Good afternoon, everyone. And thank you for participating in today's conference call to discuss Educational Development Corporation’s Financial and Operating Results for its Fiscal Second Quarter and Fiscal 2023 Year-to-date Results. As a reminder, this call is being recorded. I would now like to turn the conference over to your host, Steven Hooser, Investor Relations. Please go ahead.

Thank you, Michelle, and good afternoon, everyone. Thank you for joining us today for Educational Development Corporation’s second Quarter and fiscal 2023 year-to-date earnings call. On the call with me today are Craig White, President and Chief Executive Officer; Heather Cobb, Chief Sales and Marketing Officer; and Dan O'Keefe, Chief Financial Officer. We will also be joined by Randall White, Executive Chairman of the Board during the question-and-answer session. After the market closed this afternoon, the company issued a press release announcing its results for the second quarter and fiscal 2023 year-to-date. The release is available on the company's website at www.edcpub.com. Before turning to the prepared remarks, I would like to remind you that some of the statements made today will be forward-looking and are protected under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those expressed or implied due to a variety of factors. We refer you to Educational Development Corporation's recent filings with the SEC for a more detailed discussion of the company's financial condition. With that, I will now like to turn the call over to Craig White, the company's President and Chief Executive Officer. Craig?

Thank you, Steven, and welcome everyone to the call. We have quite a few people here today; it looks good. I will start today's call with some general comments regarding the quarter. I'll then pass the call off to Dan and Heather to run through the financials and provide an update on our sales and marketing. I'll then wrap up the call with some comments on product strategy and outlook. During the second quarter, we continued to feel the negative impacts of high inflation in the U.S. market—soaring costs have reduced the disposable income of families with young children, which is our target customer base. While we hope to see these pressures subside, we are making strategic adjustments to address our own increased costs, including an increase to the amount we charge for freight on outbound shipments. We are using extreme caution with these price increases, working to balance our increased costs while being sensitive to our customer's financial situations. Additionally, during the first quarter earnings call, I discussed our new distribution agreement with Usborne Publishing Limited, our U.K.-based supplier of Usborne products. The new agreement continues to allow uninterrupted sales through the UBAM division. However, there was some initial uncertainty from our consultant sales force about the ongoing relationship and how it might impact them. This resulted in a reduction in new recruits by 38% from the second quarter of last year. While we continue to manage through this impact and the changes created, not just from the pandemic, but also from additional global headwinds and other items within our business, I am proud to see the resiliency of our team. Profitability is the cornerstone of our business, and although we have had some recent shortcomings while managing through this rapidly changing environment, we are working hard and remain laser-focused on returning the company to its long-standing profitable state. Once we return to profitability, we will look to reinstate our historical practice of paying quarterly dividends. With that, I will now turn the call over to Dan O'Keefe to provide a brief overview of the financial highlights for our second quarter of fiscal 2023.

Thank you, Craig. Turning to the second quarter, net revenues were $19.4 million, a decrease of $13.6 million or 41.2%, as compared to $33 million in the second quarter of fiscal 2022, or a decrease of 16.4%, as compared to $23.2 million during the first quarter. The decline in revenue was primarily due to the lower active consultant count of our UBAM division coupled with rising inflation, which caused a reduction in disposable income for families within our target market. The average active UBAM sales consultants totaled 26,800, compared to 46,100 in the same period a year ago and 32,200 in the first quarter of this year. Although consultant counts continue to trend down, we expect this to stabilize throughout the remainder of the year. Our loss before income taxes was $1.1 million, a decrease of $3.8 million or 140.7%, compared to $2.7 million in the second quarter last year. Net loss totaled $0.8 million, compared to $1.9 million, a decrease of $2.7 million or 142.1%. Losses per share totaled $0.10, compared to $0.23 of earnings, down 143.5% on a fully diluted basis. Now turning to our year-to-date highlights. We recorded net revenues of $42.6 million, a decrease of $31.2 million or 42.3%, compared to $73.8 million during the same period last year. Again, the decline was primarily due to the lower active consultant count coupled with rising inflation. Average active UBAM sales consultants totaled 29,500, compared to 50,200 for the first half of fiscal 2022. Keep in mind that the first half of last year was the strongest period in the company's history, due to the major short-term benefits we experienced in relation to the pandemic. Our losses before income taxes for the six months was $0.8 million, a decrease of $8.1 million or 111%, compared to earnings of $7.3 million during the same time in fiscal 2022. Net loss totaled $0.5 million, compared to $5.3 million for the first half of last year, a decrease of $5.8 million or 109.4%. Losses per share totaled $0.07, compared to earnings of $0.63 from the first half of fiscal 2022, down 111.1% on a fully diluted basis. To update everyone on our inventory, we finished fiscal 2022 with approximately $74 million in inventory as of the end of February of this year. At the end of our second quarter of fiscal 2023, we have reduced our inventory to approximately $68 million. We expect to continue driving this inventory back down to historical levels throughout the remainder of the year and into calendar 2023. The major impacts of reducing our inventory will be to bring down our working capital borrowings. Lastly, as Craig mentioned in his previous comments, the strategic decision we have made to temporarily postpone our quarterly dividend currently improves our quarterly cash flows by approximately $1 million per quarter. That now concludes the financial update. And I will turn the call over to Heather Cobb, our Chief Sales & Marketing Officer to further discuss sales opportunities and the UBAM division.

Thank you, Dan. As Craig mentioned previously, our business is continually facing headwinds or tailwinds depending on both the change in discretionary cash flow of our customers and the change in unemployment or inflation impacting our consultant network. Fortunately, we can capitalize on these tailwinds and adjust our promotions during these challenging periods like we are now, when consumer discretionary spending has declined. We are not sitting idly by watching the impact of the market; we are constantly changing our marketing and sales strategies to maximize our opportunities while not straying from our overall long-term strategy. We have run recent sales and marketing specials and we'll continue to do so. I'd like to highlight just a few of those. In May of this year, we started our trip earning period, which is a new timeframe for us; we traditionally start in June. When we did that, it resulted in an uptick in May sales. In May and June, we provided various discount promotional opportunities on our products. Our consultants were able to offer these to their customers, which resulted in increased sales for them. July promotions included free shipping opportunities, as well as the ever-popular release of new titles. We have more promotions coming that will be announced later. A convention update: in June, we hosted our annual UBAM National Convention, and for the first time ever this year, it was a hybrid in-person & virtual event. While our in-person convention attendance numbers were promising, net profits were down from the prior two years when our convention costs were minimal since we were 100% virtual. However, having an in-person convention is still the most desirable event as it's the lifeblood for retention and recruiting. We will adjust our strategy with budgeting and offerings to ensure a more positive net impact for not only next year but beyond. We have run several recruiting specials throughout the summer. During the second quarter, we added almost 6,000 new consultants, many of whom can be attributed to specials we were offering. New consultant additions and recruitment levels are similar to the height of last year, but we are continuing some recruiting specials and additional options in the third quarter. We continue to have strong leader levels within our UBAM division; our leader levels remain above 10% of our total active consultants, which is the highest level in the event's history. The leaders tend to be our top recruiters and sales generators, receiving bonus payments monthly based on their sales and those of their teams. As these leader levels remain strong, we continue to expect positive recruiting results. I would like to remind everyone that UBAM has been in the industry for over 30 years. In high inflationary periods, we usually see growth in active consultants as more families look for supplemental income to offset increased living costs. We are working to create and support opportunities that will enable that to happen again. This concludes the sales and marketing update. I'm going to turn the call back over to Craig White for closing remarks.

Thank you, both Heather and Dan. I would like to make a couple of additional comments to expand upon my earlier remarks regarding our recent Usborne Agreement. First and foremost, our new agreement does not change the 40-plus year relationship we have with Usborne Publishing. Secondly, since executing the new agreement, we have made concerted efforts to address the concerns from our consultants and new recruits regarding the ongoing relationship and the potential impacts to our consultant sales force. We have since made livestream presentations, recorded question-and-answer sessions, and involved our consultants in the changes outlined in the new distribution agreement. As such, we are confident in the changes we have made and expect our UBAM recruiting efforts and results to be more productive, leading to stability in this division in the coming months. As a reminder, during inflationary times, we have historically grown our consultant count as more families look for non-traditional income to offset rising living costs. However, this is an extremely unique employment environment that we are all faced with. As Heather mentioned, our sales and marketing team is making exciting changes. We are creating new ideas to promote our products and excite our sales force and to grow our active consultant count. We also expect to see continued strength from sales channels that are coming back online, such as school book fairs and booth events. Regarding the rising costs and actions we are taking, we believe the increased charges on outbound freight, along with other changes we have made to our cost structure, will offset the ongoing negative cost impact from our outbound sales orders. These strategic changes, along with our overall reduced labor costs, are expected to restore profitability even at lower sales volumes. As Dan mentioned, we have a strong balance sheet, inventory that will turn to cash, and we have made changes to our cost structure to drive profitability. Our priority remains unchanged as we work to sustain profitability, pay down our working capital line, restore our dividend, and look for additional products or content to offer that we can acquire or create. Now that we have provided a summary of some of our recent activities, I will turn the call back over to the operator for the question-and-answer session.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. The first question comes from Edward Noricia, Private Investor. Please go ahead.

Can you hear me?

We can.

Okay, Craig, I'm a little confused about the Usborne contract with your publishing division. Can you explain the impact of the new contract on your publishing division? Please proceed.

We didn't address the impact on our publishing division so far in this earnings call. We are just addressing our multilevel marketing division. But as of November, they are taking over traditional publishing sales in the U.S. It's about a $7.5 million impact to our sales.

Okay. And my follow-up question is, what level of inventory do you feel is appropriate for the company with this reduced consultant level?

Well. Yes, sales are driven by consultant, so we don't necessarily think of inventory levels by consultant. But yes, we are over inventory. We're at about $67 million. The appropriate level for a company our size right now would probably be closer to $40 million to $45 million. So we're not making any more purchases of our books right now, and you should just be turning that inventory into cash. Nothing spoils or expires or goes obsolete. So we just got to work through the inventory and turn it into cash.

And I'll add to that, Ed, we're entering into typically in August, which is our highest season. August is the highest inventory we have during the normal year because that's when we're going into our busiest selling season, which is our third quarter. So we expect to see a strong impact this quarter in our inventory turnover.

Okay. Follow-up question, do you have a certain amount of books or dollar amount you need to buy from us for keeping the agreement in force per year?

Yes, there were some minimum amounts that we negotiated in the contract, and we were close to that. We were just short of it, but I'm not going to buy inventory just to put our company in jeopardy. I'm going to keep it strong.

The contract has an ongoing inventory volume requirement for a normal year, Ed. Historically, we have done well over that purchasing volume; it's a little bit unique right now as Craig said, we're working down excess inventory. But under normal circumstances, we shouldn't have a problem hitting that minimum inventory required or minimum purchase requirements outlined in our contract.

Okay. Thank you.

Thank you. The next question comes from Nick De Postella of NR Management. Please go ahead.

Hi, can you just give us some balance sheet figures, cash inventory, debt, etc.? I didn't see them in the press release. Thank you.

Yes. Good, Nick. Just to clarify, we'll be filing our 10-Q later today, and it'll have all those figures. Our cash position is less than $1 million because we sweep all our cash to our working capital line. Our line of credit was around $13 million at the end of the quarter, and our inventory was right around $67 million at the end of the quarter. Again, we look to be turning inventory into cash now during our busiest quarter of our fiscal year, which is between September and November. So we look for inventory to continue to decline, as well as working capital availability to increase this quarter.

Okay, so at the end of the next quarter, what kind of forecast do you have for where inventory would be at and cash?

If you have that crystal ball, could you share it with us?

It’s kind of a target.

We have recently made adjustments to our outbound freight and reduced our operating costs to ensure profitability even with decreased revenues. If we are profitable this quarter, any sales will convert inventory into cash, which will help improve our working capital availability. While I can't predict exactly how much our inventory will decrease from $67 million by the end of the quarter or fiscal year, I do expect it to decline. It’s important to note that much of our inventory consists of our best-selling products. During the rapid growth we experienced in 2020 and 2021 due to the pandemic, we faced shortages on about 25% of our titles, with many of our top-selling items being out of stock for extended periods. When planning reorders at those revenue levels, we placed substantial orders for inventory replenishment. Currently, we have a significant amount of our fastest-moving titles in stock.

I understand. Okay. And just, do you have any issues with your lenders or is there any apprehension or concern at this point?

Well, we have a new relationship with our lender. We closed in August, and it's a very positive relationship. They understand our high inventory position, and because they understand it, they came to us and said, look, we're not going to put unreasonable debt covenants on you this first year because we know you're working down inventory. With our new agreement, we don't have a lot of traditional covenants that you would normally have; we have basically one covenant that's really tied to the real estate and it's called a fixed charge ratio, which is more the real estate debt covenant than a working capital covenant. But they understood our inventory was high and know we're going to be turning it into cash. Yes, we were in this position back in 2017, when we had excess inventory and we worked through it. It will take a few quarters to do this, but we will be back in a normal working capital position next year.

Okay. Thank you so much, and best of luck.

Thank you.

Thank you.

Thank you. There are no further questions at this time. I would like to turn the call back over to Craig White for closing remarks.

Thanks everyone for joining us on our call today. We appreciate your continued support and look forward to providing you with additional updates when we report quarter three in January. Additionally, we will be presenting at the Southwest Ideas Investor Conference in Dallas on November 16 and 17. For more information on this event, please contact Three Part Advisors. With that, thank you everyone, and we'll talk to you next time.

Thank you, everyone.

Thank you. Ladies and gentlemen, this does conclude the conference call for today. We thank you for participating and ask that you please disconnect your lines.