Educational Development (NASDAQ:EDUC) Q1 2020 Earnings Call

0:00 Thank you, Valerie. Thank you, Valerie. Welcome to the call, gentlemen and ladies. Here with me today, I'm going to introduce Craig White, our Chief Operating Officer, and also Dan O'Keefe, our Chief Financial Officer. I think we're going to start with Dan. He'll give you a highlight of the previous earnings release.

0:47 Thank you, Randall. As a recap of our earnings for the quarter, net revenues for the first quarter of fiscal 2020 were approximately $27.6 million. down 2.4 million or 8% from approximately 30 million reported in the first quarter of fiscal 2019. Earnings before income taxes totaled approximately 1.8 million, a decrease of 0.6 million or 26% from approximately 2.5 million in the first quarter of fiscal 2019. Pre-tax profit as a percentage of net revenues were 6.7% in the first quarter of fiscal 2020 compared to 8.3% reported in the first quarter of fiscal 2019. Net earnings in the first quarter of fiscal 2020 totaled approximately 1.4 million, a decrease of 0.4 million or 25% from approximately 1.8 million in the first quarter of fiscal 2019.

1:45 Earnings per share on a fully diluted basis decreased five cents a share or 23% from 22 cents per share reported in the first quarter of fiscal 2019 to 17 cents per share reported in the first quarter of fiscal 2020. This concludes our earnings results, and I'll pass the call back to Randall. Okay, Dan, thanks. Well, investors, this is the first quarter that I've had to report that clients failed in a very long time. This is not an indication of where we're headed for the fiscal year behind, I don't think, because we continue to expect growth in both divisions of the company, actually. The decline, if there's anything to explain what happened, the decline resulted from a very successful recruiting program in February of 2018, which was in the quarter we're comparing to.

2:38 And we had 8,800 new consultants that month. And pretty much that resulted in the 10% revenue growth for the quarter. So we actually grew our average consultants between quarter four last year and quarter one of this year. So that that big negative comparison in the first quarter, not likely in the remaining quarters. But, I've told you guys before, the average number of active consultants is not exactly a firm number, but it is a guideline. I will tell you that we've had a very successful current recruiting effort, and so far, halfway through the month, we're up about Thank you for having me.

3:46 That's pretty significant in the fact that, of course, they pay their way to come here. That's all expense to the consultant to attend. So that's 1,700 people who want to do better, apparently. So that's very encouraging that that's up 40% over last year. And, again, the recruiting special. We left them with encouraging reports from the company, and they've gone back and halfway through the month of July have had a very successful recruiting effort. We're also really excited about the technology improvements that we're rolling out this summer and how that will affect our existing consultants and improve the experiences of our new recruits.

4:31 We hear a lot about the industry, probably not surprising to anybody on the call that and the new young people are very impatient with any type of technology. It's not just the most latest up to date. So we have rolled out our back office platform on a test basis already which offers that phone mobility, that mobility for the handset. They've been asking for this platform to be mobile friendly and we are delivering it. It's in the test phase right now and it should be rolled out I hope they're as excited as we are. Today, literally, they want to punch a button and their drone delivered on the porch in about 30 minutes. We're not quite there yet, of course, but certainly making their business mobile friendly where they can transact their entire business on their phone away from home.

5:30 Here's some of the other changes we had in quarter one. Our publishing division continues to grow a little bit, and we expect that to grow in the near future. We're picking up new accounts. I was back in the sales department yesterday looking at some new accounts that we're adding, and we think we can return that back to levels that we previously had. The pre-tax profit of 6.7% reflects the strength of our business model, even when revenues decline. I think for the whole year, last year, full year, we did 7.7% and 8.7% for the quarter a year ago. The fact that we had that much decline shows that we do keep control of our costs and our model is good.

6:21 Our sales are down, but we're still profitable. We also used Thank you very much. Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star then 1 on your touchtone telephone.

7:09 Again, if you would like to ask a question, please press star then 1. One moment for our first question. Again, if you'd like to ask a question, please press star then 1. So I must have answered every question you ever wanted to know about the company and the quarter and where we're headed. Okay. I hope that's the answer and not lack of interest. We're optimistic here, guys. It's tough business, a lot tougher than it used to be. We have to face things that have nothing to do with us like other companies in the industry that have had different problems than we do, and we don't have those kind of problems. Other companies in the industry may not operate as ethically as we do, and that doesn't have any effect on us, but when you're in the direct selling industry, sometimes we get painted with the same brush.

8:11 So apparently there's no questions. So guys, thank you very much for listening, and we'll report on our next quarter. Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you for your participation. You may all disconnect. Thank you, Valerie. You're welcome. Have a great day.