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 2027 first quarter results. As a reminder, this conference is being recorded. On the call today are Craig White, President and Chief Executive Officer, Heather Kopp, Chief Sales and Marketing Officer, and Dan O'Keefe, Chief Financial Officer. After the market closed this afternoon, the company issued a press release announcing its results for the fiscal 2027 first quarter results. The release will be available later today on the company's website at www.edctob.com. Before tuning into the prepared remarks, I would like to remind you that some of the statements made today will be forward-looking and unprotected 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 filing with the SEC for a more detailed discussion of the company's financial condition.

With that, I would like to turn the call over to Craig White, the company's president and chief executive officer Craig thank you Chloe and welcome everyone to the call we appreciate your continued interest I will start today's call with some general comments regarding the quarter then I will pass the call over to Dan to run through the financials after which Heather will provide an update on sales and marketing and IT projects and then I will provide an update on our plans for the rest of fiscal 2027 so during my In March, we ran a recruiting special surrounding our March 14th Pi Day, which yielded better than expected results. We added over 1,300 new brand partners, which brought our active brand partner numbers above 5,200, and we have maintained this level of brand partners to this day. This was a 20% growth in brand partners numbers since the end of last year, and continuing our brand partner growth is a key focus. Also, at the beginning of the quarter, we made several expense revictions, which are expected to exceed $1.2 million in savings for the fiscal year. These savings, which include decreases in pay for our executive team, were made to improve our cash flow and give us the ability to continue to execute our conservative purchasing plan to replenish some of our best-selling titles, as well as bring in new titles. bringing in new titles energizes our brand partners and gives our retail reps some new products to present i'm happy to say that many of these new titles came in throughout the last several months and we have introduced them with much very early success that is some confirmation that our strategy is on point the results for the quarter were driven by our lower revenue levels offset by lower expenses. The focus of our fiscal 27 turnaround plan remains on growing our revenue and brand partner levels back to pre-pandemic levels, and I'm happy with the initial progress our team has achieved. Heather will talk more about this progress in her marketing update. As I have said before, our turnaround plan is not an overnight change, but a carefully developed plan for growth over the next few quarters and years. With that, I'll now turn the call over to Dan O'Keefe to provide a brief overview of financials. Thank you, Craig. Our 2027 fiscal first quarter results compared to the first quarter last year included net revenues were $4.8 million compared to $7.1 million. Our average active brand partners for the quarter sold $5,300 compared to $7,700 last Loss before income taxes were $1.4 million in both quarters. Net loss totaled $1.4 million for the quarter compared to a net loss last year of $1.1 million in the first quarter. Loss per share totaled $0.16 compared to a loss per share of $0.13 on a fully delivered basis. Now for an update on our working capital. Inventory levels decreased from $37.7 million at the beginning of fiscal year 2027 to $36.2 million at the end of May, generating 1.5 of cash flow from inventory reductions. Our cash balance increased from $1.3 million at the end of February to $1.8 million at the end of the first quarter. I would also like to mention an unusual accounting adjustment we continue to make. Due to our head circle losses and operating expectations during the turnaround period, we evaluated the need for evaluation allowance for our deferred tax assets. Based on this evaluation, we continue to recognize evaluation adjustments offsetting the deferred tax asset and eliminating the tax benefit on our income statement. This adjustment has no cash flow impact but had a direct impact to our tax expense, net earnings, and earnings per share. When the company returns to profitability, this evaluation adjustment will be reversed. The reversal will have no cash flow impact. It will have a direct impact to tax expense, net earnings, and earnings per share. This concludes the financial update. I will now turn the call back to Heather Cobb for a sales and marketing update. Kevin?

Thanks, Dan. As Craig mentioned, our Paper Pie Day celebration in March delivered positive results across the business. The promotion generated strong recruiting activity, drove sales through our site-wide offer, increased engagement with our newly created account credits program, and helped introduce several new titles to customers. It was a great example of how coordinated initiatives can create engagement across multiple areas of the company at the same time. In April, members of our team attended the Bologna Children's Book Fair, the premier event in children's publishing. The fair provides an important opportunity to discover new content, strengthen relationships with our publishing partners, and evaluate future additions to our catalog. We also had the privilege of then traveling and celebrating many of our top performers during our incentive trip to Bermuda, recognizing those who continue to share our products and build thriving businesses, helping to expand our reach and impact. May brought the announcement of our next Storiescape incentive trip, which will take earners to Zion National Park in 2027. These experiences continue to be a powerful way to recognize achievement while inspiring future growth across the field. While brand partners were focused on serving customers and building their businesses throughout the spring, our home office team was busy preparing for Unfold, our annual convention. The event generated tremendous energy and optimism as attendees explored new product releases, participated in recruiting-focused initiatives, and received an early look at several technology enhancements currently in development. These include our new AI-assisted book buddy named Read, which launched this week, as well as our upcoming projects like our wish list and registry options and the ability to identify and market to specific audiences with targeted offers. The response to all of this reinforced what we're seeing throughout the organization, a strong belief in where we're headed and excitement about what lies ahead. Throughout this time period, our retail team was attending trade shows and showrooms, highlighting the new titles that we have available, as well as our vast backlist offerings. As we move forward through the summer months, our attention is centered on our well-read summer campaign. We're leaning into the growing consumer interest in analog experiences, reading, and intentional time together by focusing on book lovers and families seeking alternatives to screen-based entertainment. With additional promotions planned throughout the season, we believe that there are tailwinds to build on the engagement that we've seen so far this year. I will now turn the call back over to Craig White.

Thank you, Heather and Dan. As I mentioned before, we are happy with the initial results of our turnaround plan. Specifically, we are continuing our effort to build our brand partner levels, and they are excited about our new titles and our IT improvements. You heard from Heather about some of our recent IT initiatives are focused on making it easier to do business with us and adapting to the new way that different generations prefer to transact with us. This new generation presents challenges not just for our company, but many companies in the direct selling industry to revise their engagement methods. I can tell you that our sales and marketing as well as IT departments are working actively to ensure our strategies take into account this important group. Lastly, I want to thank all shareholders for their patience, our employees for their commitment to our mission, and our customers and brand partners for their loyalty. I'm confident that the steps we have taken and will continue to take will result in sales growth and our return to profitability. Now that we have provided a summary of some recent activity, I'll now turn the call back over to the operator for question and answer.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. To join the question queue, you may press star, then 1 on your touchtone phone. We will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To rejoin your question, please press star, then the number 2. We will pause for a moment to compile the Q&A roster. We have a question from Paul Carter from Capstone Asset Management. your line is open.

Thank you. Good afternoon everyone. Thanks for taking my questions.

Sure.

So first question is, well, it's a good question, Paul.

The challenge is, is we don't know, he's not a novo owner and we have no visibility to his ownership levels. So we could not include it in the proxy because we could not confirm his share ownership. Well, yeah, so it increased in March and then kind of remained pretty consistent through the end of the quarter. Yeah, based on the way we count active, you know, at the end of every month, there's some people that fall off that we had such a great addition that that's why we increased as a net.

That's a great question, Paul. Well, I would say we consistently offer a variety of different kind of recruiting initiatives and promotions, not only just because we know that different audiences may be paying attention at different times of the year, but also different things attract different audiences as well. And so when we offer any sort of recruiting special or promotion, it will vary in some way shape or form whether it's cost or what is available as part of the kit different things like that so we did a promotion immediately out of convention we have other promotions planned coming later in the year as well I don't think that we're are now or have ever been in the business that we can lean solely on a single promotion in a year and think that that is a place that we're in good standing direct selling as a whole is a business of you know people coming in and people staying and people going at some sort of um at some sort of level and so i think

that we're definitely looking ahead and planning ahead um both in the current day and in the coming six months to a year so does that answer your question well let me know a little bit paul While I'm certainly not forecasting what's going to be happening the rest of this year, I think this is evidence that our strategy is somewhat working. I mean, they were waiting for new titles, and now that we've released some new titles, everyone's excited. There's a buzz in the field. Convention was incredible. That's how it works. It's word of mouth, and while our brand partners are energized and excited and enthusiastic, it's just easier for them to recruit. So I think that's basically what's happening.

Actually, that's a really good point.

That's a great question. I will say we do look at all sorts of data like that. I think considering our new titles dropped, we released a few in March and April. But when I say a few, I mean that pretty literally. And so considering we're not even a full month into our full release of new titles, it's really too early to look at any concrete data that would show that.

I would say that we're still seeing impact related to that. The promotions that we ran and the site lights that we ran were wrapped surrounding our paper pie day, kind of was consistent with the promotions that we ran in the first quarter last year. So we don't see a lot of margin improvement yet.

So I know, like, Senadat, give or take?

Well, again, good question. It's kind of a balancing act, right? I mean, we need to bring in cash, but we don't want to reduce the value of our product. So it is, I mean, we look at it every single month. Okay, do we need to do something in the next quarter or things like that? So it's not, well, I'd like to say it's an overall strategy where we're not going to discount as much, and that is the case. But there's just times where it's necessary. Well, it's a great question. I'd like to say we're back, but we've just so recently come out of difficult periods. In fact, I am somewhat conservative, but I think you're right. We need to focus on new title acquisition and really make sure we're not missing the window of opportunity here. So it's a point well taken, and I agree with you. We need to try to reduce the times that we're discounting from it. So you're right.

I think I'll add, too, Paul, that when we do look at times that we're discounting, we're looking at it through a different lens. You know, when we were doing deep discounting across the board as a site-wide sale, that looks very different than some of the things that we've done recently where we've done more of a category sale approach. And so we've discounted a handful of titles as opposed to, you know, just an across-the-board, things like that, that while from an outside view it might look like, oh, they're still offering site-wide sales, if you dig a little deeper, you will see that move that will get us back to those normal gross margins without just stopping that activity altogether in anticipation that the consumers are ready for that.

Okay, that's great. That's very helpful. Well, that's it for me. Thanks very much, everybody. Thanks, Paul.

The question is from Ignocroxess. The line is open.

It's a little – there's an echo that makes it hard to hear you.

So it should be better now. Now it's a little better. about this. Okay, sounds good. So I have several questions, and hopefully I won't take that much of your time. So regarding the new, we're happy to see the new partners. I actually want to point out, I think I did the count today. This is the first time in 10 quarters that the partner number is actually up, not down. So that's nice to see. However, it doesn't look like it's translated into actual sales. and I understand this is the new partners and it takes time. So what's the typical ramp-up time when you start seeing the actual tangible results from these new partners?

Yeah, that's a great question. I think that, you know, that goes back a little bit to the question that Paul had about, you know, is it, you know, we've released new titles, we have these new brand partners, do we consider that a success? You know, we brought in these new brand partners in March. We have a decent amount of turnaround time. to get them into the culture, into selling, introducing new titles, different things like that. And so I would say within the next couple of quarters, we'll definitely see some of that fall into place in the bottom line.

Okay. So there is a significant lag. Just because you sign up new partners, it takes them time basically to get up to speed and to start delivering the revenue. You know, it's usually a couple of quarters length, right? That's how I understood this.

It can be. It can also happen the other way, where you see an immediate bolt to that, and then it continues. So it can happen either way. We just don't consider it completely negative if it doesn't happen that way immediately.

Right. So, sure enough, I know you put some effort in the promotion, but promotion cannot be continuous. How are you planning to keep the numbers of partners up going forward? What are your plans? What are you going to do differently because the count has been falling for, like, two years, and this time it seems to be turning around, but obviously you're just in the beginning of a turnaround. So what are your plans to keep the numbers up?

Yeah, I think that's a great question, And I think it's what Craig and I both mentioned and alluded to as we shared the summary. Two main things are making sure that our inventory that we have in place is really what consumers are looking for right now, whether that means new titles or staying in stock of some of the most beloved titles that we need to order reprints for and things like that. That's where our conservative phase purchasing approach, we really feel, is key as part of that strategy. The other thing is those IT initiatives that we mentioned. Some of the ones that we very specifically mentioned is they all filter through this lens of just removing any sort of friction points and making it easier not only for the consumer to actually make that purchase, but also for the brand partner to get the information to them and help them along through the process of finding what they're looking for.

Titles. I know it's not a precise equation, but could you give us some sense of how your mix of sales has changed or has it changed so far, like over new titles versus the title scanning of your inventory, or how it's going to change going forward to the percentages, or how do you think about it?

Yeah, that's a great question. You know, we are going to have to really dig through the data on that one since we haven't introduced new titles in quite a bit of time. And as we shared with Paul, we did that big drop in the middle of June, And so we aren't even a month into full sales cycle of new titles. So it really is too early to tell any of those percentages. If I were to give any sort of percentages right now, they'd be so inflated with people that are buying new titles because they're excited about them that it really wouldn't be accurate of the representation of what that means going forward.

Oh, so what's your – oh, sorry, go ahead.

Yeah, I was just going to add that the new title drop was in the second quarter, so it's not been reported. I just deleted in my summary that we're happy with the results. So you can take that however you'd like.

Okay. No, no, no. I get it. So whatever you're looking at, it's strictly old titles, so that makes sense. Speaking about the Q2, Q2, and I know you're not providing guidance, but Q2 is summer is usually the slowest water. Do you think this is going to remain this way? Is it always seasonally this way or something is different about the summer?

No, I think it's still hot and people are still on vacation. And so I think unless something drastically changes there, summer just remains just one of the lowest quarters for us as a whole.

So Q3 is basically where you'll probably see, like, the real results if things are turning around, right, basically speaking?

Well, all the results that we report, we're comparing not sequentially but year over year. So, I mean, even though Q-chips flow, we're still hoping and planning and working towards it being up over last summer. I'm not saying it is, but that's the plan.

Okay. So, you alluded that there is a significant expense reduction, I can see, that you are basically doing much better on a much lower revenue level, which is nice. I have a two-fold question. cash flow so you basically right now early some of that important because we understand there is a depreciation amortization and all that and I don't have you down in front of me but I just want to understand how what is your cash flow look like from operations is it really you were even even with your following revenue levels he was still able to pay the bank loan and the cash flow stayed positive. Is that still the story that you expect that your cash flow will still stay positive even at these reduced levels?

Well, I'll answer that on two points. The first point is that, you know, we had 1.4 million of operating losses in this quarter that we just reported, but our cash bill was at half a million So, you know, turning inventory into cash, it should translate into positive cash flow. Now, the key thing for us is sales growth, because the faster we grow brand partners, and now that we're able to have new titles for our retail side, the faster we grow revenues overall, the more cash we'll fill. Now, I don't have the crystal lens to tell you how much cash flow we're going to build, you know, over the next three quarters of fiscal 2027, but the plan is to be cash flow positive and hopefully be very cash flow positive. Okay.

So the cash flow, cash increase came out of your inventory reduction, not from the reduction of your accounts receivable, right? Is that what I'm reading from the parents?

Yeah, receivables dropped a little bit, but it was primarily from inventory reductions.

Okay, that's really great to hear, and that's sort of gives campus to investors hard. My last question, and it's sort of a comment. I know that I read your presentation, and that's one of the things it says. You said no to Amazon, but given that you have so much inventory, you have so many titles, and actually do the dig-dig into your titles, and you have some tremendous titles that have been around forever, and you have IP to them, intellectual property, the ownership. Do you guys would ever consider partnering with somebody to move some of your biggest inventory items, which are slow-moving, or you have too much, and maybe not making them exclusive and putting them on sale, maybe not building your own channels? I understand that takes cash and time, but maybe partnering with somebody to put them in a line store? Any thoughts to that?

Yeah, that's a good question. You know, we made the concerted, you know, effort and decision to not sell directly to Amazon over a decade ago, and we would say that we still consider that to be a good decision for us and both of our sales channels. We do focus on the retail side with brick-and-mortar stores mainly, whether it be independent bookstores or larger entities like a Barnes & Noble or someplace like that. In addition to that, our retail side, we have several partnerships with various different distributors and reps who sell through places, which it sounds like are ones that you are recommending, and we continue to work with places that are interested in potential large quantities. We've worked on that over time and are continuing to do so to sell off larger quantities of inventory where we can.

So right now, I believe you're something around 15% is non-partner revenue part. Do you think you can grow that part?

You know, I think it can grow. Can it grow to 50%? We don't anticipate that that's the case, but it definitely has the potential to grow. We've seen great response, not only in the book-selling side of it, but also in Toy and Gift, especially related to our Smart Life Toys division and our Learning Wrap-Up line. And so, yeah, I definitely think that there's room to grow. Okay.

Thank you very much. I don't have any more questions. Thank you for your question.

If there are no questions at this time, I would now like to turn the conference back to Quig. Please go ahead.

Thank you, everyone, for joining us on the call today. I always appreciate the questions and the interest. So, again, appreciate you, and have a good day.

This concludes today's conference. Thank you for attending. You may now disconnect.