EDC(EDUC) - 2023 Q4 - Annual Report

Financial Performance - Net revenues for fiscal year 2023 were $87.83 million, a decrease of 38.2% from $142.23 million in fiscal year 2022[57]. - Operating expenses for fiscal year 2023 totaled $58.65 million, down from $87.69 million in fiscal year 2022, primarily due to a reduction in sales commissions and operating costs[57]. - The company reported a net loss of $2,504,900 for fiscal year 2023, despite generating positive cash flows from operations of $58,500[71]. - Operating income decreased by $0.4 million, or 11.1%, to $3.2 million for the fiscal year ended February 28, 2023, compared to $3.6 million in the previous year[69]. Revenue Breakdown - The Publishing division generated 2% of net revenues from national chain bookstores, while 98% came from all other markets[55]. - Publishing division's net revenues remained consistent at $13.3 million for fiscal years ended February 28, 2023, and 2022[66]. - PaperPie net revenues decreased by $54.5 million, or 42.2%, to $74.5 million for the fiscal year ended February 28, 2023, compared to $129.0 million for the previous year[62]. Cost and Margin Analysis - Cost of goods sold decreased to $31.76 million in fiscal year 2023 from $44.30 million in fiscal year 2022, resulting in a gross margin of $56.07 million[57]. - Gross margin for PaperPie decreased by $41.9 million, or 45.6%, to $49.9 million, with gross margin as a percentage of net revenues dropping to 66.9% from 71.2%[63]. - Gross margin for the Publishing division increased by $0.1 million to $6.2 million, with gross margin as a percentage of net revenues rising to 46.4%[67]. Brand Partner Activity - The PaperPie division added 16,500 new Brand Partners in fiscal year 2023, down from 26,100 in fiscal year 2022, with active Brand Partners decreasing to 24,600 from 36,100[45]. - The average number of active Brand Partners decreased by 16,900, or 37.6%, to 28,000 in fiscal year 2023 from 44,900 in fiscal year 2022[62]. - Approximately 8.5% of active Brand Partners maintained consignment inventory at the end of fiscal year 2023, with total consignment inventory costs of $1.5 million[98]. Debt and Interest - Interest expense increased to $2.17 million in fiscal year 2023 from $0.92 million in fiscal year 2022, attributed to increased borrowings and rising interest rates[59]. - The Company has a Fixed Rate Term Loan with an interest rate of 4.26% and a Floating Rate Term Loan with an effective rate of 6.28% as of February 28, 2023[83]. - The company anticipates not meeting the fixed charge ratio during fiscal year 2024, which could represent an Event of Default under the Credit Agreement[80]. Inventory Management - Noncurrent inventory balances were $5.1 million and $2.4 million at February 28, 2023, and February 28, 2022, respectively, with valuation allowances of $0.4 million for both years[97]. - The Company does not expect inventory to increase in fiscal year 2024 as it continues to sell down excess inventory[87]. - The total cost of inventory on consignment with Brand Partners was $1.5 million as of February 28, 2023, compared to $1.4 million in the previous year[98]. Other Income and Expenses - Other income decreased to $1.33 million in fiscal year 2023 from $1.91 million in fiscal year 2022, influenced by prior year recoveries not repeating[60]. - The effective tax rate increased to 26.9% for fiscal year 2023 from 26.1% in fiscal year 2022, reflecting fluctuations in sales mix between states[61]. - The Company recognized $0.9 million and $1.0 million in share-based compensation expense for fiscal years 2023 and 2022, respectively[92].