Live Ventures Inc (LIVE) 2022 Q3 法說會逐字稿

Good day, everyone, and welcome to today's Live Ventures Incorporated third quarter earnings call. (Operator Instructions) Please note today's call may be recorded and I will be standing by should you need any assistance.

And it's now my pleasure to turn the conference over to Greg Powell, Director of Investor Relations. Please go ahead.

Thank you, Brittney. Good afternoon, everyone. And welcome to Live Ventures third quarter fiscal 2022 conference call. I'm here this afternoon joined by John Isaac, our Chief Executive Officer and President; Eric Althofer, our Chief Operating Officer; and David Verret, our Chief Financial Officer.

Some of the statements we're making today are forward-looking and are based on our best view of our businesses as we see them today. The actual results could differ material due to a number of factors, including those outlined in our latest forms 10-K and 10-Q filed with the Securities and Exchange Commission.

We have no obligation to publicly update any forward-looking statements after this call, whether as result of new information, future events, changes in assumptions or otherwise. You can find our press release referenced on this call in the Investor Relations section in the Live Ventures website.

Earlier today, we filed our 10-Q with the SEC. I direct you to our website www.liveventures.com, or www.sec.gov for a copy of this quarter's 10-Q and other historical SEC filings.

I'll now turn the remainder of the call to David to walk through our financial performance.

Thank you, Greg, and good afternoon, everyone. Overall, the company delivered a solid third quarter 2022 performance, representing the three months ended June 31, 2022, despite increasing economic headwinds and inflationary pressures.

During the third quarter, we continued to execute our multi pronged capital allocation strategy to maximise shareholder value. Before we jump into the numbers, we should discuss the biggest events of the quarter.

The end of June, our steel manufacturing segment acquired The Kinetic Company, Inc, a 74 year old Wisconsin based company. Kinetic is a highly recognisable and regarded brand name in the production of industrial knives and hardened ware products for the tissue, metal, and wood industries.

It is known as a one-stop-shop for in-house grinding, machining, and heat treating. We believe that Kinetic is a great fit within our growing steel manufacturing segment.

Now, I'll discuss the financial results for the third quarter. Total revenue for the third quarter decreased slightly to $68.3 million down 1.2% as compared to $69.1 million in the prior year period. Revenue decreased in the retail in foreign manufacturing segment which was partially off-set by increased revenue in the steel manufacturing in [Covert] and other segments.

with revenues for the for the quarter increasing 20.4%, the $75.2 million as compared to $62.5 million in the prior year period. Revenue growth was driven by growth in all of our segments. Retail segment revenues were $26.2 million, a 17% increase over the prior year period. The increase was primarily due to inflationary price increases and the opening of four new stores in calendar year 2021. Steel segment revenues increased 27% to $12.4 million as compared to $9.7 million in the prior year period. Flooring segment revenues increased 8.8% to $32.9 million as compared to $30.2 million in the prior year period. Revenue increase in steel and flooring segments are primarily due to inflationary price increases as well as pent-up demand caused from the COVID pandemic in 2020 and the gradual reopening of the economy in 2021.

Finally, approximately $3.6 million of the increase in revenues is due to Solomon Witney becoming a consolidating variable interest entity in June of 2021.

Gross profit for the first quarter was $27.6 million, up from $22.3 million in the prior year period. The gross margin percentage for the Company increased to 36.7% from 35.7% in the prior year period. The increase in gross margin percentage is primarily driven by the steel segment and the consolidation of Solomon Whitney in Q1 2022 steel segment gross profit margin increased to 29.2% as compared to 18.2% in the prior year period. Increase is primarily attributable to product mix fluctuations and inflationary sales price increases. The increase in gross profit margin was partially offset by the retail segment.

Retail segment gross profit margin decreased to 51.1% from 53.9% in the prior year period due to sales mix of new and used inventory.

General and administrative expenses increased 15.3% to $14.2 million from $12.3 million in the prior year period. General and administrative expenses as a percentage of revenues were down at 18.8% of revenue for the first quarter as compared to 19.7% in the prior year period. Sales and marketing expenses were $3.1 million as compared to $2.7 million in the prior year period. Sales and marketing percentage expenses as a percentage of revenue improved to 4.1% as compared to 4.3% in the prior year period.

Operating income was $10.4 million for the first quarter, an increase of $3.1 million or 42.7% over the prior year period.

Net income for the first quarter increased 24% to $6.5 million as compared to $5.3 million for the prior year period. Internally management has historically used adjusted EBITDA to evaluate performance of our operating entities. In addition, we believe it is an important metric to highlight the Company's value proposition to investors. Therefore, we will report adjusted EBITDA in our filings going forward. A definition of adjusted EBITDA has been provided in our earnings release and in the Form 10 Q. Adjusted EBITDA for the first quarter of 2022 increased 21.9% to $12.1 million as compared to $9.9 million in the prior year period. The increase is primarily attributable to the company's top line growth in revenue and the leveraging of fixed costs. Earnings per basic common share for the first quarter was $4.14 as compared to $3.45 for the prior year period.

Turning to liquidity, we ended the quarter with cash of $10 million and cash availability under our various lines of credit of $28.8 million for a combined total liquidity of $38.8 million. Cash generated by operations in the first quarter was $4.2 million as compared to $7.7 million in the prior year period. The decrease is primarily attributable to the timing of inventory purchases and normal fluctuations in working capital.

Working capital for the Company at the end of the first quarter was $42.5 million as compared to $33.8 million in the prior year period. Total assets grew $7.2 million to $219 million in Q1 of 2022 as compared to $211.7 million as of September 30th, 2021.

From a capital structure management and strategy perspective, we continue to operate our up, optimize our balance sheet during the quarter, paying down our more expensive seller notes and term loans, while utilizing low-cost equipment financing to improve liquidity and lower average cost of borrowing company continues to invest in buying back its common stock as opportunities in the market present themselves. As of December 31st, 2021, the company has repurchased 534,520 shares of common stock under our buyback program company did not buy back any shares of common stock during the first quarter. However, we continue to look for opportunities to buy back shares of common stock under our program. John, Eric and I will now take questions from those of you on a question on the conference call at this time, if you would like to ask a question, please press the star and one on your touch tone phone. You may withdraw your question at any time by pressing the pound key once again for your questions that is star and one. We'll pause a moment to allow any quick in the Q.

Thank you once again for your questions today that is star and one on your tone phone pause another moment, and it does appear there are no questions at this time. But once again, that is star, Ian one Seeing that there are no questions from everyone. We wish everyone a good day and we will see you on the next earnings release. Thank you.