Good day, everyone, and welcome to the First Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. Later you will have an opportunity to ask questions during the question-and-answer session. [Operator Instructions] Please note, this call maybe recorded.

It is now my pleasure to turn today's program over to Greg Powell, Director of Investor Relations. Please, go ahead..

Thank you, Gretchen. Good afternoon, everyone, and welcome to the Live Ventures fiscal 2023 first quarter 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 material due to the 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 new information, future events, changes in assumptions or otherwise. You can find our press release and 10-Q referenced on this call in the Investor Relations section of the Live Ventures Web site.

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

Thank you, Greg, and good afternoon, everyone. Overall, the company delivered $69 million of revenue, $1.8 million in net income and $7.5 million of adjusted EBITDA, in spite of a challenging economic environment.

As evidenced by our acquisition of flooring liquidators, we continue to execute our multi-level buy-build-hold strategic plan to maximize stockholder value. In addition, we repurchased 24,710 shares of our common stock during the quarter.

Before we jump into the numbers, let's briefly discuss the Flooring Liquidators acquisition that we announced in January. We are very excited about the Flooring Liquidators acquisition. Flooring Liquidators is a leading retailer and installer of floors, carpets and countertops to consumers, builders and contractors in California and Nevada.

Over the years they have established a strong reputation for innovation, efficiency and service in the home renovation and improvement market.

The transaction valued at approximately $84 million was financed through a combination of cash, debt and the issuance of 116,441 shares of our common stock, representing a 3.78% dilution of Live Ventures fully diluted common stock.

Our expectation is that, Flooring Liquidators will add a significant new revenue stream of approximately 125 million per year. We believe there are strong growth opportunities in all three of Flooring Liquidators' divisions, retail builder and franchise mobile store model.

We look forward to sharing the results with you beginning with our next earnings reports. Now, I will discuss the financial results for our first quarter. Total revenue for the first quarter decreased to 69 million, down 8.2%, as compared to 75.2 million in the prior year period.

The decrease in revenues is due to lower revenues in the flooring manufacturing, retail and corporate and other segments. Flooring manufacturing revenues of $26.4 million decreased approximately $6.4 million or 19.6% as compared to the prior year period. The decrease is primarily due to reduced demand as a result of general economic conditions.

Retail revenues of $23.3 million decreased approximately 2.9 million or 11.2% as compared to the prior year period. The decrease is primarily the result of reduced demand due to inflationary pressures, supply chain issues in the overall product sales mix.

Steel manufacturing revenues of $18 million increased approximately $5.6 million or 45.4% as compared to the prior year period. primarily due to the acquisition of kinetic. Corporate and other segment revenues decreased approximately $2.4 million partly due to the decreased revenues at SW Financial.

Gross profit for the quarter was $21.9 million, down from $27.6 million in the prior year period. The gross margin percentage for the company decreased to 31.8% from 36.7% in the prior year. This decrease is primarily due to the tightening margins in our Flooring and Steel segments.

Flooring manufacturing segments gross profit margin decreased to 17.6% as compared to 27.5% in the prior year. This decrease was primarily due to increases in raw material cost and lower demand. Retail segments gross profit margin increased to 52.5% as compared to 51.1% in the prior year. The increase is primarily due to fluctuations in product mix.

Steel manufacturing segments gross profit margin decreased at 24.4% as compared to 29.2% in the prior year period. The decrease in profit margins, primarily due to increases in raw material costs as well as the acquisition of Kinetic.

General and administrative expense increased by 3.1% to approximately $14.6 million as compared to the prior year period. The increase is primarily due to the acquisition of kinetic, partially offset by decreases in professional fees and other general and administrative expenses.

Selling and marketing expense decreased by 9% to approximately $2.8 million as compared to the prior year period. The decrease is probably primarily due to a decrease in trade show and convention activity related to our flooring manufacturing segment.

Operating income decreased to $4.6 million for the first quarter of 2023 as compared to $10.4 million in the prior year period. The decrease in operating income is primarily attributable to lower gross profits as a result of inflationary costs increases.

First quarter interest expense increased approximately $1 million as compared to the prior year period. The increase is primarily due to increased debt balances as a result of the Kinetic acquisition and increased interest rates. Quarter net income was 1.8 million as compared to net income of $6.5 million in the prior year period.

Diluted EPS for the first quarter was 60 cents per share as compared to $2.04 per share in the prior year period. And adjusted EBITDA for the first quarter was $7.5 million, a decrease of approximately $4.6 million as compared to the prior year period.

Turning to liquidity, we ended our first quarter with cash of $12.8 million and cash availability under our various lines of credit of $21.2 million for a combined total liquidity of $34 million. I would like to highlight our low level of leverage. As of the end of our first quarter, our net debt to last 12 months adjusted EBITDA ratio was 2.3 times.

We maintained a low level of leverage, while purchasing two new businesses in the last 12 months, repurchasing shares and making significant capital investments in our businesses. We have working capital of approximately $78.1 million as of December 31, 2022, as compared to $78.4 million as of September 30, 2022.

Total assets increased $279.1 million as compared to $278.6 million as of September 30, 2022. In total stockholders' equity increased $1.2 million to $98.4 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.

As previously disclosed, the company announced a 10 million common stock repurchase plan in 2018. During the first quarter, we repurchased 24,710 shares of common stock at an average price of approximately $25.16 per share. As of December 31, the company had approximately $3.4 million available for repurchases under this program.

In conclusion, while we continue to face significant macroeconomic headwinds, we believe we are well positioned to continue to deploy our capital in a smart, focused, disciplined manner to create long term stockholder value. We will now take questions from those of you on the conference call. Operator, please open the line for questions..

At this time, we will open the floor for questions. [Operator Instructions] And our first question comes from Theodore O'Neill with Litchfield Hills Research..

Hi..

Hello..

Hi, Theodore..

Sorry. Hi, guys. Yeah. Well congratulations on a good quarter despite the issues here.

Last quarter, and this quarter both sided inflation as issues for the retail segments and the flooring segment, do you see any abatement of that now that we're here in February?.

We are seeing some abatement in that, but we believe it's just going to take some time for it to really funnel through, and be able to start driving up our margins..

And I know you talked about the flooring acquisition, in your prepared remarks at the beginning, is there any kind of guidance you can give us as to how the revenue might flow in over the subsequent quarters coming up?.

We don't give guidance on – but I mean, we have noted that, we expect around 125 million per year, so I would just kind of prorate that. I think it's a great start..

Okay. That's fine..

None of the figures that you see in the queue here reflect anything from Flooring Liquidators, because it was purchased after the end of the quarter..

Understood..

So next quarter, you should see revenues flowing from Flooring Liquidators, and we put in our press release that we expect about 125 billion here, could be more, could be less than just a high level number..

Okay. Thanks, guys. In the steel manufacturing segment is there.

Is there any seasonality to that – to that business that would – that would make revenue maybe go up next quarter or few quarters here?.

I don't think so. No, there's moderate seasonality but not significantly in the steel segment..

Okay. Thanks very much..

Thanks, Theodore..

[Operator Instructions] We'll take our next question from Joseph Kowalsky..

Hi, gentlemen and thank you. Thank you for the hard work and good quarter. I have several questions. So just stop me if I'm taking up more than my fair share of time. If that's all right..

Go ahead..

First one. First one is I'm not an accountant. And I just want to understand the dilution compared to the increase in the asset value. I mean, we are getting a new asset for that dilution. So it sounds like some stockholders equity is up.

Does that mean that that each share actually owns more even after the dilution, given the new asset that has become part of the portfolio?.

That dilution is just representative of the number of shares that we issued in connection with the deal and that – so there's no – it's just strictly the number of shares that are outstanding. How many did we add and to what percentage is that I would say overall..

That I understand. That I understand. What I'm asking you is that the actual assets that each share owns, did that go up, given the new….

Yes, yes, we'll have assets that will allocate that you know, towards that. We've also noticed that it's – we're valued at roughly 84 million, so we have 84 million of additional assets..

Got it? All right. My next question is….

The word you're looking for is an accretive deal. It is….

Thank you, yes. That’s exactly what I looking for….

Deal for the shareholders because there's a very small share issuance valued at around 5 million for what we disclosed. So you will see equity, shareholders equity rising and then you will see in the future, the future cash flows hitting, the return per share will be hopefully higher..

Thank you for pulling the word out that I was looking for. I appreciate it. That is what I was looking for. And I appreciate the elucidation. It's what I thought from when I first read it, but I just wanted to make sure that I was correct on that.

Why do you use a fiscal year compared to a calendar year?.

Gosh, we've always been on at 9/30 for a while. So honestly….

I mean, is there a benefit to the company? Is there a detriment, or is just you know, because you have? I just don't know….

There's a plethora of companies listed. Good question, Joe. There's lots and lots of companies that have fiscal year ends that are not 12/31 Many of them. I think Apple is using June 30 or something..

I know..

You know, I don't think that there's an actual reference. I mean, I think our auditors prefer that we're not 12/31 because that's when they're super busy doing their slower times, so there's no real good answer for that..

Okay. All right. That's fine. I just didn't know if there was a business benefit and that's why it was done or not. Okay, you mentioned macroeconomic headwinds.

You both mentioned it and I just wondered if that's – you expected that in all areas, in all of your subsidiaries or in more in particular areas than another's?.

Yeah, I believe that. I mean, the macroeconomic conditions really is going to impact everyone but to different levels.

I think right now we're kind of seeing more of it on the manufacturing side, particularly with respect to flooring, which they've got issue just with housing market and the increase in interest rates that will impact kind of the demand for flooring..

Thank you. And then my last question, so I guess I made it through them all. Salomon Whitney, are you still planning to buy the remainder of the shares outstanding? Number one, I guess, actually, there are several questions relating to Salomon Whitney.

What is their total assets under management? And what made you decide to go after them in the first place? I don't know that it seems to fit with the other purchases that you've made..

Yes, so -- yes, a bunch of questions in there. In terms of the go forward plan, we continue to review strategic alternatives and assess what makes the most sense in terms of the remainder of the ownership shares. In terms of what we liked in the first place, it was an accretive acquisition and we saw a lot of opportunity for growth.

So while we have historically been more focused on manufacturing and asset intensive businesses, we liked and like the ability to open up new offices and continue to grow through investment. We always look to be able to invest further, continue to invest in the acquisitions we make and look for ROI there.

And we think that provides an attractive opportunity..

And as far as their total assets under management currently?.

I don't know that I have that number off the top of my head. But it hasn't been disclosed. I can certainly try to look for the next quarterly earnings call..

I appreciate that.

And the last question about them is, last time I asked you about them, you mentioned that they were -- it was a smaller focus on RIA then on brokerage, and I wonder if that's changing or if that's still the case?.

No. And I -- and in fact, I misspoke. It's entirely on the BD and not on RIA. So appreciate you actually bring that up, because that was a misstatement..

I'm sorry, you're saying, it's entirely BD not RIA, did I hear correctly?.

Correct. That is correct..

And is that intended to stay that way, considering RIA?.

Again, continuing to look at all opportunities, but the current focus is entirely on the BD, on the broker dealer..

Okay. Thank you very much..

Appears we have no further questions at this time..

Okay, great. Thanks for joining us on the call. We look forward to speaking to you later. Thanks..

And thank you, ladies and gentlemen, this does conclude today's conference. You may now disconnect..