Live Ventures Inc (LIVE) 2019 Q1 法說會逐字稿

Good day, everyone, and welcome to today's Live Ventures quarterly earnings call. (Operator Instructions) Please note today's call may be recorded. I'll be standing by should you need any assistance. And it is now my pleasure to turn the call over to Chief Financial Officer, Mr. Virland Johnson.

Thank you. Good afternoon, and welcome to the Live Ventures Incorporated First Quarter Fiscal Year-End 2019 Conference Call. This morning the company filed its Form 10-Q for the first quarter ending December 31, 2018, for fiscal year 2019 with the SEC. This filing can be found on our website www.liveventures.com in the Investor Relations section or as well as on the SEC website at www.sec.gov.

My name is Virland Johnson, Chief Financial Officer of Live Ventures Incorporated, and joining me today is Jon Isaac, Chief Executive Officer, Live Ventures Incorporated.

Please note that some of the remarks 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 or 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, everyone, joining us today for our first quarter fiscal year 2019 call. During our call today, we will briefly cover our company's operating and financial results for the quarter and then answer your questions at the end of our comments.

Operating results and highlights for the first quarter fiscal year 2019. This quarter's results include a full quarter of ApplianceSmart results versus only one day's results in the same period last fiscal year. The company reported record year revenue of $53.2 million, representing an increase of 31.8% over the same period last fiscal year. In first quarter fiscal year 2019, earnings per basic share of $0.79. For the year, gross prof -- excuse me, for the quarter, gross profit was $19.3 million, which is up 17.9% for the same period last fiscal year.

In addition, our operating income was $2.1 million compared to the same period last fiscal year of $3.9 million. And net income was $1.5 million compared to $1.9 million same period last fiscal year.

For the quarter, our gross profit margin percent was down to 36.4% and operating income margin percent was down to 3.9%. This compares to the same period prior fiscal year when our gross profit margin percent was 40.6% and operating income margin percent was 9.7%. Cost of new product, sales levels and mix of products negatively affected gross margins realized in the quarter for both Vintage and ApplianceSmart.

Interest expense decreased to $1.7 million for the first quarter from $2.5 million for the same period prior fiscal year due to pay down in revolving and term debt.

On December 21, 2018, Marquis Industries sold 2 synthetic turf extrusion lines for $4.75 million, plus the book value of the raw material operating and packing inventories associated with the synthetic turf extrusion lines for a total purchase price of approximately $5.5 million, plus $0.10 per pound of nylon sold by the buyer during the 36-month period after December 21, 2018. Gain on the sale was $1.5 million recorded in other income.

As of December 31, 2018, the company reported approximately 3.5 -- $3.4 million of cash on hand plus an additional $12.6 million of available credit under the company's consolidated revolving lines of credit. Net cash provided from operating activities for the 3 months ended December 31, 2018, was $8.2 million, an increase of 30.8% or $1.9 million.

Stockholders' equity increased approximately 3.9% to $41.0 million over our quarter and year-end September 30, 2018.

Total liabilities decreased by $11.5 million for the first quarter fiscal year 2019. This decrease was largely a decrease in accounts payable and accrued liabilities of $1 million and long-term debt of $10.5 million.

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

Thank you very much for your participation on this call and your continued interest in Live Ventures Incorporated. At this time, Jon is going to open up the call and may have some comments after this point. We welcome any questions that you may have.

Thanks, everyone, for joining the call. And I get questions all the time from various people, but I always -- my response is always please save your questions for the quarterly call. So this is your opportunity to ask a question. Operator, maybe you can remind our listeners how to ask a question.

Absolutely. (Operator Instructions)

Generally speaking, overall it's been a really good quarter, another record quarter, $53.2 million in sales. We're growing pretty drastically pretty quickly as a company. We've had Vintage that performed very well and Marquis as well. ApplianceSmart is another area that we're -- we keep focusing on. We're looking at increasing operational efficiencies, cutting costs and moving things around. But it did contribute to some losses to this quarter's earnings. So this is work in progress, and it's really very high up on our list. Had it not been for the losses from ApplianceSmart, obviously our earnings would have been higher this quarter. So I think this is something that's noteworthy for all of our shareholders or potential shareholders.

If you notice as well quarter over quarter, this quarter versus the quarter from September 2018, 90 days prior, our assets decreased by about $10 million. But our liabilities as well, we've paid off a lot of debt over the quarter. Our liabilities decreased by about $11.5 million. And of course, our equity increased more as a result of retained earnings. So overall as a company, our balance sheet shrunk a little bit, but that's for the good of the company.

We're still always looking for positions, and I always ask the question, what are you going to buy? What are you looking at? Are you looking at something to buy? The answer is always -- at all times, we're always looking at different opportunities. We got opportunities from people from all over the country. Investment bankers sometimes from sellers directly. So we're always looking at opportunities, and of course, we will make it public and make the public aware once there's a transaction that closes. So really, that's the only answer that I can give for that question. We're always looking for different acquisition opportunities, but our favorites are ones that could be potentially bolt-on opportunities. So something that could be related to our carpet operation, Marquis, or it could be related to our Vintage Stock, and we're constantly evaluating different opportunities.

With us on the call, actually joined just a few seconds after the moderator was speaking, is Mr. Rodney Spriggs from Vintage Stock, CEO of Vintage Stock. If anyone has questions related to Vintage, especially if they're specific questions, we have him as well on the call and he'd be able to answer those for you. In terms of share buybacks, we did just a little bit this quarter. It was obviously a funny quarter because we had our year-end report at the end of December. So our blackout periods, of course, we as a company are restricted to blackout periods, customary blackout periods. And of course, if the company is in possession of inside information, then just like I couldn't buy it, the company as well cannot buy back its shares. And even then, we have to follow certain rules from the SEC as to how much we buy, when we can buy and all sorts of things that our investment bankers handle.

Maybe we'll turn it to Rodney. Rodney, how was the holiday period? This is for the quarter ending December 31. Give us the pulse on how Vintage did, especially since it impacts you the most, really, because of the seasonality in your business.

Thanks, Jon. We had a strong fourth quarter. A few of the things that you would see on what has been released is that we actually increased our gross profit margin in used products, movies, music, games and other, over 2%. And that's a combination of things, again, selling a little higher margin, working on our buy prices. So again, some extra management in that area has helped us move margins even better on a high margin line of products.

Also, the rental concession was up, and we were actually down slightly in new products in the fourth quarter on our gross profit margin from 24.8 the previous year to 23.1 this year. That was mainly due to competition and a lot of what are called back-end rebates where we actually receive rebates later from the manufacturers and the studios. So it was heavy this year. So everybody likes good deals at Christmastime, and the video game industry was exceptionally heavy on that in the fourth quarter. And there was even more titles this year that instead of paying $300 for a PS4 system, they had a $100 rebate and were selling it for $199.99. So sometimes we don't get full credit for that until it can drop into a next quarter situation. But we're very satisfied with the numbers.

We had a great fourth quarter. We are still pushing for new customers and to be able to contact those customers with the new text messaging system that has not been in place for a year yet, and we're still getting 10,000-plus new, repeat customers, subscribers to that program every week. And that has done very well for us during sales. We had the anniversary sale the first weekend of November that we have every year, and sales were up double digits year over year and it's the exact same sale. And a lot of that is attributed to the better communication with our customers by sending a direct text to them and reminding them of these sales.

Same thing with the online also. We've seen double digit increases in the online sales because of the same thing of being able to have better communication with our customer base.

How's your new store outlook looking like for new store and growth?

The newer stores that we have, which would be stuff, say, in the last 18 months, we've had 2 of those and they both came out of the gate profitable almost from day 1. So that's good. We didn't have a ramp up where they actually operated at a loss for any period of time. We have a couple more that are in the pipeline, and that, because of our covenants, we can only have 3 in the previous 12-month cycle.

So we're basically at the point when we open one more store that we will be there. There's one that's getting ready to open in Oklahoma City. Looks like it'll open here in the next 60 days. And it's a former competitor location known as an entertainment spot for the past 2 decades. So that -- hopefully in those types of situations, we do greenspace new store openings, we acquire competitors sometimes, or we will take a competitor's location. So that's one of those things that helps you come out of the gate a little bit faster, so we're kind of excited about the opportunity in that.

We'll open it up to some -- any -- if the audience has any questions.

(Operator Instructions) And we can take our first --

Let's take the question from [Joseph], please.

Thank you again for another good performance. Really appreciate you taking the time to talk with us about these things and all the good information. I'm just wondering with regard to the types of acquisitions that you're looking for, are they going to continue to be smaller private companies? Do you also look at public companies, presumably smaller public companies? That's number one. And number two, have you any -- have you looked at all within the hemp industry now that that's been legalized federally?

To answer your first question, we look at all sorts of opportunities, whether it's private or it's public, we'll look at anything. Our criteria is the company needs to be profitable and have a pretty strong historical performance in terms of its financials and a good and able management team. So whether it's public or private, that really doesn't matter to us. We'll look at anything.

Regarding your question regarding hemp, no, we haven't really been looking at that space. I don't think there are many companies out there. Our criteria's pretty stringent. In addition to that is really we're contained in terms of size. The pool of companies that generate a million dollars in earnings a year is a very, very large pool. However, as the numbers get bigger, the pool gets much, much smaller, and that's going to be one of the challenges we'll face as a company. When we've got cash being generated from several fronts and we can afford to buy bigger and bigger companies, the pool of available companies will shrink every time we're looking for something that's large. So we haven't looked specifically at hemp companies, but we'll look at anything.

I haven't studied the legality of it and what's federally legal and what's not, but we're really looking right now for companies that are very easy to understand and that generate a good profit and come with a good management team. There are two types of companies we look for. Of course, there's the bolt-on acquisitions, which we love. And of course, if it's a new platform type company, then on a standalone basis then we will evaluate that differently. Does that answer your questions?

It does.

(Operator Instructions)

Let's take the question from [David].

I just had a quick question. On ApplianceSmart, you said that the margins would have been improved, that your overall performance would have improved year over year on EPS and on margins were it not for ApplianceSmart. And so I'm assuming that you were pretty much aware of that going in, and what is your strategy to and your time frame that you think that that'll no longer be a drag?

Want me to answer it? Our time frame is roughly a quarter in terms of not being a drag on operations. It's a combination of things. It's mix and it's volume, and right now we're addressing both issues. And I think, based on what management is working on right now, I think it'll turn within a quarter, but probably outside 2 quarters.

What I had mentioned the first, David, was it's not that margins compressed. It's -- Marquis was profitable, Vintage was profitable, ApplianceSmart wasn't, so that's where the drag came. It was a hit to earnings and the earnings would have been higher had it not been for ApplianceSmart. But we have -- we're confident that it will be turned around and it'll be a contributor in future quarters. Does that answer your question?

Right. Yes, sir, it did. And just one more quick one. What is the status of your LiveDeal platform? Or is it still operational?

It is operational, but we're not dedicating a lot of resources to it. It is there, but we're focused on the Live Ventures business since 2015 since we've rebranded from LiveDeal to Live Ventures. So it is there and operational, but we're not dedicating a lot of resources to it.

(Operator Instructions)

If there are no other questions, then we'll end the call and we'll be having another call for the next -- for Q2, fiscal Q2 2019. Thank you, everyone, for joining. We'll see you on the next call.

And this does conclude today's call. Thank you, everyone, for your participation. You may disconnect at any time and have a great day.