Educational Development Corp (EDUC) 2018 Q2 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by.

Welcome to the Educational Development Corporation Second Quarter 2018 Results Call.

(Operator Instructions)

Now I would like to turn the call to the Chief Executive Officer, Mr. Randall White.

Thank you, guys.

Thanks for the people who are attending here today.

I got a little bit better news.

With us today on the call, so we'll have questions later, we've got Dan O'Keefe, who's our CFO; we have Heather Cobb, our Vice President of UBAM; and we've got Craig White, Vice President of Information Technology.

So we'll all be available for questions.

But first, let me pass the lead to Dan just to go over our earnings report.

Thank you, Randall.

I will announce the earnings results for the second quarter and then our year-to-date as well.

So we'll start with net revenues.

Net revenues for the second quarter decreased from $25,893,000 to $24,181,000 or a decrease of $1.7 million or 7% over the same quarter last year.

Earnings before income taxes increased from $520,700 in the second quarter of our fiscal 2017 to $1,682,700 for our second quarter of our fiscal '18.

That was an increase of $1,162,000 or 223% increase in earnings over the prior year common quarter.

Earnings -- net earnings after taxes increased from $318,500 in the second quarter of fiscal 2017 to $1,036,900 in the second quarter of fiscal 2018, an increase of $718,400 or 226%.

Earnings per share increased from $0.08 in the second quarter of last year to $0.25 in the second quarter of fiscal 2018, an increase of $0.17 or 212% increase in earnings per share over the common quarter comparison.

Year-to-date comparison for the 6-month period ended August 31, 2018.

Net revenues were $51,112,000 compared with $48,680,000 for the same 6-month period last year, an increase of $2.4 million or 5% increase year-to-date over last year's results.

Earnings before income taxes were $3.7 million versus $1.5 million for the 6-month period last year, an increase of $2.1 million or 140%.

And then net earnings after taxes were $2.3 million for the 6-month period ended August 31, 2017, compared with $938,000 for the same 6 months -- or for the comparable 6 months of 2017 last year.

That's an increase of $1.3 million or 141% increase in earnings after taxes.

Earnings per share increased from $0.23 for the 6-month period ended August 31, 2017 to -- or '16 to $0.55 for the 6 months ended August 31, 2017.

That's an increase of $0.32 per share or 139% increase in earnings.

That concludes the financial update for the earnings call, and I'll pass the call back over to Randall White, our CEO.

Okay.

Thanks, Dan.

Good results there.

I'm really happy about these results because we've had explosive growth in sales.

And during that period of time, it's been a real struggle to be profitable because of all the implementation training, new technology to try to digest while we're doing this.

But -- so to have increase in earnings.

But it goes back for quite a few months that trend has.

So our growth, of course, is driven by our UBAM, and it's due to the success of the consultants and against strong demand for our product.

We really see that in 2 ways.

The second quarter is a continuation.

It goes back to probably a year ago when we finally walked away from a software program that we had purchased from an outside vendor and it never worked.

It was -- it never worked and so we took it back over in-house and brought in some new developers, additional developers.

And we're having much better results, and it's more efficient and certainly more profitable to do this for ourselves.

And we're still [implementing] technology, by the way.

It's a day-to-day thing.

We have people here all the time, advising us, what if you do this?

Tweak this, tweak that.

And we are putting out more and more product.

As a matter of fact, we had a record week last week for one shift.

We did as much on one shift last week as we did in the fall in our biggest month in November on 2 shifts.

So we're getting there.

So you can imagine that the operating efficiency is getting significantly better.

And again, it's attributed to the people here in this room, by the way: Heather driving the sales, Craig with the technology and Dan actually recording it correctly.

Those are all kind of important steps to make this program a success.

And so it's really fun for me to watch what's happening.

And I've known it.

I've known it all along.

When we had a tough fall, and by the way, we had a tough fall, and people kind of turned away from us, our suppliers, the bank, everyone, but I just kept telling them I know how the story ends because this company has had the same formula for years and now it's only getting better.

Our cost of goods is coming down, our operations is improving so that we're more profitable.

And this quarter, we're just kind of an example of what can happen here when we're more profitable.

I will tell you that the sales are increasing.

We're starting our night shift tonight.

It's the first time we've had to do a night shift in the fall.

But we started much earlier last year.

But this year, because we've been more efficient, we haven't had to.

But tonight, we're starting our night shift to handle what we expect to be an excellent fall selling season.

Anyway, I think I'm probably ready for questions because I can tell you stuff, but you might want to know specifically this.

I will tell you that -- you might have a question.

The fall was very hard on us, we think, well, last 10 months ago.

Yes, I know.

But women will forgive you, but they don't forget.

And you'll be amazed at the number of the people who will post on Facebook.

I haven't ordered anything in a while.

How's the shipping doing?

My gosh, you guys that was 10 months ago.

So we're gradually getting people back.

And right now, we haven't reported this, but we have right around 30,000 salespeople.

And that's pretty good because these 6 months, you knock people out of active salespeople if they haven't sold anything in 6 months.

So this 6-month sales period goes back for -- Craig was telling me what went right on there.

Generally it's a reduction in this -- when he reported this quarter because the months it covers.

You're just getting past the Christmas selling season in January, February, March.

So the fact that we still are increasing is, I think, a significant item for us and sales also are increasing.

And we got control of the place.

It's been a wild ride.

It's been a wild ride here, guys, and we survived it and I think that we've got some sunny days ahead.

So with that, I'm ready to open up for questions.

If I haven't told you anything you want to know, well, now's your chance.

(Operator Instructions) And our first question is from the line of Paul Carter with Adaptable Capital.

First of all, what were your cash flows from operations and then CapEx numbers just for the second quarter?

I missed the first part.

I heard CapEx.

What was the what?

Oh, cash flows from operations.

Paul, we're filing our Q later today so we don't -- I don't have that information in front of me, but it will be out there within the next hour or so.

So I don't have the Q right in front of me.

Our CapEx so far year-to-date is roughly around $1 million that we've spent.

We -- the board approved a $2 million capital expenditure budget for this year to improve the efficiency, primarily -- the primary piece of that CapEx budget was to improve our daily output in shipping numbers, and so that CapEx project was broken down into 2 pieces.

One was to implement some additional technology on our pick lines.

And then our second part was to implement some additional automation and technology on our packing process.

And so far, through the second quarter, we've implemented the pick line automation and technology improvements that have really sped up our shipping, daily shipping, as Randall was talking about earlier.

And the pack line process automation is actually scheduled to be performed in the fourth quarter.

Okay.

So you're not sure what your cash flows were but what about just your book inventory for the quarter?

How did that look relative to the end of May?

Again, I apologize, Paul.

I didn't bring any Q with me to do that comparison for you.

We were just doing the press release discussion right now.

So I don't have that information.

You have a rough idea?

It's down.

It's down, but...

No, no, it's okay.

So I apologize, Paul.

That's my mistake for not bringing in the Q with me to go through those numbers with you.

That's fine.

I'll wait till later this afternoon.

So just sort of big picture question.

So over the last number of years, there have been lots of examples of companies that use the direct sales model, posting sort of explosive growth, only to see that growth subsequently, like, dissipate.

So UBAM has obviously posted some tremendous growth here over the last few years.

So how confident are you that UBAM is not going to retrace a large portion of these gains?

And then what gives you that confidence?

Well, we have -- we're a very small piece of the industry, both direct sales and publishing.

Publishing children's books is about $3 billion a year, and obviously, we've not exactly got that market cornered.

But we have the very best direct selling program in the industry because we have a value product.

Most fixed owned companies have a very high markup, and we don't because we sell in retail stores and that keeps us honest, so to speak, in that we price the books on the back.

And if it's $15, $14.99, that's what it's sold at in direct sales and it's also what it's sold at in our retail stores such as Barnes & Noble.

So we can't raise the price of a book and increase our margins because retail stores are not going to buy them.

Now we do have a strong demand, and I'm going to let Heather, who is in charge of that division.

Maybe she has a little more insight about that and where we're going.

Hey, Paul.

It's a great question and one that we actually look at pretty closely day in and day out because we have experienced such significant growth.

I think that one of the differences that you'll see in how we've handled that growth and how other companies have is really how they've approached their sales force.

And that is truly that.

When you have the number of new consultants and the sales increase that we've had, traditionally in the direct sales model, the immediate response is to turn around and throw more back to them, throw more cash bonuses, throw more expensive items and gifts and things like that.

Where we have been quite a bit more conservative with that, we know that our model worked in the way that it was built with the trip incentives and other things like that, that we do.

And so we haven't overexerted ourselves outside of what the growth allows.

And so I really feel like we're in a good position going forward.

We do see continued growth happening, maybe not at the same rate, but we feel like we're in a really solid position to continue growing.

Does that answer a little bit of what you were asking?

Yes.

Paul, let me add.

Let me add one more thing to that.

I think what makes it grow, there's a couple of things.

One is you have a great product and we do.

The quality of our product is unsurpassed.

The second thing is do the consultants make money?

Because direct selling people would get in.

Oh, yes, first thing you know, they've spent more than they've made.

Well, our program is very simple.

We do not push product down anybody's throat to where at the end of the year, you've lost money.

You'd have to work at it to be involved in our organization and lose money.

So that's one thing.

It is a very simple process.

The second one is we have people who make significant money now because of our growth.

We have people who make over $200,000 a year, and that's working out of their house.

And I'm going to tell you, that's not bad for someone to work from their home, make that kind of income.

And what happens is when you make that kind of income, you tell other people.

And they say, "Are you serious?

Well, I want to join that." And that's kind of how it works.

So I think that we have, because of those 2 things, a very valued product and a chance to earn significant income.

I don't see that we've anywhere near plateaued in sales.

Okay.

That's great.

Just another kind of big picture question.

So sort of 5 or I guess maybe closer to 10 years ago when EDC was a $30 million company, you regularly posted net profit margins of like 7% or 8%.

So assuming you sort of stabilized your net -- either stabilized your net revenues out like the $110 million level or kind of grow it somewhat going forward, where do see those net profit margins growing to in the near term, understanding that your mix between your 2 divisions is different than what it used to be?

So, so far, Paul, this is Dan again.

So far, year-to-date, we've reported about a 7% earnings before income taxes, and that's an increase from last year when we were about 3%.

And we don't want to necessarily give projections as to where we're headed.

But we do see opportunities to continue to improve our efficiency.

And one of those is obviously, as Randall was saying earlier, we're now shipping out more product on a daily basis in 1 shift than we were last year in 2 shifts.

And so if you come to think about the periods that you have 2 shifts, which is going to be for the next, what we're targeting, October, November and December of this year, we'll be at 2 shifts, and you compare that to last year, we will still see some operational efficiencies with 2 shifts because those 2 shifts are going to be putting out a lot more product per shift.

I can remember those ledgers, by the way, Paul.

I can remember a long time ago when we hit as much as 15% to 18% pretax because we were a solid company that wasn't growing that much but we had tighten down everything there was and we made a nice profit.

Well, we grow like we did.

Those went out the window.

And so we're in a place now where we're trying to tighten up on expenses and get that back to the bottom line.

And I like to think that 10% to 12% pretax is not out of the realm of possibility because it comes in 2 places.

It comes from the products we're purchasing through Kane Miller.

We're getting volume discounts, and that's making a significant increase in our cost of goods.

And so that, and with the -- just volume, boxes go down.

We're not nearly back to the point that we were a few years ago when we ran a very tight operation.

This is not tight yet, but we can get -- we can do a lot better.

And the fact that we just hit our largest day on 1 shift than we've ever had with 2 shifts.

So you can see that we're getting there.

It's a real challenge to grow 100% in the kind of a business we're in, and install our technology and what have you.

But believe me, I'm the same person that 15 years ago kind of knew everything that's going on and had a very tight control of expenses, and we're getting back to that.

Okay, great.

And just final, really quick question.

This is a minor thing.

But your weighted average basic share count this quarter was about 6,000 shares less than what it was in July.

Is that an indication -- are you buying back stock again or is that some other reason?

That's associated with our 401(k) plan, Paul.

So we've had a 401(k) plan for decades now and our employees can choose to invest in EDC stock as part of their 401(k) investment option on a pretax basis.

And when they leave, they can request that the company buy their shares back from them and just provide a cash payment to them.

And so we had some minor 401(k) redemptions that we approved, but there's no share buyback program in place or any other type of opportunity like that.

It was just the minor 401(k) transactions.

If it came down to buying stock or paying a dividend, I think I'd probably pay a dividend at this point.

But that's in -- sometimes somebody else's hands right now.

(Operator Instructions)

Surely somebody has a question.

Results are so good you don't need to know anything, is that it?

And we have a question or a comment from the line of [Tom Roach], a private investor.

Yes, Randall, I was just wondering if Heather could give us a little color on what she's hearing from the sales consultants and how they feel about the downtime that was recently experienced and how they feel about sales in this quarter and going forward.

Sure.

I can share that we actually tend to not hear a ton of stuff from them during the fall because they're so busy out selling in various booths and parties and things like that.

We did have some short slowdown of the website issues.

It was corrected by our IT team as quickly as possible, and we saw a record number of orders in the following 24 hours after that.

Sentiment still seems to be pretty high when it comes to love of the books, love of sharing the book and love of sharing the opportunity with others.

There's always room for us to continue to look at things and improve internally what we can provide them, which is what we'll continue to do.

Overall, I would say they're still out there, slinging books, as Randall likes to say, and getting those into the hands of kids and families that need them.

I'm going to add to that, too.

It's not a secret here, guys.

We lost a bunch of people in the fall last year because at one time in November, December last year, we had 127,000 orders to ship that had been paid for, and we were shipping about 8,000 or 9,000 a day.

And there was nothing I can do.

I mean I'm down here 61 days straight.

And there's nothing I could do.

I did everything.

We did everything we could.

But those days were past now.

But some people still remember that.

And so we lost a lot of consultants and customers.

But the fact that we now have more right around the same or more than we've ever had is an indication that it's kind of like marching a Chinese army 2 by 2 into the ocean.

They're reproducing faster and are dying.

So I'm not -- certainly not arrogant about that.

We are -- we really worked towards keeping our consultants happy and our customers happy, and that's a challenge.

That's a challenge because in the fall, there are so many people on the lower end who don't make a lot of money.

They may make $200, $300, $400, $500 a month, and it doesn't take a lot of adversity for them to give up.

And so the fact that we're still growing in consultant headcount is very encouraging to us.

And we listen to the field.

They have -- I believe, well, they've got none to say.

If they're happy, they put it on Facebook.

And if they're not happy, they put it on Facebook.

And we read all these things.

And right now, I think overall, the top leaders of the company are tired.

They feel like they had a tough fall.

But when you put out new titles like we have, just recently, oh my gosh, it's just like a shot of adrenaline.

And then, we're meeting with our top 200 or so leaders in Dallas in January, and it's always a big kickoff.

But a key element here is, do you make money?

And if you do, that's a big draw.

And so while we've had to overcome some things that you think we'd be able to be now.

But they are, from our standpoint, we just got to get all the fields to realize that the fall is not going to happen again.

I know in July, we infamous new technology, which means you have to take the lines down and so we did one line at a time.

And so one line was down.

It supposed to be back up July 6. Well, for whatever reason, they didn't get it back up till July 16th.

We got about 10 days behind in orders.

And you started getting these comments.

"Oh, no, oh no.

It feels like the fall again." No, no, ladies.

it's not the fall again.

But it's a sensitive issue and sometimes it's precarious.

But I feel like we have a very strong group of leaders now that see what's happening here and they're very excited about going in the fall selling season because that's kind of -- that's kind of time to reap, not sow.

They like sowing seeds and now this is time to reap.

So I think we, by and large, have an excited sales force going into the best-selling season.

And our next is from the line of Eric Landry from BML Capital.

If you didn't have to take down whatever line it was you took down in the quarter, would your sales have been flat to up?

No.

This is Dan, Eric.

Our deferred revenue changed slightly.

It went up -- I want to estimate between $100,000 and $300,000.

But with the deferred revenue change in the orders that came in, we'd still be down a little bit, well, in the common quarter comparison to last year.

Well, here's the thing: we don't really know because when you get a little bit behind, I'm telling you, it's like somebody puts in their finger in a sore and gouging it.

You already have people sounding an alarm.

So when you say would've, could've, should've, anything that can alarm people, [set it], it gives them a reason to do or not do something.

So it's hard to say if and what because if finance were pots and pans, we'd all be in the hardware business.

All I know is we've got people who are very happy with what they do, make a lot of money and they're spreading the word.

And there isn't a whole lot of people who got left behind because they didn't -- if you have one bad experience and it's your neighbor, it's just like they're gone.

But believe me, we work on it and Heather gives me a heads-up.

She'll give me one this weekend.

She sent me my homework.

She gave me 2 pages of people to call and talk to, and one of them is a customer who had a very bad experienced.

She was really angry.

And I just called her.

I'm the CEO.

I just called her and she was pretty much taken aback by that.

And she said, "Well, I did have a bad experience." And I said, "Well, this is a great company." She said, "I know.

I love your products.

As a matter fact, I was thinking about joining." I said, "Well, sorry about that.

And we'll fix every problem we had." And at the end of the call, she joined as a consultant.

So that -- it's not that hard.

We have a really nice company, great product and a fair price.

So I just feel like that we spent 8 months trying to figure out how to catch up in sales.

About 2 days after we catch up in sales, we go, oh, no, we caught up in sales.

Well, one of the things we're doing about that, by the way, is we're reopening the school and library division.

That's been closed for what, 18 months, because we could not handle any more consultants selling.

So January?

January?

January, we'll open that up for people to sign up to going into the school and library market.

And we think as many as 4,000 to 5,000 people will do that because that's a very nice market that we're in, but we haven't expended because we couldn't handle it.

And now we think we can.

So that's just another area that gives us confidence that our sales will get back on a growth mode.

Okay.

How much is your growth driven by new title releases?

I think somebody mentioned -- there was one -- there was one mention on the call earlier.

How much of your growth is driven by just the sheer number of new titles introduced during a quarter?

Heather might know, but I'll tell you this.

Sales are driven by consultant headcounts, and it's all part of the picture, okay?

New consultants get -- well, existing consultants get so excited when they get new books.

I mean, it's like Christmas.

It's like opening a Christmas present.

They post on Facebook, "Oh my gosh, look what we got." They get all excited about that, and they tell other people.

Other people join.

And so is it consultant-driven or new title-driven.

Heather, what?

I would say -- I heard you up the question about the number of new titles that we have coming in.

It's less about the number of new titles and the psychological impact of getting the new titles.

It is a little bit of what Randall said.

It has everything to do with someone who's been a consultant or a leader with us for 20 years, who has seen at least 40 new title releases plus small releases and other 40 of those in between and still manages to get just as excited about the new titles that they ordered about the day that they joined.

And so I think that we do 2 catalogs a year, add new title release in January and July.

And then we do a mid-season release in March and October.

And what that allows for is just that little shot of energy and that little bit of excitement.

So I don't know that it's necessarily driven specifically by those new titles, but I think it's another thing for them to get excited about.

And Eric, just from a quantitative viewpoint -- this is Dan -- we introduced about 200 new titles a year, which represents about 10% of our portfolio.

So when we're releasing new titles, it's not replacing a significant piece of our offering.

A lot of our books that we offer, we've carried for decades.

But we consistently look at some that are 10% that are going out of favor, out of genre, out of the current influence of little kids and then replacing those with more books that are current and exciting.

I'm going to add one more thing on that, too.

On new titles, we feel like for the last 20 years, we've said, oh my gosh, new titles are better than ever.

It's really interesting how the new titles create such excitement.

Well, with Usborne, we've had the best books in the world.

But now with Kane Miller, the phenomenon we had with Kane Miller because of the growth, we are attracting the very best products from all over the world besides Usborne.

We have the top people bringing products to us.

And because they're hearing about these 30,000 salespeople out selling, doing $100 million in sales and everybody wants to be a part of that.

We recently just picked up a very popular line of books from England called Bear Grylls, which it's comparable to what, Heather, kind of?

Well, I mean, he's an avid outdoor survivalist and has riveted us with 4 different new series for kids of all ages, from activity books to nonfiction survival skills as well as a fabulous new chapter book series so...

Very popular and so it seems like that.

But we do think our products get better.

Usborne does get better and better.

And then, with the Kane Miller side, where we attract from the top people around the world, we really are accumulating the top product line in the world.

I have one more, if it's okay.

Sure.

I think I heard somebody mention that you're taking the lines down again in the current quarter coming up soon.

Is that correct?

No, no, I didn't say that.

I said that we did that in July and that we took them down one at a time.

And the second one took longer to get back going.

There are some technology improvements coming up, but we're not going to do that in a busy season.

We postponed -- Craig, do you want to address that?

Yes.

We're redesigning the pack layout and pack process.

We will not be taking down at all during that time.

It should take a couple of weeks, but we're starting just after January 1 and January is typically our slowest month.

So it shouldn't affect productivity virtually at all.

So it's just a new project where we're taking work to the packers as opposed to them having to walk in and get work.

Eric, you might have heard me say that we're doing that in our fourth quarter.

Our fourth quarter starts in December and goes till the end of February.

So we are doing the pack line process changeover in the fourth quarter, but it's not the fourth quarter of the calendar year.

It's our fiscal fourth quarter, which will be, as Craig said, in January after the season is over.

I might have mentioned to you, guys, but I'm going to tell you again.

In the fall last year, October and November and December, we had 25,000 customer service orders, which means probably (inaudible).

And we assist a reasonable amount of $40 to each one because if you send it to the wrong person, you pay for it.

Now you got to get it back and reship it.

And $40 is pretty close, I could be off $1 or $2.

And so and that's $1 million.

And the new processes that we have now is electronic.

Each box is scanned and barcoded, scanned.

And we're using technology for quality control, and we really feel like that call volume and our customer service level has really improved by going back down.

Do you see [NIMS] like that Dan?

Yes, yes.

So definitely yes.

Go ahead.

Dan?

Okay.

So you said that a number of years ago, everything tightened down.

How do you think your cost to ship one package now compares to what it did when you had things, in your words, tightened down?

Well, when you go 15 years ago, prices increased in everything that we do.

But with UPS, as volume goes up, prices go back down.

It wasn't a matter of cost per book it was a matter of we had a system that had same number of people.

Our sales were fairly static.

And you can be really be efficient in customer service operations, everything.

But when you grow like as fast as we did, last year, we just did what we could to get out of the door.

And now, we are refining that.

And again, Dan has given us report, so we never had before.

He does analyses and graphs.

And I go, holy mackerel, that's kind of interesting.

We're just kind of flying blind this past year or 2 seriously before Dan got here.

And so we are much able now to zero in on areas that need to be improved.

And so we're -- and we are.

And so I can see our profit margin increasing.

Again, they don't like me to make these forward-looking statements, but I don't think that we are at the end of our -- what we can do to become more efficient.

I think there's plenty more to go.

And now we have a follow-up from [Tom Roach], a private investor.

Yes.

Guys, I have a couple of questions.

I read recently that some of your sales come from what you call Internet parties or Facebook parties or Facebook meetings.

And I was wondering how that works and how much of that there is, maybe what percentage of your sales comes from that kind of work.

Give me something on that.

I do.

I know a whole lot about this, about Facebook.

I know a lot.

But you know what, Heather knows about 10x more than me, so I'm going to let her answer that.

So Tom, we are a traditional home party business or a party planning business.

And it was probably about 3 years ago, that party revolutionized.

They went from being inside someone's home, which is still something that's done today.

It's still something that many of our leaders do today.

But I will tell you, when they were able to move those parties onto a platform such as Facebook, it opened up all sorts of doors that they did not have with the traditional home party, the biggest of which is that they could reach people all across the country in a single party.

We have a home party.

You are inviting those people in your own neighborhood, your own community to come into your home on that specific night.

Our ladies found quickly that they wanted to meet people where they were.

And as I said, 3 years ago was about the time and people were and still are on Facebook.

And so they wanted to meet them there, and they essentially set up these online parties.

We already had the e-commerce platform that allowed for it to take orders and associate those with a specific host.

And so they capitalized on all of those opportunities.

And all of a sudden, the business became even easier to do, even easier to start, and more importantly for us, much simpler for people to have early success, which is always the key in a direct sales model.

The earlier you're going to experience success, the more success you will end up having in the long run.

Does this mean that you're getting sales into areas that -- geographical areas that you weren't reaching before?

I would say that the simple answer to that is yes.

Realistically, what's happening is people who happen to live in smaller communities that felt like they have really already reached all of their friends and family and neighbors and everybody that they could in that community, those doors were open to them when Facebook -- we started to do Facebook parties because they could reach out to former college friends or family members that lived across the country or anyone like that.

And not only people that they knew, but as they had their host inviting people, they were also reaching out to people that live in the other states and other cities.

Can I ask you a little different question?

I wonder if you have a series of books, for example, math books where you could work with somebody starting, say, in the first grade and then you have some second-grade level books and on up so that you get into selling somebody something every year in the same area?

And in that connection, do you have something resembling subscriptions for your customers, customers who are not sales consultants?

So on your first question on whether we have series of books, we do.

We don't actually do the majority of those in a graded series, as you suggested.

But instead, we do it more in a beginner, intermediate and advanced function as they grow and as they increase their knowledge level.

We have that with most of the different subjects, everything from dictionaries to thesaurus, to math dictionaries, science dictionaries and encyclopedias and various things like that as well as a number of different early learning opportunities for them to use before they even get into school.

So we do capitalize on all of those different opportunities available to us.

And then your second question about subscription, we do not currently offer subscription for our customers.

We have found that almost the fact that we have upwards of 2,000 different titles almost makes it even harder to offer a subscription because there is a little bit of something for absolutely everyone.

And we love the customer to be able to pick out specifically what they want for the reader in their lives.

Because just while one 6-year-old reader may love everything, trucks and dinosaurs, another one may want nothing to do with that same topic.

And so we have what I know our consultants do is that they will create specialized wish lists for their customers to really get to the bottom of what that reader is looking for, what level they're reading at and different things like that to try to customize the shopping experience for them for the best possible outcome.

Well, if I could ask a similar question.

Do your sales consultants try to focus on the particular status and age and so forth of their customers' children and what they need and to try to lead them into a progression of books?

Is there anything like that?

Or particularly, is there any kind of -- you've got it in your name that this is an educational company, and I just wonder if you have your sales consultants try to lead their customers through the educational process that way.

I think absolutely.

I would say that, that that's what our best consultants do, is that they lead them through that process.

I think that that's exactly why they're called consultants because they're there to consult with the customer that's purchasing for the reader in their life, whether it be a parent, a grandparent, aunt, uncle or even a teacher in a classroom.

Trying to introduce them to something possibly in a different format or concept than they've seen it before is really what we try to do.

We try to make sure that we are getting books into the kids' hands that are going to make them fall in love with reading even more.

We know for a fact that there's reluctant readers.

We know for a fact that there's some that are voracious readers that are reading above their age levels.

However, many of the books that are available to them above their age level are not necessarily appropriate.

And so our consultants try their best to absolutely match the product with their audience and make sure that they're educating their audience along the way.

I might add something to that also.

We have a very high percentage of our consultants that are former school teachers.

A lot of people found out about the products as teachers and now are consultants for us.

And really, when you're a consultant and someone asks you about a product and you're a former teacher, it's kind of hard to argue with you with the recommendations because we do have professional people all the way up to masters in readings -- in reading, speech and hearing professionals.

We really have a wide gamut of professional people who can represent our product in a very professional manner.

And I think it's part of our growth that they love the product, they've used the product and they're recommending the product.

So I think that's a key element to our growth.

And Tom, even outside of what they recommend, they also do participate in all of the major leveling programs that are offered in various school districts.

And so our books -- the books that we submit to those different programs are leveled by Accelerated Reader, Lexile, Fountas & Pinnell and things like that, that give at least a little bit of an insight to the parents and the educators as to what level that book is at to try to match that with their reader.

Have you ever had schools adopt your books as their textbooks?

We have.

Actually, the largest sale we've ever made was -- interestingly, it came from the school finding out about the books through the Scholastic Book Fair because Scholastic sometimes has some of the best-selling books.

They found out about them, but then they couldn't get them at Scholastic because Scholastic has them and they're gone whereas they're with us forever.

And they contacted us and we got 3 books adopted in their curriculum.

And I think the sales was $0.25 million.

So it's kind of unusual to adopt a trade book as curriculum, but we have had that happen.

Yes, we have in the past.

We do sell a lot of classroom set of many of our books.

We have different levels of math dictionaries and things like that, that we've sold a number of classroom sets to an entire district.

We've also had a few of our picture books selected as the school book of the year that they focus on and give every single student in the school a copy of the book as well as having classroom copies available throughout the year.

And they talk about that book for a specified amount of time throughout the year.

Can I ask one last question?

I remember when I was about 7 or 8 years old, my favorite book was actually a dictionary.

And I read that you used to sell a lot of reference books.

Do you still do that?

We absolutely do.

We actually are coming out with more and more reference books because of the focus on nonfiction in the school and library market and the interest just from our customers as a whole.

So we -- some of the old standard that Dan mentioned earlier and referred to are some of our dictionaries and encyclopedias, but we do have additional nonfiction reference type books that we add into our collection each season.

And to add to that, there's a period of time in 3 or 4 years, where reference books kind of fell out of favor.

They thought, "Oh, I don't need to buy a reference book anymore because I can get everything I want to know on the Internet." Well, we're finding that trend is not necessarily continuing, and we are having nice sales in reference material book about a specific subject instead of trying to find it on the Internet because when we present the subject, it's much more in-depth.

So reference books were what this company is founded on, basically nonfiction.

The trend in the last 10 years was more younger books like sticker books, things like that.

But we're still finding a very strong demand for nonfiction informational books, and that's really -- that's what our wheelhouse is.

So we think we're very -- looking good for the future.

Sir, I don't show any questions in the queue at this time.

Okay.

Well, I'll be remiss if I didn't tell you, whoever posted on Seeking Alpha today, thank you very much.

It's about the guy talking about El Salvador in prison and shorts and you guys can look it up yourself.

I'm not going to go any further than that, but it provided me a little chuckle today.

But thank you, guys, for listening.

And let me tell you, I'm very proud of what's happened in this quarter and the trend of the earnings.

Well, let me tell you what the best part about this company is.

I'm going to tell you.

The people in this room, you've got Craig, Heather and Dan.

This is a very strong team, young unlike myself, that are the future of this company.

And I feel very comfortable.

We're all in the same page.

We have a very good working relationship, the team does, and that's very important on a go-forward basis.

You guys can be proud of the team, the executive team at Educational Development Corporation.

And with that, okay.

Have a great day.

Have a great day.

And if you need more questions, email me.

Thanks, guys.

Ladies and gentlemen, thank you for participating in today's program.

This concludes the conference and you may all disconnect.

Have a wonderful day, everyone.