Live Ventures Q3 2023 Earnings Call Transcript

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August 10, 2023

There are 5 speakers on the call.

Operator

Good day, everyone, and welcome to today's Live Ventures Incorporated 2023 Third Quarter Earnings Call. At this time, all participants are in a listen only mode. Later, you will have the opportunity to ask questions during the question and answer session. Please note this call may be recorded. I'll be standing by if you just need any assistance.

Operator

It is now my pleasure to turn the conference over to Greg Powell, Director of Investor Relations. Please go ahead, sir.

Speaker 1

Thank you, Travis. Good afternoon, and welcome to the Live Ventures fiscal 2023 Q3 conference call. Joining us this afternoon for the call are John Isaac, our Chief Executive Officer and President David Barrett, our Chief Financial Officer and Eric Althofer, our Chief Operating Officer. Some of the statements we are 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 materially due to a number of factors, including those outlined in our latest Forms 10 ks and 10 Q filed with the Securities and Exchange Commission.

Speaker 1

We have no obligation to publicly update any forward looking statements after this call, Whether as a result of new information, future events, changes in assumptions or otherwise, you can find our press release and 10 Q referenced on this call in the Investor Relations section of the Live Ventures website. I direct you to our website, www.liveventures.comoresec.gov or our historical SEC filings. I will now turn the call over to David to walk us through our financial performance.

Speaker 2

Thank you, Greg, and good afternoon, everyone. Before jumping into the number, let's briefly discuss the Precision Metal Works acquisition. Subsequent to quarter end, we acquired Precision Metal Works, or what I'll refer to as PMW, for total consideration of 28,000,000 Adding approximately $75,000,000 of revenue per year, PMW manufactures and supplies highly engineered parts and components. We also offer world class metal forming, assembly and finishing solutions across diverse industries, including appliance, Automotive, hardware, electrical, electronic and medical products and devices. The acquisition of PMW is a source of great excitement

Operator

for us

Speaker 2

as it complements our current steel manufacturing operations and aligns perfectly with our long term buy, build, hold strategy. We see immense potential with this acquisition. Now I will discuss the financial results for our Q3. Total revenue for the Q3 increased 34.1% to $91,500,000 The increase is primarily attributable to the acquisitions of Flooring Liquidators and Kinetic, partially offset by decreased revenues in our other businesses as compared to the prior year period. Flooring manufacturing revenues $27,400,000 decreased by approximately $4,800,000 or 14.8 percent as compared to the prior year period, primarily due to reduced consumer demand.

Speaker 2

Retail and entertainment revenues of $18,000,000 decreased by approximately $1,200,000 or 6.3 percent as compared to the prior year. Revenues decreased due to reduced consumer demand. As we announced last quarter, we have a new segment, the Retail Flooring segment, which consists of Flooring Liquidators. Revenues for retail flooring were $27,400,000 for the 3rd quarter. Steel Manufacturing revenues of $18,400,000 increased by approximately $3,400,000 or 22.9 percent as compared to the prior year period, primarily due to the acquisition of Kinetic.

Speaker 2

Corporate And other segment revenues decreased by approximately $1,700,000 primarily due to decreased revenues at SW Financial, which was due to the shutdown of operations at SW Financial in the current quarter. As a result of the shutdown, we recorded loss in the disposition of SW Financial's assets and liabilities of approximately 1,700,000 In addition, we recognized a $1,000,000 gain related to the settlement agreement that we entered into in the 2nd quarter. Gross profit for the 3rd quarter was $32,200,000 up from $22,300,000 in the prior year period. Gross margin percentage for the company increased to 35.2% from 32.7% in the prior year period. The increase is primarily due to the addition of flooring liquidators in Kinetic, which have higher margins.

Speaker 2

General and administrative expenses of $23,200,000 increased $9,800,000 as compared to the prior year period. The increase is primarily due to the additions of Fluent Liquidators and Kinetic. Selling and marketing expenses increased 9 9% to approximately $3,400,000 as compared to the prior year. Operating income decreased 5.2% to $5,600,000 for the 3rd quarter as compared to $5,900,000 in the prior year period. The decrease in operating income is primarily attributable to lower revenues and higher costs in the retail entertainment, flooring manufacturing and corporate segments, partially offset by additions of Flowing Liquidators and Kinetic.

Speaker 2

3rd quarter interest expense increased approximately $2,800,000 as compared to the prior year period, primarily due to increased debt balances related to the acquisition of Flooring Liquidators and Kinetic. 3rd quarter net income was $1,100,000 and diluted EPS was $0.33 per share as compared to the with net income of $3,500,000 and diluted EPS of $1.11 in the prior year period. The decrease in net income is primarily attributable to lower operating margins and higher interest expense. Adjusted EBITDA for the 3rd quarter was $9,600,000 an increase of approximately $700,000 as compared to the prior year period. Turning to liquidity.

Speaker 2

We ended our Q3 with cash of $3,500,000 and cash availability under our various lines of Credit of $28,800,000 for combined total liquidity of $32,300,000 We had working capital of approximately $81,600,000 as of June 30, 2023, as compared to working capital of approximately $78,400,000 as of September 30, 2022. Total assets were $360,200,000 as of June 30, 2023, as compared to $278,600,000 as of September 30, 2022. Total stockholders' equity was $104,200,000 as compared to $97,100,000 as of September 30, 2022. As part of our capital allocation strategy, we may make share repurchases from time to time. We believe our stock repurchases represent long term value for our stockholders.

Speaker 2

As previously disclosed, the company announced a $10,000,000 common stock repurchase plan in 2018. During our Q3, we repurchased 3,702 shares of common stock at an average price of approximately $25.31 per share under this program. As of June 30, the company had approximately $3,300,000 available for repurchases under this program. In conclusion, we remain committed to creating long term value for our stockholders. To achieve this, we focus on strategic, well planned acquisitions and investments aligning with our growth objectives and generating sustainable returns.

Speaker 2

We believe that our financial strength and strategic focus Position us well to weather near term headwinds and emerge as a stronger, more resilient company in the long run. We We'll now take questions from those of you on the conference call. Operator, please open the line for questions.

Operator

Yes, we have a question from Theodore O'Neill, Bitchfield Hills Research.

Speaker 3

Thank you very much. Just a question on the Solomon and Whitney disposition. It seems like I ought to be able to net those two things together, the settlement and the loss, but you've got them broken out separately, so there must be a reason for that. Can you give us a little history of a little more information about the settlement's about?

Speaker 2

So just from an accounting standpoint, So the loss is just related to disposing of the asset, deconsolidating, and So that requires a separate line item then of the settlement gains. We provided some disclosures in our 10 Q related to the settlement. I guess what I'll say about the settlement agreement is that settlement agreement, we Basically, pursuant to the debt written agreement that we believe is in the best interest of Live and its shareholders that we shut that we Close the operations or wound down the operations of Solomon and Whitney. And according to that agreement, we are limited on what we can discuss. So really what I want to do is just refer you over to our disclosures in our 10 Q.

Speaker 3

Okay. I read the Q. I was just Looking for some

Speaker 2

explanation, but that's fine.

Speaker 4

Yes. If you look at the press release that we published and go down to adjusted EBITDA, You'll see a breakdown there and it'll say, Solomon, financial settlement gain and disposition, you'll see that in your competitive pretty easily. Yes.

Speaker 3

Yes. Okay. And you've sort of you talked about the flooring business and the retail business and having reduced customer demand. Is there anything idiosyncratic about that that's going on? Or is that just sort of a general economic

Speaker 2

situation? It's going to be more or less of general economic conditions. I mean, the only other thing I would add is during 2020 2021, there was a lot of There was a decent boost in revenues. A lot of people were getting home remodels and things like that. So Between that and just overall general economic conditions and what we're seeing is kind of right in line with our pure company.

Speaker 2

I would

Speaker 4

say, Theodore, if you went and looked at companies of similar that do what we do, look at Mohawk's Numbers will paint a very clear picture. And L. L. Flooring published their numbers yesterday. You will see that their Same store sales are down 20%.

Speaker 4

I think that we are outperforming the general market with this financing.

Speaker 3

Yes. Okay. Yes, that makes total sense. Everybody was Staying at home and doing remodeling or finding something else to get entertained at home and now we're all out and about. Yes.

Speaker 3

Okay. Those are my questions. Thank you.

Operator

Excellent. Thank you, Theodore. We have no further questions in the queue at this time. I'd now like to turn the call back over to today's speakers.

Speaker 2

Well, I want to thank everyone for attending the call today and we look forward to our next call for the year end. So thank

Operator

you. This does conclude today's program. Thank you for your participation. You may disconnect at any time.

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Earnings Conference Call
Live Ventures Q3 2023
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