Crown Crafts Inc (CRWS) 2023 Q4 法說會逐字稿

Good morning, and welcome to the Crown Crafts Financial Results for the Fourth Quarter and Full Year Fiscal 2023. (Operator Instructions) Please note, this event is being recorded. I would now like to turn the conference over to John Beisler, Investor Relations. Please go ahead.

早上好，歡迎來到 Crown Crafts 2023 財年第四季度和全年財務業績。（操作員說明）請注意，正在記錄此事件。我現在想將會議交給投資者關係部的約翰·貝斯勒 (John Beisler)。請繼續。

Thank you, operator, and good morning, everyone. We appreciate you joining us for the Crown Crafts Fourth Quarter and Fiscal 2023 Conference Call. Joining me on the call today are Crown Crafts President and CEO, Olivia Elliott, and the company's CFO, Craig Demarest.

謝謝接線員，大家早上好。我們感謝您參加 Crown Crafts 第四季度和 2023 財年電話會議。今天和我一起參加電話會議的是 Crown Crafts 總裁兼首席執行官 Olivia Elliott 和公司首席財務官 Craig Demarest。

Earlier this morning, Crown Crafts issued a press release regarding their fourth quarter and fiscal 2023 results. A copy of this release is available on the company's website, crowncrafts.com. The company's Form 10-K is expected to be filed within the next few days. During today's call, the company will make certain forward-looking statements, and actual results may differ materially from those expressed or implied. These statements are subject to risks and uncertainties that may be beyond Crown Crafts' control, and the company is under no obligation to update these statements.

今天上午早些時候，Crown Crafts 發布了有關第四季度和 2023 財年業績的新聞稿。該新聞稿的副本可在該公司網站 Crowncrafts.c​​om 上獲取。該公司的 10-K 表格預計將在未來幾天內提交。在今天的電話會議中，該公司將做出某些前瞻性陳述，實際結果可能與明示或暗示的結果存在重大差異。這些聲明存在可能超出 Crown Crafts 控制範圍的風險和不確定性，公司沒有義務更新這些聲明。

For more information about the company's risk factors and other uncertainties, please refer to the company's filings with the Securities and Exchange Commission. Finally, I would like to remind you today's call is being recorded, and a replay will be available through the company's Investor Relations page.

有關公司風險因素和其他不確定性的更多信息，請參閱公司向美國證券交易委員會提交的文件。最後，我想提醒您今天的電話會議正在錄音，並且可以通過公司的投資者關係頁面進行重播。

Now I would like to turn the call over to President and CEO, Olivia Elliott.

現在我想將電話轉給總裁兼首席執行官奧利維亞·埃利奧特 (Olivia Elliott)。

Thank you, John, and good morning, everyone. Fiscal 2023 presented a number of challenges across the business. The start of the year was impacted by the fallout of the port delays that occurred in the winter and spring of fiscal 2022, causing retailers to acquire excess inventory. Consumer spending slowed into the summer thanks in part to the highest inflation the country has experienced in 40 years, which caused retailers to adjust their inventory positions, subsequently reducing their reorder levels in the second half of the fiscal year.

謝謝約翰，大家早上好。 2023 財年整個企業面臨著許多挑戰。今年年初受到 2022 財年冬季和春季發生的港口延誤的影響，導致零售商購買了過多的庫存。夏季消費者支出放緩，部分原因是該國經歷了 40 年來最高的通脹，導致零售商調整庫存狀況​​，隨後降低了本財年下半年的再訂購水平。

We experienced this particularly within our toddler bedding category, which historically has represented almost half of (inaudible) business. Although recent headlines indicate inflation may have peaked in the near term, consumers are still experiencing higher prices for core needs, such as food and housing, which limit their discretionary income. Despite these multiple challenges, we focused on strengthening our relationships with our customers and maintained our overall shelf space for the year. The obvious exception being buybuyBaby as its parent company's financial problems impacted sales throughout the year before they filed for bankruptcy in April.

我們尤其在幼兒床上用品類別中經歷過這種情況，該類別在歷史上幾乎佔（聽不清）業務的一半。儘管最近的頭條新聞表明通貨膨脹可能在短期內達到頂峰，但消費者仍在經歷食品和住房等核心需求的價格上漲，這限制了他們的可自由支配收入。儘管面臨這些多重挑戰，我們仍專注於加強與客戶的關係，並維持了今年的整體貨架空間。明顯的例外是buybuyBaby，因為其母公司的財務問題影響了全年的銷售，直到四月份申請破產。

We also implemented cost savings across the business. On a full year basis, our marketing and administrative expenses decreased compared to fiscal 2022, even when including certain one-time items that Craig will speak to shortly. In March 2023, we purchased Manhattan Group, including Manhattan Toy and Manhattan Toy Europe. We believe this acquisition provides many opportunities in fiscal 2024 and beyond, which I'll detail later in the call. Most importantly, we remained profitable and maintained our quarterly dividend payments in a time when many companies within the consumer and retail sector were forced to either reduce or completely suspend their dividends.

我們還在整個企業範圍內實現了成本節約。從全年來看，與 2022 財年相比，我們的營銷和管理費用有所下降，即使包括克雷格即將談到的某些一次性項目。 2023年3月，我們收購了曼哈頓集團，包括曼哈頓玩具和曼哈頓玩具歐洲。我們相信此次收購在 2024 財年及以後提供了許多機會，我將在稍後的電話會議中詳細介紹。最重要的是，在消費者和零售行業的許多公司被迫減少或完全暫停股息的情況下，我們仍然保持盈利並維持季度股息支付。

Overall, we weathered the multiple headwinds throughout fiscal 2023 and remain well positioned entering fiscal 2024. With that, I'd like to turn the call over to Craig to cover the financials in more detail.

總體而言，我們在 2023 財年經受住了多重阻力，並在進入 2024 財年時保持了良好的地位。因此，我想將電話轉給克雷格，以更詳細地介紹財務狀況。

Thank you, Olivia, and good morning, everyone. Before I begin the discussion of our results, please note that the fourth quarter of fiscal '22 was a 14-week period versus 13 weeks this year. And fiscal year '22 was a 53-week year versus 52 weeks this year. Net sales for the fourth quarter of 2023 were $21.6 million compared to $25.7 million in the prior year quarter. The decline was primarily driven by reduced orders from our customers as a result of consumers' response to the current macroeconomic conditions and adjusted inventory levels as well as the reduction in sales to buybuyBaby and the impact of the extra week in the fourth quarter of the prior fiscal year.

謝謝你，奧利維亞，大家早上好。在開始討論我們的業績之前，請注意，22 財年第四季度的周期為 14 週，而今年為 13 週。 22 財年為期 53 週，而今年為 52 週。 2023 年第四季度的淨銷售額為 2160 萬美元，而上年同期為 2570 萬美元。下降的主要原因是消費者對當前宏觀經濟狀況的反應和庫存水平的調整導致客戶訂單減少，以及buybuyBaby銷量減少以及上一季度額外一周的影響。財政年度。

The prior year fourth quarter also included unusually high sales as a result of retailers overstocking inventory following supply chain delays in late calendar 2021. Gross margin for the quarter was 21.9% compared to 25% in the fourth quarter of fiscal '22. The margin decrease reflected higher inventory reserves in the current year quarter related to buybuyBaby private label inventory and the impact of a rent increase at our warehouse in California.

去年第四季度的銷售額也異常高，原因是零售商在 2021 年末供應鏈延遲後庫存積壓。該季度的毛利率為 21.9%，而 22 財年第四季度的毛利率為 25%。利潤率下降反映了本季度與 buybuyBaby 自有品牌庫存相關的庫存儲備增加以及我們加州倉庫租金上漲的影響。

Marketing and administrative expenses were $3.8 million versus $3.4 million in the prior year quarter. The increase here is primarily driven by expenses related to the Manhattan Group acquisition. Net income for the quarter was $828,000 or $0.08 per diluted share compared to net income of $2.4 million or $0.24 per diluted share in the prior year quarter. Net sales for fiscal 2023 were $75 million compared to $87.4 million in the prior year. The decline was primarily driven by the factors mentioned earlier.

營銷和管理費用為 380 萬美元，去年同期為 340 萬美元。這裡的增長主要是由與曼哈頓集團收購相關的費用推動的。本季度淨利潤為 828,000 美元，即稀釋後每股收益 0.08 美元，而去年同期淨利潤為 240 萬美元，即稀釋後每股收益 0.24 美元。 2023 財年的淨銷售額為 7500 萬美元，而上一年為 8740 萬美元。下降主要是由前面提到的因素驅動的。

Gross margin for the year was 26.4% compared to 26.7% in fiscal '22. We've seen a benefit in the current year from some stabilization in many of our input costs and increases in the selling price of certain products. Gross margin in fiscal '23 was negatively impacted by the February rent increase at our warehouse in California. Marketing and administrative expenses were $12.7 million versus $13 million in the prior year. The decrease was primarily driven by the closure of our Carousel Designs subsidiary in the first quarter of fiscal '22 and lower compensation costs in the current year, which were partially offset by expenses related to buybuyBaby bad debt reserve and the Manhattan Group acquisition expenses.

今年的毛利率為 26.4%，而 2022 財年的毛利率為 26.7%。今年我們看到許多投入成本的穩定和某些產品銷售價格的上漲帶來了好處。 23 財年的毛利率受到加州倉庫 2 月份租金上漲的負面影響。營銷和管理費用為 1,270 萬美元，而上一年為 1,300 萬美元。下降的主要原因是我們的 Carousel Designs 子公司在 22 財年第一季度關閉，以及本年度補償成本降低，但部分抵消了與 buybuyBaby 壞賬準備金和曼哈頓集團收購費用相關的費用。

Other income in fiscal '23 was $258,000 compared to $2 million in the prior year, the primary driver being last year's (inaudible). Net income for the year was $5.6 million or $0.56 per diluted share compared to net income of $9.9 million or $0.98 per diluted share in the prior year.

23 財年的其他收入為 258,000 美元，而上一年為 200 萬美元，主要驅動因素是去年（聽不清）。本年度淨利潤為 560 萬美元，即稀釋後每股收益 0.56 美元，而上一年淨利潤為 990 萬美元，即稀釋後每股收益 0.98 美元。

Turning now to the balance sheet. As Olivia mentioned earlier, we acquired Manhattan Group on March 17. The purchase price was $17 million and was funded through our revolver and cash on hand. Our year-end financials reflect the acquisition of Manhattan Group. Cash and cash equivalents at the end of fiscal '23 totaled $1.7 million compared to $1.6 million at the end of the prior year. Inventories at the end of fiscal '23 were $34.2 million compared to $25.8 million at the end of the third quarter and $20.7 million at the end of fiscal '22. The increase in inventories is primarily related to the acquisition of Manhattan Group (inaudible) inventories were in line with historical fiscal year-end levels.

現在轉向資產負債表。正如奧利維亞之前提到的，我們於 3 月 17 日收購了曼哈頓集團。收購價格為 1700 萬美元，資金來自我們的左輪手槍和手頭現金。我們的年終財務數據反映了對曼哈頓集團的收購。 23 財年末的現金和現金等價物總額為 170 萬美元，而上一財年末為 160 萬美元。 23 財年末的庫存為 3420 萬美元，而第三季度末的庫存為 2580 萬美元，22 財年末的庫存為 2070 萬美元。庫存增加主要與收購曼哈頓集團有關（聽不清）庫存與歷史財年末水平一致。

In conjunction with the Manhattan Group purchase, we increased our line of credit from $26 million to $35 million and extended the agreement by 3 years through July of 2028. Our long-term debt at the end of fiscal '23 was $12.7 million with an interest rate of 6.4%. Finally, we paid $0.32 per share in cash dividends to shareholders in fiscal '23. We believe the dividend, which currently provides a 6.1% yield based on yesterday's closing price, is a key component to offering long-term returns to our shareholders.

在收購曼哈頓集團的同時，我們將信貸額度從 2600 萬美元增加到 3500 萬美元，並將協議延長 3 年至 2028 年 7 月。截至 23 財年末，我們的長期債務為 1270 萬美元（含利息）率為6.4%。最後，我們在 23 財年向股東支付了每股 0.32 美元的現金股息。我們相信，目前根據昨天收盤價計算的股息收益率為 6.1%，它是為股東提供長期回報的關鍵組成部分。

Now I will turn the call back over to Olivia for additional comments.

現在我將把電話轉回奧利維亞以徵求更多意見。

Thank you, Craig. This is the first opportunity we've had to discuss our acquisition of Manhattan Group. So let me take a few minutes to discuss how they fit into our company and the opportunities they provide. Manhattan Toy's product offerings of plush, dolls and wooden toys are highly complementary to Crown Crafts' existing line of Sassy Toys. The product range (inaudible) higher and targets a higher-income consumer. There's currently very little overlap in distribution channels. Manhattan Toy is sold into Amazon, Target and specialty stores as well as (inaudible) and they have no penetration in Walmart. So there are opportunities to expand our sales channels on both sides.

謝謝你，克雷格。這是我們第一次有機會討論收購曼哈頓集團的事宜。因此，讓我花幾分鐘時間討論一下他們如何融入我們公司以及他們提供的機會。曼哈頓玩具 (Manhattan Toy) 的毛絨玩具、玩偶和木製玩具產品與 Crown Crafts 現有的 Sassy Toys 系列產品高度互補。產品範圍（聽不清）更高，針對的是高收入消費者。目前，分銷渠道幾乎沒有重疊。曼哈頓玩具銷往亞馬遜、塔吉特和專賣店（聽不清），但在沃爾瑪沒有滲透率。所以我們有機會擴大雙方的銷售渠道。

We also have an opportunity on the international front through Manhattan Toy Europe, roughly 14% of Manhattan sales are international. We also believe there are meaningful cost savings opportunities available from sourcing and importation. As we mentioned in the March release, we expect this acquisition will add approximately $24 million to the company's net sales in fiscal 2024 and be accretive to earnings by the end of the fiscal year. It should be noted that approximately 35% to 40% of Manhattan sales are in our third fiscal quarter, which is from October through December.

我們還通過曼哈頓玩具歐洲公司獲得了國際化的機會，大約 14% 的曼哈頓銷售額來自國際市場。我們還相信，採購和進口可以帶來有意義的成本節約機會。正如我們在 3 月份發布的新聞稿中提到的，我們預計此次收購將為公司 2024 財年的淨銷售額增加約 2400 萬美元，並在本財年末增加盈利。應該指出的是，大約 35% 到 40% 的曼哈頓銷售額發生在我們的第三財季，即 10 月到 12 月。

The toy category will become our largest product category across the business, representing approximately 40% of consolidated net sales. Overall, we believe we are well positioned entering fiscal 2024, which would be further helped by an improvement in the macroeconomic picture. We're excited about the opportunities that the addition of Manhattan Toy brings to us and look forward to reporting on our progress in the coming quarters.

玩具類別將成為我們整個業務中最大的產品類別，約佔合併淨銷售額的 40%。總體而言，我們相信進入 2024 財年我們處於有利位置，宏觀經濟形勢的改善將進一步有助於這一點。我們對曼哈頓玩具的加入給我們帶來的機會感到興奮，並期待在未來幾個季度報告我們的進展。

With that, I'd like to open up the line for questions. Drew?

至此，我想開通提問熱線。德魯？

(Operator Instructions) The first question comes from John Deysher with Pinnacle.

（操作員說明）第一個問題來自 Pinnacle 的 John Deysher。

Just a couple of quick questions. Regarding the reserve for the buybuyBaby bankruptcy, how much was that exactly?

只是幾個簡單的問題。關於buybuyBaby破產準備金到底是多少？

260-something on the receivables. Yes. 263. That sounds right. Yes.

應收賬款上有260左右。是的。 263. 聽起來不錯。是的。

$263,000?

263,000 美元？

Right.

正確的。

Okay. Okay. There's no additional exposure going forward with that client?

好的。好的。該客戶未來不會有更多曝光嗎？

No. We've got some private label inventory that we also took reserves on in the quarter for about $300,000. And from a go-forward standpoint, no, we don't believe we've got any exposure out there.

不會。我們有一些自有品牌庫存，並在本季度預留了約 30 萬美元的儲備。從未來的角度來看，不，我們不相信我們在那裡有任何曝光。

Okay. So $300,000 for the private label and $263,000 for buybuyBaby?

好的。那麼自有品牌的售價為 300,000 美元，buybuyBaby 的售價為 263,000 美元？

For the receivables, yes.

對於應收賬款，是的。

For the receivables. Right. Okay. Okay. And regarding the acquisition, what were the nonrecurring acquisition-related costs in the fourth quarter?

對於應收賬款。正確的。好的。好的。關於收購，第四季度的非經常性收購相關成本是多少？

So that was primarily just the due diligence costs, a little bit of travel to do the due diligence and make the announcement, some accounting fees and that type of thing. So it's just that truly acquisition due diligence type costs.

因此，這主要只是盡職調查成本、進行盡職調查和發佈公告的一點出差費用、一些會計費用等。所以這只是真正的收購盡職調查類型的成本。

Okay. And what would those be in total?

好的。這些總共是多少？

I think they were...

我認為他們是...

$370,000, roughly.

大約37萬美元。

$370,000. Okay. So it looks like you had about $900,000 of nonrecurring costs in the fourth quarter. Is that right? Total?

370,000 美元。好的。因此，您在第四季度的非經常性成本看起來約為 900,000 美元。是對的嗎？全部的？

That's fair. Yes.

這還算公平。是的。

That's fair enough. Yes.

這很公平。是的。

And going forward, what kind of -- when you get Manhattan Toy to where you want it to be, can you give us a feel for kind of what the cost savings might be on a go-forward basis?

展望未來，當您將曼哈頓玩具帶到您想要的位置時，您能否讓我們了解一下未來可能會節省哪些成本？

That's not something we've really given publicly. I don't think we're really ready yet to discuss that.

這並不是我們真正公開給出的東西。我認為我們還沒有真正準備好討論這個問題。

Okay. When do you think you'll have a better handle on that?

好的。你認為什麼時候你能更好地處理這個問題？

I think probably maybe mid-year, maybe 6 months into this year. We'd like to get at least through a few months of sales, and we're already realizing some cost savings. I mean it's easy to realize the cost savings in freight when their last calendar year included the highest of all-time. But we're also getting a lot of help just in negotiating better prices with the suppliers, et cetera. So it would be nice to have a few months behind our belt before we really put that out in the world.

我想可能是年中，也許是今年 6 個月。我們希望至少能完成幾個月的銷售，並且我們已經實現了一些成本節省。我的意思是，當他們的上一個日曆年達到歷史最高水平時，很容易實現貨運成本的節省。但我們在與供應商談判更優惠的價格等方面也得到了很多幫助。因此，在我們真正將其發布之前，最好先花幾個月的時間。

Okay. So another 6 months or so?

好的。那麼還有 6 個月左右嗎？

Yes, that would be good.

是的，那很好。

All right. Good. Thanks very much, and good luck.

好的。好的。非常感謝，祝你好運。

Thank you.

謝謝。

Thanks.

謝謝。

This concludes our question-and-answer session. At this time, I would like to turn the conference back over to Olivia Elliott for any closing remarks.

我們的問答環節到此結束。此時，我想將會議轉回給奧利維亞·埃利奧特（Olivia Elliott）做總結髮言。

Thank you, Drew. Thank you for your continued interest in the company. We look forward to speaking with you again when we report our first quarter results in August.

謝謝你，德魯。感謝您對公司的持續關注。我們期待在八月份報告第一季度業績時再次與您交談。

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

會議現已結束。感謝您參加今天的演講。您現在可以斷開連接。