LIVE - NASDAQ

Good day, everyone and welcome to today’s Live Ventures Incorporated Earnings Call. [Operator Instructions] Please note, this call is being recorded, and that I will be standing by should you need any assistance. It is now my pleasure to turn today’s program over to Greg Powell, Director of Investor Relations.

Thank you, Chelsea. Good afternoon and welcome to the Live Ventures fiscal year end 2023 conference call. Joining us this afternoon for the call are Jon Isaac, our Chief Executive Officer and President; David Verret, 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-K and 10-Q 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 new information, future events, changes in assumptions or otherwise. You can find our press release referenced on this call in the Investor Relations section of the Live Ventures website. I direct you to our website, liveventures.com or sec.gov for our historical SEC filings. Now, I will turn the call over to David to walk you through our financial performance.

Thank you, Greg and good afternoon everyone. Before jumping into the numbers for fiscal year 2023, let’s briefly discuss our record year of acquisitions. We are pleased to report that we significantly bolstered our portfolio through several strategic transactions aligning with our long-term buy-build-hold strategy. During the year, we executed four transactions, totaling an investment of approximately $117 million. We acquired Flooring Liquidators, Inc., a retailer and installer of flooring, carpeting and countertops; Precision Metal Works, a manufacturer and supplier of highly engineered parts and components; certain assets from Cal Coast Carpet Warehouse, a flooring retailer; and the Harris Flooring Group brand from Q.E.P. In addition and subsequent to year end, we made a public offer to buy all of the outstanding shares of LL Flooring Holdings, Inc., a publicly traded flooring retailer. The details of our offer are described in our public filings. We are not able to provide any additional updates on LL Flooring at this time. Now I will discuss the financial results for our fiscal year ended September 30, 2023. Total revenue for the year increased 23.8% to $355.2 million. The increase is primarily attributable to the acquisitions of Flooring Liquidators and PMW in 2023 as well as the acquisition of Kinetic in late 2022. The increase was partially offset by decreased revenues in the Flooring Manufacturing, Retail Entertainment and Corporate and Other segments. Flooring Manufacturing revenues of approximately $109.8 million, decreased by $21.1 million or 16.1% as compared to the prior year period. The decrease was primarily reduced to consumer demand as a result of general economic conditions. Retail Entertainment revenues of approximately $78.1 million, decreased by $8 million or 9.3% as compared to the prior year. Revenues decreased due to reduced demand as a result of the deterioration in general economic conditions and a shift in sales mix towards used products, which generally have lower ticket sales with higher margins. As we announced earlier this year, we have added the Retail Flooring segment in connection with the acquisition of Flooring Liquidators in January 2023. Revenues from Retail Flooring were approximately $75.9 million for the year. Steel Manufacturing revenues of approximately $88.9 million increased by $28.3 million or 46.7% as compared to the prior year period. The increase is due to the acquisitions of Kinetic in June 2022 and PMW in July 2023. Corporate and Other revenues decreased by approximately $6.8 million or 73.2% to $2.5 million as compared to the prior year period. The decrease is primarily due to the closure of SW Financial in May 2023. Gross profit for the year was $115.6 million, up from $97.8 million in the prior year period. Gross margin percentage for the company decreased to 32.5% from 34.1% in the prior year. The decrease is primarily attributable to the impacts of inflationary cost increases, partially offset by the acquisition of Flooring Liquidators, which generated margins of over 36% in 2023. General and administrative expenses increased by approximately $32.1 million or 58.8% as compared to the prior year period. The increase is primarily due to the acquisitions of Flooring Liquidators, PMW and Kinetic, which collectively contributed $32.8 million of general and administrative expenses in 2023. Selling and marketing expenses increased by approximately $1 million as compared to the prior year period, primarily due to an increase in marketing activity in our Flooring Manufacturing and Retail Flooring segments. Operating income decreased to approximately $15.4 million as compared to $25.9 million in the prior year period. The decrease in operating income was primarily attributable to lower gross profit margins and increased operating expenses. Interest expense increased by approximately $8.5 million compared to the prior year period. The increase was primarily due to the increased debt balances related to the acquisitions of Flooring Liquidators, PMW and Kinetic as well as increased interest rates during the period. Net loss was $0.1 million and diluted loss per share was $0.03 as compared to net income of $24.7 million and diluted EPS of $7.84 in the prior year period. The decrease in net income is attributable to lower operating income and increased interest expense. In addition, prior year’s net income included a benefit of approximately $11.4 million or $3.56 per diluted share related to the ApplianceSmart bankruptcy settlement and a charge of approximately $4.9 million or $0.0156 per diluted share related to the impairment of SW Financial goodwill and intangibles. Adjusted EBITDA for the year was approximately $31.5 million, a decrease of approximately $6.8 million or 17.8% as compared to the prior year period. The decrease is primarily due to an overall decrease in operating income. Turning to liquidity. We ended the year with total cash availability of $37.1 million, consisting of cash on hand of $4.3 million and cash availability under our various lines of credit totaling $32.8 million. We had working capital of approximately $85 million as of September 30, 2023 as compared to $78.4 million in the prior year. Total assets were $421.8 million as of September 30, 2023 as compared to $278.6 million in the prior year. Total stockholders’ equity was $100.1 million as compared to $97.2 million 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 a long-term value for our stockholders. During the year, we repurchased 39,092 shares of common stock at an average price of approximately $25.35 per share. As of September 30, the company had approximately $3.3 million available for repurchases under our repurchase program. In conclusion, fiscal year 2023 was marked by challenging economic headwinds. In spite of the challenging environment, we remain focused on creating long-term value for our stockholders by executing our long-term buy-build-hold strategy. As I mentioned earlier, we completed four transactions during the year and we are excited about the opportunities that these acquisitions offer us going forward. We believe that these transactions, our financial strength and our strategic focus position us well to weather the near-term headwind and emerge as a stronger, more resilient company in the long run. We will now take questions from those of you on the conference call. Operator, please open the line for questions.

[Operator Instructions]

Let’s take a call from the question from Theodore, please.

Thank you. [Operator Instructions]

We will take the question from Tom, please.

Alright. Tom, your line is open.

I have a question. Do you still own any LL shares? And if so, what’s the status on the offering that you made?

Thank you for your question. At this time, we really cannot discuss anything related to LL Flooring. I do appreciate the question. The only thing we can point to you is the press release and what we have made publicly available for all to read. I do appreciate the question, though.

Okay. Thank you.

Thank you, Tom.

Alright. And at this time, there are no further questions in the queue.

I want to thank everyone for attending the year end call and we look forward to sharing results for Q1 shortly. Thank you.