Envela Corp (ELA) 2015 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the DGSE Companies, Inc. second-quarter 2015 financial results conference call. During today's presentation, all parties will be in a listen-only mode. This conference is being recorded today, August 13, 2015.

I would now like to turn the conference over to Dusty Clem, Chairman and Chief Executive Officer of DGSE Companies. Please go ahead.

Thank you and good day. The call today will be hosted by myself and Mr. Brett Burford, the Company's Chief Financial Officer. Before we get started, I'm going to review the Safe Harbor statement.

Some of the information discussed in this call, particularly our revenue, operational targets and our forward-looking business plans, is based on information as of today, August 13, 2015, and contains forward-looking statements that involve risks and uncertainty. Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, you should review the forward-looking statement disclosure in the earnings press release we issued today, as well as DGSE's SEC filings.

To begin, let's go over the agenda for today's call. First, I will start with a few comments on our recent announcement concerning management and Board changes at DGSE. Then I'll give a brief summary of the second quarter of 2015. Next, Brett Burford, our CFO, will go over our financial results for the second quarter. And finally, we will give a few closing remarks.

As you will have seen in our press release last Monday, I have announced my resignation as CEO, President and Chairman of DGSE effective September 15. This was a difficult personal decision, but I believe this change will allow a new leader to build on our team's many accomplishments over the last several years.

I still care deeply for this Company, the people who support it every day, and its long-term viability. To this end, I will continue to work in the coming weeks to smoothly transition my responsibilities and support the employees, senior management and the Board in any way possible. Like you, I am a shareholder at DGSE, and I want to do everything I can to make this transition a success, and see the Company grow and prosper in the future.

You will have also seen in the same release that two of our outside Directors, Bruce Quinnell and Dennis McGill, have left the Board for personal reasons. I'd like to thank Bruce and Dennis for their contributions to the Company and wish them the best in their future endeavors.

Now turning to the results for the second quarter of 2015. This quarter represents a significant improvement over the same period last year, as well as the first quarter of 2015. While our bullion and scrap businesses continue to decline, due to a very challenging precious metals environment, our jewelry business was stable versus the prior year, and was up significantly from the first quarter, despite operating fewer locations.

In addition, through ongoing efforts to control costs and strategically exit underperforming stores, we have continued to lower our cost structure while working towards fewer and larger locations, with broader product selections and more diverse service offerings. We also believe that our customer -- as our customers adapt to our new footprint, we will pick up an increasingly higher percentage of transactions that would have previously occurred at our closed stores, but without the associated overhead.

To this end, we continue to work on the buildout of our new store on the west side of the DFW Metroplex, and expect it to open later this year. This will allow us to further consolidate our locations in that part of DFW.

With that, I will now turn the call over to Brett for a more detailed look at the second-quarter 2015 financial results. Brett?

Thanks, Dusty. For the quarter ended June 30, 2015, revenues from continuing operations were $14.9 million, a 15% decrease compared to $17.5 million in the quarter ended June 30, 2014. As bullion scrap sales continue to trend downward, consistent with the industry, DGSE's jewelry, watch and diamond lines were consistent with the prior year, despite the Company operating fewer locations.

Gross profit from continuing operations for the quarter was $2.6 million or 17.2% of revenue compared to $3 million or 17.2% of revenue in the prior-year quarter. The overall gross profit decrease was driven by lower sales in our bullion and scrap categories.

Selling, general and administrative expenses for continuing operations decreased $824,000 or 25% in the quarter ended June 30 to $2.5 million compared to approximately $3.4 million in the prior-year quarter. This reduction was due to reduced store count, lower corporate overhead, and reductions in advertising spending. The loss from continuing operations for the second quarter was $132,000 or $0.01 per share compared to a loss from continuing operations of $539,000 or $0.04 per share in the year-ago quarter, an improvement of $407,000.

Discontinued operations related to the closure of Southern Bullion Coin and Jewelry in early 2014 generated income of $42,000 in the quarter, due to positive adjustments in accrued shutdown expenses, compared to a loss of $3.9 million in the second quarter of 2014. The Company reported a net loss in the second quarter of approximately $90,000 or $0.01 per diluted share compared to a net loss of approximately $4.4 million or $0.36 per share in the prior-year quarter.

Turning to the year-to-date financials, in the six months ended June 30, 2015, revenues were $27.8 million, down $7.8 million or 22% compared to $35.6 million in the same period last year. This decrease is again primarily due to the continued industrywide weakness in bullion and scrap transactions.

Gross profit in the first six months of 2015 was $4.9 million or 17.6% of revenue, which was down $1.3 million compared to $6.2 million or 17.5% of revenue in the prior-year period. The decrease in gross profit dollars is directly related to lower year-over-year sales.

SG&A expenses decreased by $1.3 million or 19% to $5.4 million compared to $6.7 million in the prior-year period. The decrease was achieved despite recognizing $143,000 in expenses related to the closure of three DFW area stores. These expenses were primarily comprised of accelerated lease expense and fees related to early lease terminations. The overall decrease in SG&A was achieved primarily through continued efforts to reduce expenses at all levels, including store level operating expenses, corporate overhead, and advertising.

The loss from continuing operations for the six months ended June 30, 2015 was $933,000 or $0.07 per share compared to a loss from continuing operations of $823,000 or $0.07 per share last year. Income from discontinued operations for the six months ended June 30, 2015 was $44,000 related to the closed Southern Bullion locations, compared to a net loss of $4.2 million for these locations in the same period of 2014. Again, the income from discontinued operations in the current year was primarily due to positive adjustments in accrued shutdown expenses.

The Company reported a net loss in the six months ended June 30, 2015 of $889,000 or $0.07 per share compared to a net loss of $5 million or $0.41 per share last year. As of June 30, DGSE had cash and cash equivalents of $1.4 million compared to $2.2 million at December 31, 2014. Stockholders equity decreased 14% to $5.2 million at June 30, 2015 compared to $6.1 million at December 31, 2014. As of June 30, 2015, the outstanding balance for the Company's credit facility with NTR metals was $2.3 million compared to $2.3 million at December 31, 2014.

I'll now turn it back over to Dusty for some additional comments.

Thank you, Brett. This will be my last conference call with DGSE, and I'd like to take a moment to thank the shareholders for your support over the years, despite the significant hardships the Company has endured. As CEO, and before that as COO, I worked hard to help successfully lead the Company through some extremely difficult issues, which could have had profoundly negative consequences for the corporate entity.

While a historic downturn in the precious metals market has made it necessary to make significant changes in our business model, I am more comfortable than ever that DGSE has the right team, the right processes, and the right corporate governance in place to be successful in the future. I would also like to personally thank my staff who have worked so hard over the years to serve our customers with expertise and diligence.

I am confident that Brett and the senior management team can lead the Company through this transition. And, as I've stated before, I will do everything I can to ensure that DGSE's future is as successful as possible. As a shareholder, I expect to listen with keen interest to these calls in the future, and I wish DGSE, its employees, and its shareholders, all the best.

At this point, I would like to turn the call back over to Brett for final remarks.

Thank you, Dusty. Well, on a personal note, I'd just like to say I've worked very closely with Dusty over the last three years since I've been here, and I just want to say that nobody has worked more tirelessly for DGSE or cares more about DGSE than Dusty. On behalf of the DGSE team, I'd like to thank him for his many contributions to the Company and wish him the best in his future endeavors.

We've now begun the search for a new leader and that will continue -- for a new leader that will continues DGSE's efforts to create a profitable long-term growth for our shareholders. During this transition, we expect no impact on our ability to service our customers at the store level, and create a positive jewelry, bullion and numismatic buying and selling experience.

Given the significant changes at the senior management and Board levels, we don't think it's appropriate at this time to take questions regarding the strategy or long-term goals of the Company. We'll keep you posted as the search for these critical roles progresses, and you will have an opportunity to address any questions to the new CEO once our search is complete.

Thank you for joining us today. And this concludes our second-quarter 2015 conference call.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.