Virland Johnson - CFO Jon Isaac - CEO Rodney Spriggs - CEO, Vintage Stock.

Analysts:.

Good day, everyone, and welcome to Live Ventures First Quarter 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 maybe recorded. I will be standing by should you need any assistance.

It is now my pleasure to turn today's conference over to Chief Financial Officer, Mr. Virland Johnson. Please go ahead, sir..

Thank you. Good afternoon, and welcome to the Live Ventures Incorporated fiscal first quarter 2018 conference call. Earlier today, the company filed its Form 10-Q for the first quarter ended December 31, 2017, with the SEC.

This filing can be found on our website www.live-ventures.com in the Investor Relations section as well as on the SEC website at www.sec.gov. I'm joined today by Jon Isaac, Chief Executive Officer; and Rodney Spriggs, Chief Executive Officer of Vintage Stock.

Please note that some of the comments you will hear today may contain forward-looking statements about the company's performance, as well, there may be forward-looking statements made during the Q&A session that follow our prepared remarks.

These statements are neither promises nor guarantees, and there are a number of risks and uncertainties that could cause actual results to differ materially from those set forth in these forward-looking statements.

Additional information concerning factors that could cause actual results to materially differ from those in these forward-looking statements is contained in our filing and periodic reports filed with the SEC, copies of which are available on our website and may be requested directly from the company.

Forward-looking statements are made as of today's date, and we do not undertake any obligation to update any forward-looking statements made during today's call. Thank you to everyone joining us today for our first quarter 2018 call.

I would also like to express my appreciation to our management and associates of Live Ventures for another outstanding quarter. During our call, we will briefly cover our company's operating financial results for the quarter, and then, answer your questions at the end of our prepared remarks. Operating results for the first fiscal quarter of 2018.

The company reported record quarterly revenue of $40.3 million representing an increase of 25.4% over the same period last year and quarterly earnings per basic share of $0.95. Hard surface products revenue was up 59.5% year-over-year.

Hard surface products gross profits were up 50.4% year-over-year due to increased sales efforts, as a notable product line exception this quarter. Vintage results were strong and included a full quarter's operating results. Prior year results only included November 3, 2016, the acquisition date through December 31, 2016.

For the quarter, gross profit was almost $16.3 million which is up 29% from the same period of fiscal 2017. In addition, our operating income was $3.9 million compared to the same period last year of $3.6 million, a 6.6% improvement, and net income was $1.8 million.

For the quarter, margins for gross profit were up slightly to 40.5% and operating income to 9.7%. This compares to the prior year margins of gross profit were 39.3% and operating income of 11.4%.

As of December 31, 2017, the company reported approximately $1.7 million of cash on hand plus an additional $17.8 million of available credit under the company's revolving lines of credit. Net cash provided from operating activities for the quarter was $6.3 million.

Stockholders' equity increased approximately 5% to $35.2 million over our year-end September 30, 2017. As most people understand tax reform legislation passed in December 2017. And for the quarter we adjusted our deferred income tax assets through a charged earnings of $2.33 million, a one-time charge related to our U.S. corporate income tax re-change.

Our general and administrative expenses were higher this quarter due to larger than expected personal expense, professional fees, property taxes, and repairs and maintenance. Corrective action is being taken to drive these expenses as a percent of revenue lower and back to more normal historical norms for both of our core businesses.

For the quarter we had a bargain purchase gain of $3.7 million from our new and recent acquisition of ApplianceSmart, a 17-store retail appliance dealer with stores in Minnesota, Ohio, Georgia, and Texas.

This gain is provisional as our final purchase price allocation is not final at this time and maybe adjusted up or down after the final purchase price allocation adjustments are determined. We have one year from the acquisition date to make the final purchase price allocation and related adjustments.

We are currently out of covenant with our lender, Capitola. And we are aggressively working to resolve this out of covenant condition either through renegotiation or refinance of all of our portion of the outstanding obligation.

Our goal is not just to resolve the out of covenant condition but to seek and secure interest rates that are lower than our cost to borrow today thereby increasing profits and lowering interest expense. Earlier this year, and today, we filed our 10-K and three 10-QAs restating our annual fiscal 2016 and quarterly fiscal results for 2017.

These restatements were largely reclassifications and some tax-related areas associated with our purchase of marquee industries affecting deferred tax assets and bargain purchase gain.

For additional financial information and details I invite you to review our press release distributed this afternoon and view our SEC filings on either our website or on the SECs website. With that, I thank you very much for your participation on this call, and your continued interest in Live Ventures.

At this time, Jon has some prepared comments and then we welcome any questions that you may have..

It was definitely a good quarter. And we're very pleased with the results, revenues up 25%, gross profit up 29%, and for the first time our cash availability hit a record $19.6 million. So we strongly believe that this was one of the best quarters that we've had as a company.

We can go over a lot of things that I have on my list and maybe we can even open it up to some questions-and-answers. Operator, would you remind people how to ask questions..

[Operator Instructions]..

Let's take a question from David..

Yes, sir.

Can you hear me, okay?.

Yes..

Okay. Yes I just wanted to get more visible way of reporting here, can you tell me what a bargain purchase gain is, that doesn't sound anything I've been around 30 years never heard that term before and isn't that a one-time item and should not be included with your income..

Bargain purchase gains are reported when assets are in excess of purchase price for those acquired assets..

And who determine that..

Bargain purchase gain is a rare occasion; it doesn't happen very often. Typically you see goodwill which is in excess paid amount over assets acquired..

Right, right.

So who determines that?.

In Layman's terms we bought something that's worth $10 but we paid $7 for it, so the $3 gets added back on to the balance sheet and it has to go through our income statement for it to end up on the balance sheet..

Correct..

Okay, okay, understand that.

But who determines that number one and why would that be included in an ordinary income when it's really a special gain that's not what would be the actual number be around $0.20 or $0.25 without that, right?.

It's typically included as other income when it does happen and that's exactly how we've called it out. And we have also specifically called it out as its online item.

Again rare does happen and it's a one-time event but there is the ability for it to be adjusted sometime in the future within a one-year period of time when we're actually doing the fair value analysis work on all the assets that are related to the acquisition..

Hey is that something you individual internally determined? Or was that an audit that some outside party did for you on the asset valuation?.

Management makes the initial determination of those values relative to the carrying values that the company has at that time. But ultimately it's determined through both work that management does and other outsider appraisers in terms of assessing the fair value of the assets acquired.

Now in this case, specifically it's receivables, inventories, and fixed assets. So prepaid some restricted cash. There aren't too many categories of assets where we are going to expect to see most of the variability will be in receivables, inventory, and possibly fixed assets..

Okay..

This has happened twice so far from what I remember with here at our company and this as a shareholder this sort of indicative of what management or how we negotiate our purchases, many times we are buying things that below their market value which --.

I think that's fine, it just seems like it's not something that should be considered in normal part of your profit, so won't be included on your profit in a way you portrayed it in the statement here.

That said, you said you have over $6 million in cash flow in the quarter and how does that transpire?.

Well cash flow is a component of several things and it is backing out the gain on the bargain purchase gain which is in our income statement. We get better than expected collections off our receivables. We did have a change, a positive change in our deferred income taxes again.

We have a long history of using our historical NOLs, so that's been very helpful. The --.

These are untaxed earnings, right?.

No, these are earnings that the company lost in previous years and we have the ability to apply those losses against future earnings which we're earning now..

Right. On yes you have got unrealized losses that you can carryforward the losses that you have had from the past yes. So that's what I mean, yes. Okay.

And the other thing is you said you have record cash availability, is the credit line what is in dispute right now though?.

No, it's not, both of our lines of credit we don't have any disputes over with either Texas Capital Bank or Bank of America..

Okay. So that 19 --.

Capitola is a long-term note that we have with Vintage Capital. Even the word dispute is sort of a heavy word. We don't have dispute with any of our lenders. All of our lenders love us and we love them as well. But from a technical standpoint, management is legally required to tell you when we are out of covenant with a certain lender.

That certain lender is the one that's associated with Vintage Stock and it is a technical error that we can talk about for hours and hours but it's just not, it doesn't make sense to do that now.

But as we mentioned in the previous earnings call we are in communication with another lender who is hopefully going to -- will close with which will replace Capitola which will offer a reduced rate of interest but we're on a very friendly basis with Capitola and everybody else..

Okay. Okay.

And that timeframe on that, do you have any kind of thought about that, is it a few weeks? A few months?.

Again for legal purposes I have to say that nothing is guaranteed. But if I was to get it'd probably be in this second fiscal quarter that we're in..

Okay..

We were also able to negotiate with Capitola the removal of an early prepayment penalty normally in our loan documents if we were to prepay them there would be a six figure charge. We were able to waive that if we prepay them within a certain period of time..

And so what's the --.

Our shareholders we updated via press release, sorry?.

What's the approximate outstanding on that line is it separate from the cash receivable?.

It's term loan, it is about $25 million, $26 million I would say..

Okay..

So it once closes, if it closes we hope that will close, it will drop additional money to the bottom-line..

Okay. All right. Good luck going forward..

Thank you. Let's go to Daniel from Jefferies..

Yes, hello. Good afternoon guys and great job in the quarter here.

Really my question really just revolves I have couple of clients that hold a position in Live Ventures and my question really just revolves around the debt schedules and the debt that's on the company because a lot of people tend to get confused on how much debt is on the company and they believe that it's due let's say at the end of this year or some of them believe that it's all Capitola.

So I guess if you could explain a little more about how that debt on the books breaks down and how many years out that debt is due in the different debt schedules just so we can get a little more clarity here on the cash flow and when that debt is due, so we can have more visibility on how much cash is going to pay down debt and when that debt is due? I will note to Tom here..

I do. The -- I think to understand this a little more simply is to understand how the debts are classified. The Bank of America revolver loan and the TCB revolver loans are classified as current and these loans get paid off with all of our receipts that come in through our Marquee and Vintage businesses.

And then we borrow back on these loans and there is quite a discussion about this in the MD&A in capital section. The Capitola term loan that Jon was referring to is a term loan that has fixed payments of $725,000 a quarter.

And the terms and conditions of all of our note agreements are detailed in footnote number -- footnote number 8 long-term debt in our most recent filing. But essentially all of our equipment loans have terms and they have monthly payments attached to them.

We have some individual notes that are due within a certain notice period and then we have the Capitola term loan which we've classified as current but also has modest principal reductions on a quarterly basis together with some interest. So I think that's the easiest way to answer this.

There is also a forecast of the future maturities that's also located in Note 8 that talks about when these notes are due and again ignoring for a moment the first year which is 2018 which has both Bank of Americas line of credit, TCB's line of credit, and Capitola, the remaining future maturity schedule denotes how much principal has to be repaid by year into the future.

So hopefully that answers your question..

Hey it does and I really appreciate it..

All right. Anything else..

Bill from Merrill Lynch..

Bill from Merrill Lynch. All right..

Hey Jon, thanks for taking my call. Just I have a few clients who are on this for a number of years and seen the direction you've changed going with acquisitions.

Last quarter, was such a great quarter to see the volume and know that people are following the company and the floor I think caused such a run-up, I was not happy to see it fall back to where it started.

And I’m wondering the perception and the market and the new acquisition, I haven't heard a lot but I don’t think appliances are a area that's growing.

And the news in the earnings today and the aftermarkets were down, I know you have a plan in mind here, you’re a large shareholder, I just was wondering, Jon, what the vision of five-years from now is and how does this appliance company tie into that vision because I think it’s kind of negatively proceed maybe short-term but I really want to know where we’re going with Live Ventures with the way the market treats it and I think the earnings are great, I think the cash flow, you show good numbers but there's got to be a five-year strategy, I would like to hear your comments on that if you will..

Well, first of all we don't -- we can’t control what the market does and what it perceives of us.

We can’t control the market but we do know how to take advantage of it, when the price of our stock is at a level that management feels is a bargain purchase for lack of a better term, then we try to buy as much as we can and the evidence is in the repurchase program we've acquired almost 5% of the company back and we’re up about, we are in the money by about 50% on those first of all.

Secondly, ApplianceSmart actually the bargain purchase was attributed to ApplianceSmart and its acquisitions. We would love something that was fairly below market value and there are numerous synergies between ApplianceSmart and our other subsidiary Vintage Stock and Rodney can maybe elaborate on that in a few minutes.

But there is synergies between our 59 50 store chain Vintage Stock with ApplianceSmart. For example there is ideas floating around the plans that there could be some additional space they could co-locate within the same space, a lot of these stores that ApplianceSmart they are in markets that Vintage Stock is currently not in.

ApplianceSmart is in Georgia, Minnesota, Texas, well we have stores in Texas with Vintage and Ohio. So potentially we could carve out 3,000 to 4,000, 5,000 square feet.

Maybe Rodney can elaborate us, what Rodney -- what your plans are it would be a natural fit between the two?.

Okay. So again we’re evaluating locations with Vintage Stock all the time and while these are not BestBuy, where you have a lot of electronics and things like that, you do have big footprint stores that are in shopping centers not all of them, but we have actually visited some of those stores and they are in vibrant shopping centers.

But again they can give up 3,000 to 5,000 square feet and we can have a store inside that store and again you’ve got the same sound case because ApplianceSmart is paying X amount for rent and for payroll and we think if there is a possibility that we could actually add our product lines into those stores without having any actual hard cause for occupancy..

The second part of that question would be though how do you compete with the Lowe's; The Home Depot's where a lot of these other smaller appliance companies are having a difficult time.

How do we know the margins? You bought something for a bargain price, sometimes that tells me be careful because is that an industry we should be buying into, so I understand the synergy that makes sense but we can't make it profitable --.

One of the key differentiators is the key differentiator is out of box or out of cordon BestBuy doesn’t do that and those are being in dense as they call them in the industry, those are -- they are not used but they are new products but there is a scratch or mark or something or dent on them. And those provide the best margins for us.

So that's one key differentiator. Number two, we really think that appliances is somewhat Ecommerce proof, I mean when was last time you bought a stove or bought a Fridge on Amazon or online.

People want to see if they want to touch it, they want to mix, they want delivery; they want to speak somebody who is going to come to their door and install it for them..

Lowe's and Home Depot, Jon, they are the ones that seem to be grabbing that market. Go ahead, I’m sorry..

But there is also another major differentiator and that is ApplianceSmart if you want to buy the product, you get the product now. You don’t have to wait for the product. You go to a Lowe's or Home Depot; you have to wait sometimes weeks to be able to get the product. That's a huge differentiator to most buyers.

The other major thing that we see strategically in the market is that several key competitors are dropping or have dropped out. H. H. Gregg specifically has dropped out. Sears is significantly retracing their position and is expected to drop from many different perspectives.

So we see some gaps in the market that still need to be filled and still see this is as a synergistic play with Vintage but also a strategic play with vacating competitors..

And that makes sense. And the --.

If it wasn't for the increased margins on the out of box product it wouldn't really be a play, but with that it really kind of changes the dynamic..

Supposed to be immediately accretive to earnings, do you have estimates as far as what, when you looked at it, what do we think it’s going to add to the company in the next -- this fiscal year? Do you have any estimates?.

We want to be cautious and we don’t provide guidance, but we bought it at such a price that we feel that this is going to accretive to earnings, how much it's going to be accretive to earnings, we don't want to say at this time, but we do feel it's going to be accretive..

It was profitable, let me say that --.

It's been profitable, yes..

It’s -- we would not buy a company that was losing money that would be a drag on earnings. So the company generated $65 million I believe last year we put that in the press release back in January.

So this should add about -- our earnings for the quarter that we just announced don't really reflect any of the numbers that ApplianceSmart generated because we didn't own it that long --.

Only for one day..

Only for one day. But going forward for Q2, fiscal Q2, and we should see a nice jump in and revenue. If things go the same as last year it would add about $15 million or so per quarter in sales. And I think it will be broken down in the Q, in the next Q..

Yes.

I didn't read the Q, but can you mention how you finance that deal?.

We arranged the contract such that the purchase price is going to be deferred and the purchase price has to be paid by the end of our Q2. And that's --.

There will not be any stock issuances, no warrants, nothing that's related to stock it will be an all cash transaction where we're working with a couple of lenders that will give us an inventory backline and an receivable backline, so it will be an all cash transaction for now from what we see..

Okay, thank you very much. Keep up the good work..

Thank you..

Thank you..

Let’s go to Joseph from Upstream..

Most of my questions have been answered. I was concerned also about the appliances I think you pretty well addressed that I agree that Sears getting out of the marketplace for other reason leaves a certain GAAP.

I don't know about other organizations that are getting out of the marketplace whether they're doing that because they find it’s not financially healthy for them to stay in that marketplace and whether that it will leave a GAAP for you to fill or not but I do agree that the out of box -- out of boxes is a big difference, so I appreciate you addressing those questions.

The other question that I had related to Capitola and most of my question was answered but with regard to being out of covenants is there a timeframe that Capitola has give you to resolve this or is there something within the covenants let’s say that if you're out of covenant for a certain period of time that they have certain additional rights and if so what are those rights and what is the timeframe..

No, first of all they haven't notified us of anything. We're legally required to notify our shareholder base of what's going on that's number one. Number two, we're on a very friendly relationship with them. We speak to them regularly. We -- very friendly relationship, is not the problem.

Third, they know that we are in contract with another lender that's going to take them out very soon. And again there's no promises and no guarantees that we're very -- we're highly confident that this new transaction will close I'd say in the next 30, 45 days. The new lender they love the company, they visited with management, with Rodney.

And they're undergoing their due diligence and some studies but it looks very promising..

Give me your history and the way you've made things happen I have little doubt that what you're saying will indeed come to pass.

What I'm asking for is just a worst case scenario picture as far as what rights they have if it isn't somehow resolved and again I do believe that it will be resolved I believe what you're saying and I think that you've shown with your history that you're able to deal with these issues as they come up and these issue do arise.

But worst case scenario do they have certain things they can do, if things are not resolved say within three months or six months or something like that? And you can have great relationship with the company, but something happens..

Yes, they have all sorts of -- they have -- I mean the short answer is they have all sorts of remedies they could do a lot of things from being out of covenant.

The reason we got out of covenant again it's a long story but covenants were set wrong from the beginning and high, the bar was very, very high and despite that Vintage performed exceptionally well, up until the most recent quarter, and in the last quarter too they did very well, but the company did well and despite the high bars that we set on ourselves.

Now we can go back to Vintage and argue and say not Vintage, sorry to Capitola and argue and say look these were set wrong but it really doesn't matter at this point because they provided us something, they helped us acquire the company. We -- they were too expensive for us.

They knew we were going to refinance them within a year, year-and-a-half, two years. They're more of a bridge lender I'm not happy with the range. So the new lender is going to help us reduce interest cost and there's just no point in going back in and argue with them. We're on a very friendly basis. We speak to them regularly, I spoke to them today.

And things will get resolved once a new lender comes in which will happen hopefully very soon..

But let me just reiterate one little point that is let's say something stick with the glue, something doesn't happen it takes longer for you to refinance than expected anything can happen.

What -- there must be some timeframe where they'll say, we have to portrait here we have to do something is it three months, six months, eight months is there a timeframe? Or is it just a lot of covenants it's up to us and [indiscernible]..

I mean look I can't speak on what could happen, but I mean the best thing I recommend is the loan documents are all on EDGAR, they're on the SEC, and you could read them as well. The transactions happen in November of 2016. But there's absolutely no indication about any of this number one. Number two they’re in the lending business. They deploy capital.

They make points on the way in; they make points on the way out. This is where they make their money they're not a lender that is one thing to own companies they -- that's not what they do. So they are one, they would like to see their money back because they can redeploy that capital into other opportunities..

Makes a lot of sense. And I think that’s likely the scenario that's going to come to pass and I appreciate nice questions..

We're confident that things will go as I described again no guarantees but the moment it happens we will alert all shareholders via press release..

Appreciate it. Thank you very much and again congratulations and good job to everybody over there and I'm very pleased..

Thank you, Joe..

Thank you..

[Operator Instructions]..

Yes. Before we speak to have once thing I also wanted to mention that I forget to mentioned is that if things do something does turn bad with the, with Capitola. I mean we have a lot of resources on hand then we may even be able to pay them off cash I mean between liquidity and availability. We have a lot of option.

I should have also mentioned that to Joe, hopefully he's still on the line. Let's talk to [indiscernible]..

Hi good afternoon. I thought in the afterhours of some kind of release in 8-K about a restatements, financials can you discuss that..

Yes. We in connection with our filings today we filed 10-QAs for our prior quarters in fiscal year 2017. This was basically the push back, the restatement that we did in our 10-K with regards to our prior fiscal year, as well as the effects of that those changes that we identified in our 10-K throughout our interim quarters in fiscal year 2017.

These were largely reclassification of TCB and BMA from long-term to short-term due to lockbox and the fact that there was a subjective acceleration cost within both lending agreements in the combination of those two things GAAP requires that we treat it as short-term that was picked up in the audit, so we’ve done that.

We also reclassified a small preferred share reclassification as well as non-cash effect of our selling note that we had with regards to Vintage. We also went back and cleaned up an equipment deposit that was made at the end of fiscal year 2016, when they had a cash flow effect is it rolled through fiscal year 2017 so we cleaned that up.

It was largely a reclassification exercise but because the amounts were material we felt it best to go and do that. We disclosed all of these changes in our 10-K but it was still a matter of going back and cleaning up the 10-Qs which we’ve now done, so that's what it related to..

Thank you..

The other thing as I got to note from our General Counsel saying that, all the 10-QAs were filed but the SEC is experiencing a big backlog today for some reason, maybe its earning season or something but they've all been filed but you should see them on sec.gov very shortly..

Yes..

Thank you..

Thank you. Jay please. Go to Jay..

Jay?.

Jay, your line is open. Please check your mute function..

We can go back to him in a minute, few minutes if he comes back. Some other things that happened during the quarter is in early December we announced the full and complete dismissal of the class action lawsuit and the shareholder derivative lawsuit we were successful.

In both those lawsuits in dismissing them, there was no settlement at all, no monies paid to them, it just went away we we're very happy about that obviously. We've always denied all of the false allegations and we were winners in this. Let's go to one question, Philip..

Two quick questions.

One is, were there any share repurchases in the past quarter and second how much of the cash on hand in from the revolver versus actual cash that’s not loan based?.

Let's address the cash on hand issue. Cash on hand that we have is typically not associated with the revolver its monies that we've already either borrowed or have as a result of distributions. Revolver, the way the revolver works is proceeds of our accounts receivable and other collections, go to pay the loan down.

Once we borrow proceeds for either operations or keeping in our operating account or for purposes of other distributions or loan pay downs that resides in our cash balance..

Almost every dollar that we generate in cash flow our respective CFO and our subsidiaries use that money to pay down the lines of credit. There is no point in keeping a large cash balance on the balance sheet while we're paying interest on a loan that’s there.

So it’s just -- it makes no sense, so we pay it down and that's why sort of a trick question, when somebody says how much cash you have on hand well technically in the last few we showed $1.7 million and $1.8 million but that’s because the millions of dollars that we generate every quarter goes to pay down the line.

So that's why I think first time we put in cash availability in the press release and that’s totaled $19.6 million as of 12/31/17..

And what that means is if we wanted to draw on the line that sounds like we could draw immediately. Okay.

For your other question, could you repeat the question?.

The repurchase..

Oh, the repurchase. There were some repurchases in the quarter. We repurchased approximately 20,000 shares in the quarter. We went up to 116,050 shares at the end of December from 96,307 shares at the end of September. We also acquired 50,000 shares of Convertible E preferred stock dropping there from 127,840 to under 77,840..

The Q1, our first fiscal quarter is a little bit tricky because we have the 10-K which is supposed to be released on 12/31 and we have certain blackout periods and things like that. So the first Q is usually not a big quarter where we acquire a lot of stock.

And I think we repurchased I believe over 110,000 shares at an average price of about US$10 a share. So I don’t think we have seen US$10 in the last three, four months..

Okay, thank you..

Thank you. [Operator Instructions]..

Maybe we’ll discuss with Rodney just a little bit on what your outlook is or what you believe the outlook is for the next six months on games and movies and console how are things going in Missouri Rodney?.

Well, besides cold weather it’s actually pretty good. So we have actually had some issue with ice and stuff that we haven't had in the past which [indiscernible] deal with that.

But moving forward we’re seeing strengthening video games sales which is something we’ve talked about in past quarters, we’re still seeing large double-digit increases on new video game sales and new hardware and that is not all attributable to the switch, it’s actually larger installed bases and back in rebates from Sony and Microsoft on the Xbox and PS4 system.

That for us is a leading indicator that when we’re selling new go one to two years down the line, we start seeing large margin increases because our used product lines average 80% profit margins versus a 20 some percent on new products. So we’re pretty excited about that we’re out of the valley on video games and seeing large increases.

I think most people have heard that the switch is a resounding homerun in the video game market, so we have a third company and we do need Nintendo to be a strong company which their last system was very weak.

They are actually outselling the original V system that came out over 10 years ago and that system ultimately sold over 100 million pieces of hardware and then of course numerous on top of that pieces of video game software. So the outlook is very bright on the video game side.

On the movie side we came out of a very soft movie release schedule last year with I believe only seven 300 million box-office titles which are considered to be Tempo and drive a lot of foot traffic into retail when they come out on Blu-ray and DVD.

We’re already seeing a large increase of 300 plus million titles that were released in first and second quarter of this year. There is usually about a 120 day lag from when they leave box office. We have sorted $315 million to Jumanji 2, which is a surprise hit at over $400 million.

We have the Star Wars movie at $615 million, just as in CoCo we're high 200s and Black Panther is coming out and is expected to open out to 125, 135 million box. So again another new title that is 300 plus million.

So we could see versus seven titles last year as many as 10 plus and possibly 12 or 13 titles with Jurassic Park and Avengers and another Dead Pool coming out plus other titles. It looks like a strong year on movies and that has been a lagging sales product line for us.

And those two product lines make up about a third of sales each, so it is important that those product lines perform well and we're seeing again great sales out of those two lines and a better outlook on movies.

And then on music there has been headlines that BestBuy is going to get out of the CD business July 1st which for us a lot of times they are a direct competitor that are very close to us.

They do send us customers because their product selection depth is very light whereas we have a lot of depth; we carry more music CDs, video games, and movies than any retailer. So we view that as a big positive that we will get an uptick in sales in July for when they do drop out of that market.

And hopefully honestly they will get out of some of the other lines like movies and video games that they actually have downsized over a few years. So we think that moving forward, we're going to see some increases in all the big three product lines because of those reasons..

What’s your outlook on new spaces or expansion new store openings are you seeing deals out there or what do you think?.

There are deals depends on the site. But we are having some luck negotiating leases if there are vacancies in our center. We are aggressive in holding our rent numbers as leases come due to the same number or we’re actually getting rent concessions on some sites. There has been a lot of talk about malls struggling and things like that.

We have a couple malls sites that we have saved over $100,000 annually on rent that will save us approximately $500,000 over the term of the leases that's left. And those stores are very profitable for us.

So as there are, these retail issues where some companies are struggling and you're seeing companies go out, it would affect our sales slightly, but we really generate our own traffic and we are a destination retailer.

So yes we want co-tenancy and we absolutely want our center to be 100% filled, but if it is not we definitely take advantage of those situations as leases come to negotiate even more favorable rent and occupancy terms for the company..

That’s great. The new stores from that we -- that you opened last year during Thanksgiving they're all -- how are they comping year-over-year I mean there were, I think there were new last November, December I think you opened what eight -- seven, eight..

Those stores were Hastings locations and there were seven locations that we bought through the bankruptcy courts and we are predatory company we've acquired the Entertain Mark brand and those are two of our top performing stores that we had acquired. And we acquired these Hasting stores and branded them entertainment also.

They opened up to different ranges. We have talked about we were not 100% satisfied with what the numbers were since they started, even though most were profitable from the day we opened them.

We were expecting a little bit higher numbers but even where that is that all of those stores in the first six weeks of this year, five of the stores are comping in the 23% to 20%, 26% gain year-over-year in sales numbers, so that's a very promising trend.

It's kind of the thing we see on a new store opening whatever number it does open at we see fairly heavy double-digit increases in year two, so we're very satisfied with the numbers and the growth that we're seeing out of those locations.

We have a couple of other stores that are just getting ready to comp one of those being one of the former Hastings locations that will comp here two months from now. And we look to open additional stores going forward or acquiring acquisitions if any of our competitors have issues.

But again the most important thing as you guys have discussed is getting this re-fi done and everybody needs to remember that we acquired those Hasting Stores on November 1st and the company act 16 and the company acquisition was November 3rd, so we have a lot going on.

There was a lot happening during those timelines that we want to make sure that we get this re-fi done because the amount of money that saves the company and Live going forward is a large number compared to again what we can generate out of a store it's that's a good number in an individual sort of the most important thing is to get this re-fi taken care of and then going forward we would expect to probably open a store every quarter or so..

Great. Thank you Rodney..

Thank you..

You should hang around to get someone else have the question related to Vintage. On the marquee side we invested a bunch of money last year one new extruder machines, those are delivered around October of 2017 and they're now fully installed and operational.

I invite you to check out our Facebook page for Live Ventures and you'll see some pictures that were taken I believe this morning or yesterday. The new machines are operational and have a great team there running the operations.

The equipment should be -- should produce an ROI very quickly as it will reduce our cost of goods we're currently outsourcing millions of pounds of the arms and so we'll be able to bring that in-house and be able to achieve more margin on that. If you haven't already done, so please follow-up on Facebook.

I don't see any other questions unless someone else has anything else, really anything else to add..

No..

[Operator Instructions]..

Let’s take [indiscernible]..

Good afternoon Jon congratulation on a great quarter. My question is regarding to a platform of Live deal.

Do you have any outlook for the future, what you are going to do or if you have any option on that matter?.

Right now our sole focus is on acquiring companies, established companies that have shown and demonstrated a strong earnings power historically and companies that have an existing management team that model has worked out very well for us.

So we're not really spending a lot of -- we're not putting a lot of resources into the Live deal platform although it is still there and it doesn't generate much revenue but it's still there and we don't dedicate a lot of resources to it. We're really focused on looking for new acquisitions and we're looking at several number one.

Number two reinvesting our capital into our existing subsidiary such as Vintage and Marquee. We just spent about $5 million at Marquee Industries and on the new extruder machines that will hopefully give us a pretty nice double-digit yield. Those are the type of opportunities that we're really looking for right now.

And when the opportunity arises well we will buy back stock or we pay down that. On the Capitola side we failed to mention that we voluntarily made additional principal payments during the quarter. I think we've been sending them more almost every month over the last three, four, five months I believe.

So the company Vintage is doing very, very well under we’re taking the additional cash flow and just paying them down as aggressively as we can.

So when opportunities arise, Louise, we try to allocate the capital as efficiently as possible with the sole focus of maximizing shareholder equity which is the most important number in my view in all of our financials.

That is the wealth in the company and you want a piece of that if you're a shareholder, so that's really what our primary focus has been..

Thank you very much. You've done a fantastic job in any event you we're considering some good offering for that platform if somebody shows up be interesting of it..

Yes, of course someone has an increase of course we will look at all the --.

Entertain all offers..

Absolutely..

Thank you so much, Jon..

Thank you for being a shareholder for many, many years by the way you're probably one of the other shareholders you’ve been following us for many, many years..

Yes, light enough..

Thank you..

Wonderful time. Thank you so much for the wonderful job for you and all the rest of the team. Thanks for that. Have a wonderful day. Bye-bye..

If there is no other questions maybe we -- will maybe in 30 seconds we will end the earnings call and we will reconvene in about 90 days for fiscal Q2..

Q2..

Mostly we will be there for 30 seconds..

So if you have a question please ask it..

Please yes..

We will be back to you in 90 days..

[Operator Instructions]..

Since there are no questions, we will -- actually hear less second Dana showed up with a question. Dana, please go ahead. No she dropped off..

Okay..

Okay. Thank you guys for joining and we will see you and we will talk to you in about 90 days. Have good evening..

This does conclude today’s program. You may disconnect your line at anytime and have a wonderful day..