Good day, everyone, and welcome to today's Live Ventures Quarterly 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. [Operator Instructions] Please note today's call may be recorded and I will be standing by should you need any assistance.

And on today's call we have the President and CEO of Live Ventures, Jon Isaac as well as Wes Godfrey, CEO of Marquis Industries. It is now my pleasure to turn the call over to Virland Johnson, CFO of Live Ventures..

Thank you. Good afternoon, and welcome to the Live Ventures Incorporated second quarter fiscal year 2019 conference call. This afternoon the company filed its Form 10-Q for the second quarter ended March 31, 2019, for fiscal year 2019 with the SEC.

This filing can be found on our website www.liveventures.com in the Investor Relations section as well as on the SEC website at www.sec.gov.

Please note that some of the remarks 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 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 or 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 for joining our Call today for our second quarter fiscal year 2019.

During our call today, we will briefly cover our company's operating and financial results for the year and then answer your questions at the end of our comments. The six months results include a full quarter of ApplianceSmart versus one day's results in the same period last fiscal year.

The company reported quarterly revenue of 46.9 million, representing a decrease of 10% over the same period last fiscal year, and second quarter fiscal year 2019 earnings per basic share of $0.25. For the quarter gross profit was 18.6 million, which was down 5.1% over the same period last fiscal year.

In addition, our operating income was 2 million compared to the same period last fiscal year 4.1 million. And net income was point 0.473 million compared to 1.9 million same period last fiscal year. For the quarter, our gross profit percentage was up to 39.7%. And operating income margin percent was down to 4.4%.

This compares to the same period prior fiscal year when our gross profit margin percent was 37.7%. And operating income margin was 7.8%. Cost of new product sales levels in mix of products negatively affected gross margins realized in the year for both Vintage and ApplianceSmart. ApplianceSmart has been lagging operationally.

We are of the opinion operations begin to turn around late in the quarter and are looking forward to positive operational results going forward. Interest expense decreased to 1.5 million for the second quarter from 1.8 million for the same period prior fiscal year due to pay down in revolving and term debt and refinance of Vintages mezzanine debt.

As of March 31, 2009, the company reported approximately 3.3 million of cash on hand, plus an additional 13.9 million of available credit under the company's consolidated revolving lines of credit. Net cash provided from operating activities for the six months ending March 31, 2019 was 7 million. Stockholders' equity increased to 41.2 million.

Total liabilities decreased by 11.7 million for the six months fiscal year 2019. For additional financial information and details, I invite you to review our press release filed this morning and view our SEC filings on either our website or the SEC website.

Thank you very much in advance for your participation on this call and your continued interest in live ventures. At this time John, I and Wes will take your questions. Thank you..

[Operator Instructions].

Thank you, everyone for joining the call today. We're happy to see that you're taking an interest in our company and we're pleased to have you today. As our press release and 10-Q will mention that we had a pretty solid quarter. Year-over- year revenues were down, yes.

But there's, if you read the quote provided by Virland there are some reasoning as to why our net income was down for the quarter. Let's take a call from Joseph and then we can continue, the question, sorry from Joseph..

Hello, good afternoon. And thank you for taking my call.

It just about ApplianceSmart, can you give us some color on why you think that it's turned the corner? What you think the positives are going forward for that division please?.

Virland, why don't you answer that question?.

Okay. One, margins are improving mainly because of a focus on out of box product versus inbox product, selling more of that as opposed to inbox. And we've significantly cut expenses on the February, March timeframe, such that - and we've also consolidated some stores that were not performing as well into stores that have been performing quite well.

So those are the major reasons for optimism..

Thank you.

Management at Live has been very actively involved with that division. I like to say that our other divisions have sort of been on autopilot. But ApplianceSmart as I like to say was in the intensive care unit for some time. But we've been managed to identify which stores were not performing well, we've been able to exit some of them.

Other ones were more negotiating with landlords on getting out of them. And then of course, the mix that Virland spoke about. Obviously, our margins are much, much greater on the out of box unit. So we've shifted and we've seen drastic changes in numbers just very recently. And we hope that in this quarter that it's really would have turned the corner.

We've done –well, how many stores do we have now?.

Nine..

We have nine stores. When we first acquired ApplianceSmart, we had double the amount of stores, so you can see the consolidation that we've done. We would rather own a company that's smaller, but profitable and healthy than a company that is much larger with big revenues in order to woo Wall Street. That's not what we're trying to do.

What we care about really is the bottom line.

So does that answer your question or do you have any other ones?.

Yeah. No, that gives me some good information. I appreciate it. Thank you. I'm all for that..

We do have a special guest today. Mr. West Godfrey. He runs our corporate division in Georgia. He's been with the company for - he's been a CEO of the company Marquis for some time now. And if anyone has questions, you're welcome to ask any time just press.

What do they have to do moderator?.

[Operator Instructions].

Star one. In the meantime, maybe we'll turn it over to Wes. Wes, maybe you can introduce yourself to our shareholders and give us a little bit of a - 30,000 foot view of what's going on in Georgia..

Thanks, Jon. I've been with Marquis, I've been CEO since July of last year and we've had a record fiscal 2019 so far, so real positive year going. Gross profits are up to 15% through Q1, for this first half of the year 17% overall, so really healthy growth. Our mix has been improving as well.

We've exited synthetic turf, yarn business and just really a low margin, low profit business and really grown our sales in the floor covering side, which is a healthier, more profitable business for us and we're seeing hard surface driving a lot of that growth.

So I guess we're manufacturing our own carpet, but the hard surface side is a little bit nerve wracking with the tariffs that are coming forward but we're working our way through that as we speak and managing to reduce the impact of those tariffs from 10% to 25%..

So what, you experienced as strong quarter despite the tariff issues that's going on politically right..

That's correct.

I mean, we've really been able to through some mix improvement, selling more flooring through our specialty retail partners versus some big box and getting out of that low margin turf business has really helped the bottom line and even despite the 10% tariff that we received where hard surface as a category for us through the year is up 26%.

So it's a healthy growing business, so we'll just have to see and mitigate the impact from this next round and hopefully it's not going to be too significant..

For everyone's information, Marquis Industries as a subsidiary performed better than last year. So year-over-year, there's an uptick in sales. Vintage was flat to maybe a little bit on the small decline very negligible. The majority of the decline in our revenues, I'm sure this is something on everyone's mind.

Why did we decrease from 52 million to 46 million in the quarter? I believe most of it, 90% plus of that decrease is really attributable to ApplianceSmart. And as I mentioned, we would rather have a smaller and leaner and meaner company than have lots of stores with - that not performing optimally.

So majority of the decrease was as a result of ApplianceSmart..

Any other questions?.

Second question from Joe, Joseph..

Yeah, as long as - there aren't other questions, I'm able to throw another one out there. So you bought back shares. And I just wondered how you think about looking for new acquisitions versus buying back shares and if you could give us some ideas about that..

Well, we're looking at any and all opportunities, I mean, what we primarily do here is try to allocate the capital that we have as efficiently as possible. But right now, I mean, we're trading at around one third of book value.

I would encourage anyone listening to if they know any company that's trading at these types of valuations, please let me know where they are. We would love to see them. So we are buying back shares as aggressively as we can, of course, we have to abide by securities rules, 10b-18. So we can't just arbitrarily buy whatever we want in a given day.

But on many days, provided we're not in a blackout period. We're buying the maximum that we legally can. When it comes to acquisitions, we look at anything and everything of course and we you know, we always have deals in the works was always my answer.

They always ask me, what deals are you buying something? We always have deals that we are, quote-unquote chasing. And once we find something that's good, we'll be ready. We have the low half, we have the ability to finance companies and we've done very well historically.

If you even look at our debt level - our debt to equity ratio, we have 90 million in total liabilities and 42 million of equity, that's a debt to equity ratio of 2.1, which is pretty healthy. Our loan with Comvest has decreased substantially.

And we've - by next month we would have paid down about one third of the total term loan in just a 12 month period. So we are very aggressively paying down higher cost debt.

This loan with Comvest used to be a $30 million loan today we're sitting at 18 million and if you look at our numbers that we have an excess cash flow suite, that number will be down to 16 million in the next week or so. So that's a pretty substantial reduction in liabilities there. So we believe that our numbers will continue to improve.

We're very focused on the bottom line and of course, our shareholders equity is very important. In our press release, you will notice that our basic - we're at $21.59 per common share. This is where our stockholders equity today stands and we're trading at below seven bucks..

Book value..

Book value or stockholders equity, yes, at $21.59 per basic common share..

Thank you. Thank you very much..

We've acquired 43,000 shares - 43,347 shares since the beginning of October, I guess our fiscal year. In just the last few months, our liabilities have decreased by about 12 million, almost 12 million bucks from 102 million down to 90 million while improving our bottom line settlement..

So it's staggering, so good..

Any other questions?.

[Operator Instructions].

Take a call from the - question from David..

Hey, Jon, I had a question from the - really, this is maybe just to refresh my memory. A long time ago you had done something with your shares. I don't know. Maybe saying you weren't - you couldn't sell.

So that's the difference between the basic and the diluted shares, correct?.

Yeah, we have a Series B. I decided to restrict my stock in December 2016. So the majority of my shares other than the ones that I bought on the open market and I bought, I believe on 25 plus occasions and I filed Form 4s.

Those are free trading, but I've never sold any of them, but yes, so on a fully diluted basis, I believe there's 214,000 shares of Series B. I can't remember the conversion ratio. I think it's five to one or six to one. But either way, yes, my shares are still restricted for five years from December 16, so takes us to December 2021..

Okay, super, thank you..

[Operator Instructions].

We had a call from John..

That's right Jon, how are you?.

Good.

How are you John?.

Doing pretty good. Thank you. Going back to the favorite aspect of the challenges on ApplianceSmart, I don't know if you saw the article for that in the Wall Street Journal about the impact of tariffs on appliances. There's an article about Whirlpool and the problems they're having.

I think knowing little bit about the operations, out of the box product maybe not as impacted as new product in the appliance business..

Yes, I have not read the article, but I do get the Wall Street Journal daily and I will look for it. I will look for it, I appreciate it. You bring this to our attention..

We are clearly aware of that John and that's again another reason for the shift in product mix. New appliances, especially appliances manufacturers overseas are subject to tariffs, they're subject to a number of things that could be adverse to the business. And so one, out of box product is more profitable.

Two, we're positioned better to sell it to our customer base. And that's really what our customers are looking for. And so we're going to do everything we can to mitigate any tariff increases or price increases from the core manufacturers. But the focus right now is an out of box product and enhanced margin..

Okay, thank you..

Thank you, John..

Thank you, John..

[Operator Instructions].

Another 10 seconds, if there's no questions we'll end the call..

Thank you everyone for your participation. And we look forward to speaking with you in our next Q in about three months. Thank you very much..

Thank you..

And this does conclude today's call. Thank you everyone for your participation. You may disconnect at any time and have a great day..