Live Ventures Incorporated (LIVE) CEO Jon Isaac on Q1 2022 Results - Earnings Call Transcript

Feb. 10, 2022 8:41 PM ETLive Ventures Incorporated (LIVE)
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Live Ventures Incorporated (NASDAQ:LIVE) Q1 2022 Earnings Conference Call February 10, 2022 5:00 PM ET

Company Participants

Jon Isaac - CEO

David Verret - CAO

Eric Althofer - COO

Conference Call Participants

Operator

Good day, everyone. And welcome to today's Live Ventures Incorporated Earnings 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. Please note today's call maybe recorded. [Operator Instructions]

It is now my pleasure to turn the conference over to Chief Executive Officer, Jon Isaac. Please go ahead.

Jon Isaac

Thank you, Operator. Good afternoon, everyone. Welcome to Live Ventures first quarter 2022 earnings call. I'm joined by two new members of our management team that I'm excited to introduce to you today. Chief Accounting Officer, David Verret; and Chief Operating Officer, Eric Althofer.

David joins us after working as Chief Accounting Officer at Brink's Home Security and brings a wealth of experience in both public and private accounting. Eric joins us as our Chief Operating Officer and has the diverse experiences across strategy consulting, investment banking, M&A, and private lending. I'm excited to have them join me today.

And I'll now hand it over to David to walk through our financial performance for the quarter.

David Verret

Thank you, Jon. Good afternoon, everyone.

Please note that 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. Earlier today, we filed our Form 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 Form 10-Q and other historical SEC filings.

Overall, the company delivered a strong first quarter 2022 performance, representing the three months ended December 31, 2021 with revenues for the quarter, increasing 20.4% to $75.2 million as compared to $62.5 million in the prior year period. Revenue growth was driven by growth in all of our segments. Retail segment revenues were $26.2 million, a 17% increase over the prior year period. The increase is primarily due to inflationary price increases and opening of four new stores in calendar year 2021.

Steel segment revenues increased 27% to $12.4 million as compared to $9.7 million in the prior year period. Flooring segment revenues increased 8.8% to $32.9 million as compared to $30.2 million in the prior year period. Revenue increase and steel and flooring segments are primarily due to inflationary price increases, as well as pent-up demand caused from the COVID pandemic in 2020 and the gradual reopening of the economy in 2021.

Finally, approximately $3.6 million of the increase in revenues is due to Salomon Whitney becoming a consolidating variable interest entity in June of 2021. Gross profit for the first quarter was $27.6 million up from $22.3 million in the prior year period. The gross margin percentage for the company increased to 36.7% from 35.7% end of prior year period. The increase in gross margin percentage is primarily driven by the steel segment and the consolidation of Salomon Whitney in Q1 2022.

The steel segment gross profit margin increased to 29.2% as compared to 18.2% and the prior year period. Increase is primarily attributable to product mix fluctuations and inflationary sales price increases. The increase in gross profit margin was partially offset by the retail segment. Retail segment gross profit margin decreased to 51.1% from 53.9% in the prior year period, due to sales mix of new and used inventory.

General administrative expenses increased 15.3% to $14.2 million from $12.3 million in the prior year period. General administrative expenses as a percentage of revenues were down at 18.8% of revenue for the first quarter as compared to 19.7% in the prior year period.

Sales and marketing expenses were $3.1 million, as compared to $2.7 million in the prior year period. Sales and marketing percentage -- expenses as a percentage of revenue improved to 4.1% as compared to 4.3% in the prior year period.

Operating income was $10.4 million for the first quarter, an increase of $3.1 million or 42.7% over the prior year period. Net income for the first quarter increased 24% to $6.5 million as compared to $5.3 million for the prior year period.

Internally, management has historically used adjusted EBITDA to evaluate performance of our operating entities. In addition, we believe it is an important metric that highlights the company's value proposition to investors. Therefore, we will report adjusted EBITDA in our filings going forward. A definition of adjusted EBITDA has been provided in our earnings release and in the Form 10-Q.

Adjusted EBITDA for the first quarter of 2022 increased 21.9% to $12.1 million as compared to $9.9 million in the prior year period. The increase is primarily attributable to the company's top line growth in revenue and the leveraging of fixed costs. Earnings per basic common share for the first quarter was $4.14 as compared to $3.45 for the prior year period.

Turning to liquidity, we ended the quarter with cash of $10 million in cash availability under our various lines of credit of $28.8 million for a combined total liquidity of $38.8 million. Cash generated by operations in the first quarter was $4.2 million as compared to $7.7 million in the prior year period. The decrease is primarily attributable to the timing of inventory purchases, and normal fluctuations and working capital.

Working capital for the company at the end of the first quarter was $42.5 million as compared to $33.8 million in the prior year period. Total assets grew $7.2 million to $219 million in Q1 of 2022 as compared to $211.7 million as of September 30, 2021.

From a capital structure management and strategy perspective, we continue to optimize our balance sheet during the quarter, paying down our more expensive seller notes and term loans while utilizing low cost equipment financing to improve liquidity and lower average cost of borrowing.

Company continues to invest in buying back its common stock as opportunities in the market present themselves. As of December 31, 2021 the company has repurchase 534,520 shares of common stock under our buyback program. The company did not buy back any shares of common stock during the first quarter. However, we continue to look for opportunities to buy back shares of common stock under our program.

John, Eric and I will now take questions from those of you on the conference call.

Question-and-Answer Session

Operator

Jon Isaac

Being that there are no questions from everyone, we wish everyone a good day and we will see you on the next earnings release. Thank you.

Operator

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

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