Jon Isaac, CEO of Live Ventures Incorporated (LIVE), on First Quarter 2022 Earnings – Earnings Call Transcript

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Live Ventures Incorporated (NASDAQ: LIVE) First Quarter 2022 Earnings Conference Call February 10, 2022 5:00 p.m. ET

Participating companies

Jon Isaac – CEO

David Verret – CAD

Eric Althofer – COO

Conference call participants

Operator

Have a good day everyone. And welcome to today’s Live Ventures Incorporated earnings call. At this time, all participants are in listen-only mode. Later, you will have the opportunity to ask questions during the Q&A session. Please note that today’s call may be recorded. [Operator Instructions]

I now have the pleasure of handing over the conference to the CEO, Jon Isaac. Please continue.

Jon Isaac

Thank you, Operator. Good afternoon, everyone. Welcome to Live Ventures’ Q1 2022 Earnings Call. Joining me are two new members of our leadership team whom I am delighted to introduce to you today. Accounting Director, David Verret; and Chief Operating Officer Eric Althofer.

David joins us after working as Director of Accounting at Brink’s Home Security and brings extensive experience in public and private accounting. Eric joins us as COO and has diverse experience in strategy consulting, investment banking, mergers and acquisitions and private lending. I am delighted to have them join me today.

And I’m now going to turn it over to David to review our financial performance for the quarter.

David Verret

Thanks Jon. Good afternoon, everyone.

Please note that some of the statements we make today are forward-looking and are based on our best view of our business as we see it today. Earlier today, we filed our Form 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 Form 10-Q and other historical filings with the SEC.

Overall, the company delivered a strong performance in the first quarter of 2022, representing the three months ended December 31, 2021, with revenue for the quarter up 20.4% to $75.2 million, versus $62.5 million over the prior year period. Revenue growth was driven by growth in all of our segments. Retail segment revenue was $26.2 million, an increase of 17% over the prior year period. The increase is mainly 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 from $9.7 million in the same period a year earlier. Flooring segment revenues increased 8.8% to $32.9 million from $30.2 million in the prior year period. The increase in revenues and segments of Steel and Flooring is mainly due to inflationary price increases, as well as pent-up demand caused by the COVID pandemic in 2020 and the gradual reopening of the economy in 2021.

Finally, approximately $3.6 million of the revenue increase is due to Salomon Whitney becoming a consolidating variable interest entity in June 2021. Gross profit for the first quarter was 27, $6 million, compared to $22.3 million in the prior year period. The company’s gross margin percentage increased to 36.7% from 35.7% at the end of the prior year period. The increase in gross margin percentage is mainly due to the steel segment and the consolidation of Salomon Whitney in the first quarter of 2022.

Steel segment gross profit margin increased to 29.2% from 18.2% and the same period a year earlier. The increase is mainly attributable to fluctuations in the product mix and inflationary increases in selling prices. The increase in gross profit margin was partially offset by the retail segment. Retail gross profit margin decreased to 51.1% from 53.9% in the same period last year due to the mix of new and used inventory sales.

General administrative expenses increased 15.3% to $14.2 million from $12.3 million for the prior year period. General administrative expenses as a percentage of revenue decreased to 18.8% of revenue for the first quarter, compared to 19.7% for the same period last year.

Sales and marketing expenses were $3.1 million compared to $2.7 million in the prior year period. Sales and Marketing Percentage — Expenses as a percentage of revenue improved to 4.1% from 4.3% in the prior year period.

Operating profit was $10.4 million for the first quarter, an increase of $3.1 million or 42.7% over the corresponding period last year. First quarter net income increased 24% to $6.5 million from $5.3 million for the prior year period.

Internally, management has always used Adjusted EBITDA to assess the performance of our operating entities. Additionally, we believe it is an important metric that highlights the company’s value proposition to investors. Therefore, we will report Adjusted EBITDA in our documents going forward. A definition of Adjusted EBITDA has been provided in our earnings release and in Form 10-Q.

Adjusted EBITDA for the first quarter of 2022 increased 21.9% to $12.1 million from $9.9 million in the same period a year earlier. The increase is mainly attributable to the growth of the company’s turnover and the optimization of fixed costs. Basic earnings per common share for the first quarter were $4.14, compared to $3.45 for the prior year period.

On the liquidity side, we ended the quarter with $10 million in cash available under our various lines of credit of $28.8 million for a combined total liquidity of $38.8 million. Cash flow from operations for the first quarter was $4.2 million, compared to $7.7 million in the prior year period. The decrease is mainly due to the timing of inventory purchases, normal fluctuations and working capital.

The company’s working capital at the end of the first quarter was $42.5 million, compared to $33.8 million in the prior year period. Total assets increased by $7.2 million to $219 million in the first quarter of 2022 from $211.7 million as of September 30, 2021.

From a capital structure and strategy management perspective, we continued to optimize our balance sheet during the quarter, repaying our more expensive sell notes and term loans while utilizing equipment financing at low cost to improve liquidity and reduce the average cost of borrowing.

The company continues to invest in repurchasing its common stock as opportunities arise in the market. As of December 31, 2021, the company has repurchased 534,520 common shares under our buyback program. The company did not repurchase any common shares during the first quarter. However, we continue to seek common stock buyback opportunities under our program.

John, Eric and I will now take questions from those of you on the conference call.

Q&A session

Operator

Jon Isaac

Since there are no questions from everyone, we wish everyone a good day and we’ll see you when the next results are released. Thank you.

Operator

This concludes today’s program. Thank you for your participation. You can disconnect at any time and have a wonderful afternoon.

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