Educational Development Corp 2027 Q2 Earnings Call
Review the key takeaways and the transcript of this earnings call.
- Fiscal 2027 Q2 net revenues were $4.1 million, down approximately 11% from $4.6 million in the second quarter last year, compared with internal projections for a decline of approximately 35%.
- The loss before income taxes was $1.6 million, compared with $1.8 million in the prior-year quarter; net loss was $1.6 million, compared with $1.3 million, and loss per share was $0.19, compared with $0.15 on a fully diluted basis.
- Average active brand partners totaled 5,100 at the end of August 2026, up approximately 19% from 4,300 at the end of February 2026, but below the 5,800 reported at the end of August 2025.
- Inventory decreased from $37.7 million at the beginning of fiscal 2027 to $34.9 million at the end of August, generating $2.8 million of cash flow from inventory reductions.
- Cash decreased from $1.3 million at the end of February 2026 to $1.1 million at the end of August, and the company had no borrowings under its $2 million line of credit during the quarter.
- A valuation adjustment against net deferred tax assets eliminated the tax benefit on the income statement; it had no cash flow impact but affected tax expense, net earnings, and earnings per share.
STOCKNOW INSIGHTS
Continue with outlook and guidance.
Log in to unlock executive comments and Q&A highlights.
Log in for the full summaryStockNow uses AI to translate and summarize earnings calls. Accuracy and completeness are not guaranteed.
Transcript
Preview the first fifteen paragraphs, organized by speaker.
Good afternoon, everyone, and thank you for participating in today's conference call to discuss Educational Development Corporation's financial and operating results for its fiscal 2027 second quarter and year-to-date results. As a reminder, this conference is being recorded. On the call today are Craig White, President and Chief Executive Officer, Heather Cobb, Chief Sales and Marketing Officer, and Dan O'Keefe, Chief Financial Officer. After the market closed this afternoon, the company issued a press release announcing its results for the fiscal 2027 second quarter and year-to-date results. The release will be available later today on company's website at www.edcpub.com. Before turning to the prepared remarks, I 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 Educational Development Corporation's recent filings with the SEC for a more detailed discussion of the company's financial condition. With that, I would like to turn the call over to Craig White, the company's President and Chief Executive Officer.
Craig? Thank you, Alan, and welcome everyone to the call.
We appreciate your continued interest. I will start today's call with some general comments regarding the quarter. Then I will pass the call over to Dan to run through the financials, after which Heather will provide an update on sales and marketing and IT projects, and then I will provide an update on our plans for the rest of fiscal 2027. First, I would like to remind everyone that our second quarter is typically our softest quarter of the year, and our quarters cannot be analyzed sequentially. During the quarter, we saw progress in the execution of our turnaround strategy. This is most evident by a reduction in our sales decline. Over the past quarters, we have reported sales declines of 30% or more, and our forecasts have been for 35% down.
During the second quarter, our sales decline decreased to 11%. This shows that our strategies and turnaround plan is working. During the quarter, we were able to replenish some existing best-selling titles that were out of stock, as well as introduce several new titles, both energizing our sales force. The overall results for the quarter were driven by our lower revenue levels, offset by lower expenses. The focus of our fiscal 2027 turnaround plan remains on growing our revenue and Brand Partner levels back to pre-pandemic levels, and I'm happy with the progress we've made in the second quarter, which, as I said, is our softest period of the year. Heather will talk more about this progress in her marketing update. As I've said before, our turnaround plan is not an overnight change, but a carefully developed plan for growth over the next few quarters and years.
With that, I'll now turn the call over to Dan O'Keefe to provide a brief overview of the financials.
Dan? Thank you, Craig. Our fiscal 2027 second quarter results compared to the second quarter last year include net revenues were $4.1 million compared to $4.6 million, a decrease of approximately 11%.
Average active Brand Partners totaled 5,100 compared to 5,800 at the end of August 2025. Our average active Brand Partners increased from 4,300 at the end of February 2026 to 5,100 at the end of August 2026, an increase of approximately 19%. Our loss before income taxes were $1.6 million, compared to a loss in the second quarter last year of $1.8 million. Net loss totaled $1.6 million in the second quarter, compared to $1.3 million in the second quarter last year. Loss per share totaled $0.19 compared to a loss of $0.15 on a fully diluted basis. Now for an update on our working capital.
Inventory levels have decreased from $37.7 million at the beginning of the fiscal year to $34.9 million at the end of August, generating $2.8 million of cash flow from inventory reductions. Our cash balance decreased slightly from $1.3 million at the end of February 2026 to $1.1 million at the end of August. We had no borrowings under our $2 million line of credit during the quarter. I would also like to mention an unusual accounting adjustment that continues through the second quarter. Due to our historical losses and operational expectations during our turnaround period, we evaluated the need for a valuation allowance for our net deferred tax assets. Based on this evaluation, we continue to recognize a valuation adjustment offsetting the deferred tax asset and eliminating the tax benefit on our income statement.
This adjustment has no cash flow impact but had a direct impact on our tax expense, net earnings, and earnings per share. When the company shows sign of returning to profitability, this valuation adjustment will be reversed. The reversal will have no cash flow impact, but it will have a direct impact to our tax expense, net earnings, and earnings per share. That concludes the financial update. I'll now turn the call back over to Heather Cobb for a sales and marketing update.
Heather? Thanks, Dan. As Craig mentioned earlier, our second quarter is traditionally our slowest selling period.
As we entered June, our internal sales projections anticipated a decline of approximately 35% compared to the prior year, reflecting the trends we had seen in recent quarters. Instead, we finished the quarter with an overall revenue decline of approximately 11%, significantly outperforming those internal expectations. While we recognize there is still work ahead, we are encouraged by this progress, especially as several important initiatives began coming together during the quarter.
One of the most significant developments was the return of new product intros. In mid to late June, we released our first full group of new titles, and over the past several months, we have also replenished inventory for several of our best-selling titles and series. We have shared previously that new titles are an important sales driver for our business, and we believe the sales results we are seeing continue to reinforce that. Even more importantly, we are moving back toward a consistent release schedule with two main season and two mid-season product intros planned each year. This is an integral step forward because it creates a more predictable flow of new products and gives our Brand Partners and retail sales reps more opportunities to reconnect with customers, generate excitement, and drive repeat purchases throughout the year.
We are seeing encouraging activity within our EDC Pub retail division, where our retail partners continue to respond positively to our offerings across Kane Miller Books, Learning Wrap-Ups, and SmartLab Toys. We are receiving strong interest in sizable orders across these brands, reinforcing the demand we are seeing for our educational products. The response to our recently introduced new titles has been enthusiastic, and we are already seeing excitement surrounding additional releases planned for January from both Kane Miller and SmartLab Toys. As we return to a more consistent product intro schedule, we believe these offerings will create additional sales opportunities across both our sales channels. Alongside product availability, another key priority remains rebuilding and strengthening our PaperPie Brand Partner community.
During the quarter, we offered a special activation opportunity in June, along with a targeted summer sales event designed to encourage engagement, generate customer activity, and support our Brand Partners during a traditionally slower season. While our Brand Partner population remains below where it was a year ago, we are encouraged that we have grown from approximately 4,300 active Brand Partners at the beginning of the fiscal year to approximately 5,100 at the end of August. As Dan mentioned, that represents an increase of nearly 19% over the first six months of our fiscal year. We recognize that growing our Brand Partner community is only one part of the equation. Equally important is helping those Brand Partners become active, productive, and successful in building their businesses. We continue to focus on both growth and new customer acquisition because those two priorities are closely connected.
FULL TRANSCRIPT
Continue the full translated transcript in StockNow.
Log in to unlock every statement, the English original, and speaker-by-speaker history.
Log in for the full transcriptCall participants
5 people spoke on this call — only 2 are shown here.
PARTICIPANT LIST
View participant details in StockNow.
Log in to see executives and analysts, their roles, and complete speaking history.
Log in to view all participantsKeep exploring