Live Ventures - Earnings Call - Q1 2025

Executive Summary

• Q1 FY2025 revenue declined 5.2% year over year to $111.5M, as flooring and steel faced softer demand; gross margin improved 80 bps to 31.7% on mix benefits in Retail-Entertainment and Steel.
• Net income was $0.5M ($0.16 diluted EPS) vs. a loss of $0.7M in the prior year, driven by non-recurring gains: $2.8M earnout settlement (PMW) and $0.7M seller note settlement; adjusted EBITDA fell 33.9% to $5.7M on lower operating income.
• Segment performance bifurcated: Retail-Entertainment and Steel posted higher operating income and margins YoY, while Retail-Flooring and Flooring Manufacturing were pressured by reduced demand and mix; management is implementing efficiency measures in flooring.
• No formal guidance was provided; management cited ongoing cost actions and remained confident in the long-term strategy. Street consensus from S&P Global was unavailable at the time of this analysis, so no vs-estimates comparison could be made.

What Went Well and What Went Wrong

• What Went Well

  • Retail-Entertainment: revenue +3.3% to $21.3M; operating income +8.4% to $3.4M; segment gross margin 56.6% (+60 bps) on higher used product mix.
  • Steel Manufacturing: gross margin expanded to 18.3% from 15.8% on price actions and Central Steel acquisition; operating income +18.7% YoY to $1.2M.
  • Management tone: “pleased with the operating improvements achieved in our Retail-Entertainment and Steel Manufacturing segments” (CEO Jon Isaac).

• What Went Wrong

  • Retail-Flooring: revenue -7.5% to $31.7M; swung to an operating loss of $2.2M vs. $0.1M profit prior year on reduced demand and higher wages/G&A; gross margin fell 80 bps to 37.2% on mix.
  • Flooring Manufacturing: revenue -11.1% to $26.0M; operating income turned to a slight loss; gross margin 21.2% (-80 bps) on mix and demand softness.
  • Consolidated profitability: operating income fell to $0.8M from $3.5M; adjusted EBITDA down 33.9%, reflecting lower operating income despite improved gross margin rate.

Transcript

Operator (participant)

Welcome to the Live Ventures FY 2025 First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. I would now like to turn the call over to Greg Powell, Director of Investor Relations. Please go ahead, sir.

Greg Powell (Director of Investor Relations)

Thank you, Jen. Good afternoon, and welcome to the Live Ventures First Quarter Fiscal Year 2025 Conference Call. Joining us this afternoon is David Verret, our Chief Financial 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-K and 10-Q, as filed with the Securities and Exchange Commission. We have no obligation to publicly update any forward-looking statements after this call, whether as a result of any new information, future events, changes in assumptions, or otherwise. You can find our press release that we referenced on this call today in the Investor Relations section of the Live Ventures website.

I will direct you to our website, liveventures.com or sec.gov, for our historical SEC filings. I will now turn the call over to David to walk you through our financial performance.

David Verret (CFO)

Thank you, Greg, and good afternoon, everyone. Let's jump right in and discuss the financial results for the first quarter ended December 31, 2024. Total revenue for the quarter decreased 5.2% to approximately $111.5 million. The decrease is attributable to the Flooring Manufacturing, Retail-Flooring, and Steel Manufacturing segments, which decreased by approximately $6.7 million in the aggregate. Retail-Entertainment revenue increased $700,000, or 3.3% compared to the prior year period, to approximately $21.3 million. The increase in revenue was primarily due to an increase in the number of stores from 70 in Q1 2024 as compared to 73 in Q1 2025. Retail-Flooring segment revenue decreased $2.6 million, or 7.5% compared to the prior year period, to approximately $31.7 million. The decrease is primarily due to reduced demand in the flooring industry.

Flooring manufacturing segment revenue decreased $3.2 million, or 11.1% compared to the prior year period, to approximately $26 million. The decrease in revenue is also primarily due to reduced demand in the flooring industry. Steel manufacturing segment revenue decreased $900,000, or 2.8% compared to the prior year period, to approximately $32.4 million. The decrease is primarily due to reduced consumer demand, partially offset by revenue of $3.1 million at Central Steel, which was acquired in May 2024. Gross profit for the quarter was approximately $35.4 million, a decrease of $1 million compared to the prior year period. The gross margin percentage for the company increased to 31.7% from 30.9% in the prior year period. The increase is primarily attributable to increased margins in our retail-entertainment segment, as well as the steel manufacturing segment, primarily due to product mix.

General and administrative expense increased approximately $2.4 million-$30.1 million. The increase is primarily due to increased compensation and other general administrative expenses in the Retail-Flooring segment. Sales and marketing expense decreased approximately $600,000-$4.5 million. This decrease was primarily due to reduced sales and marketing activities in the Retail-Flooring segment. Interest expense remained constant at $4.2 million in the current quarter as compared to the prior year period. Net income for the quarter was approximately $500,000, and diluted EPS was $0.16, compared to net loss of approximately $700,000 and loss per share of $0.22 in the prior year period. The increase in net income is primarily attributable to a $2.8 million gain on the settlement of the earn-out liability related to the PMW acquisition and a $0.7 million gain on the settlement of PMW seller notes.

Adjusted EBITDA for the quarter was approximately $5.7 million, a decrease of approximately $3 million as compared to the prior year period. Turning to liquidity, we ended the quarter with total cash availability of $31.1 million, consisting of cash on hand of $7.4 million and availability under our various lines of credit, totaling $23.7 million. Our working capital was approximately $51 million as of December 31, 2024, compared to $52.3 million as of September 30, 2024. As of December 31, total assets were $395.5 million, and total stockholders' equity was $73.3 million. 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. During the quarter, we repurchased approximately 15,700 shares of common stock.

In conclusion, we are pleased that both our retail-entertainment and steel manufacturing segments delivered improved operating performance in the first quarter, with increases in operating revenue and operating margins as compared to the prior year period. However, challenging market conditions continue to impact our retail-flooring and our flooring manufacturing segments as reduced consumer demand weighed on performance. To address this, we are implementing measures to enhance efficiency of our flooring businesses. Despite these challenges, we remain confident in the long-term strategy of our businesses. We will now take questions from those of you on the conference call. Operator, please open the line for questions.

Operator (participant)

Thank you. At this time, we will conduct the question-and-answer session. If you would like to ask a question, please press Star 1 on your phone now, and you'll be placed into the queue in the order received. Once again, to ask a question, press Star 1 on your phone now. Our first question will come from Joseph Kowalsky with JD Investments.

Joseph Kowalsky (Analyst)

Hello, and nice to see earnings. I just wondered if you could give me some color, give us some color on the settlement, what it relates to, how it works. Is there more to it in the future? Is it a one-time thing?

David Verret (CFO)

Sure. Yes. This is a one-time thing. It was our goal to get the sellers kind of completely out of the picture going forward. We had approached them on settling. It was a $2.5 million seller notes, as well as eliminating the earn-out liability, which was a five-year earn-out period. We were able to negotiate with them, paying off the loan early at a discount and forgiving the earn-out for basically, that helped us get about a $3.5 million gain out of the deal.

Joseph Kowalsky (Analyst)

Very nice. Without that, and into the future, how do things look? I mean, obviously, we had losses last year. Do you anticipate losses continuing for this year and in which divisions, or do you anticipate earnings profits?

David Verret (CFO)

Yeah. I'll start off with that. We don't kind of give guidance on expectations for projections in the future. I will say that there has been a number of initiatives that we have been implementing across a couple of our entities whose performance has struggled more than others. I think we're pleased with what we're seeing, and we're expecting to see some results of these initiatives that we're enacting here in the near future.

Joseph Kowalsky (Analyst)

Okay. Fair enough. Last question. Anything on the horizon as far as a new company to be added to the portfolio? Are there things that you're working on in the near term as opposed to just looking around out there?

David Verret (CFO)

Yeah. There's always opportunities that come up. I'll say that there's really nothing that's hot at the moment that is worthy of discussing.

Joseph Kowalsky (Analyst)

Okay. Thank you very much.

Operator (participant)

Once again, if you'd like to ask a question, please signal by pressing Star 1 at this time. It appears we have no further questions. Mr. Verret, I'll turn the conference back to you for any additional or closing remarks.

David Verret (CFO)

Okay. I just want to thank everyone for attending our Q1 earnings call, and we look forward to giving you an update in Q2. Thank you.

Operator (participant)

This does conclude today's conference call. Thank you for attending.