]. Brand Partner Engagement - The average number of active PaperPie Brand Partners decreased to 7,700 from 13,400 year-over-year [4]. - The company is working to provide additional opportunities for Brand Partners to succeed, aiming to normalize business operations post-transaction [2]. Company Overview - EDC specializes in publishing books and educational products for children and is the owner of several brands including Kane Miller Books and SmartLab Toys [6]. - EDC products are sold through 4,000 retail outlets and via independent brand partners through various sales channels [6].

Educational Development (EDUC) Q4 2025 Earnings Call May 19, 2025 04:30 PM ET Company Participants Craig White - President, CEODan O'Keefe - CFOHeather Cobb - Chief Sales & Marketing OfficerPaul Carter - CIO Conference Call Participants None - Analyst Operator Good afternoon, everyone, and thank you for participating in today's conference call to discuss Educational Development Corporation's financial and operating results for its fiscal fourth quarter and fiscal twenty twenty five results. As a reminder, t ...

Financial Data and Key Metrics Changes - For Q4 2025, net revenues decreased to $6.6 million from $9 million in the same period last year, reflecting a decline in sales [7] - Average active paper pie brand partners fell to 9,400 from 15,500 year-over-year [7] - Loss before income taxes improved to $1.5 million from a loss of $2.2 million in Q4 2024 [7] - For the fiscal year 2025, net revenues totaled $34.2 million compared to $51 million in the previous year [8] - Average active paper pie brand partners decreased to 12,300 from 18,300 year-over-year [8] - Loss before income taxes for the year was $6.9 million compared to income before taxes of $0.7 million in the prior year [8] Business Line Data and Key Metrics Changes - The decrease in sales was attributed to a reduced number of active brand partners and a lack of new titles over the past year [4][5] - Increased discounts offered to customers negatively impacted gross margin and bottom line, as part of a tactical decision to boost sales and convert excess inventory into cash [5] Market Data and Key Metrics Changes - The company noted fluctuations in consumer behavior due to inflation and shifting discretionary spending among families with young children, impacting customer purchasing habits [4] - The direct selling model's adaptability was highlighted as a strength in navigating the current economic environment [4] Company Strategy and Development Direction - The company is focused on reducing expenses and is committed to strategic and financially responsible purchases of new titles in the future [5] - The sale of the Hilti Complex is expected to fully pay back bank debt, leading to limited borrowing needs moving forward [14] - The company aims to redefine its identity and product offerings post-sale, with plans to purchase new titles conservatively [40][41] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges faced in the current environment but expressed confidence in the company's ability to emerge stronger [15] - The management emphasized the importance of completing the building sale to regain operational flexibility and return to business as usual [27][44] Other Important Information - The company launched a new shipping subscription program, The Pass, aimed at enhancing customer experience and encouraging repeat purchases [10] - The StoryMaker Summit was initiated to foster stronger community bonds and provide training for brand partners [12] Q&A Session Summary Question: Can you disclose who the buyer is for the Hilti Complex? - The company chose not to disclose the buyer's identity at this time, preferring to wait until the due diligence period is complete [16][18] Question: What price has been agreed upon for the sale? - The agreed price for the sale is $35.15 million [20] Question: Why was there a significant drop in average brand partners? - The drop was attributed to the seasonal nature of recruitment specials and the activity levels of brand partners [25][26] Question: What are the future plans for the undeveloped land? - The land will remain under the company's ownership for potential future use, including the possibility of building a warehouse if business grows [47]

Financial Performance - For fiscal year 2025, net revenues decreased to $34,191,000 from $51,030,300 in fiscal year 2024, representing a decline of approximately 33.1%[66] - Gross margin for fiscal year 2025 was $21,027,700, down from $32,984,900 in fiscal year 2024, indicating a decline of approximately 36%[66] - Net loss for fiscal year 2025 was $5,263,600, compared to a net earnings of $546,400 in fiscal year 2024, marking a significant downturn[66] - Other income fell to $2,109,000 in fiscal year 2025 from $9,394,300 in fiscal year 2024, a decrease of approximately 77.6%[69] - The effective tax rate decreased to 23.2% for fiscal year 2025 from 25.6% in fiscal year 2024, primarily due to fluctuations in sales mix and eligible credits[70] Brand Partner Activity - The PaperPie division added 7,800 new Brand Partners in fiscal year 2025, down from 10,800 in fiscal year 2024, resulting in a total of 7,800 active Brand Partners at the end of fiscal year 2025 compared to 15,000 in fiscal year 2024[53] - The average number of active Brand Partners decreased by 6,000, or 32.8%, to 12,300 in fiscal year 2025 from 18,300 in fiscal year 2024[71] - Active Brand Partners decreased from 15,000 in fiscal year 2024 to 7,800 in fiscal year 2025, with 7,800 new Brand Partners added during fiscal year 2025[53] - Approximately 17.3% of active Brand Partners maintained consignment inventory at the end of fiscal year 2025, with total consignment inventory costs of $1.3 million[118] Operating Expenses - Total operating expenses for fiscal year 2025 were $27,803,300, a decrease from $38,885,800 in fiscal year 2024, reflecting a reduction of approximately 28.5%[66] - Total operating expenses for PaperPie decreased by $9.3 million, or 36.0%, to $16.5 million for the fiscal year ended February 28, 2025[73] - Operating expenses decreased by $0.5 million, or 26.3%, to $1.4 million for the fiscal year ended February 28, 2025, compared to $1.9 million for the previous fiscal year[78] Inventory Management - Noncurrent inventory balances were $16.3 million as of February 28, 2025, compared to $12.3 million at February 29, 2024, with valuation allowances of $0.7 million and $0.6 million respectively[117] - Management has estimated a valuation allowance for inventory, including reserves for consigned inventory, of $1.2 million at February 28, 2025, compared to $1.0 million at February 29, 2024[119] - The total cost of inventory on consignment with Brand Partners was $1.3 million and $1.4 million at February 28, 2025 and February 29, 2024, respectively[118] Cash Flow and Financing - Cash flows from operations were positive at $3,211,700 during fiscal year 2025 despite a net loss of $5,263,600[82] - The Company executed multiple amendments to its credit agreement, with the latest extending the maturity date of the Revolving Loan to July 11, 2025, and adjusting the interest rate to SOFR + 6.00%[100] - As of the end of fiscal year 2025, the revolving bank credit facility loan balance was $4.2 million with $0.6 million of borrowing availability[81] - Cash used in financing activities totaled $3,083,000, consisting of net payments on the line of credit and term debt[87] Division Performance - PaperPie net revenues decreased by $15.7 million, or 34.4%, to $29.9 million for the fiscal year ended February 28, 2025, compared to $45.6 million for the fiscal year ended February 29, 2024[71] - Publishing division net revenues decreased by $1.1 million, or 20.4%, to $4.3 million for fiscal year ended February 28, 2025, due to the new distribution agreement with Usborne[76] - Gross margin for PaperPie decreased by $11.5 million, or 38.5%, to $18.4 million, with gross margin as a percentage of net revenues decreasing to 61.8% from 65.5%[72] - Gross margin for the Publishing division decreased by $0.5 million, or 16.1%, to $2.6 million, while gross margin as a percentage of net revenues increased to 59.5% from 57.5%[77] Debt Management - The Company plans to reduce debt by selling owned real estate, with proceeds expected to pay off Term Loans and the Revolving Loan[104] - The Company has taken steps to address concerns about its ability to continue as a going concern by planning to reduce debt through the sale of owned real estate[104]

Financial Transactions - Educational Development Corporation executed a Purchase and Sale Agreement for its headquarters and distribution warehouse for a total sale price of $35,150,000[6]. - The proceeds from the sale will be used to pay off outstanding Term Loans and Revolving Loan in the Credit Agreement with the Company's Bank[7]. - The sale agreement includes a 90-day due diligence period for the Buyer to secure financing and perform inspections[8]. - The Hilti Complex sale does not include approximately 17 acres of undeveloped land, which will remain under the ownership of Educational Development Corporation[7]. Lease Agreements - The new lease with the Buyer will have an initial term of 10 years at a rate of $8.62 per square foot, with 2.0% annual escalations starting in year two[9]. - The Company will assign existing tenant leases to the Buyer and enter into a new lease for its occupied space in the Hilti Complex[7]. - The initial lease will include typical triple-net terms, where the Seller is responsible for utilities, insurance, property taxes, and regular maintenance[9]. Corporate Governance - The Board of Directors approved the addition of Steven Hooser as a Class I Director, who will serve on the Audit, Compensation, and Governance Committees[13]. Financial Reporting - Educational Development Corporation announced its fiscal 2025 financial results on May 19, 2025, with a corresponding earnings call scheduled for the same day[14]. - Educational Development Corporation's fiscal 2025 earnings call will take place at 3:30 PM CT on May 19, 2025[14].

Core Viewpoint - Educational Development Corporation (EDC) has focused on cash flow management over profitability in fiscal 2025, leading to significant debt reduction and inventory management strategies [2][5]. Fiscal Year Summary Compared to the Prior Year - EDC reduced bank debts and vendor payables by a total of $16.9 million over fiscal years 2024 and 2025, with a reduction of $3.1 million in bank debts and $2.0 million in vendor payables during fiscal 2025 [2]. - Inventory levels decreased from $55.6 million to $44.7 million, generating $10.9 million in cash flow, with an excess inventory of approximately $30 million remaining [2]. - The company experienced a net loss of $(5.3) million for the fiscal year, compared to a net gain of $0.5 million in the previous year [4][6]. Fourth Quarter Summary Compared to the Prior Year Fourth Quarter - Net revenues for the fourth quarter were $6.6 million, down from $9.0 million in the previous year, while the average active PaperPie Brand Partners decreased from 15,500 to 9,400 [4][6]. - The loss before income taxes improved to $(1.5) million from $(2.2) million in the prior year’s fourth quarter, indicating a focus on cost reductions [4][6]. - Loss per share for the fourth quarter was $(0.16), an improvement from $(0.19) in the previous year [4][6]. Strategic Direction - EDC plans to strengthen its financial position through the sale and leaseback of its headquarters, which is expected to eliminate remaining bank debts and associated interest expenses [5]. - A Purchase Sale Agreement has been executed with TG OTC, LLC, with the transaction expected to close by early September 2025, allowing EDC to retain ownership of excess land [5].