Educational Development Corp (EDUC) 2024 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the Educational Development Corporation's First Quarter Fiscal Year 2024 Earnings Call. (Operator Instructions) This call is being recorded on Thursday, the 13th of July 2023.

女士們、先生們，下午好，歡迎參加教育發展公司 2024 財年第一季度收益電話會議。 （操作員說明）本次通話錄音時間為 2023 年 7 月 13 日星期四。

Before beginning the call, we would like to remind you that some of the statements made today will be forward-looking and are protected under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those expressed or implied due to a variety of factors. We refer you to the Educational Development Corporation's recent filings with the SEC for a more detailed discussion of the company's financial condition. I would now like to turn the conference over to Jean Marie Young from Three Part Advisors. Please go ahead.

在開始通話之前，我們想提醒您，今天所做的一些陳述屬於前瞻性陳述，並受到1995 年《私人證券訴訟改革法案》的保護。由於各種原因，實際結果可能與明示或暗示的結果存在重大差異。的因素。我們建議您參閱教育發展公司最近向美國證券交易委員會提交的文件，以更詳細地討論該公司的財務狀況。現在我想將會議轉交給三部分顧問公司的讓·瑪麗·楊 (Jean Marie Young)。請繼續。

Thank you, JP, and good afternoon, everyone. Thank you for joining us today for Educational Development Corporation's Fiscal First Quarter Earnings Call. On the call with us today are Craig White, President and Chief Executive Officer; Heather Cobb, Chief Sales and Marketing Officer; and Dan O'Keefe, Chief Financial Officer.

謝謝你，JP，大家下午好。感謝您今天參加我們教育發展公司的第一季度財報電話會議。今天與我們通話的是總裁兼首席執行官 Craig White；希瑟·科布 (Heather Cobb)，首席銷售和營銷官；和首席財務官 Dan O'Keefe。

After the market closed this afternoon, the company issued a press release announcing its results for the fiscal first quarter. The release is available on the company's website at www.edcpub.com. With that, I'd like to turn the call over to Craig White, the company's President and CEO. Craig?

今天下午收盤後，該公司發布新聞稿，宣布第一財季業績。該新聞稿可在公司網站 www.edcpub.com 上獲取。說到這裡，我想把電話轉給公司總裁兼首席執行官克雷格·懷特(Craig White)。克雷格？

Thank you, Jean, and welcome, everyone, to the call. I will start today's call with some general comments in regards to the quarter, and I will pass the call off to Dan and Heather to run through the financials and provide an update on our sales and marketing. Finally, I will wrap up the call with some comments on strategy and fiscal 2024 outlook. During the first quarter, our sales continued to be impacted by high inflation, which we will likely face for the remainder of the year. As we have said on previous calls, our sales results are primarily driven by our active brand partners. This is our key indicator that reflects current sales levels and where we expect them to trend in the future. Our brand partner levels decreased again this quarter. We believe this was for a variety of reasons, like we mentioned, the economy, rebrand, et cetera.

謝謝你，Jean，歡迎大家來電。我將在今天的電話會議開始時對本季度發表一些一般性評論，然後我會將電話轉給丹和希瑟，讓他們了解財務狀況並提供有關我們銷售和營銷的最新信息。最後，我將以對戰略和 2024 財年展望的一些評論來結束這次電話會議。在第一季度，我們的銷售繼續受到高通脹的影響，我們很可能在今年剩餘時間內面臨這種情況。正如我們在之前的電話會議中所說，我們的銷售業績主要是由我們活躍的品牌合作夥伴推動的。這是我們的關鍵指標，反映了當前的銷售水平以及我們預計未來的趨勢。本季度我們的品牌合作夥伴水平再次下降。我們認為這是出於多種原因，就像我們提到的那樣，經濟、品牌重塑等。

As I mentioned on the fourth quarter earnings call, some of this was carryover from rebranding, which takes some time to work through our entire network of sales partners. We are still making additional changes to improve our sales to not only make our brand partners more successful but also entice new brand partners to join PaperPie. I'll let Heather talk further about that later in the call.

正如我在第四季度財報電話會議上提到的，其中一些是品牌重塑帶來的，這需要一些時間來完成我們整個銷售合作夥伴網絡的工作。我們仍在做出額外的改變來提高我們的銷售，不僅使我們的品牌合作夥伴更加成功，而且吸引新的品牌合作夥伴加入PaperPie。我將讓希瑟在稍後的電話中進一步討論這一點。

On a more positive note, our brand partners at leadership levels remain higher than pre-pandemic numbers, and they are primary drivers for new recruiting and overall sales growth. Brand partner success generates additional brand partners, and that continues to be our #1 focus.

從更積極的角度來看，我們領導層的品牌合作夥伴數量仍然高於大流行前的數字，他們是新招聘和整體銷售增長的主要推動力。品牌合作夥伴的成功會產生更多的品牌合作夥伴，這仍然是我們的第一重點。

We will be looking at numbers of our active brand partner count from this summer as an indicator for the future. This is due to the fact that by the end of the summer, based on our definition of active, which hasn't changed, that each of our brand partners will either have joined under the new PaperPie brand and/or made a sale under this new brand. As you will hear Heather discuss a bit more, our marketing promotions and programs are focused on building this number back at the higher levels.

我們將關註今年夏天以來活躍品牌合作夥伴的數量，作為未來的指標。這是因為，到夏末，根據我們對活躍的定義（這一定義沒有改變），我們的每個品牌合作夥伴要么加入新的 PaperPie 品牌，要么在此下進行銷售。新品牌。正如您將聽到希瑟進一步討論的那樣，我們的營銷促銷和計劃的重點是使這一數字恢復到更高的水平。

Another positive in the first quarter was the continued results from our SmartLab Toys product line. We introduced 13 new SmartLab Toys to our Publishing and PaperPie customers, and our sales have exceeded expectations. Not only have we received great reception from our retail customers, but we have also picked up some nice international orders as well.

第一季度的另一個積極因素是我們的 SmartLab 玩具產品線的持續業績。我們向出版業和 PaperPie 客戶推出了 13 款新的 SmartLab 玩具，我們的銷量超出了預期。我們不僅受到零售客戶的熱烈歡迎，而且還收到了一些不錯的國際訂單。

Our PaperPie division continues to drive the total sales for our company, and the sales of SmartLab Toys from this division are exceeding our original expectations. During the quarter, our gross sales of SmartLab Toy products exceeded $1.4 million. We introduced 10 new products in June and have another 15 or so over the next 12 months. Some of these are customers I've never seen before, so we've started new development since we've owned them. With that, I will now turn the call over to Dan to provide a brief overview of the financials. Dan?

我們的 PaperPie 部門繼續推動我們公司的總銷售額，並且該部門的 SmartLab Toys 的銷售額超出了我們最初的預期。本季度，我們的 SmartLab 玩具產品總銷售額超過 140 萬美元。我們在 6 月份推出了 10 款新產品，並在接下來的 12 個月內推出了大約 15 款新產品。其中一些是我以前從未見過的客戶，所以自從我們擁有他們以來，我們就開始了新的開發。現在，我將把電話轉給丹，以提供有關財務狀況的簡要概述。擔？

Thank you, Craig. To our fiscal first quarter results compared to the first quarter of last year, net revenues of $14.5 million, a decrease of $8.7 million or 37.5% compared to $23.2 million. Our average active PaperPie brand partners for the first quarter totaled 23,200 compared to 32,200 in the first quarter last year, a decrease of 9,000 or 28%. Loss before income taxes totaled $1.2 million, a decrease of $1.5 million, compared to an income of $0.3 million in the first quarter last year.

謝謝你，克雷格。與去年第一季度相比，我們第一財季的淨收入為 1,450 萬美元，比 2,320 萬美元減少了 870 萬美元，即 37.5%。第一季度平均活躍 PaperPie 品牌合作夥伴總數為 23,200 名，而去年第一季度為 32,200 名，減少了 9,000 名，即 28%。所得稅前虧損總計 120 萬美元，比去年第一季度的收入 30 萬美元減少了 150 萬美元。

After-tax loss totaled $900,000 compared to $200,000, a decrease of $1.1 million. Loss per share for the quarter was $0.11 compared to income of $0.03 per share on a fully diluted basis. To update everyone on our inventory and working capital levels, inventories decreased $8.3 million from $70.6 million at May 31, 2022, compared to $62.3 million at May 31, 2023. Our working capital line of credit was $11 million at the end of May 2023. That concludes the financial update, and I'll turn the call over to Heather Cobb to talk about sales and marketing opportunities in further detail. Heather?

稅後虧損總計 90 萬美元，較之前的 20 萬美元減少了 110 萬美元。本季度每股虧損為 0.11 美元，而完全攤薄後每股收益為 0.03 美元。為了向大家通報我們的庫存和營運資金水平的最新情況，庫存從2022 年5 月31 日的7,060 萬美元減少了830 萬美元，而2023 年5 月31 日的庫存為6,230 萬美元。截至2023 年5 月末，我們的營運資金信貸額度為1,100 萬美元。財務更新到此結束，我將把電話轉給希瑟·科布，進一步詳細討論銷售和營銷機會。希瑟？

Thank you, Dan. As Craig mentioned earlier, we have made some recent changes to bring success to our brand partners this summer. We know that success begets success, and this is true with our brand partners as well. Success with our current brand partners leads to better recruiting, which leads to more sales. The most impactful change that we have made is to reduce the freight change on outbound shipping to our customers. That's reducing hurdles that prevent them from shopping with our brand partners.

謝謝你，丹。正如克雷格之前提到的，我們最近做出了一些改變，以便在今年夏天為我們的品牌合作夥伴帶來成功。我們知道成功會帶來成功，對於我們的品牌合作夥伴來說也是如此。我們當前品牌合作夥伴的成功可以帶來更好的招聘，從而帶來更多的銷售額。我們所做的最有影響力的改變是減少了向客戶發貨的運費變化。這減少了他們在我們的品牌合作夥伴處購物的障礙。

Prior to this change, we saw a reduction in the number of smaller orders overall, and we believe that this is a direct reflection of the impact of inflation on the economy. By reducing our freight charge, through a simple flat rate structure, we expect to entice these customers to complete a purchase with a smaller order as opposed to abandoning their cart and not buying anything from their brand partner. We also expect for our number of higher-dollar orders to stay approximately the same.

在這一變化之前，我們看到整體小訂單數量有所減少，我們認為這是通脹對經濟影響的直接反映。通過簡單的統一費率結構降低我們的運費，我們希望吸引這些客戶以較小的訂單完成購買，而不是放棄購物車，不從其品牌合作夥伴那裡購買任何東西。我們還預計我們的高額訂單數量將保持大致相同。

An additional benefit from these smaller orders is that they introduce more new customers to our products. Having more customers introduced to these products gives our brand partners more opportunities to find their next party host and possibly even recruit their next brand partner.

這些較小訂單的另一個好處是它們可以為我們的產品引入更多新客戶。讓更多的客戶了解這些產品，可以讓我們的品牌合作夥伴有更多機會找到下一個派對主辦方，甚至可能招募下一個品牌合作夥伴。

We've heard stories from all levels of our brand partners that they join for the books. But then, they turn their discount into a successful business. Because we want our brand partners to be even more successful with their business this summer, we've offered them additional cash bonuses on their sales. This is due to the fact that we have seen a direct correlation between our brand partners who sell during the summer months and them continuing to sell and have success during the fall, which is always our busiest season of the year.

我們從各個級別的品牌合作夥伴那裡聽到了他們加入書籍的故事。但隨後，他們將折扣變成了成功的生意。因為我們希望我們的品牌合作夥伴今年夏天的業務更加成功，所以我們為他們的銷售提供了額外的現金獎勵。這是因為我們發現，在夏季銷售的品牌合作夥伴與他們在秋季繼續銷售並取得成功之間存在直接關聯，而秋季始終是我們一年中最繁忙的季節。

We have also added other promotions and specials this summer to give our brand partners reasons to contact their existing and potential new customers with these new and exciting offers. The summer is normally our slowest time of the year, so we are giving our brand partners lots of reasons to stay engaged and build their businesses. This concludes our sales and marketing update for today. I'm turning the call back over to Craig now for closing remarks. Craig?

今年夏天，我們還增加了其他促銷和特價活動，讓我們的品牌合作夥伴有理由通過這些令人興奮的新優惠聯繫他們現有和潛在的新客戶。夏季通常是我們一年中最慢的時間，因此我們為我們的品牌合作夥伴提供了很多理由來保持參與並發展他們的業務。我們今天的銷售和營銷更新到此結束。我現在將電話轉回給克雷格，讓其作結束語。克雷格？

Thank you, Heather and Dan. As I have said before, EDUC has decades-long history of profitability. Naturally, it's easier to grow profitability when revenues are increasing and steadily outpacing expenses. However, we are in a period where we have seen our revenues decline and thus, we are having to manage our costs.

謝謝你們，希瑟和丹。正如我之前所說，EDUC 擁有數十年的盈利歷史。當然，當收入增加並穩步超過支出時，就更容易提高盈利能力。然而，我們正處於收入下降的時期，因此我們必須管理成本。

We are continuing to make operating adjustments each month to reduce our costs. The single most significant cost reduction this year will come from normalizing our inflated inventory levels. As we reduce inventory, it turns into free cash flow, which will be used to pay down debt, which will reduce the interest expense that hits our P&L. This will be one of the most significant improvements to profitability in fiscal 2024.

我們每個月都會繼續進行運營調整以降低成本。今年最顯著的成本削減將來自於使我們膨脹的庫存水平正常化。當我們減少庫存時，它就會變成自由現金流，用於償還債務，這將減少影響我們損益的利息費用。這將是 2024 財年盈利能力最顯著的改善之一。

To normalize inventory levels, we are executing a two-pronged approach. First and foremost, as Heather mentioned earlier, we are taking significant steps to energize our sales force. We expect to introduce new incentives and promotions not only in December but throughout the rest of the year.

為了使庫存水平正常化，我們正在採取雙管齊下的方法。首先，正如希瑟之前提到的，我們正在採取重大措施來激勵我們的銷售隊伍。我們預計不僅會在 12 月推出新的激勵措施和促銷活動，而且會在今年剩餘時間推出。

Additionally, we will maintain a strict discipline in our purchasing. Over the past 12 months, we have made significant efforts to reduce the quantities of titles we are printing and put increased focus on ordering more frequently. We expect this two-pronged approach will normalize our inventory faster. As an example, we have purchased roughly half of what we did last year and about 1/4 of what we did pre-pandemic levels. We have also reduced payroll and other operating costs and look for every opportunity to improve our bottom line performance. We will continue on this path until we reach profitability.

此外，我們將在採購中保持嚴格的紀律。在過去的 12 個月裡，我們做出了巨大的努力來減少正在印刷的圖書數量，並更加註重更頻繁地訂購。我們預計這種雙管齊下的方法將使我們的庫存更快正常化。舉例來說，我們的採購量約為去年的一半，約為大流行前水平的 1/4。我們還減少了工資和其他運營成本，並尋找一切機會來提高我們的底線績效。我們將繼續沿著這條道路前進，直到實現盈利。

Once we return to profitability and pay down debt levels, we plan to reinstate our past practice of paying quarterly dividends to our shareholders. This has been and continues to be a top priority for myself and our shareholders. I'd like to take this opportunity also to mention we've just come off a couple of our largest opportunities to energize our sales force and make our PaperPie division as attractive as possible.

一旦我們恢復盈利並降低債務水平，我們計劃恢復過去向股東支付季度股息的做法。這一直是並將繼續成為我和我們股東的首要任務。我還想藉此機會提及，我們剛剛獲得了幾個最大的機會來激勵我們的銷售隊伍，並使我們的 PaperPie 部門盡可能具有吸引力。

In June, we had our convention where we had a good average number of attendees. But what we kind of heard is that a lot of them are coming to just kind of see what the brand, the rebrand, was all about. And to a person, every single person left much more positive than they'd come into it. They were very impressed with what our sales and marketing teams have done with the brand, and we really, really focused on our mission, which is children's literacy and learning. So those things, the convention, was a very positive impact.

六月，我們召開了一次大會，與會者的平均人數很高。但我們聽到的是，他們中的很多人只是來看看這個品牌、品牌重塑的意義何在。對於一個人來說，每個人離開時都比進入時更加積極。他們對我們的銷售和營銷團隊對該品牌所做的工作印象深刻，我們非常非常專注於我們的使命，即兒童的識字和學習。所以這些事情，即大會，產生了非常積極的影響。

And right now, I happen to be -- Heather and I happen to be on our sales incentive trip. So we came from Rome last week where we had roughly -- that's the highest-level trip. It had roughly 40 people that -- with family members and such. We brought about 125 people. And now we're in Punta Cana, Dominican Republic, where we have roughly 400 people, and that's not all earners but that's including family members. So that's the biggest recruiting factor or one of the biggest recruiting factor for PaperPie is to see the amazing trips we take people that earn on. So anyway, the -- we're very, very encouraged coming out of convention and out of these trips, and we're looking forward to the fall.

現在，我和希瑟碰巧正在進行我們的銷售激勵之旅。所以我們上週從羅馬來，在那裡我們進行了大約 - 這是最高級別的旅行。大約有 40 人——還有家人等。我們帶來了大約125人。現在，我們在多米尼加共和國的蓬塔卡納，大約有 400 名員工，其中不全是掙錢的人，還包括家庭成員。因此，PaperPie 最大的招聘因素或者說最大的招聘因素之一就是看到我們為人們帶來的令人驚嘆的旅行。所以無論如何，我們非常非常受鼓舞地走出大會和這些旅行，我們期待秋天的到來。

Now that we have provided a summary of some recent activity, I will now turn the call back over to the operator for question and answer.

現在我們已經提供了一些近期活動的摘要，我現在將把電話轉回給接線員進行問答。

Your first question comes from the line of Ed Norcini, private investor.

你的第一個問題來自私人投資者埃德·諾西尼（Ed Norcini）。

Craig, I haven't talked to you in a while. I'm on the call and I was looking at the 10-K that was published in February of this year, February 28. Your inventory at that level was $59 million. Today, it's $62 million, so it went up $3 million from the last quarter. It seems to me that inventory has gone in the wrong direction. Do you have anything to say?

克雷格，我有一段時間沒和你說話了。我正在通話中，正在查看今年 2 月 2 月 28 日發布的 10-K。您當時的庫存為 5900 萬美元。如今，該數字為 6200 萬美元，比上一季度增加了 300 萬美元。在我看來，庫存已經走向了錯誤的方向。你有什麼要說的？

This is Dan O'Keefe. Just to clarify, because I think you've got some numbers that are different. If you look at our press release, our inventory at the end of February of this year was -- if you add both the current and the long-term inventory together, was $63,800,000. And at the end of May, it's $62,300,000, so we dropped about $1.5 million this quarter. And just -- I just wanted to clarify that before, the drop in inventory, the $1.5 million.

這是丹·奧基夫。只是為了澄清一下，因為我認為你得到了一些不同的數字。如果你看一下我們的新聞稿，我們今年 2 月底的庫存是——如果你把當前庫存和長期庫存加在一起，就是 63,800,000 美元。截至 5 月底，該數字為 62,300,000 美元，因此本季度我們減少了約 150 萬美元。我只是想澄清一下，之前庫存下降了 150 萬美元。

Well, Dan, my point is, and Craig also, also in that 10-K that you released, you're having problems with the bank. They need their money. Is there any plans? Do you have any plans to sell any of your assets in bulk, like, for example, sell on the Hilti complex or sell Kane Miller or maybe sell $30 million worth of this inventory back to Usborne or another distributor? Do you have any plans to get some massive amount of cash in to pay off these debts? I'm worried about it.

嗯，丹，我的觀點是，還有克雷格，也在你發布的 10-K 中，你與銀行有問題。他們需要他們的錢。有什麼計劃嗎？您是否有計劃批量出售您的任何資產，例如出售 Hilti 綜合體或出售 Kane Miller，或者將價值 3000 萬美元的庫存賣回給 Usborne 或其他經銷商？您是否有計劃獲得大量現金來償還這些債務？我很擔心。

Yes. Well, you kind of had a bunch of points there. I was trying to keep track so I could respond. But first of all, yes, inventory levels, we -- I've said all along that we will continue to order new titles. We have to do that. But what we said in earlier in the call was that we were reducing the quantities and potentially the number of new titles that we're ordering. So we're being very aggressive on reducing our purchases, very aggressive. Historically, aggressively low. So as we sell inventory, it will turn into cash, and we'll pay the bank back.

是的。嗯，你在那裡有很多觀點。我試圖跟踪，以便我可以做出回應。但首先，是的，庫存水平，我們——我一直說過，我們將繼續訂購新書。我們必須這樣做。但我們在電話會議早些時候表示，我們正在減少數量，甚至可能減少我們訂購的新遊戲的數量。因此，我們非常積極地減少採購，非常積極。從歷史上看，非常低。因此，當我們出售庫存時，它會變成現金，我們將償還銀行。

Another point you made is that we owe the bank a lot of money. Yes, we do. We have renewal coming up next month, and there's no indication whatsoever that we will not be able to renew successfully with them. And that's for our working capital line. And another point you made is, do we have any plans to sell our assets? I -- we have engaged with a firm to look into the market for a building of our size and the market is very good. We could turn the building around and sell it within 60 to 90 days, so we know that's available to us. I want to keep that in my back pocket as a last resort. We have plans for this property once we get sales back up, so I don't want to get rid of that property just yet. Now if we need to, we can. So again, I just want to reiterate that we have a good relationship with the bank, and there's -- I've had no indication that we're not going to be able to renew the line of credit.

你提到的另一點是我們欠銀行很多錢。是的，我們願意。我們下個月將進行續約，並且沒有任何跡象表明我們將無法與他們成功續約。這就是我們的營運資金額度。您提出的另一點是，我們有出售資產的計劃嗎？我——我們已經與一家公司合作，調查我們規模的建築的市場，市場非常好。我們可以在 60 到 90 天內扭轉建築物並出售它，所以我們知道我們可以這樣做。作為最後的手段，我想把它放在後面的口袋裡。一旦銷售回升，我們就計劃出售該房產，所以我還不想賣掉該房產。現在，如果我們需要的話，我們可以。再次，我想重申，我們與銀行有著良好的關係，而且我沒有任何跡象表明我們將無法更新信貸額度。

As far as the building debt, Hilti pays their part. We pay a smaller portion of it, and we've never defaulted on any payment. So again, they're not concerned about the building debt. They just want us to work down the working capital line, which we're doing by selling inventory.

就建築債務而言，喜利得承擔了自己的部分。我們支付了其中的一小部分，並且我們從未拖欠任何付款。再說一遍，他們並不擔心不斷增加的債務。他們只是希望我們通過出售庫存來減少營運資金。

Okay. That's helpful, Craig. And my other main concern, for right now, in my mind, you have no concrete plans to sell $30 million, $40 million worth of that inventory back to Usborne or another distributor. Because I'm looking, Craig, at your 2017 fiscal ending, we had approximately 25,000 consultants, which are probably what you have today. You had 34,000 -- excuse me, $34 million in inventory. So it seems like to me, you're like close to $30 million over what you need based on 2017, okay?

好的。這很有幫助，克雷格。我的另一個主要擔憂是，目前，在我看來，你們還沒有具體計劃將價值 3000 萬美元、4000 萬美元的庫存賣回給尤斯伯恩或其他經銷商。克雷格，因為我正在查看你們 2017 年的財務報告，我們大約有 25,000 名顧問，這可能就是你們今天所擁有的。你有 34,000 件——對不起，庫存價值 3400 萬美元。所以在我看來，根據 2017 年的數據，你的需求比你的需求多了近 3000 萬美元，好嗎？

That's correct.

這是正確的。

So wouldn't it be helpful if we just had a mass sale just because it seems like the consultants aren't producing enough sales to reduce this inventory to normal levels?

那麼，如果我們只是因為顧問似乎沒有產生足夠的銷售額來將庫存減少到正常水平而進行大規模銷售，這不是有幫助嗎？

Yes, that's a good point. We are looking at options to do some mass inventory reductions. But whatever we do, we don't want to damage our brand partners' ability to continue to sell inventory. As far as selling it back to Usborne or other distributors, that's not an option. They have no incentive to buy back inventory from us. So again, we're looking at some major foundations. We're looking at some other inventory reduction in sales and things like that. So...

是的，這是一個很好的觀點。我們正在尋找大規模減少庫存的方案。但無論我們做什麼，我們都不想損害我們的品牌合作夥伴繼續銷售庫存的能力。至於將其賣回給尤斯伯恩或其他經銷商，這不是一個選擇。他們沒有動力從我們這裡回購庫存。再次強調，我們正在研究一些主要的基礎。我們正在考慮其他一些銷售庫存減少之類的事情。所以...

I'll also just add, Ed, that one of the things that we know that you look to us to do for the company is to manage not only the short-term challenges as well as successes but with long-term things in mind. And so I'll just kind of reiterate what Craig said. We're looking at what all of our options are now, but one of the last things that we want to do is some sort of short-term strategy that will end up in some sort of damaging long-term effect that none of us want to see. So while, yes, we are looking at various different creative and alternative ways to reduce this inventory, we definitely want to do it in a way that will allow us to continue the business as we've done with PaperPie as well as with our retail division for the long term.

埃德，我還要補充一點，我們知道您希望我們為公司做的一件事是不僅要管理短期挑戰和成功，還要著眼於長期的事情。因此，我將重申克雷格所說的話。我們正在考慮現在所有的選擇，但我們最不想做的事情之一是某種短期策略，這最終會導致某種我們都不希望產生的破壞性長期影響查看。因此，雖然我們正在尋找各種不同的創意和替代方法來減少庫存，但我們絕對希望以一種能夠讓我們繼續開展業務的方式，就像我們在 PaperPie 以及我們的零售業務中所做的那樣長期劃分。

And Ed, this is Dan. I'll kind of add another thought as well. You mentioned the 2017 period. If you recall during that time, we were also over inventory. And the over inventory issue is we have excess quantities of our best-selling items. Those were the titles that we ordered the most quantity of, the titles that are our best sellers. And so in 2017, what we did is just we worked through it. And through 2017 to 2018, we reduced our inventory from the high 40s down to about $30 million, reaching about $18 million. And so that's kind of the approach we're taking right now, too. We're a little bit more aggressive on the purchasing than we were back in 2017, as Craig has explained earlier. But the excess inventory is working down and it's in our best-selling items.

艾德，這是丹。我也會添加另一個想法。你提到了2017年期間。如果你還記得那段時間，我們的庫存也過剩了。庫存過剩問題是我們的暢銷商品數量過多。這些是我們訂購數量最多的圖書，也是我們最暢銷的圖書。所以在2017年，我們所做的只是努力克服它。從 2017 年到 2018 年，我們的庫存從 40 多美元減少到約 3000 萬美元，達到約 1800 萬美元。這也是我們現在正在採取的方法。正如 Craig 之前所解釋的那樣，我們的採購比 2017 年更加積極一些。但過剩的庫存正在減少，並且出現在我們最暢銷的商品中。

Okay. That's understood. My other question, if you don't mind, is about your relationship with Usborne. I read in the 10-K that you are in violation of the new distribution requirement. Is that correct? You're not buying enough minimum amounts from Usborne, so you're in violation. And they -- according to the 10-K, they can cut you off at any minute because you're violating the contract. What do you say to that? What kind of assurances can you say because you've been dealing with these people for decades? And also, they said that they're not -- they owe you $1 million from last year, and they're not paying. To me, it's like, well, you've been dealing with these people for decades. And they -- they're fighting you about a $1 million discount rebate. To me, it's like, well, this is not right. So what do you say to that?

好的。就這麼理解了。如果您不介意的話，我的另一個問題是關於您與尤斯伯恩的關係。我在 10-K 中看到您違​​反了新的分配要求。那是對的嗎？您沒有從 Usborne 購買足夠的最低金額，因此您違規了。他們 - 根據 10-K，他們可以隨時切斷你的聯繫，因為你違反了合同。你對那個有什麼想法？因為您已經與這些人打交道數十年了，您能做出什麼樣的保證？而且，他們說他們沒有 - 他們去年欠你 100 萬美元，但他們沒有付款。對我來說，這就像，你已經和這些人打交道幾十年了。他們——他們正在與你爭奪 100 萬美元的折扣回扣。對我來說，這就像，嗯，這是不對的。那麼你對此有何看法？

Yes. We have been dealing with Usborne for decades. I've just taken over and been dealing with them myself for the last 2 years. And recently, Nicola -- his father, Peter Usborne, the founder of the company, passed away, so I'm dealing exclusively with Nicola at this point. There is no incentive for them to cancel the distribution agreement. That's not to say they won't, but they know that we just got to get this inventory situation back to a normal level, and then we will get back to purchasing inventory at historic levels.

是的。幾十年來，我們一直與尤斯本打交道。過去兩年我剛剛接手並親自與他們打交道。最近，尼古拉（Nicola）——他的父親，公司的創始人彼得·烏斯伯恩（Peter Usborne）去世了，所以我現在只與尼古拉打交道。他們沒有動力取消分銷協議。這並不是說他們不會，但他們知道我們只需將庫存狀況恢復到正常水平，然後我們將恢復以歷史水平採購庫存。

So they have no options to replace us on the PaperPie side. They're replacing us as a distributor for our retail division, but that's going to be -- take years and years for them to ramp up the inventory that's necessary to service the retail division. So I really don't feel like it's in their best interest. Again, we're preparing ourselves. We are trying to protect ourselves. Whatever kind of cancellation of the distribution agreement gives us a sell-off period. So we're just trying to get stronger financially by selling down inventory, and that gives us a little bit more leverage with Usborne. So that's the approach we're taking.

所以他們沒有選擇在 PaperPie 方面取代我們。他們正在取代我們成為我們零售部門的分銷商，但這將是他們需要數年時間才能增加為零售部門提供服務所需的庫存。所以我真的覺得這不符合他們的最佳利益。再說一遍，我們正在做好準備。我們正在努力保護自己。無論以何種方式取消分銷協議，都會給我們帶來拋售期。因此，我們只是想通過出售庫存來增強財務實力，這讓我們對尤斯伯恩有了更多的影響力。這就是我們正在採取的方法。

Well, my other question. Dan, what's the status of the employee retention credit?

好吧，我的另一個問題。丹，員工保留積分的狀況如何？

Well, we filed for it. So we're waiting on the IRS to take action.

嗯，我們申請了。所以我們正在等待美國國稅局採取行動。

So nothing concrete there.

所以沒有什麼具體的。

No, it's working towards -- go ahead.

不，它正在努力——繼續前進。

Okay. So I was just wondering if there's nothing -- there's no definitive answer from the IRS on that.

好的。所以我只是想知道是否沒有什麼——美國國稅局對此沒有明確的答复。

Not yet.

還沒有。

We meet the requirements, so I would expect that we would get it at some level, which, man, if we can get some cash from that would be outstanding. It's not necessary or required for us to continue on, but it sure would be great.

我們滿足了要求，所以我希望我們能在某種程度上得到它，伙計，如果我們能從中獲得一些現金，那就太好了。我們沒有必要或要求繼續下去，但這肯定會很棒。

Okay. Well -- and Craig, I've been wanting to ask you this question. We're going to have to go back some time with you. So Christmas of 2016, you remember when you guys just moved into the Hilti complex and you bought a software package from a company in Florida and it broke down? Actually, it was a classic nightmare, okay? Your father and you had grandkids up there trying to get all the packages out, and customer service was going crazy. Anyway, you paid about $1 million for the software package, as I recall. Did you ever get your money back for that software package? Do you remember that?

好的。嗯——克雷格，我一直想問你這個問題。我們得找個時間和你一起回去。 2016 年聖誕節，你們還記得當時你們剛搬進喜利得大樓，從佛羅里達州的一家公司購買了一個軟件包，結果它壞了？事實上，這是一場經典的噩夢，好嗎？你的父親和你的孫子們在那裡試圖把所有的包裹拿出來，而客戶服務卻變得瘋狂。不管怎樣，我記得你為這個軟件包支付了大約 100 萬美元。您是否已收回購買該軟件包的錢？你是否記得？

Well, of course, I've been with the company for 30 years. I remember that. Of course, I do. Both sides were working in good faith, and we had just determined that it was not in our best interest to continue with them, so we severed the tie and we moved on. We developed all the software programs we needed in-house. And so that's a distant memory.

嗯，當然，我已經在公司工作了 30 年。我記得那個。我當然是了。雙方都真誠地合作，我們剛剛確定繼續與他們合作並不符合我們的最佳利益，所以我們斷絕了聯繫並繼續前進。我們內部開發了所需的所有軟件程序。所以那是一個遙遠的記憶。

Yes. Well, it almost bankrupt your company at the time, if I recall, because you were also in violation with the covenants with the bank. I'm thinking it was Midwest Bank at the time. So anyway, I kind of -- right now, I think you guys are in a pickle, and we have to get this inventory or have some cash up to get to the bank because you're working on a waiver right now it seems like from the 10-K. And how generous are they going to be with the waiver? I mean they could shut you off August 9, I think. And you might be out of business is a going concern.

是的。嗯，如果我沒記錯的話，當時你的公司幾乎破產了，因為你也違反了與銀行的契約。我認為當時是中西部銀行。所以無論如何，我認為現在，我認為你們陷入了困境，我們必須獲得這些庫存或有一些現金才能去銀行，因為你們現在正在申請豁免，看起來就像從10-K。他們會多麼慷慨地給予豁免？我的意思是，我認為他們可能會在 8 月 9 日關閉你的服務。你可能會破產，這是一個持續經營的企業。

No. That is highly unlikely.

不，那是極不可能的。

Your next question comes from the line of [Frank Goodell] from [Jean Goodell Associates].

您的下一個問題來自 [Jean Goodell Associates] 的 [Frank Goodell]。

Am I on?

我在嗎？

Yes, we can hear you.

是的，我們能聽到你的聲音。

Yes. I had a couple of comments off of what Ed has said. I noticed the sales volumes are down quite a bit. Everything gets healed, of course. I've been in business myself many years, everything gets healed if you can increase sales. What's the outlook for the next year or so realistically?

是的。我對埃德所說的話有幾點評論。我注意到銷量下降了很多。當然，一切都會痊癒。我自己也做生意很多年了，只要能提高銷量，一切都會好起來的。明年左右的現實前景如何？

Well, we don't -- and this is Dan. Frankly, we don't give guidance as far as revenue, just to put that out there, before turning the call back over to Craig. As a small reporting company, we just -- it's been our past practice to just be conservative and not put out guidance. Craig, I'll let you take over from there.

好吧，我們不——這是丹。坦率地說，我們不會提供收入方面的指導，只是在將電話轉回克雷格之前將其公佈出來。作為一家小型報告公司，我們過去的做法是保持保守，不提供指導。克雷格，我會讓你接替那裡的工作。

Yes. That's good. Thank you. Well, things are looking up. We're doing all kinds of things to help increase sales, retain brand partners. And it takes a little time for those things to come to fruition. The sentiment right now is more positive than it has been. We're going to be releasing some of our software projects in the next couple of months, which will be a positive impact. Our products get better and better. When we keep our brand partners and salespeople and customers focused on our mission of children's literacy and learning, things always go better. So we're doing all the right things. It's just taking a little longer than we hoped. But we will survive this tough period and increase sales.

是的。那挺好的。謝謝。嗯，事情正在好轉。我們正在採取各種措施來幫助增加銷量、留住品牌合作夥伴。這些事情需要一點時間才能實現。現在的情緒比以前更加積極。我們將在接下來的幾個月內發布一些軟件項目，這將產生積極的影響。我們的產品越來越好。當我們讓品牌合作夥伴、銷售人員和客戶專注於兒童識字和學習的使命時，事情總會進展得更好。所以我們正在做所有正確的事情。只是比我們希望的時間要長一點。但我們會度過這個困難時期並增加銷售額。

Second question I had. What are the insiders within EDUC doing as far as stock retention?

我的第二個問題。就股票保留而言，EDUC 內部人員正在做什麼？

All 3 of us are buying.

我們3個人都在買。

[Yes, same here].

[是的，這裡也一樣]。

I was going to say, so the insiders being the -- obviously, the White family, the Board, and nobody has really been selling any shares. And then, of course, as Craig mentioned, Heather, Craig and I continue to buy shares every quarter. And we've recently filed some Form 4s that reflect our activity for the first quarter.

我想說的是，內部人士顯然是懷特家族、董事會，但沒有人真正出售任何股票。當然，正如克雷格提到的，希瑟、克雷格和我每個季度都會繼續購買股票。我們最近提交了一些表格 4，反映了我們第一季度的活動。

Okay. To that point, one way you obviously improved cash flow is to pay in shares rather than salaries. Obviously, people have to make a certain amount of money to maintain a standard of living. Companies I worked for in the past often did that. Call them golden handcuffs, whatever, but they paid with shares when times are hard to reduce losses, I guess, you could say, by having high salaries.

好的。就這一點而言，明顯改善現金流的一種方法是支付股票而不是工資。顯然，人們必須賺一定數量的錢才能維持一定的生活水平。我過去工作過的公司經常這樣做。不管怎樣，稱他們為金手銬吧，但他們在困難時期以股票支付，以減少損失，我想，你可以說，通過高薪。

And I don't know how long ago you're mentioning. But [Frank], the key thing that -- I mean it's a great idea. It's something that Craig has -- and I have talked about in the past. But I just want to -- before Craig -- before I turn the call over to Craig, I just want to make sure you're aware that it's not legal underneath the SEC rules for us to issue shares to management, unless we've got shareholder approval to do so. So we will -- to do that, we will have to file -- we would have to file a registration statement registering the shares and have a shareholder vote. So just on -- just giving you current SEC guidance. Craig, I'll let you discuss your thoughts on that.

而且我不知道你說的是多久以前的事。但是[弗蘭克]，關鍵的是——我的意思是這是一個好主意。這是克雷格所擁有的——我過去也曾談論過。但我只是想——在克雷格之前——在我把電話轉給克雷格之前，我只是想確保你知道，根據美國證券交易委員會的規定，我們向管理層發行股票是不合法的，除非我們已經這樣做已獲得股東批准。因此，我們將 - 為此，我們將必須提交 - 我們將必須提交一份登記股份的登記聲明並進行股東投票。那麼，只是給你當前的 SEC 指導。克雷格，我會讓你討論一下你對此的想法。

Yes. The only thing also I was going to add is that we do have short-term and long-term incentives. The long-term incentives are shares. Now those were earned, and the first tranche was awarded this past March after a 5-year vesting period. But we have other chunks of stock that our top 15 to 20 management have earned over the past several years. They're still being vested and things like that, so we do have long-term incentive plans in place. We have small cash bonuses with short term. They've been bigger in the past. We're doing very nominal short-term cash incentives. But yes, I like the thinking that -- we're doing some of that.

是的。我唯一要補充的是，我們確實有短期和長期激勵措施。長期激勵是股權。現在這些都已獲得，第一筆款項在 5 年歸屬期後於今年 3 月授予。但我們還有其他大量股票，是我們的 15 至 20 名管理層在過去幾年中獲得的。他們仍然被授予諸如此類的東西，所以我們確實制定了長期激勵計劃。我們有短期的小額現金獎金。過去它們更大。我們正在進行非常名義上的短期現金激勵。但是，是的，我喜歡這樣的想法——我們正在做一些這樣的事情。

Part of where I'm going is you're highly incentivized to turn this company around rather than bailing when it gets tough, and you are in a tough situation right now. So as a stockholder, I have a lot of patience if I have hope. But if you lose hope, then your patience goes away. So it's just a -- it's been a tough time for EDUC in my own stock account that I have with it. Luckily, I have a lot of other assets, but it's just a very worrisome thing when you see a company stock go down as heavily as EDUC has done in the last 3 years. I'm sure I'm not telling you to...

我要說的部分原因是，當公司遇到困難時，你會非常有動力去扭轉這家公司，而不是放棄，而你現在的處境很艱難。所以作為股東，如果我有希望，我就會有很大的耐心。但如果你失去希望，你的耐心就會消失。所以，對於我自己的股票賬戶中的 EDUC 來說，這是一段艱難的時期。幸運的是，我還有很多其他資產，但當你看到一家公司的股票像過去 3 年 EDUC 那樣大幅下跌時，這是一件非常令人擔憂的事情。我確信我不是在告訴你...

I hear you. Right. I'm probably in the top 10 largest shareholders, including institutional. So I get what you're saying. I've been through a lot of the good times, some of the bad times. And yes, ever since I took over, it's been a little bit of a tough stretch with the pandemic and the economy and things like that, but I'm here for the long haul. I've got to look at this as a long-term turnaround, and we're here for it.

我聽到了。正確的。我可能是前10大股東之一，包括機構股東。所以我明白你在說什麼。我經歷過很多美好的時光，也經歷過一些糟糕的時光。是的，自從我接手以來，疫情、經濟等問題讓我經歷了一段艱難的時期，但我會長期留在這裡。我必須將此視為一個長期的轉變，而我們就是為此而努力的。

There are no further questions at this time. I will now hand over to Craig. Please continue.

目前沒有其他問題。現在我將把工作交給克雷格。請繼續。

Thanks, everyone, for joining us on the call today. We appreciate your continued support and look forward to providing you an additional update when we report quarter 2 in October. We know it's been a tough time. We're doing everything we can to get this turned around. We're seeing positive indicators, so hang in there. Have a great day. Thank you.

感謝大家今天加入我們的電話會議。我們感謝您持續的支持，並期待在 10 月份報告第二季度時為您提供額外的更新信息。我們知道這是一段艱難的時期。我們正在盡一切努力扭轉局面。我們看到了積極的跡象，所以堅持下去。祝你有美好的一天。謝謝。

Thank you, everyone.

謝謝大家。

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

女士們、先生們，今天的電話會議到此結束。感謝您的參與。您現在可以斷開連接。