EDC(US:EDUC)2023-07-12 16:00Financial Performance - Net revenues for the three months ended May 31, 2023, decreased by $8.6 million, or 37.2%, to $14.5 million compared to $23.2 million for the same period in 2022[68]. - Gross margin decreased by $5.9 million, or 38.5%, to $9.4 million during the three months ended May 31, 2023, compared to $15.3 million in the same period last year[68]. - Operating expenses decreased by $4.8 million, or 31.9%, to $10.2 million for the three months ended May 31, 2023, compared to $15.0 million for the same period in 2022[68]. - PaperPie net revenues decreased by $7.4 million, or 37.0%, to $12.6 million during the three months ended May 31, 2023, compared to $20.0 million in the same period last year[73]. - Publishing division's net revenues decreased by $1.2 million, or 38.7%, to $1.9 million during the three-month period ended May 31, 2023, primarily due to the stoppage of distribution of Usborne products[82]. - Gross margin for the Publishing division decreased by $0.5 million, or 33.3%, to $1.0 million during the three-month period ended May 31, 2023, from $1.5 million in the same quarter last year[83]. - Operating income for the PaperPie segment decreased by $1.6 million, or 48.5%, to $1.7 million during the three months ended May 31, 2023, compared to $3.3 million in the same quarter last year[80]. Active Brand Partners - The average number of active brand partners decreased by 9,000, or 28.0%, to 23,200 in the first quarter of fiscal 2024 from 32,200 in the first quarter of fiscal 2023[73]. - Approximately 9.0% of active Brand Partners maintained consignment inventory, totaling $1.4 million as of May 31, 2023[109]. Discounts and Sales Impact - Discounts as a percentage of gross sales increased from 26.8% in the first quarter of fiscal 2023 to 29.9% in the first quarter of fiscal 2024, impacting net revenues by approximately $0.5 million[76]. Cash Flow and Financing - EDC reported cash inflows from operations of $1,177,100 during the first three months of fiscal year 2024, despite a net loss of $872,800[87]. - The company reduced inventories by $1,430,400, contributing positively to cash inflows[87]. - Cash used in investing activities totaled $300,900, primarily for capital expenditures on software upgrades amounting to $288,100[88]. - Financing activities resulted in a cash outflow of $689,200, including net borrowings of $324,700 and payments on term debt of $450,000[89]. - As of the end of the first fiscal quarter of 2024, EDC's revolving bank credit facility loan balance was $11.0 million, with $3.0 million in available capacity[86]. - The company anticipates using cash generated from operations to purchase inventory and pay down existing debt[90]. - The company executed a new Credit Agreement with BOKF, NA, establishing a fixed rate term loan of $15,000,000 and a floating rate term loan of $21,000,000[91]. Compliance and Inventory - The company expects to be out of compliance with the fixed charge ratio covenant during fiscal year 2024, raising substantial doubt about its ability to continue as a going concern[96]. - Noncurrent inventory balances were $6.4 million as of May 31, 2023, with valuation allowances of $0.5 million[107]. Compensation and Incentives - During the first three months of fiscal year 2024, the Company recognized $0.1 million of compensation expense associated with the shares granted[113]. - The restricted share awards under the 2019 and 2022 Long-Term Incentive Plans contain both service and performance conditions[112].