Live Ventures Inc (LIVE) 2018 Q1 法說會逐字稿

Good day, everyone, and welcome to Live Ventures' first quarter call. (Operator Instructions) Please note, this call may be recorded. I'll be standing by, should you need any assistance.

It is now my pleasure to turn today's conference over to Chief Financial Officer, Mr. Virland Johnson. Please go ahead, sir.

Thank you. Good afternoon, and welcome to the Live Ventures Incorporated Fiscal First Quarter 2018 Conference Call. Earlier today, the company filed its Form 10-Q for the first quarter ended December 31, 2017, with the SEC. This filing can be found on our website, www.live-ventures.com, in the Investor Relations section as well as on the SEC website at www.sec.gov.

I'm joined today by Jon Isaac, Chief Executive Officer; and Rodney Spriggs, Chief Executive Officer of Vintage Stock.

Please note that some of the comments you will hear today may contain forward-looking statements about the company's performance. As well, there may be forward-looking statements made during the Q&A session that follow our prepared remarks. These statements are neither promises nor guarantees, and there are a number of risks and uncertainties that could cause actual results to differ materially from those set forth in these forward-looking statements.

Additional information concerning factors that could cause actual results to materially differ from those in these forward-looking statements is contained in our filing and periodic reports filed with the SEC. Copies of which are available on our website and may be requested directly from the company. Forward-looking statements are made as of today's date, and we do not undertake any obligation to update any forward-looking statements made during today's call.

Thank you to everyone joining us today for our first quarter 2018 call. I would also like to express my appreciation to our management and associates of Live Ventures for another outstanding quarter.

During our call, we will briefly cover our company's operating financial results for the quarter and then answer your questions at the end of our prepared remarks.

Operating results for the first fiscal quarter of 2018. The company reported record quarterly revenue of $40.3 million, representing an increase of 25.4% over the same period last year and quarterly earnings per basic share of $0.95.

Hard-surface products revenue was up 59.5% year-over-year. Hard-surface products gross profits were up 50.4% year-over-year due to increased sales efforts as a notable product line exception this quarter.

Vintage results were strong and included a full quarter's operating results. Prior year results only included November 3, 2016, the acquisition date, through December 31, 2016.

For the quarter, gross profit was almost $16.3 million, which is up 29% from the same period of fiscal 2017. In addition, our operating income was $3.9 million compared to the same period last year of $3.6 million, a 6.6% improvement. And net income was $1.8 million.

For the quarter, margins for gross profit were up slightly to 40.5% and operating income to 9.7%. This compares to the prior year margins of gross profits were 39.3% and operating income of 11.4%.

As of December 31, 2017, the company reported approximately $1.7 million of cash on hand, plus an additional $17.8 million of available credit under the company's revolving lines of credit.

Net cash provided from operating activities for the quarter was $6.3 million. Stockholders' equity increased approximately 5% to $35.2 million year-over-year -- excuse me, over our year-end September 30, 2017.

As most people understand, tax reform legislation passed in December 2017. And for the quarter, we adjusted our deferred income tax assets to recharged earnings of $2.33 million, a onetime charge related to our U.S. corporate income tax rechange.

Our general and administrative expenses were higher this quarter due to larger-than-expected personnel expense, professional fees, property taxes and repairs and maintenance.

Corrective action is being taken to drive these expenses as a percent of revenue lower and back to more normal historical norms for both our -- of our core businesses.

For the quarter, we had a bargain purchase gain of $3.7 million from our new and recent acquisition of ApplianceSmart, a 17-store retail appliance dealer with stores in Minnesota, Ohio, Georgia and Texas. This gain is provisional as our final purchase price allocation is not final at this time and may be adjusted up or down after the final purchase price allocation adjustments are determined. We have 1 year from the acquisition date to make the final purchase price allocation and related adjustments.

We are currently out of covenant with our lender, Capitala, and we are aggressively working to resolve this out-of-covenant condition, either through renegotiation or refinance of all our reports and of the outstanding obligation. Our goal is not just to resolve the out-of-covenant condition but to seek and secure interest rates that are lower than our cost to borrow today, thereby increasing profits and lowering interest expense.

Earlier this year, and today, we filed our 10-K and 3 10-Q/As, restating our annual and fiscal 2016 and quarterly fiscal results for 2017. These restatements were largely reclassifications and some tax-related errors associated with our purchase of Marquis Industries, affecting deferred tax assets and bargain purchase gain.

For additional financial information and details, I invite you to review our press release distributed this afternoon and view our SEC filings on either our website or on the SEC's website.

With that, I thank you very much for your participation on this call and your continued interest in Live Ventures. At this time, Jon has some prepared comments, and then we welcome any questions that you may have.

It was definitely a good quarter, and we're very pleased with the results. Revenues up 25%, gross profit up 29%, and for the first time, our cash availability hit a record $19.6 million. So we strongly believe that this was one of the best quarters that we've had as a company.

We can go over a lot of things that I have on my list, but maybe we can even open it up to some questions and answers.

Operator, would you remind people how to ask questions?

(Operator Instructions)

Let's take a question from [David].

Yes, can you hear me okay?

Yes.

Okay. Yes. I just wanted to get a more visible way of reporting here. Can you to tell me what a bargain purchase gain is? It doesn't sound anything. I've been around 30 years, never heard that term before. And isn't that a onetime item, and should not be included with your income?

Bargain purchase gains are reported wins, assets are in excess of purchase price for those acquired assets.

And who determines that?

A bargain purchase gain is a rare occasion. It doesn't happen very often. Typically, you see goodwill, which is in excess paid amount over assets acquired.

Right. So who determines that?

In layman's terms, it's we bought something that's worth $10, but we paid $7 for it. So the $3 gets added back on to the balance sheet, and it has to go through our income statement for it to end up on the balance sheet.

Correct.

Okay. Okay. Understand that. But who determines that? Number one. And then why would that be included in an ordinary income when it's really a special gain that's not -- what would the actual number be, around $0.20 or $0.25 without that, right?

It's typically included as other income when it does happen. And that's exactly how we called it out. And we've also specifically called it out as its own line item. Again, rare does happen, and it's a onetime event, but there is the ability for it to be adjusted sometime in the future within 1 year period of time when we're actually doing the fair value analysis work on all of the assets that are related to the acquisition.

Okay. Is that something that you individually internally determined? Or was that an audit that some outside party did for you on the asset valuation?

Management makes the initial determination of those values relative to the carrying values that the company has at the time. But ultimately, it's determined through both work that management does and other outside appraisers in terms of assessing the fair value of the assets acquired. Now in this case, specifically, it's receivables, inventories and fixed assets, some prepaid, some restricted cash. There aren't too many categories of assets. Where we are going to expect to see most of the variability will be in receivables, inventory and possibly fixed assets.

This has happened twice so far from what I remember with here at our company. And this -- as a shareholder, this is sort of an indicative of what management or how we negotiate our purchases. Many times we're buying things that's below their market value, which...

That's fine. It's just that it seems like it's not something that should be considered in a normal part of your profit. So when you include it on your profit, in a way, you've portrayed it in the statement here. That said, you said you have over $6 million in cash flow in the quarter. And how did that transpire?

Well, cash flow is a component of several things. And it is backing out the gain on the bargain purchase gain, which is in our income statement. We have better-than-expected collections off our receivables. We did have a change, a positive change in our deferred income taxes. Again, we have a long history of using our historical NOLs, so that's been very helpful. The...

These are untaxed earnings, right?

No, these are earnings that the company lost in previous years, and we have the ability to apply those losses against future earnings, which we're earning now.

Right. On -- yes, you've got unrealized losses that -- you can carry forward the losses that you've had from the past, yes. So that's what I mean, yes. Okay. And the other thing is you've said you have record cash availability. Is the credit line what is in dispute right now, though?

No, it's not. Both of our lines of credit, we don't have any disputes over with either Texas Capital Bank or Bank of America.

Okay. So...

Capitala is a long-term note that we have with Vintage cap.

Even the word dispute is sort of a heavy word, we don't have a dispute with any of our lenders. All of our of lenders love us, and we love them as well. But from a technical standpoint, management is legally required to tell you when we are out of covenant with a certain lender. That certain lender is the one that's associated with Vintage Stock, and it is a technical error that we can talk about for hours and hours, but it's just not -- it doesn't make sense to do that now. But as we've mentioned in the previous earnings call, we are in communication with another lender who is hopefully, going to -- we'll close with, which will replace Capitala, which will operate a reduced rate of interest. But we are on a very friendly basis with Capitala and everybody else.

Okay. Okay. And that -- the time frame on that? Do you have any kind of thought about that? In a few weeks? A few months?

Again, for legal purposes, I have to say that nothing is guaranteed. But if I was to guess, it would probably be in this second fiscal quarter that we're in. We were also able to negotiate with Capitala the removal of an early prepayment penalty. Normally, in our loan documents, if we were to prepay them, there would be a 6-figure charge. We were able to waive that if we prepay them within a certain period of time.

And so what's the...

All shareholders will be updated via press release. Sorry?

What's the approximate outstanding on that line, though? Is it separate from the...

It's a term loan that's about $25 million, $26 million, I would say. So it'll -- once closes -- if it closes, we hope it'll close, it'll drop additional money to the bottom line.

Let's go to [Daniel] from Jefferies.

Really -- my question really just resolves -- I have a couple of clients who hold a position in Live Ventures, and my question really just revolves around the debt schedules and the debt that's on the company. Because a lot of people tend to get confused on how much debt is on the company, and they believe that it's due, let's say, at the end of this year, or some of them believe that it's all Capitala. So I guess, if you could explain a little more about how the debt on the books breaks down? And how many years out that debt is due? And the different debt schedules just so we can get a little more clarity here on the cash flow and when that debt is due. So we can have more visibility on how much cash is going to pay down debt and when that debt is due. I don't know if you follow me here.

I do. The -- I think to understand this a little more simply is to understand how the debts are classified. The Bank of America Revolver loan and the TCB Revolver loans are classified as current. And these loans get paid off with all of our receipts that come in through our Marquis and Vintage businesses. And then we borrow back on these loans, and there's quite a discussion about this in the MD&A and capital section. The Capitala Term Loan that Jon was referring to is a term loan that has fixed payments of $725,000 a quarter. And the terms and conditions of all of our note agreements are detailed in footnote number, let's see here, Footnote #8, long-term debt, in our most recent filing. But essentially, all of our equipment loans have terms, and they have monthly payments attached to them. We have some individual notes that are due within a certain notice period. And then we have the Capitala term loan, which we've classified as current but also has modest principal reductions on a quarterly basis, together with some interest. So I think that's the easiest way to answer this. There's also a forecast of the future maturities. It's also located in Note 8, that talks about when these notes are due. And again, ignoring for a moment the first year, which is 2018, which has both Bank of America's line of credit, TCB's line of credit and Capitala, the remaining future maturities schedule denotes how much principal has to be repaid by year into the future. So hopefully, that answers your question.

It does, and I really appreciate it.

Right. Anything else? [Bill] from Merrill Lynch.

[Bill] from Merrill Lynch. All right.

Just I have a few clients who've owned this for a number of years that's in the direction you've changed going with acquisitions. The last quarter was such a great quarter to see the volume and to know that people are following the company. And the low flow I think caused such a run-up, I was not happy to see it fall back to where it started. And I'm wondering, the perception in the market to the new acquisition I haven't heard a lot, but I don't think appliances are a area that's growing. And the news of the earnings today and the aftermarkets were down. I know you have a plan in mind here. You're a large shareholder. I just was wondering, Jon, what the vision of 5 years from now is. And how does this appliance company tie into that vision? Because I think it's kind of being negatively perceived, maybe short term. But I really want to know where we're going with Live Ventures, with the way the market treats it. And I think the earnings are great. I think the cash flow, you showed good numbers, but there's got to be a 5-year strategy. I'd like to hear your comments on that, if you will.

Well, first of all, we don't -- we can't control what the market does and what perceives of us. We can't control the market, but we do know how to take advantage of it. When the price of our stock is at a level that management feels is a bargain purchase, for lack of a better term, then we try to buy as much as we can. And the evidence is in the repurchase program, we've acquired almost 5% of the company back. And we're up about -- we're in the money by about 50% on those, first of all. Secondly, ApplianceSmart, actually, the bargain purchase was attributed to ApplianceSmart and its acquisition. We bought something that was clearly below market value. And there are numerous synergies between ApplianceSmart and our other subsidiary, Vintage Stock, and Rodney can maybe elaborate on that in a few minutes. But there's synergies between our 59 or 58 store chain Vintage Stock with ApplianceSmart. For example, there's ideas floating around and plans that there could be some additional space, they could co-locate within the same space. A lot of these stores at ApplianceSmart, they're in markets that Vintage Stock is currently not in. ApplianceSmart is in Georgia, Minnesota, Texas -- well, we have stores in Texas with Vintage, and Ohio. So potentially, we could carve out 3,000 to 4,000, 5,000 square feet. Maybe Rodney can elaborate this. So what you -- Rodney, what your plans are. It would be a natural [fit] between the 2.

Okay. So again, we're evaluating locations with Vintage Stock all the time. And while these are not Best Buy where you have a lot of electronics and things like that, you do have big footprint stores that are in shopping centers, not all of them. But we've actually visited some of those stores, and they're in vibrant shopping centers that, again, they can give up 3,000 to 5,000 square feet, and we can have a store inside that store. And again, you've got the same sunk cost because ApplianceSmart is paying x amount for rent and for payroll. And we think that there's a possibility that we could actually add our product lines into those stores without having any actual hard cost for occupancy.

The second part of that question would be, though, how do you compete with the Lowe's, the Home Depots where a lot of these other smaller appliance companies are having a difficult time. How do we know the margins? You bought something for a bargain price. Sometimes that tells me, be careful because is that an industry we should be buying into? So I understand the synergy. That makes sense. But if we can't make it profitable...

Well, one of the key differentiators is out of box or out of carton. Best Buy doesn't do that, and those are ding and dents as they call them in the industry. Those are -- they're not used, but they are new product, but there's a scratch or a mark or some ding or a dent on them, and those provide the best margin for us. So that's 1 key differentiator. Number two, we really think that appliances is somewhat e-commerce proof. I mean, when was the last time you bought a stove or bought a fridge on Amazon or online? People want to see it. They want to touch it. They want a mix. They want delivery. They want to speak to somebody who's going to come to their door and install it for them.

But that's why I mentioned Lowe's and Home Depot, Jon, they're the ones that seem to be grabbing that market, but go ahead. I'm sorry.

Yes. But there's also another major differentiator, and that is ApplianceSmart, if you want to buy the product, you get the product now. You don't have to wait for the product. If you go to a Lowe's or a Home Depot, you have the wait, sometimes weeks to be able to get the product. That's a huge differentiator to most buyers. The other major thing that we see tragically in the market is that several key competitors are dropping or have dropped out. hhgregg specifically has dropped out. Sears is significantly retracing their position and is expected to drop from many different perspectives. So we see some gaps in the market that still need to be filled. And we still see this as a synergistic play with Vintage but also a strategic play with vacating competitors.

That makes sense. And the...

If it wasn't for the increased margins on the out-of-box product, it wouldn't really be a play. But with that, it really kind of changes the dynamic.

It was supposed to be immediately accretive to earnings. Do you have estimates as far as, when you looked at it, what do we think it's going to add to the company in the next -- this fiscal year? Do you have any estimates?

We want to be cautious, and we don't provide guidance. But we bought it at such a price that we feel that this is going to be accretive to earnings. How much it's going to be accretive to earnings, we don't want to say at this time, but we do feel it's going to be accretive.

It was profitable. Can we say that?

It's been profitable, yes.

It's a -- we would not buy a company that was losing money, that would be a drag on earnings. So the company generated $65 million, I believe, last year. We put that in the press release back in January. So this should add about -- our earnings for the quarter that we just announced don't really reflect any of the numbers that ApplianceSmart generated because we didn't own it that long.

We had it 1 day.

Only for 1 day. But going forward, for Q2, fiscal Q2, we should see a nice jump in revenue. If things go the same as last year, it would add about $15 million or so per quarter in sales. And I think it'll be broken down in the Q -- in the next Q.

It will.

Yes. I didn't read the Q, but can you mention how you financed that deal?

We arranged the contract such that the purchase price is going to be deferred. The purchase price has to be paid by the end of our Q2. And that's...

There will not be any stock issuances, no warrants, nothing that's related to stock. It'll be an all-cash transaction. We're working with a couple of lenders that'll give us an inventory back line and a receivable back line. So it'll be an all-cash transaction for now, from what we see.

Let's go to [Jonas] from Upstream.

Most of my questions have been answered. I was concerned also about the appliances. I think you pretty well addressed that. I agree that Sears getting out of the marketplace for other reasons leaves a certain gap. I don't know about other organizations that are getting out of the marketplace, whether they're doing that because they find it's not financially healthy for them to stay in that marketplace and whether that'll leave a gap for you to fill or not. But I do agree that the out-of-box is a big difference. So I appreciate your addressing those questions. The other question that I had related to Capitala. And most of my questions was answered. But with regard to being out of covenant, is there a time frame that Capitala has given you to resolve this? Or is there something within the covenants that say that if you're out of covenant for a certain period of time, that they have certain additional rights. And if so, what are those rights? And what is the time frame?

No, first of all, they haven't notified us of anything. We're legally required to notify our shareholder base of what's going on. That's number one. Number two, we're on a very friendly relationship with them. We speak to them regularly. We -- very friendly relationship is not a problem. Third, they know that we are in contract with another lender that's going to take them out very soon. And again, there's no promises and no guarantees, but we're very -- we're highly confident that this new transaction will close, I would say, in the next 30, 45 days. The new lender, they love the company. They visited with management, with Rodney. And they're undergoing their due diligence in some studies, but it looks very promising.

I'll give your history -- given your history and the way you've made things happen, I have little doubt that what you're saying will indeed come to pass. What I'm asking for is just a worst-case scenario picture as far as what rights they have if it isn't somehow resolved? And again, I do believe that it will be resolved. I believe what you're saying. And I think that you've shown with your history that you're able to deal with these issues as they come up. And these issues do arise. But worst case scenario, do they have certain things they can do if things are not resolved, say, within 3 months or 6 months or something like that? (inaudible) great relationship with the company, but...

Yes. (inaudible) They have all sorts of -- they have -- I mean, the short answer is they have all sorts of remedies they could do. They could do a lot of things for being out of covenant. The reason we got out of covenant, again it's a long story, but covenants were set wrong from the beginning, and the bar was very, very high. And despite that, Vintage performed exceptionally well up until the most recent quarter. And in the last quarter, too, they did very well, but the company did well despite the high bar that we set on ourselves. Now we can go back to Vintage and argue and say -- not Vintage, sorry to...

Capitala

Capitala, and argue and say look these were set wrong, but it really doesn't matter at this point because they provided us something. They helped us acquire the company. We -- they were too expensive for us. They knew we were going to refinance them 1 year, 1.5 years, 2 years. They're more of a bridge lender. I'm not happy with the rate. So the new lender is going to help us reduce interest cost, and there's just no point in going back and arguing with them. We're on a very friendly basis. We speak to them regularly. I spoke to them today. And things will get resolved once the new lender comes in, which will happen, hopefully, very soon.

Let me just reiterate one little point of that, and that is let's say something sticks in the glue. Something doesn't happen. It takes a longer for you to refinance than expected. Anything could happen. There must be some time frame where they'll say, you know what, we have to pull the trigger here. We have to do something. Is it 3 months, 6 months, 8 months? Is there a time frame? Or is it just...

(inaudible) I mean, I can't speak on what could happen. But I mean the best thing I recommend is the loan documents are all on EDGAR. They're on the SEC. You can read them as well. The transaction happened in November of 2016. But there's absolutely no indication about any of this, number one. Number two, they're in the lending business. They deploy capital. They make points on the way in. They make points on the way out. This is where they make their money. They're not a lender that is wanting to own companies. That's not what they do. So they would like to see their money back because they can redeploy that capital into other opportunities.

That makes a lot of sense then, and I think that that's likely the scenario that's going to come to pass and I appreciate...

We're confident that things will go as I described. Again, no guarantees, but the moment it happens, we'll alert all shareholders via press release.

(Operator Instructions)

Yes, before we speak to [Hal], one thing I also wanted to mention that I forgot to mention is that if things do -- something does turn bad with Capitala, I mean, we have a lot of resources on hand, and we may even be able pay them off, cash, I mean, between liquidity and availability. We have a lot of options. I should have also mentioned that to [Joe.] Hopefully, he's still on the line. Let's talk to [Hal.]

I saw it in the afterhours is some kind of relief, an 8-K about a restatement of financials. Can you discuss that?

Yes. The -- we -- in connection with our filings today, we filed 10-Q/As for our prior quarters in fiscal year 2017. This was basically the pushback, the restatement that we did in our 10-K with regards to our prior fiscal year, as well as the effects of those changes that we identified in our 10-K throughout our interim quarters in fiscal year 2017. These were largely reclassifications of TCB and BofA from long term to short term due to lockbox and the fact that there was a subjective acceleration clause within both lending agreements. And the combination of those 2 things, GAAP requires that we treat it as short term. That was picked up in the audit, so we've done that. We also reclassified a small preferred share reclassification as well as a noncash effect of our seller note that we had with regards to Vintage. We also went back and cleaned up an equipment deposit that was made at the end of fiscal year 2016. But it had a cash flow effect as it rolled through fiscal year 2017. So we cleaned that up. It was largely a reclassification exercise. But because the amounts were material, we felt it best to go and do that. We disclosed all of these changes in our 10-K, but it was still a matter of going back and cleaning up the 10-Qs, which we've now done. So that's what it related to.

The other thing is that I got a note from our General Counsel saying that all the 10-Q/As were filed, but the SEC is experiencing a big backlog today for some reason, maybe it's earnings season or something. But they've all been filed, but you should see them on sec.gov very shortly. [Jay,] please? Let's go to [Jay.] [Jay?]

(Operator Instructions)

We can go back to him in a few minutes if he comes back. Some other things that happened during the quarter is, in early December, we announced the full and complete dismissal of the class-action lawsuit and the shareholder derivative loss that we were successful -- in both those lawsuits in dismissing them. There was no settlement at all, no monies paid to them. It just went away, and we're very happy about that, obviously. We've always denied all of the false allegations, and we were winners in this. Let's go to one question, [Philip]?

Two quick questions. One is, were there any share repurchases in the past quarter? And second, how much of the cash on hand is from the revolver versus actual cash that's not loan-based?

Let's address the cash on hand issue. Cash on hand that we have is typically not associated with the revolver. It's monies that we've already either borrowed or have as a result of distributions. Revolver. The way the revolver works is proceeds off our accounts receivable and other collections go to pay the loan down. Once we borrow proceeds for either operations or keeping our operating account or for purposes of other distributions or loan paydowns, that resides in our cash balance.

Almost every dollar that we generate in cash flow, our respective CFOs and our subsidiaries use that money to pay down the lines of credit. There's no point in keeping a large cash balance on the balance sheet while we're paying interest on a loan that's there. So it just makes no sense. So we pay it down, and that's why it's sort of a trick question when somebody says how much cash you have on hand. Well, technically, in the last Q, we show $1.7 million to $1.8 million, but that's because the millions of dollars that we generate every quarter goes to pay down the lines. So that's why I think first time we put in cash availability in the press release. And that totaled $19.6 million as of 12/31/17.

And what that means is if we wanted to draw on the line, that's how much we could draw immediately.

Okay?

For your other question, could you repeat the question?

The repurchase.

Oh, the repurchases. There were some repurchases in the quarter. We repurchased approximately 20,000 shares in the quarter. We went up to 116,050 shares at the end of December from 96,307 shares at the end of September. We also acquired 50,000 shares of (inaudible) E preferred stock, dropping that from 127,840 down to 77,840.

The Q1 -- our first fiscal quarter is a little bit tricky because we have the 10-K, which is supposed to be released on 12/31, and we have certain blackout periods and things like that. So the first Q is usually not a big quarter where we acquire a lot of stock. And I think the -- we repurchase I believe over 110,000 shares. At an average price of about $10 a share. So I don't think we've seen $10 in the last 3, 4 months.

(Operator Instructions)

Maybe we'll discuss with Rodney just a little bit on what your outlook is or what do you believe the outlook is for the next 6 months on games and movies and consoles. How are things going in Missouri, Rodney?

Well, besides cold weather, it's actually pretty good. So we've actually had some issue with ice and stuff that we haven't had in the past, which all retailers deal with that. But moving forward, we're seeing strengthening video game sales, which is something we have talked about in past quarters. We're still seeing large double-digit increases on new video game sales and new hardware. And that is not all attributable to the switch. It's actually larger installed bases and back-end rebates from Sony and Microsoft on the Xbox and PS4 system. That for us is a leading indicator that when we're selling new, go 1 to 2 years down the line, we start seeing large margin increases because our used product lines average 80% profit margins versus a 20-some percent on new product. So we're pretty excited about that, that we're out of the valley video game and seeing large increases. I think most people have heard that the Switch is a resounding home run in the video game market. So we have a third company, and we do need Nintendo to be a strong company, which their last system was very weak. They're actually outselling the original Wii system that came out over 10 years ago, and that system ultimately sold over 100 million pieces of hardware. And then of course, numerous on top of that pieces of video game software. So the outlook is very bright on the video game side. On the movie side, we came out of a very soft movie release schedule last year with, I believe, only 7 $300 million box-office titles, which are considered to be tentpole and drive a lot of foot traffic into retail when they come out on Blu-ray and DVD. We're already seeing a large increase of $300-plus million titles that will release in first and second quarter of this year. There's usually about a 120-day lag from when they leave box office. We have Thor that did $315 million, Jumanji 2, which was a surprise hit, at over $400 million. We have the Star Wars movie at $615 million. And Justice League and Coco were high $200s. And Black Panther is coming out and is expected to open up to $125 million, $135 million box office. Again another new title that's $300-plus million. So we could see, versus 7 titles last year, as many as 10-plus and possibly 12 or 13 titles with Jurassic Park and Avengers and another Deadpool coming out, plus other titles. It looks like a strong year on movies, and that has been a lagging sales product line for us. And those 2 product lines make up about 1/3 of sales each. So it is important that those product lines perform well. And we're seeing, again, great sales of those 2 lines and a better outlook on movies. And then on music, there's been headlines that Best Buy is going to get out of the CD business July 1, which for us, a lot of times, they're a direct competitor that are very close to us. They do send us customers because their product selection depth is very light, whereas, we have a lot of depth. We carry more music CDs, video games and movies than any retailer. So we view that as a big positive that we will get an uptick in sales in July for when they do drop out of that market. And hopefully, honestly they'll get off some of the other lines like movies and video games that they actually have downsized over a few years. So we think that, moving forward, we're going to see some increases in all the big 3 product lines because of those reasons.

What's your outlook on new spaces or an expansion -- new-store openings? Are you seeing deals out there or leasing?

There are deals. Depends on the site. But we are having some luck negotiating leases. If there are vacancies in our center, we're aggressive in holding our rent numbers as leases come due to the same number, or we're actually getting rent concessions on some sites. There's been a lot of talk about malls struggling and things like that. We have a couple mall sites that we have saved over $100,000 annually on rent that will save us approximately $500,000 over the term of the lease that's left. And those stores are very profitable for us. So as there are these retail issues, where some companies are struggling and you're seeing companies go out, it would affect our sales slightly, but we really generate our own traffic, and we're a destination retailer. So yes, we want cotenancy, and we absolutely want our center to be 100% filled. But if it is not, we definitely take advantage of those situations as leases come due to negotiate even more favorable rent and occupancy terms for the company.

That's great. The new stores front that we -- that you opened last year during, I think, Thanksgiving, they're all -- how are they comping year-over-year? I mean, they were -- I think they were new last November/December? I think you opened, what, 8 -- 7, 8?

Those stores were Hastings locations, and there were 7 locations that we bought through the bankruptcy courts. And we are a predatory company. We've acquired the EntertainMart brand, and those are 2 of our top-performing stores that we had acquired. And we acquired these Hastings stores and branded them EntertainMart also. They opened up to different ranges. We have talked about we were not 100% satisfied with what the numbers were as soon as they started, even though most were profitable from the day we opened them. We were expecting a little bit higher numbers. But even where that is that, all of those stores in the first 6 weeks of this year, 5 of the stores are comping in the 23% to 20% -- 26% gain year-over-year in sales numbers. So that's a very promising trend. It's kind of the thing we see on a new-store opening, whatever number it does open out, we see fairly heavy double-digit increases in year 2. So we're very satisfied with the numbers and the growth that we're seeing out of those locations. We have a couple other stores that are just getting ready to comp, one of those being one of the former Hastings locations that will comp here 2 months from now. And we look to open additional stores going forward or acquiring acquisitions if any of our competitors have issues. But again, the most important thing, as you guys have discussed, is getting this refi done. And everybody needs to remember that we acquired those Hastings stores on November 1, and the Company Act of '16 -- and the company acquisition was November 3, so we have a lot going on. There was a lot happening during those time lines that we want to make sure that we get this refi done because the amount of money that saves the company and Live going forward is a large number compared to again what we can generate out of the store. That's a good number in an individual store. But the most important thing is to get this refi taken care of. And then going forward, we would expect to probably open a store every quarter-or-so.

Great. Thank you, Rodney.

Thank you.

You should hang around just in case somebody else has a question related to Vintage. On the Marquis side, we invested a bunch of money last year on new extruder machines. Those were delivered around October of 2017, and they're now fully installed and operational. I invite you to check out our Facebook page for Live Ventures, and you'll see some pictures that were taken, I believe, this morning or yesterday. The new machines are operational now. We have a great team there running the operations. The equipment should be -- should produce an ROI very quickly as it'll reduce our cost of goods. We're currently outsourcing millions of pounds of yarn, and so we'll be able to bring that in-house and be able to achieve more margin on that. If you haven't already done so, please follow us on Facebook. I don't see any other questions. Unless someone else has anything else? Virland, anything else to add?

No.

(Operator Instructions)

[Luigi] Let's take a call from [Luigi.]

My question is regarding to the platform of LiveDeal, do you have any outlook for the future, what you are going to do or if you have any option on that matter?

Right now, our sole focus is on acquiring companies -- established companies that have shown and demonstrated a strong earnings power historically and companies that have an existing management team. That model has worked out very well for us. So we're not really spending a lot of -- we're not putting a lot of resources into the LiveDeal platform, although, it is still there. And it doesn't generate much revenue, but it's still there, and we don't dedicate a lot of resources to it. We're really focused on looking for new acquisitions, and we're looking at several, number one; number two, reinvesting our capital into our existing subsidiaries, such as Vintage and Marquis. We just spent about $5 million at Marquis Industries and on the new extruder machines that will hopefully give us a pretty nice double-digit yield. Those are the types of opportunities that we're really looking for right now. And when the opportunity arises, well, we buy back stock or we pay down debt. On the Capitala side, we failed to mention that we've voluntarily made additional principal payments during the quarter. I think we've been sending them more almost every month over the last 3, 4, 5 months, I believe. So the company, Vintage, is doing very, very well. And there's -- we're taking the additional cash flow and just paying them down as aggressively as we can. So when opportunities arise, Luigi, we tried to allocate the capital as efficiently as possible with the sole focus of maximizing shareholder equity, which is the most important number in my view, in all of our financials. That is of the wealth in the company. And you own a piece of that if you're a shareholder. So that's really what our primary focus has been.

In any event, you were considering some good offerings for that platform if somebody shows up and be interesting of it?

Yes. Of course. Someone adds to the inquiries, of course, we will look at all deals.

We will entertain all offers.

Absolutely. If there's no other questions, maybe we'll -- maybe in 30 seconds, we'll end the earnings call, and we'll reconvene in about 90 days?

Yes.

For fiscal Q2.

Q2.

Let's leave it there for 30 seconds.

If you have a question, please ask it.

Please, yes.

We'll be back to you in 90 days.

(Operator Instructions)

Since there are no questions, we will -- actually, here, last second. [Dana] showed up with a question. [Dana,] please go ahead. No, she dropped off. Okay. Thank you, guys, for joining, and we'll see you and we'll talk to you in about 90 days. Have a good evening.

Thank you.

This does conclude today's program. You may disconnect your line at any time, and have a wonderful day.