Good day, everyone, and welcome to today's Live Ventures Incorporated Third Quarter 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. Please note this call may be recorded, and I will be standing by should you need any assistance. It is now my pleasure to turn today's program over to Greg Powell, Director of Investor Relations. Please go ahead.

Thank you, Brittany. Good afternoon, everyone, and welcome to the Live Ventures third quarter fiscal 2022 conference call. I'm here this afternoon joined by Jon Isaac, our Chief Executive Officer and President; Eric Althofer, our Chief Operating Officer; and David Verret, our Chief Financial 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 materially due to the number of factors, including those outlined in our latest Forms 10-K and 10-Q 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 referenced on this call in the Investor Relations section of the Live Ventures website. Earlier today, we filed our 10-Q with the SEC. I direct you to our website, www.liveventures.com or www.sec.gov for a copy of this quarter's 10-Q and other historical SEC filings. I will now turn the remainder of our call over to David to walk through our financial performance.

Thank you, Greg, and good afternoon, everyone. Overall, the company delivered a solid third quarter 2022 performance, representing the three months ended June 30, 2022, despite increasing economic headwinds and inflationary pressures. During the third quarter, we continued to execute our multi-pronged capital allocation strategy to maximize shareholder value. Before we jump into the numbers, we should discuss the biggest event of the quarter. At the end of June, our Steel Manufacturing segment acquired The Kinetic Co., Inc., a 74-year old Wisconsin-based company. Kinetic is a highly recognizable and regarded brand name in the production of industrial knives and hardened wear products for the tissue, metals and wood industries. It is known as a one-stop shop for in-house grinding, machining and heat treating. We believe that Kinetic is a great fit within our growing Steel Manufacturing segment. Now we will discuss the financial results for the third quarter. Total revenue for the third quarter decreased slightly to $68.3 million, down 1.2% as compared to $69.1 million in the prior year period. Revenue decreased in the Retail and Flooring Manufacturing segments, which was partially offset by increased revenue in the Steel Manufacturing and Corporate and Other segments. Flooring segment revenue decreased 6% to $32.2 million as compared to $34.2 million in the prior year period, primarily due to reduced customer demand. Retail segment revenue decreased 11.5% to $19.2 million as compared to $21.7 million in the prior year period. The decrease is primarily due to reduced demand as a result of inflationary factors. Steel segment revenue increased 15% to $15 million as compared to $13 million in the prior year period. The increase in revenue was primarily due to increased sales prices resulting from rising costs. Finally, approximately $1.8 million of the increase in Corporate and Other segment revenue was due to Salomon Whitney becoming a consolidating variable interest entity in 2021. Gross profit for the third quarter was $22.3 million, down from $25.1 million in the prior year period. The gross margin percentage for the company decreased to 32.7% from 36.3% in the prior year period. The decrease in the gross margin percentage is primarily due to inflationary pressures, which resulted in increased raw material costs. The Flooring segment's gross profit margin decreased to 23.2% as compared to 28.8% in the prior year period. The decrease is primarily due to increases in raw material costs. The Retail segment's gross profit margin decreased slightly to 53.2% as compared to 53.8% in the prior year period. The Steel segment's gross profit margin increased to 26.8% as compared to 26.2% in the prior year period. The increase is primarily due to increased sales prices resulting from inflationary pressures. General administrative expenses decreased by 2.8% to approximately $13.4 million for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021, primarily due to decreases in taxes and license costs, legal expenses and employee variable compensation costs, which were partially offset by costs associated with the acquisition of Kinetic. General administrative expenses as a percent of revenues decreased to 19.6% of revenue as compared to 20% in the prior year period. Sales and marketing expenses for the third quarter were $3.1 million as compared to $3 million in the prior year period. Sales and marketing expenses as a percentage of revenue were 4.5% as compared to 4.4% in the prior year period. Operating income was $5.9 million for the third quarter, a decrease of $2.4 million or 28% as compared to the prior year period. Net income of $3.5 million for the three months ended June 30, 2022, decreased $6.5 million or 65.1% as compared to the prior year period. The decrease is primarily attributable to fiscal year 2021 gains on settlement of debts of approximately $5.4 million, including a gain on the payroll protection program loan forgiveness. Diluted EPS for the current quarter was $1.11 per share, a decrease of 63.2% as compared with the prior year period. Adjusted EBITDA for the third quarter of 2022 decreased 9.5% to $8.8 million as compared to $9.8 million in the prior year period. The decrease in EBITDA is primarily due to the decrease in revenue and an increase in the cost of revenue resulting from inflationary pressures. The reconciliation of adjusted EBITDA has been provided in our earnings release and in the 10-Q. Turning to liquidity. We ended the quarter with cash of $3.6 million and cash availability under our various lines of credit of $32 million for combined total liquidity of $35.6 million. Net cash provided by operations was approximately $10.8 million for the nine months ended June 30, 2022, as compared to net cash provided from operations of approximately $32.2 million for the nine months ended June 30, 2021. The decrease was primarily due to purchases of inventory and inflationary pressures on raw material. Working capital for the company at the end of the third quarter was $72 million as compared to $33.8 million as of September 30, 2021. The increase is primarily due to net assets received from the acquisition of Kinetic and an increase in inventory. Total assets increased $51 million or 24.1% to $262.8 million as compared to $211.7 million as of September 30, 2021. Cash flows provided by financing activities increased approximately $20.8 million during the nine months ended June 30, 2022, primarily due to proceeds from borrowings under revolver loans and issuance of notes payable, which was primarily associated with the acquisition of Kinetic. As part of our capital allocation strategy, we may do 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 quarter, we repurchased 14,160 shares of common stock at an average price of approximately $23.31 per share. Year-to-date, we have repurchased 79,828 shares of common stock at an average price of approximately $31.67 per share. The company has repurchased 498,298 shares of its common stock for approximately $5.8 million under this program. As of June 30, the company had approximately $4.2 million available for repurchases under this program. In conclusion, while the current business environment remains challenging, we remain optimistic about our ability to navigate the environment and drive long-term returns for our shareholders.

We'll take our first question from Joseph Kowalsky with Upstream Investment Partners. Your line is open.

Thank you very much. That's close, it's Kowalsky. But great job, and continuing great job on this. And I'm really happy about the Kinetic acquisition. I think that's really terrific. I have several questions. I know there aren't usually a lot of questions on these calls. So just – I'm going to go into them and just stop me if I'm going beyond my fair share. You have something on there that says corporate and other in the revenue, and I'm just not clear. I think SW Financial is included in that. What else is included in the revenue from corporate and other?

It's also the call center for the Live corporate. So the corporate office is in there.

The corporate, but what revenue comes from that?

There's a little bit, a very immaterial amount of – I mean, it's pretty much all Salomon Whitney in the revenue.

Okay. And then, I didn't see free cash flow listed. Do you list that? Do you have that?

We have not listed the free cash flow.

Okay.

And the 10-Q is our cash flow statement.

We have a cash flow statement.

Oh, it is in there. Okay. I'll take a look at the Q. I'm sorry.

$20.8 million during the nine months ended June 30, but you'll see it in the 10-Q.

Okay, great. The nine-month numbers, when was the PPP gain included? Was that included in the 2021 numbers or the 2022 nine-month numbers?

It was in the 2021 June numbers.

It was in the June quarter.

The prior quarter.

Okay. So then it would've been in the June, the 2021 nine months as well. I'm sorry, yes. Are you intending to...

That is why you see a material decrease in our net income this quarter versus last year's quarter because of the PPP forgiveness, which was, I guess, the non-cash income, and this year we don't have it.

Yes. No. I understood that. I saw that and I was just – I wanted to make sure that I was reading it correctly as far as when it came in. And I thought that's – I mean, that only made sense, but I still wanted to double-check it. Do you intend to take a larger holding in Salomon Whitney? Or is that – is that something you've disclosed? Or is that something you're considering? Or is this intentional? Because I mean, generally you buy companies outright, you don't usually take – at least in the past, haven't taken partial holdings.

That's correct. And the unique situation here is that to get that majority or 100% ownership, we need approval from FINRA. And so that is a long process and we're kind of working through that now, but we have to wait for that before we get the complete ownership.

And good luck with FINRA, they're always fun to deal with. What is the current outstanding debt? It must be there, but somehow I just missed it, I guess.

You want the current portion of debt? Let's see. So we have…

Well, long-term...

For long-term debt, we have $49 million in long-term. And well actually, I think I have it. I think it's the older one. Hold on. I got that for you.

I've got it. If the current portion is $18.4 million and the long-term debt is $58.5 million.

$58.5 million. Okay. Thank you. And I have just two more questions, if that's okay.

Sure.

Okay. Thank you. Appreciate it. What percent of the shares repurchase, what percentage was that of the total shares outstanding? I just don't know how many are at this point are outstanding. So I guess you could tell me that too, and I could do the calculation.

We have a total of 3,081,000 shares outstanding.

So it's about half percent approximately.

Okay. All right. Great. And were any of the shares that were bought back reissued? That is for employee stock purchase plans, anything like that?

No.

Okay. And then finally consideration of new ventures, I was just wondering how you go about finding companies that you might be interested in. If you're looking at things, you've typically done things that are very vanilla, which I kind of like because they just provide steady income. But I mean, have you been looking at anything like space exploration, biotech, green technologies, anything like that still within the parameters of small companies that are profitable, but something a little bit different or are you largely staying in things that are more, I don't know, you might say old school, kind of Warren Buffett sort of, you know, they just keep making money for you that kind of thing? And in particular, like, I'll give you an example. I just heard that the fellow who invented the MRI, Damadian, that he just passed away this week and Fonar, which is his baby, it's maybe a $100 million company or something like that, very profitable, but it's a tech company, and I didn't know if that's the kind of – if you'd be looking out in that area or if you're looking in particular areas, I guess I've asked the question six times from Sunday. So I’ll let you guys answer.

No problem at all. This is Eric Althofer. I oversee the M&A group, and it is a multipart question. So I'll answer them in stages. In terms of our deal flow and its sources, our M&A team has a development team that goes out and contacts brokers and intermediaries and is tasked with sourcing new deal opportunities. The majority of the deals that we review come in through that channel. Given our growing presence in the market and our continued M&A activity, we also receive a considerable amount of inbound inquiries and proposals for potential acquisitions. Those are the primary sources of our deal flow. In terms of what we would look at, we will look at anything and everything. You kind of nailed it, though, in terms of our general box, when you started your question, we tend to look at family-run, founder-owned businesses that are closely held. Historically, we have looked at more asset-intensive businesses. We have historically been value-oriented in our acquisitions; that continued with the Kinetic acquisition. We look at asset bases, we like manufacturing businesses, that has been our primary background and focus. That said, we have the flexibility to look at any transaction that would be accretive to our shareholders and wouldn't rule out any potential opportunities.

Thank you very much.

This is Jon, Joe. These acquisitions come in different. Every acquisition has a different story. I mean, in this one here, we kind of – for Kinetic, it was actually an interesting story. We got it by fluke. One of the suppliers of Kinetic was chatting with the previous owner and said, 'Hey, have you looked at Live Ventures, they acquired Precision.' And they've been doing some wonderful things to it. So the owner contacted his investment banker, who contacted us and said, 'Hey, are you interested in this company?' So you never know where these companies come from. Sometimes our phone rings, sometimes we call out, and we work with various investment bankers who have deals – a deal pipeline and we've been on those.

Thank you. I appreciate that. That's a good story. And I would imagine that as the company grows and gets better known, you're going to have – it'll be both a blessing and a curse. You'll have a lot more people coming to you and a lot more opportunities, but also a lot more to go through and try and weed out. But thank you, thank you very much for all that. That's it for me.

Thank you for your questions.

Thank you very much.

Thanks, Joe.

And it appears we have no further questions on the line at this time. I will turn the program back over to our presenters for any additional or closing remarks.

Thank you all for joining us today. We really appreciate it. If you have any further questions after the call, please feel free to reach out to us. My phone number and e-mail is at the end of the press release. Thank you. Have a great day. Look forward to talking to you next quarter.

This does conclude today's program. Thank you for your participation. You may disconnect at any time, and have a wonderful day.