EDC(EDUC) - 2026 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In the third quarter, net revenues decreased to $7 million from $11.1 million year-over-year [5] - Average active brand partners fell to 5,100 from 12,400 [5] - Earnings before income taxes improved to $10.6 million from a loss of $1.1 million in the prior year [5] - Net earnings for the quarter were $7.8 million compared to an $800,000 loss last year [5] - Year-to-date net revenues were $18.7 million, down from $27.6 million [6] - Year-to-date earnings before income taxes were $7.4 million compared to a loss of $5.3 million last year [6] - Year-to-date net earnings totaled $5.4 million compared to a $3.9 million loss last year [6] Business Line Data and Key Metrics Changes - The company launched the Gathered Goods fundraising program, which is expected to improve margins and scalability [8][10] - The Book Friday promotion drove strong engagement, reinforcing the value of the catalog [9] - Despite a decline in brand partner count, remaining partners are more productive and engaged [10] Market Data and Key Metrics Changes - The company reported a decrease in inventory levels from $44.7 million to $39.1 million, generating $5.6 million in cash flow from inventory reductions [6][7] - At the end of the quarter, cash was $3.4 million, receivables were $800,000, and accounts payable were $2.0 million [7] Company Strategy and Development Direction - The sale of the Hilti Complex allows the company to move forward without bank restrictions, focusing on growth and profitability [3][12] - The company plans to increase brand partner counts and has a refreshed marketing strategy targeting Gen Z [14] - An AI task force has been established to explore automation and transformational ideas [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future growth due to a committed leader base and more productive brand partners [11] - The company is preparing to execute a growth plan now that bank restrictions have been lifted [12][15] - Management acknowledged the challenges faced in recent years but is confident in the company's ability to emerge stronger [16][17] Other Important Information - The company has no bank debts following the sale of the Hilti Complex, which is expected to positively impact cash flows by approximately $1 million per year [12] - Inventory is fully insured at replacement cost, with about 50% related to Usborne [25][30] Q&A Session Summary Question: Has the sale of the building reinvigorated the salesforce? - Management noted increased activity in leader promotions and excitement among brand partners, indicating a positive shift [19][20] Question: Is there a new credit line in place? - Management is in discussions with banks for a new relationship but currently has sufficient cash [22][23] Question: Is the inventory fully insured? - Yes, inventory is insured at replacement cost [24][25] Question: What percentage of inventory could become outdated? - Historically, the company has not written down inventory and does not typically offload titles [26][27] Question: What is the status of the relationship with Usborne Publishing? - There has been no negative change, and Usborne is eager for the company to resume ordering titles [32][33] Question: What are the plans for the excess land beside the Hilti Complex? - The company is holding onto the land for now, with potential development options being considered [34]