NASDAQ:EDUC Educational Development Q2 2026 Earnings Report $1.61 +0.09 (+5.92%) Closing price 10/9/2025 04:00 PM EasternExtended Trading$1.58 -0.03 (-1.55%) As of 05:38 AM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. ProfileEarnings HistoryForecast Educational Development EPS ResultsActual EPS-$0.15Consensus EPS N/ABeat/MissN/AOne Year Ago EPSN/AEducational Development Revenue ResultsActual RevenueN/AExpected RevenueN/ABeat/MissN/AYoY Revenue GrowthN/AEducational Development Announcement DetailsQuarterQ2 2026Date10/9/2025TimeAfter Market ClosesConference Call DateThursday, October 9, 2025Conference Call Time4:30PM ETConference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by Educational Development Q2 2026 Earnings Call TranscriptProvided by QuartrOctober 9, 2025 ShareLink copied to clipboard.Key Takeaways Negative Sentiment: Net revenues fell to $4.6 million in Q2 from $6.5 million a year ago, and average active PaperPie brand partners declined to 5,800 from 13,900. Positive Sentiment: Losses before income taxes narrowed to $1.8 million versus $2.5 million last year, and net loss improved to $1.3 million, aided by $4 million in cash from inventory reductions. Negative Sentiment: Bank loan agreements expired on September 19, triggering a default notice and giving the lender rights to demand payment or liquidate collateral if the headquarters sale is delayed. Positive Sentiment: Sell-leaseback of the Hilty Complex is expected to close by November 25, 2025, at $32.2 million, which will pay off debt and free up financing options. Neutral Sentiment: Management plans phased product launches, mobile-first IT upgrades, and targeted marketing to attract Millennials and Gen Z and rebuild the brand partner base. AI Generated. May Contain Errors.Conference Call Audio Live Call not available Earnings Conference CallEducational Development Q2 202600:00 / 00:00Speed:1x1.25x1.5x2xTranscript SectionsPresentationParticipantsPresentationSkip to Participants Operator00:00:00Good 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 2026 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 2026 second quarter and year-to-date results. The release will be available later today on the 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. Operator00:01:27We 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, please go ahead. Craig WhitePresident and CEO at Educational Development Corporation00:01:49Thank you, Operator, 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, I will provide an update on our sales and marketing and end up the call with an update on our progress of the sell-leaseback of our headquarters, the Hilty Complex. During the second quarter, we experienced decreased sales compared to the prior year's second quarter. This was driven primarily by our reduced brand partner levels within our PaperPie division. Also, recent sale events, which offer our products at higher than normal discounts, have been short-term tactics used to generate cash and to reduce our borrowings. Craig WhitePresident and CEO at Educational Development Corporation00:02:36Over the past year, we have seen our brand partner levels decline due primarily to the challenging sales environment, with the fact that we have not introduced new titles that typically energize our sales force for roughly 18 months. We have developed a conservative phased approach to introducing new products for post-building sale close arriving later in the spring. Further, the direct sales industry, especially those within the product sector, have experienced a challenging period of sales. We are focusing our IT and marketing efforts toward increasing brand partner counts as opposed to only focusing on incoming cash. With this focused effort, we are targeting a new generation to the industry: young Millennials and older Gen Z. Recent studies have shown this age group is very receptive to this business model, but few have taken steps to join this industry. There is a great opportunity right now. Craig WhitePresident and CEO at Educational Development Corporation00:03:33We know they have very little patience for technology that is clunky or unnecessary. As a result, we are improving our technology to have a mobile-first impact and make it easier to do business with us, including our onboarding process. Next, I am encouraged with our continued focus on reducing our costs and improving our results by seeing lower losses, even on lower sales. The next big step towards profitability will be returning to revenue growth, which will be driven by adding brand partners, as mentioned before. With that, I will now turn the call over to Dan O'Keefe to provide a brief overview of the financials. Dan? Dan O'KeefeCFO at Educational Development Corporation00:04:13Thank you, Craig. Second quarter summary compared to the prior year's second quarter: net revenues were $4.6 million compared to $6.5 million. Average active PaperPie brand partners totaled 5,800 for the quarter compared to 13,900 in the second quarter last year. Losses before income taxes were $1.8 million compared to a loss of $2.5 million in the second quarter. Net loss totaled $1.3 million compared to a loss of $1.8 million, and loss per share totaled $0.15 compared to a loss of $0.22 on a fully diluted basis. Year-to-date summary compared to the prior year: net revenues were $11.7 million compared to $16.5 million. Our average active PaperPie brand partners totaled 6,800 compared to 13,700. Losses before income taxes totaled $3.2 million compared to $4.2 million, and net losses totaled $2.4 million compared to $3.1 million. Dan O'KeefeCFO at Educational Development Corporation00:05:20Our loss per share totaled $0.28 year to date compared to $0.37 on a fully diluted basis. Now for an update on our working capital and banking relationship. Inventory levels have decreased from $44.7 million at the beginning of fiscal year 2026 to $40.7 million at the end of August, generating $4 million in cash flow from inventory reductions. This cash flow has been used to pay down vendors, reduce bank debts, and to fund our operational losses. Our bank loan agreements expired on September 19, and the bank has indicated that they are not going to renew them at this time. Following the credit agreement expiration, we received a notice of default and reservation of rights from the bank, detailing their ability to demand payments, liquidate collateralized assets, and charge an additional default rate on our loans of 2%. Dan O'KeefeCFO at Educational Development Corporation00:06:16To date, the bank has not taken any of the rights outlined in the notice of default. Craig will discuss this further on in the call. That concludes the financial update, and I'll turn it over to Heather Cobb for a sales and marketing update. Heather. Heather CobbChief Sales and Marketing Officer at Educational Development Corporation00:06:33Thanks, Dan. During the second quarter, our sales and marketing efforts focused on engagement, recognition, and positioning the business for future growth. In June, we wrapped up our 2025 StoryMaker Summit event, a five-city training series that brought together brand partners and leaders from across the country. These regional summits happened in Dallas, Atlanta, Salt Lake City, Chicago, and Philadelphia, and offered hands-on training, leadership development, and inspiring keynote sessions from field experts. The feedback from attendees was incredibly positive, and the energy generated at those events will resonate throughout the field. These gatherings are a key investment in our people, helping brand partners feel equipped, supported, and connected, not only to our mission of gathering for good around literacy and learning, but also to other brand partners, leaders, and home office team members. Heather CobbChief Sales and Marketing Officer at Educational Development Corporation00:07:31In July, we celebrated our Storyscape incentive trips to Scotland, recognizing top-performing brand partners who achieved outstanding sales and leadership milestones. These incentive trips are an important part of our culture. They both reward hard work and dedication, and they also strengthen relationships and loyalty within our PaperPie community, which directly contributes to retention and sustained engagement across the field. As we moved into late summer and early fall, our focus shifted to the upcoming seasonal selling period, historically one of our strongest times of the year. The team has been executing targeted promotions and end-of-year campaigns to drive customer engagement and increase order activity, while also spending time in strategic planning for 2026. Those planning efforts include improving the brand partner experience, refining our sales programs, and aligning our product and promotional calendars to support growth in the coming year. Heather CobbChief Sales and Marketing Officer at Educational Development Corporation00:08:29On the retail side of our business, we continue to see steady performance, particularly in the specialty, toy, and gift markets. Our products remain well received, and our relationships with key retail partners continue to strengthen. This channel provides an important layer of consistency and diversification in our overall revenue base. While the broader selling environment remains challenging, we're encouraged by the enthusiasm and resilience of our brand partners, the strength of our retail partnership, and the groundwork that we are laying for 2026. Craig, back to you. Craig WhitePresident and CEO at Educational Development Corporation00:09:05Thank you, Heather and Dan. As Dan mentioned, we no longer have an active credit agreement with our bank, and our loans are currently in default status. The notice of default and reservation of rights is merely a formality and used to put pressure on us to complete the building sale. We have continued to make our monthly interest and principal payments, and our working capital is sufficient to meet our ongoing needs until the sale is completed. The bank understands that the sale of the building will pay off their loan balances, and they support this direction. We expect the sale to be completed prior to the allotted close period deadline of November 25, 2025, and our brokers are targeting an earlier close date. We continue to develop options for financing post-building sale close. Craig WhitePresident and CEO at Educational Development Corporation00:09:51This will be resolved shortly, and we can get back to focusing on growing our business. Lastly, I want to thank all of our shareholders for their patience, our employees for their commitment to our mission, and our customers and brand partners for their loyalty during this difficult period. I'm confident in our collective ability to emerge stronger and more resilient than ever before. Now that we've provided a summary of some recent activity, I'll now turn the call back over to the Operator for questions and answers. Operator? Operator00:10:22Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Paul Carter of Capstone Asset Management. Your line is already open. Paul CarterChief Investment Officer at Capstone Asset Management00:11:06Good afternoon, everyone. First of all, on the real estate, can you confirm, is the buyer group related to Tenmark Holdings in Encino, California, who have quite a bit of real estate holdings in Oklahoma City and Tulsa? Craig WhitePresident and CEO at Educational Development Corporation00:11:26Yes, they are. Yes, as you, it sounds like you've researched, they have a great deal of real estate in the Oklahoma market. They understand the area, they understand the environment. We're very pleased. Paul CarterChief Investment Officer at Capstone Asset Management00:11:41How much was the earnest money that you now are entitled to? Craig WhitePresident and CEO at Educational Development Corporation00:11:48It's $100,000, and I think it probably stays in escrow till closing. Paul CarterChief Investment Officer at Capstone Asset Management00:11:52Okay. Do you know yet sort of how much you're going to net from the property sale in November after commissions and any other costs? Craig WhitePresident and CEO at Educational Development Corporation00:12:08We do. There are several things that need to probably shake out, but we're going to come out with enough to kind of get us started on our plan. Do you want to add anything to that? Paul CarterChief Investment Officer at Capstone Asset Management00:12:20Okay, that's good. Dan O'KeefeCFO at Educational Development Corporation00:12:22We'll have a little bit left over to get us started. Paul CarterChief Investment Officer at Capstone Asset Management00:12:28Okay, I know you're probably tired of thinking about the real estate sale, but on this one, it seems a little bit more encouraging than maybe some of the other tentative transactions that you entered into. How confident would you say that this one will actually close at the $32.2 million level? Craig WhitePresident and CEO at Educational Development Corporation00:12:53Very high degree, very, very confident. There are third parties that know this buyer, and since they know the area so well, we are very confident it's going to close. Paul CarterChief Investment Officer at Capstone Asset Management00:13:04Okay, great. I know once you pay off the debt, you mentioned that you're looking at having some sort of credit line with a different party. I guess, number one, how close are you to establishing that? Number two, do you have an idea of how much flexibility you want there? Is it going to be a fairly small, like, you know, $2 million or $3 million, or is it going to be closer to $10 million? What's your thoughts there? Craig WhitePresident and CEO at Educational Development Corporation00:13:35Yeah, we're developing several options. Honestly, most of the banks are kind of waiting to see that this sale does close. We're looking at some alternate forms of financing, which are not necessarily tied to the building close, so we're just kind of developing several options, but it's going to be very conservative. We're going to start with a smaller 3%-5% number. Paul CarterChief Investment Officer at Capstone Asset Management00:13:59Okay. I know, obviously, your brand partner count has been coming down most quarters, and you're trying to keep up by cutting costs. I guess maybe just in the last couple of quarters, what is it that you, what costs have you cut out of the business and what is left to cut? At a brand partner count of 5,800, understanding you want that to grow from here, at that level, is it possible to get to accounting profitability or are there still cuts that could be made to get there or do you need that number to come back up somewhat? Dan O'KeefeCFO at Educational Development Corporation00:14:47That's a good question, Paul. It's been several years since we've been at this kind of level with brand partner numbers. Some of the biggest impacts to our P&L, interest expense is a big one. That's going to be negligible. That's the number one and biggest item. After that, discounts are actually the next biggest impact to our P&L. We've done some aggressive discounting with some of the sales, as Craig mentioned earlier, that are not in our normal business model. Those two items will have the biggest impact. There are some smaller items that we're always looking to improve on. We do have excess inventory. We do have additional outside warehouse rental space that is about $1 million a year by itself. Working down the excess inventory, exiting these short-term storage facilities will be another big impact on a, we're talking about big numbers, right? Big changes. Dan O'KeefeCFO at Educational Development Corporation00:15:59We're always looking, we've got two or three cost savings initiatives ongoing right now that are in the $50,000-$100,000 ranges. Paul CarterChief Investment Officer at Capstone Asset Management00:16:12Okay. And then, I know this is hard to kind of figure out exactly, but your brand partner count has obviously been decimated the last few years. There are a lot of different reasons for that. Some are related, some unrelated to you, the economy, inflation, and all that. How much of that decline do you figure is because of your inability to sort of energize the sales force through new titles? A different way of asking, I guess, would be once you get out from under the bank and you're able to start buying some new titles, can we expect, and do you expect, an immediate turnaround in that number from 5,800 back up to closer to the 10,000 level? I know there are other factors still at play, but can you give a little bit of sense for what your expectations are there? Heather CobbChief Sales and Marketing Officer at Educational Development Corporation00:17:19Sure, Paul. That's a great question. I think that the thing to remember is that, as you stated at the end, there's a number of factors. Being able to introduce new titles is definitely a big one. There are other things that, as we alluded to, we are working on for the end of calendar year, as well as into 2026, initiatives and programs, updates, and different things like that. We think that the all total of all of those is what will eventually result in those numbers turning around. I don't think it's a matter of your words of, like, you know, new titles are introduced and all of a sudden that number doubles. Heather CobbChief Sales and Marketing Officer at Educational Development Corporation00:18:06I think all of the quote-unquote "red flags" that we've been throwing up of not introducing new titles, not reordering some of our bestsellers, and different things like that, as each of those become green flags, we'll definitely see those numbers continue to rise. Craig WhitePresident and CEO at Educational Development Corporation00:18:22Yeah, let me just add on to that a bit, Paul. I think with the new titles, it would definitely stem the loss of brand partners. With some of our marketing and IT efforts, we'll attract again more brand partners or maybe reactivate ones that left when they were frustrated with our lack of new titles. There's a lot around new titles, but we're doing everything we can. It's our major focus to increase that. Paul CarterChief Investment Officer at Capstone Asset Management00:18:54Okay, great. Just last question from me, and this might sound like a dumb question considering you just received a notice of default on your credit agreement, but assuming everything goes according to plan with the real estate sale, and you kind of reinvigorate the business a little bit from new titles and whatnot. I know the original plan was to, once you got out from underneath the bank, that you would be generating positive cash flow just from working down the excess inventory and then reinstate the quarterly dividend that you haven't had in place for a few years now. Is that still the plan? If so, have you decided what that dividend might possibly look like, three or six months down the road? Craig WhitePresident and CEO at Educational Development Corporation00:19:46Easy there, killer. Let us get out from under this and get this thing turned around to where it makes sense. Yeah, definitely. I mean, we'd like to say some of these things will happen immediately, but that's just probably not realistic. I mean, it's going to take us some time to increase headcount, increase sales, all those things. It's definitely the goal. I wouldn't see it for a quarter or two at least. Paul CarterChief Investment Officer at Capstone Asset Management00:20:13Fair enough. That's fair. Okay, great. Listen, thanks very much for taking all my questions, and I'll get back in the queue. Craig WhitePresident and CEO at Educational Development Corporation00:20:21Yeah, I appreciate you, Paul. Operator00:20:25Your next question comes from Alexander Smithley of Mitchell-DeClerck. Your line is already open. Alexander SmithleyAttorney at Law and Associate at Mitchell-DeClerck00:20:37Hi guys, this is Alex here. I just had two questions, so not quite the gauntlet Paul just had for you, and they're fairly simple. The first one that I have is, I know that the notice of default is merely a formality likely, but you mentioned there were a couple like rights they had towards collateralized items. What items are collateralized, if any? Dan O'KeefeCFO at Educational Development Corporation00:21:03Our bank agreement cross-collateralizes all of our assets. That includes the building, AR, inventory, equipment, and land. Alexander SmithleyAttorney at Law and Associate at Mitchell-DeClerck00:21:15Okay, sorry about that. Dan O'KeefeCFO at Educational Development Corporation00:21:18No problem. All of those will be released when we sell the building and pay them off. We'll be left with AR, inventory, excess land, and our equipment. Alexander SmithleyAttorney at Law and Associate at Mitchell-DeClerck00:21:30Okay, yep, that makes sense. My last question is, I was also following along with the brand partner numbers, and you mentioned that you were going to do some sort of marketing. What sort of plans do you have for actually increasing the brand partner count? Is it going to be some sort of technological ad campaign or something like that? Heather CobbChief Sales and Marketing Officer at Educational Development Corporation00:21:51Yeah, good question, Alex. It's a multi-pronged approach because the way that our business is structured, that brand partners recruit new brand partners, we basically take a top-down approach that we provide them with various different tools and assets and different things like that that enable them to go out and find the next brand partner and the next person who is going to want to sell our products. Having said that, as I mentioned in response to Paul's question about new titles, that will definitely generate interest and garner a lot of attention on its own. We do have some enterprise IT and marketing initiatives that we also believe will definitely attract quite a bit of attention. Heather CobbChief Sales and Marketing Officer at Educational Development Corporation00:22:44That specific audience that Craig referred to of the younger Millennials and older Gen Zs, which are the new parents having babies, raising toddlers, and different things like that right now, are just the perfect audience for what we have to offer. Alexander SmithleyAttorney at Law and Associate at Mitchell-DeClerck00:23:03Thank you. Thank you. That's all for me. Heather CobbChief Sales and Marketing Officer at Educational Development Corporation00:23:06Absolutely. Thank you. Operator00:23:11Ladies and gentlemen, as a reminder, if you have a question, please press star one. There are no further questions at this time. I would hand over the call to Craig White for closing remarks. Please go ahead. Craig WhitePresident and CEO at Educational Development Corporation00:23:32Thank you. Thanks, everyone, for joining us on our call today. We appreciate your continued support and expect to provide an additional update on the Hilty Complex sale progress prior to our next scheduled earnings call. As always, you can reach out if you have further questions to me, and I'd be happy to answer them. Have a great day, and we'll talk to you again sometime in the next few months. Thanks. Operator00:23:58Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.Read moreParticipantsExecutivesHeather CobbChief Sales and Marketing OfficerDan O'KeefeCFOCraig WhitePresident and CEOAnalystsAlexander SmithleyAttorney at Law and Associate at Mitchell-DeClerckPaul CarterChief Investment Officer at Capstone Asset ManagementPowered by Earnings DocumentsEarnings Release(8-K)Quarterly Report(10-Q) Educational Development Earnings HeadlinesEducational Development Corporation Reports Q2 Fiscal 2026 ResultsOctober 9 at 12:30 AM | tipranks.comEducational Development Corporation (EDUC) Q2 2026 Earnings Call TranscriptOctober 9 at 7:02 PM | seekingalpha.comURGENT: The Market's 3 Red Flags Are FlashingHere’s the uncomfortable truth: The smartest investors in the world are already preparing for a crash before 2025 ends. | StockEarnings (Ad)‘It’s extortion’: Brown faculty resist White House bid to reshape higher educationOctober 9 at 5:57 PM | bostonglobe.comBAdult education programs face federal funding cuts; advocates lobby lawmakers for helpOctober 9 at 5:57 PM | msn.comEducational Development Reports Q2 2026 Financial ResultsOctober 9 at 4:50 PM | tipranks.comSee More Educational Development Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Educational Development? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Educational Development and other key companies, straight to your email. Email Address About Educational DevelopmentEducational Development (NASDAQ:EDUC), through its subsidiaries, engages in the direct marketing and digital retailing of educational and inspirational reading materials, including books, Bibles, devotionals, and related gift items. The company’s product portfolio extends to children’s literature, music, and home décor, targeting consumers in the faith-based and human-interest segments. Products are sold under proprietary brands across multiple online and catalog platforms. Central to the company’s operations are its e-commerce websites and print catalogs, which support both retail and wholesale distribution channels. Educational Development Corporation’s digital platforms feature search, recommendation, and fulfillment capabilities designed to enhance the customer experience. The company employs targeted marketing and data analytics to drive sales, manage inventory, and expand its product offerings in response to emerging trends in specialty publishing and gift markets. Headquartered in Sellersburg, Indiana, and incorporated in Delaware, Educational Development Corporation primarily serves customers throughout the United States via its direct-to-consumer model. The company has adapted to the shift from traditional print to digital commerce by focusing on operational efficiency and supply chain optimization. As it continues to refine its e-commerce strategies and broaden its product portfolio, Educational Development Corporation seeks to reinforce its standing in the specialty retail market for faith-based and inspirational products.View Educational Development ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Tesla Earnings Loom: Bulls Eye $600, Bears Warn of $300Spotify Could Surge Higher—Here’s the Hidden Earnings SignalBerkshire-Backed Lennar Slides After Weak Q3 EarningsWall Street Eyes +30% Upside in Synopsys After Huge Earnings FallRH Stock Slides After Mixed Earnings and Tariff ConcernsCelsius Stock Surges After Blowout Earnings and Pepsi DealWhy DocuSign Could Be a SaaS Value Play After Q2 Earnings Upcoming Earnings Fastenal (10/13/2025)Wells Fargo & Company (10/14/2025)Citigroup (10/14/2025)Johnson & Johnson (10/14/2025)JPMorgan Chase & Co. 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PresentationSkip to Participants Operator00:00:00Good 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 2026 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 2026 second quarter and year-to-date results. The release will be available later today on the 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. Operator00:01:27We 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, please go ahead. Craig WhitePresident and CEO at Educational Development Corporation00:01:49Thank you, Operator, 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, I will provide an update on our sales and marketing and end up the call with an update on our progress of the sell-leaseback of our headquarters, the Hilty Complex. During the second quarter, we experienced decreased sales compared to the prior year's second quarter. This was driven primarily by our reduced brand partner levels within our PaperPie division. Also, recent sale events, which offer our products at higher than normal discounts, have been short-term tactics used to generate cash and to reduce our borrowings. Craig WhitePresident and CEO at Educational Development Corporation00:02:36Over the past year, we have seen our brand partner levels decline due primarily to the challenging sales environment, with the fact that we have not introduced new titles that typically energize our sales force for roughly 18 months. We have developed a conservative phased approach to introducing new products for post-building sale close arriving later in the spring. Further, the direct sales industry, especially those within the product sector, have experienced a challenging period of sales. We are focusing our IT and marketing efforts toward increasing brand partner counts as opposed to only focusing on incoming cash. With this focused effort, we are targeting a new generation to the industry: young Millennials and older Gen Z. Recent studies have shown this age group is very receptive to this business model, but few have taken steps to join this industry. There is a great opportunity right now. Craig WhitePresident and CEO at Educational Development Corporation00:03:33We know they have very little patience for technology that is clunky or unnecessary. As a result, we are improving our technology to have a mobile-first impact and make it easier to do business with us, including our onboarding process. Next, I am encouraged with our continued focus on reducing our costs and improving our results by seeing lower losses, even on lower sales. The next big step towards profitability will be returning to revenue growth, which will be driven by adding brand partners, as mentioned before. With that, I will now turn the call over to Dan O'Keefe to provide a brief overview of the financials. Dan? Dan O'KeefeCFO at Educational Development Corporation00:04:13Thank you, Craig. Second quarter summary compared to the prior year's second quarter: net revenues were $4.6 million compared to $6.5 million. Average active PaperPie brand partners totaled 5,800 for the quarter compared to 13,900 in the second quarter last year. Losses before income taxes were $1.8 million compared to a loss of $2.5 million in the second quarter. Net loss totaled $1.3 million compared to a loss of $1.8 million, and loss per share totaled $0.15 compared to a loss of $0.22 on a fully diluted basis. Year-to-date summary compared to the prior year: net revenues were $11.7 million compared to $16.5 million. Our average active PaperPie brand partners totaled 6,800 compared to 13,700. Losses before income taxes totaled $3.2 million compared to $4.2 million, and net losses totaled $2.4 million compared to $3.1 million. Dan O'KeefeCFO at Educational Development Corporation00:05:20Our loss per share totaled $0.28 year to date compared to $0.37 on a fully diluted basis. Now for an update on our working capital and banking relationship. Inventory levels have decreased from $44.7 million at the beginning of fiscal year 2026 to $40.7 million at the end of August, generating $4 million in cash flow from inventory reductions. This cash flow has been used to pay down vendors, reduce bank debts, and to fund our operational losses. Our bank loan agreements expired on September 19, and the bank has indicated that they are not going to renew them at this time. Following the credit agreement expiration, we received a notice of default and reservation of rights from the bank, detailing their ability to demand payments, liquidate collateralized assets, and charge an additional default rate on our loans of 2%. Dan O'KeefeCFO at Educational Development Corporation00:06:16To date, the bank has not taken any of the rights outlined in the notice of default. Craig will discuss this further on in the call. That concludes the financial update, and I'll turn it over to Heather Cobb for a sales and marketing update. Heather. Heather CobbChief Sales and Marketing Officer at Educational Development Corporation00:06:33Thanks, Dan. During the second quarter, our sales and marketing efforts focused on engagement, recognition, and positioning the business for future growth. In June, we wrapped up our 2025 StoryMaker Summit event, a five-city training series that brought together brand partners and leaders from across the country. These regional summits happened in Dallas, Atlanta, Salt Lake City, Chicago, and Philadelphia, and offered hands-on training, leadership development, and inspiring keynote sessions from field experts. The feedback from attendees was incredibly positive, and the energy generated at those events will resonate throughout the field. These gatherings are a key investment in our people, helping brand partners feel equipped, supported, and connected, not only to our mission of gathering for good around literacy and learning, but also to other brand partners, leaders, and home office team members. Heather CobbChief Sales and Marketing Officer at Educational Development Corporation00:07:31In July, we celebrated our Storyscape incentive trips to Scotland, recognizing top-performing brand partners who achieved outstanding sales and leadership milestones. These incentive trips are an important part of our culture. They both reward hard work and dedication, and they also strengthen relationships and loyalty within our PaperPie community, which directly contributes to retention and sustained engagement across the field. As we moved into late summer and early fall, our focus shifted to the upcoming seasonal selling period, historically one of our strongest times of the year. The team has been executing targeted promotions and end-of-year campaigns to drive customer engagement and increase order activity, while also spending time in strategic planning for 2026. Those planning efforts include improving the brand partner experience, refining our sales programs, and aligning our product and promotional calendars to support growth in the coming year. Heather CobbChief Sales and Marketing Officer at Educational Development Corporation00:08:29On the retail side of our business, we continue to see steady performance, particularly in the specialty, toy, and gift markets. Our products remain well received, and our relationships with key retail partners continue to strengthen. This channel provides an important layer of consistency and diversification in our overall revenue base. While the broader selling environment remains challenging, we're encouraged by the enthusiasm and resilience of our brand partners, the strength of our retail partnership, and the groundwork that we are laying for 2026. Craig, back to you. Craig WhitePresident and CEO at Educational Development Corporation00:09:05Thank you, Heather and Dan. As Dan mentioned, we no longer have an active credit agreement with our bank, and our loans are currently in default status. The notice of default and reservation of rights is merely a formality and used to put pressure on us to complete the building sale. We have continued to make our monthly interest and principal payments, and our working capital is sufficient to meet our ongoing needs until the sale is completed. The bank understands that the sale of the building will pay off their loan balances, and they support this direction. We expect the sale to be completed prior to the allotted close period deadline of November 25, 2025, and our brokers are targeting an earlier close date. We continue to develop options for financing post-building sale close. Craig WhitePresident and CEO at Educational Development Corporation00:09:51This will be resolved shortly, and we can get back to focusing on growing our business. Lastly, I want to thank all of our shareholders for their patience, our employees for their commitment to our mission, and our customers and brand partners for their loyalty during this difficult period. I'm confident in our collective ability to emerge stronger and more resilient than ever before. Now that we've provided a summary of some recent activity, I'll now turn the call back over to the Operator for questions and answers. Operator? Operator00:10:22Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Paul Carter of Capstone Asset Management. Your line is already open. Paul CarterChief Investment Officer at Capstone Asset Management00:11:06Good afternoon, everyone. First of all, on the real estate, can you confirm, is the buyer group related to Tenmark Holdings in Encino, California, who have quite a bit of real estate holdings in Oklahoma City and Tulsa? Craig WhitePresident and CEO at Educational Development Corporation00:11:26Yes, they are. Yes, as you, it sounds like you've researched, they have a great deal of real estate in the Oklahoma market. They understand the area, they understand the environment. We're very pleased. Paul CarterChief Investment Officer at Capstone Asset Management00:11:41How much was the earnest money that you now are entitled to? Craig WhitePresident and CEO at Educational Development Corporation00:11:48It's $100,000, and I think it probably stays in escrow till closing. Paul CarterChief Investment Officer at Capstone Asset Management00:11:52Okay. Do you know yet sort of how much you're going to net from the property sale in November after commissions and any other costs? Craig WhitePresident and CEO at Educational Development Corporation00:12:08We do. There are several things that need to probably shake out, but we're going to come out with enough to kind of get us started on our plan. Do you want to add anything to that? Paul CarterChief Investment Officer at Capstone Asset Management00:12:20Okay, that's good. Dan O'KeefeCFO at Educational Development Corporation00:12:22We'll have a little bit left over to get us started. Paul CarterChief Investment Officer at Capstone Asset Management00:12:28Okay, I know you're probably tired of thinking about the real estate sale, but on this one, it seems a little bit more encouraging than maybe some of the other tentative transactions that you entered into. How confident would you say that this one will actually close at the $32.2 million level? Craig WhitePresident and CEO at Educational Development Corporation00:12:53Very high degree, very, very confident. There are third parties that know this buyer, and since they know the area so well, we are very confident it's going to close. Paul CarterChief Investment Officer at Capstone Asset Management00:13:04Okay, great. I know once you pay off the debt, you mentioned that you're looking at having some sort of credit line with a different party. I guess, number one, how close are you to establishing that? Number two, do you have an idea of how much flexibility you want there? Is it going to be a fairly small, like, you know, $2 million or $3 million, or is it going to be closer to $10 million? What's your thoughts there? Craig WhitePresident and CEO at Educational Development Corporation00:13:35Yeah, we're developing several options. Honestly, most of the banks are kind of waiting to see that this sale does close. We're looking at some alternate forms of financing, which are not necessarily tied to the building close, so we're just kind of developing several options, but it's going to be very conservative. We're going to start with a smaller 3%-5% number. Paul CarterChief Investment Officer at Capstone Asset Management00:13:59Okay. I know, obviously, your brand partner count has been coming down most quarters, and you're trying to keep up by cutting costs. I guess maybe just in the last couple of quarters, what is it that you, what costs have you cut out of the business and what is left to cut? At a brand partner count of 5,800, understanding you want that to grow from here, at that level, is it possible to get to accounting profitability or are there still cuts that could be made to get there or do you need that number to come back up somewhat? Dan O'KeefeCFO at Educational Development Corporation00:14:47That's a good question, Paul. It's been several years since we've been at this kind of level with brand partner numbers. Some of the biggest impacts to our P&L, interest expense is a big one. That's going to be negligible. That's the number one and biggest item. After that, discounts are actually the next biggest impact to our P&L. We've done some aggressive discounting with some of the sales, as Craig mentioned earlier, that are not in our normal business model. Those two items will have the biggest impact. There are some smaller items that we're always looking to improve on. We do have excess inventory. We do have additional outside warehouse rental space that is about $1 million a year by itself. Working down the excess inventory, exiting these short-term storage facilities will be another big impact on a, we're talking about big numbers, right? Big changes. Dan O'KeefeCFO at Educational Development Corporation00:15:59We're always looking, we've got two or three cost savings initiatives ongoing right now that are in the $50,000-$100,000 ranges. Paul CarterChief Investment Officer at Capstone Asset Management00:16:12Okay. And then, I know this is hard to kind of figure out exactly, but your brand partner count has obviously been decimated the last few years. There are a lot of different reasons for that. Some are related, some unrelated to you, the economy, inflation, and all that. How much of that decline do you figure is because of your inability to sort of energize the sales force through new titles? A different way of asking, I guess, would be once you get out from under the bank and you're able to start buying some new titles, can we expect, and do you expect, an immediate turnaround in that number from 5,800 back up to closer to the 10,000 level? I know there are other factors still at play, but can you give a little bit of sense for what your expectations are there? Heather CobbChief Sales and Marketing Officer at Educational Development Corporation00:17:19Sure, Paul. That's a great question. I think that the thing to remember is that, as you stated at the end, there's a number of factors. Being able to introduce new titles is definitely a big one. There are other things that, as we alluded to, we are working on for the end of calendar year, as well as into 2026, initiatives and programs, updates, and different things like that. We think that the all total of all of those is what will eventually result in those numbers turning around. I don't think it's a matter of your words of, like, you know, new titles are introduced and all of a sudden that number doubles. Heather CobbChief Sales and Marketing Officer at Educational Development Corporation00:18:06I think all of the quote-unquote "red flags" that we've been throwing up of not introducing new titles, not reordering some of our bestsellers, and different things like that, as each of those become green flags, we'll definitely see those numbers continue to rise. Craig WhitePresident and CEO at Educational Development Corporation00:18:22Yeah, let me just add on to that a bit, Paul. I think with the new titles, it would definitely stem the loss of brand partners. With some of our marketing and IT efforts, we'll attract again more brand partners or maybe reactivate ones that left when they were frustrated with our lack of new titles. There's a lot around new titles, but we're doing everything we can. It's our major focus to increase that. Paul CarterChief Investment Officer at Capstone Asset Management00:18:54Okay, great. Just last question from me, and this might sound like a dumb question considering you just received a notice of default on your credit agreement, but assuming everything goes according to plan with the real estate sale, and you kind of reinvigorate the business a little bit from new titles and whatnot. I know the original plan was to, once you got out from underneath the bank, that you would be generating positive cash flow just from working down the excess inventory and then reinstate the quarterly dividend that you haven't had in place for a few years now. Is that still the plan? If so, have you decided what that dividend might possibly look like, three or six months down the road? Craig WhitePresident and CEO at Educational Development Corporation00:19:46Easy there, killer. Let us get out from under this and get this thing turned around to where it makes sense. Yeah, definitely. I mean, we'd like to say some of these things will happen immediately, but that's just probably not realistic. I mean, it's going to take us some time to increase headcount, increase sales, all those things. It's definitely the goal. I wouldn't see it for a quarter or two at least. Paul CarterChief Investment Officer at Capstone Asset Management00:20:13Fair enough. That's fair. Okay, great. Listen, thanks very much for taking all my questions, and I'll get back in the queue. Craig WhitePresident and CEO at Educational Development Corporation00:20:21Yeah, I appreciate you, Paul. Operator00:20:25Your next question comes from Alexander Smithley of Mitchell-DeClerck. Your line is already open. Alexander SmithleyAttorney at Law and Associate at Mitchell-DeClerck00:20:37Hi guys, this is Alex here. I just had two questions, so not quite the gauntlet Paul just had for you, and they're fairly simple. The first one that I have is, I know that the notice of default is merely a formality likely, but you mentioned there were a couple like rights they had towards collateralized items. What items are collateralized, if any? Dan O'KeefeCFO at Educational Development Corporation00:21:03Our bank agreement cross-collateralizes all of our assets. That includes the building, AR, inventory, equipment, and land. Alexander SmithleyAttorney at Law and Associate at Mitchell-DeClerck00:21:15Okay, sorry about that. Dan O'KeefeCFO at Educational Development Corporation00:21:18No problem. All of those will be released when we sell the building and pay them off. We'll be left with AR, inventory, excess land, and our equipment. Alexander SmithleyAttorney at Law and Associate at Mitchell-DeClerck00:21:30Okay, yep, that makes sense. My last question is, I was also following along with the brand partner numbers, and you mentioned that you were going to do some sort of marketing. What sort of plans do you have for actually increasing the brand partner count? Is it going to be some sort of technological ad campaign or something like that? Heather CobbChief Sales and Marketing Officer at Educational Development Corporation00:21:51Yeah, good question, Alex. It's a multi-pronged approach because the way that our business is structured, that brand partners recruit new brand partners, we basically take a top-down approach that we provide them with various different tools and assets and different things like that that enable them to go out and find the next brand partner and the next person who is going to want to sell our products. Having said that, as I mentioned in response to Paul's question about new titles, that will definitely generate interest and garner a lot of attention on its own. We do have some enterprise IT and marketing initiatives that we also believe will definitely attract quite a bit of attention. Heather CobbChief Sales and Marketing Officer at Educational Development Corporation00:22:44That specific audience that Craig referred to of the younger Millennials and older Gen Zs, which are the new parents having babies, raising toddlers, and different things like that right now, are just the perfect audience for what we have to offer. Alexander SmithleyAttorney at Law and Associate at Mitchell-DeClerck00:23:03Thank you. Thank you. That's all for me. Heather CobbChief Sales and Marketing Officer at Educational Development Corporation00:23:06Absolutely. Thank you. Operator00:23:11Ladies and gentlemen, as a reminder, if you have a question, please press star one. There are no further questions at this time. I would hand over the call to Craig White for closing remarks. Please go ahead. Craig WhitePresident and CEO at Educational Development Corporation00:23:32Thank you. Thanks, everyone, for joining us on our call today. We appreciate your continued support and expect to provide an additional update on the Hilty Complex sale progress prior to our next scheduled earnings call. As always, you can reach out if you have further questions to me, and I'd be happy to answer them. Have a great day, and we'll talk to you again sometime in the next few months. Thanks. Operator00:23:58Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.Read moreParticipantsExecutivesHeather CobbChief Sales and Marketing OfficerDan O'KeefeCFOCraig WhitePresident and CEOAnalystsAlexander SmithleyAttorney at Law and Associate at Mitchell-DeClerckPaul CarterChief Investment Officer at Capstone Asset ManagementPowered by