• Net Revenues (Q3): $11.1 million compared to $16.9 million in the prior year.
• Average Active Brand Partners (Q3): 12,400 compared to 16,400 in the prior year.
• Loss Before Income Taxes (Q3): $1.1 million compared to income of $2.7 million in the prior year.
• Net Loss (Q3): $800,000 compared to net income of $2 million in the prior year.
• Loss Per Share (Q3): $0.10 compared to earnings per share of $0.24 in the prior year.
• Year-to-Date Net Revenues: $27.6 million compared to $42.1 million in the prior year.
• Year-to-Date Loss Before Income Taxes: $5.3 million compared to income before taxes of $2.9 million in the prior year.
• Year-to-Date Net Loss: $3.9 million compared to income of $2.2 million in the prior year.
• Year-to-Date Loss Per Share: $0.47 compared to earnings per share of $0.26 in the prior year.
• Net Inventories: Decreased by $8.8 million from $55.6 million to $46.8 million.
• Borrowings on Working Capital Line of Credit: $4.3 million with $1.2 million of availability at the end of the quarter.

• Warning! GuruFocus has detected 6 Warning Signs with EDUC.

Release Date: January 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Educational Development Corp (NASDAQ:EDUC) has implemented operational improvements and cost efficiencies, reducing pretax losses compared to the previous year.
• The company introduced a successful shipping subscription program, offering reduced or free shipping and other perks, which received positive feedback.
• The Black Friday promotion, Book Friday, was expanded and generated significant sales performance through social media engagement.
• The company is hosting multiple StoryMaker Summits across the US, allowing for deeper connections with brand partners in regional settings.
• The sale of the Hilti Complex building is expected to pay off all bank debt, improving the company's financial position and cash flow.

Negative Points

• Net revenues for the third quarter decreased significantly from $16.9 million to $11.1 million compared to the previous year.
• The average number of active brand partners dropped from 16,400 to 12,400, indicating a decline in engagement.
• The company reported a net loss of $800,000 for the quarter, compared to a net income of $2 million in the same quarter last year.
• Gross margins were negatively impacted by increased discounting to boost sales and reduce excess inventory.
• The due diligence period for the building sale has been extended, delaying the expected financial relief from the transaction.

Q & A Highlights

Q: Can you provide an update on new markets and IT implementations? A: Craig White, President and CEO, stated that while there are no new markets to report, the SmartLab Toys in the retail division has performed well. On the IT front, successful implementations include e-commerce enhancements and a shipping subscription program. Future plans involve an online fundraiser program and a brand ambassador model to increase brand partner counts.

Q: Could you clarify the timeline and details regarding the Hilti Complex sale? A: Dan O'Keefe, CFO, explained that the due diligence period for the Hilti Complex sale began in early November, with an initial expiration on January 19, and a possible extension to mid-February. The sale price remains at $38.3 million, consistent with the letter of intent.

Q: What is the status of the relationship with Usborne? A: Craig White mentioned that there are no new updates, but they anticipate returning to normal purchasing levels with Usborne once restrictions are lifted.

Q: Has the Board considered selling the company or exploring strategic alternatives? A: Craig White responded that the focus is on completing the building sale, which will strengthen the financial position. While several options are being considered, the priority is to stabilize operations post-sale.

Q: Can you comment on the decline in brand partner numbers and future expectations? A: Heather Cobb, Chief Sales and Marketing Officer, acknowledged the decrease due to economic headwinds and MLM reputation challenges. However, she expressed confidence that numbers will improve post-building sale and as business operations normalize.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.