Earnings call transcript: EDUC reports Q4 2025 loss, stock rises 5.51%

Educational Development Corporation (EDUC) reported a net loss of $1.3 million in Q4 2025, an improvement from a $1.6 million loss in the same period last year. Despite the loss, the company’s stock rose 5.51% in after-hours trading, closing at $1.34. According to InvestingPro analysis, EDUC is currently trading near its Fair Value, suggesting the market has priced the stock appropriately despite recent challenges. This increase reflects investor optimism following strategic initiatives and cost-cutting measures discussed during the earnings call.

Key Takeaways

• EDUC’s Q4 net revenues fell to $6.6 million from $9 million the previous year.
• The company reduced its annual net loss to $5.3 million, compared to a $500,000 profit last year.
• EDUC launched a new shipping subscription program, "The Pass," to drive sales.
• The company plans to sell the Hilti Complex for $35.15 million to eliminate bank debt.

Company Performance

Educational Development Corporation experienced a challenging fiscal year, with net revenues declining to $34.2 million from $51 million the previous year. The company attributed this downturn to changing consumer behavior and economic conditions impacting discretionary spending. However, EDUC’s efforts to reduce inventory by $10.9 million and implement aggressive discounting strategies have shown signs of stabilizing the business.

Financial Highlights

• Q4 Net Revenues: $6.6 million, down from $9 million year-over-year.
• Fiscal Year Net Revenues: $34.2 million, down from $51 million.
• Q4 Net Loss: $1.3 million, improved from $1.6 million loss last year.
• Annual Net Loss: $5.3 million, compared to a $500,000 profit the previous year.

Market Reaction

Despite reporting a net loss, EDUC’s stock price increased by 5.51% in after-hours trading, reaching $1.34. This rise contrasts with the company’s 52-week low of $0.923, though InvestingPro data shows the stock has declined 33.16% over the past six months. The stock currently trades at a price-to-book ratio of 0.28, suggesting potential value for investors confident in the company’s strategic direction and future profitability.

Outlook & Guidance

Looking ahead, EDUC plans to sell the Hilti Complex for $35.15 million, which is expected to eliminate the company’s bank debt. The management aims to return to profitability by cautiously acquiring new titles and expanding inventory. With a current ratio of 3.64, the company maintains strong liquidity to support these initiatives. EDUC’s revenue forecast for FY2025 and FY2026 remains at $51.03 million, reflecting a conservative approach to future growth. For comprehensive analysis of EDUC’s financial health and growth prospects, investors can access the detailed Research Report available on InvestingPro.

Executive Commentary

CEO Craig White expressed confidence in the company’s ability to navigate the current economic environment, stating, "We believe that by staying close to the field, listening to our community, and remaining agile in our approach, we are well positioned to navigate the current environment." Heather Cobb, Chief Sales and Marketing Officer, emphasized the importance of new customer acquisition, noting, "Everything is a new title to a new customer."

Risks and Challenges

• Economic Conditions: Inflation and shifts in discretionary spending continue to impact consumer behavior.
• Inventory Management: Balancing inventory levels with demand remains a critical challenge.
• Market Competition: The competitive landscape for children’s educational products is intense.
• Recruitment and Retention: The reduction in active brand partners from 15,500 to 9,400 highlights challenges in maintaining a robust sales force.

Q&A

During the earnings call, analysts inquired about the buyer of the Hilti Complex, to which the company has not yet disclosed details. Questions also focused on the strategic rationale behind the aggressive discounting strategy, which management explained as both a market-driven and strategic decision to boost sales.

Full transcript - Educational Development Corporation (EDUC) Q4 2025:

Conference Call Operator: 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 fourth quarter and fiscal twenty twenty five results. As a reminder, this conference is being recorded. On the call today are Craig White, President and Chief Executive Officer Heather Cobb, 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 fourth quarter and fiscal twenty twenty five results. The release will be available today on the company’s website at www.edcpop.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 would like to turn the call over to Craig White, the company’s president and chief executive officer. Craig?

Craig White, President and Chief Executive Officer, Educational Development Corporation: Thank you, Chloe, and welcome everyone to the call. We appreciate your continued interest. I will start start today’s call with some general comments regarding the quarter, then I will pass the call to Dan and Heather to run through the financials and provide an update on our sales and marketing. Finally, I will wrap up the call with an update on our progress of the sale leaseback of our headquarters, the Hilti Complex, and provide some comments on our strategy for fiscal twenty twenty six. During the fourth quarter, we experienced decreased sales compared to the same period last year.

This was influenced in part by reduced number of active brand partners in our paper pie division. Across the broader marketplace, we continue to see fluctuations in consumer behavior driven by factors such as inflation and shifting discretionary spending among families with young children. These external pressures have impacted both customer purchasing habits and the pace of new brand partner acquisition. That said, one of the unique strengths of the direct selling model is its ability to flex and adapt in response to changing economic conditions. We believe that by staying close to the field, listening to our community, and remaining agile in our approach, we are well positioned to navigate the current environment and build a more sustainable path forward.

We believe another factor in the decrease in sales is the lack of new titles over the past year. Although we did not make any purchases during this quarter, we remain committed to doing so in a strategic and financially responsible manner. We continue to be presented with new content and product offerings and are excited for the opportunity to introduce those to our catalog soon. During the quarter, we continue to offer increased discounts to customers, which negatively impacted our gross margin and bottom line. Our increased discounting has been a tactical decision to bolster sales and turn excess inventory into cash to be used to pay down our bank debt.

We see this as a short term strategy and we’ll continue to offer discounts and promotions until the sale of our building and we pay back all of our borrowings. While we generated less sales during the quarter, our loss before taxes declined from last reflects our continued focus on reducing expenses during this difficult environment. With that, I’ll now turn the call over to Dan O’Keefe to provide a brief overview of the financials. Dan? Thank you, Craig.

Dan O’Keefe, Chief Financial Officer, Educational Development Corporation: To our fourth quarter results compared to the prior year fourth quarter, net revenues were $6,600,000 compared to $9,000,000 Average active paper pie brand partners totaled 9,400 compared to 15,500. Loss before income taxes totaled 1,500,000.0 compared to a loss of 2,200,000.0 in the fiscal fourth quarter last year. Net loss totaled 1,300,000.0 compared to loss of $1,600,000 and loss per share for the quarter totaled $0.16 compared to a loss of $0.19 on a fully diluted basis. Now on to our fiscal twenty twenty five summary compared to the prior year. Year to date net revenues totaled 34,200,000.0 compared to 51,000,000.

Average active Paper Pie brand partners totaled 12,300 compared to 18,300 last year. Loss before income taxes totaled 6,900,000.0 compared to income before taxes of 700,000. Net loss after taxes totaled 5,300,000.0 compared to income of 500,000. Loss per share totaled 63¢ compared to earnings per share of 7¢ on a fully diluted basis. Now for an update on our working capital positions.

Net inventories decreased 10,900,000 from 55,600,000.0 at 02/28/2024 to 44,700,000.0 February 20 8 20 20 5. Borrowings on our working capital line of credit totaled 4,200,000.0 at the February 2025 with 600,000 of availability at the end of the fourth quarter. That concludes the financial update. I will now turn the call over to Heather Cobb to talk about sales and marketing opportunities in further detail. Heather?

Heather Cobb, Chief Sales and Marketing Officer, Educational Development Corporation: Thank you, Dan. As Craig mentioned earlier, we continue to make strategic changes to bring fresh opportunities for success within paper pie, especially related to our brand partners. One of the most visible examples during this fourth quarter was our Book Friday promotion, which offered deep discounts across our ecommerce platform and was met with strong engagement. In addition to the increase in customer activity, this event allowed us to move excess inventory, generate cash flow, and create energy within our community at a critical time of year. Another key initiative this quarter was the successful launch of our new shipping subscription program, The Pass.

Designed to enhance the customer experience and encourage repeat purchases, the Pass offers members access to discounted or free shipping, exclusive perks, and special promotions throughout the year. We introduced two affordable tiers, basic and plus, to meet a range of customer needs, and early adoption was a success. Not only has the past driven strong customer loyalty, but it has also created new opportunities for brand partners to reengage past customers and build ongoing relationships rooted in both convenience and value. We also concluded our Storyscape travel incentive where top performing brand partners are can could have earned a trip

: to Scotland. The qualification period officially ended on December 31, and we are thrilled to

Heather Cobb, Chief Sales and Marketing Officer, Educational Development Corporation: be celebrating those earners this summer. We immediately followed this by launching our next major sales in incentive called a piece of the story, which offered a wide and tiered range of rewards and has been structured to encourage consistent sales activity across a broader segment of the field. As we’ve shared in the past, we believe strongly in in person connection and development. Our twenty twenty five StoryMaker Summit began during the fourth quarter and has us meeting brand partners in their neighborhoods, at least in some of them as we travel to five regions across the country. Unlike our traditional national convention, these summits are intentionally designed as smaller, more intimate gatherings, allowing for richer conversations, deeper personal connection, and focused skill building.

This structure not only provides attendees with more direct access to home office leadership and expert speakers, but also creates the space for meaningful peer to peer exchanges that inspire action and build confidence. We are already seeing how these more personal settings are fostering stronger community bonds, greater trust, and lasting loyalty among those attending. These summits are more than just training. They’re energizing touch points that remind brand partners that they are seen, supported, and part of something bigger. This concludes the sales and marketing update for the fourth quarter.

I’ll now turn the call back over to Craig for his closing remarks. Craig?

Craig White, President and Chief Executive Officer, Educational Development Corporation: Thank you both, Heather and Dan. And now for an update on the Hill Hilti Complex building sale process. Over the past few months, we have been working with a prospective new buyer, and I’m pleased to announce that last week, we executed a purchase sale agreement with the new buyer. This buyer has expressed interest since mid last year, and we hope to complete the sale within the next hundred and twenty days. Some of the positive items with this buyer is that they have a good understanding of the market as well as the Hilti Complex.

Additionally, they have agreed to a more expedited due diligence with half their deposit going hard after forty five days. I think this demonstrates a more, a higher level of commitment than our previous buyers. The the agreement excludes the 17 acres of excess land, which will remain under EDC’s ownership and provide further strength for our balance sheet post building sale. The proceeds from the sale are expected to fully pay back the bank leaving us with no debt, and we expect to have limited borrowing needs moving forward. We continue to develop options for post sale financing as well.

Lastly, I wanna thank all of our shareholders for their patience, our employees for their commitment to our mission, and our customers and brand partners for their loyalty during this difficult period. I am confident in our collective ability to emerge stronger and more resilient than ever before. Now that we have provided a summary of some recent activity, I will now turn the call back over to the operator for questions and answer.

Conference Call Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star then the number one on your telephone keypad. Our first question comes from the line of Paul Carter from Capstone Asset Management. Can

Paul Carter, Analyst, Capstone Asset Management: you you mentioned there just about the buyer and the terms of the agreement. But can you disclose who is this TG OTC? Is that a local group? Is it a REIT? Is it you know, any any characteristics that you can provide about the buyer?

Craig White, President and Chief Executive Officer, Educational Development Corporation: Yeah. Think I think we’re choosing not to disclose at this time. We kinda wanna get through the initial part of the due diligence period before we disclose

: Okay.

Craig White, President and Chief Executive Officer, Educational Development Corporation: Who the who the buyer is.

Paul Carter, Analyst, Capstone Asset Management: Can you disclose what price you’ve agreed upon?

Craig White, President and Chief Executive Officer, Educational Development Corporation: I believe that’s in the what’s been filed today. Yeah.

Dan O’Keefe, Chief Financial Officer, Educational Development Corporation: It’s in the press release. 35,150,000.

Paul Carter, Analyst, Capstone Asset Management: Oh, shoot. Sorry. Totally, missed that. Okay. So that 35, that’s quite a bit below what you sold or what you had agreed upon with the previous buyer.

Can you describe a little bit about the just the local market there in Tulsa? Has it weakened significantly, or is this more a reflection of just your desire to, to get this transaction completed as soon as possible?

Craig White, President and Chief Executive Officer, Educational Development Corporation: Well, a couple things there. Thanks for the question. That’s not exactly true with the last buyer. Well, the the net proceeds are gonna be higher with this this sale than we they were gonna be with the last buyer is what is what I’ll say. So all of our offers are netting us around the same amount, over over our last previous couple buyers, so we feel good about this one.

Paul Carter, Analyst, Capstone Asset Management: Okay. Okay. That’s great. And then just, on the average sales consultant or or brand partners. So I know, obviously, like, four years ago, that number was up around the 60,000 mark, and it’s been a a difficult last four years for a variety of reasons.

It that number seemed to be bottoming out in kind of the low teens number, but then this last quarter saw a pretty, quite honestly, a pretty shocking reacceleration in that drop. It’s now like, this last quarter versus this quarter, it’s down another 24% quarter over quarter. If I’m if my numbers are right, that’s the biggest quarter over quarter drop that you’ve seen over the last four years. And, again, I know it’s a consumer the consumer environment is a little bit more difficult now than maybe it was a year ago. But is there anything more that you can sort of talk through?

Like, why such a large drop quarter over quarter? And is sort of the thoughts of sort of bottoming out? Has that been kind of pushed aside for the moment, and and we could see continued drops in the quarter ahead quarters ahead?

Heather Cobb, Chief Sales and Marketing Officer, Educational Development Corporation: Yeah. Good question. You know, we tend not to look at quarter over quarter numbers just because of how drastically our seasonality is, and there’s all sorts of other factors. One of the biggest factors that we can attribute this drop to is, we tend to run recruiting specials at various different times of year. We ran a significant special, in, early summer of last year.

And so what happens is the way that we calculate our active brand partner count would see those that potentially joined during that recruiting special and did not continue with activity or remain active would drop off during this quarter. And so I think that that’s the main main factor that we’re seeing here as the difference in the numbers that you’re seeing there, Paul.

Craig White, President and Chief Executive Officer, Educational Development Corporation: Paul, I would also add. Sorry, Paul. I would also add that, you know, during this period of difficulty, I mean, we’re throwing up red flags left and right to our field sales force. So I think they’re kinda waiting to see what happens. Everyone’s wanting us to see the building sale complete, move on from our current lender, and and get back to business back closer to business as usual.

So and that includes buying new titles. Our lowest level of brand partner rely on new title releases to spur their activity to call customers and whatnot. So we’ve gotta get back to where we can conservatively purchase new titles.

Paul Carter, Analyst, Capstone Asset Management: Okay. No. That’s that’s fine. And then just last question. Yeah.

Last question here. So your share count increased, like, 310,000 in the fourth quarter relative to the third. Was there anything unusual that happened in the fourth quarter that caused the the share count to increase?

Dan O’Keefe, Chief Financial Officer, Educational Development Corporation: We had a vesting tranche in our LTI plan, long term incentive plan that was granted back in 02/2019 ’20 and vested on February twenty eighth of twenty twenty five. And so that is the last component of our equity incentive plan, and we have no current equity incentive plan, in place.

Paul Carter, Analyst, Capstone Asset Management: Okay. And I I do yeah. Thanks for that. I do remember that. I don’t remember the details of it, but I I’m just going off memory here.

I thought that was the vesting was driven by revenue growth, or was that not part or was it just time time vesting? The earning of it.

Dan O’Keefe, Chief Financial Officer, Educational Development Corporation: The the earning of it was based on hitting revenue and profitability targets, and then the the vesting of it was a time vesting period. So it was earned back in 1920, but there was a time vesting requirement.

Paul Carter, Analyst, Capstone Asset Management: Okay. Okay. No. That’s great. Excellent.

Well, that’s it for me. Thanks, thanks, everybody, and and best of luck with the, closing of the transaction.

Craig White, President and Chief Executive Officer, Educational Development Corporation: Thank you. Thanks, Paul.

Conference Call Operator: Again, if you would like to ask a question, please press star and the number one on your telephone keypad. Our next question comes from the line of, Daniel Bachin. Your line is open.

Daniel Bachin, Analyst: Hello. I hope you can you can hear me. So my first question was sort of thinking about the longer term future of these discounts that the company is offering. To what extent would you say that these discounts are a combination of, you know, just a lack of demand for the product rather than rather than our own ability to actually not discount those products. As in what I’m asking is, are these discounts forced upon us rather than our own choice in order to reduce inventory?

Heather Cobb, Chief Sales and Marketing Officer, Educational Development Corporation: I mean, I think I think a little bit of your answer is bothand. It it is something that we are choosing to do in order to continue to pay down inventory, generate cash, reduce inventory on hand. I would say as far as demand for the product, it is definitely still there. We see that with all sorts of market numbers and different things like that. I’ll refer back to what Craig said in one of the responses to Paul talking about new titles.

Sometimes, that we see as more of a driver, that people will come in excited about a new title. But as we know and we believe and we continue to, see happen, everything is a new title to a new customer. And so as long as babies and kids continue to be born and grow up each and every day, the demand will continue to be there. And we intend to slow down the discounts in the coming months so that we can get back to, air quotes, normal operations, and and don’t have to see this as a factor that we’re relying on

Daniel Bachin, Analyst: Okay. And Okay. In terms of the team’s own under under understanding of, the sort of the future of the company, say, looking a year and a half, two years down the line? What’s the sort of goal that that the team has in mind, the revenue and and, you know, the the leanness of the balance sheet? For example, you know, if we sell our Hilti complex, then we have a significant cash inflow.

Not all of that will go to paying off the bank debt. So and some of that will obviously be used to buy inventory. But what are your thoughts surrounding sort of your picture of the company in a year and a half time?

Craig White, President and Chief Executive Officer, Educational Development Corporation: Yeah. That’s a great question. Yeah. There’ll there’ll be a a little bit of excess funds from the sale of the building transaction in which we will start to, purchase new titles. We’re taking this opportunity to kinda define redefine who we are and what we wanna be.

And Heather’s been into, you know, Bologna, Italy back in late March where vendors and publishers present content to us. And there’s several companies that wanna offer their entire product line to us. Now we’re not gonna obviously do that, but we’re very excited about a couple of product lines that we wanna bring on. But, again, we’ve gotta be conservative. We’ve gotta get back to profitability.

Reducing our interest expense will go a long way. We’re gonna try to operate on our own cash flow, if not as very, very small borrowings from a new lender, and then rebuild this business.

Daniel Bachin, Analyst: Mhmm. And and what is your what’s your own, for all of you three, what are your personal views on how the market is evaluating the company at the moment? Do you think that investors are missing something? Do you think investors have understood your plan correctly, or do you think there’s a there’s a misunderstanding?

Craig White, President and Chief Executive Officer, Educational Development Corporation: Well, no. I I think they’re they definitely understand. This has been a year to fifteen or so. And so the stock has held relatively steady between a dollar 20 and a dollar 50 for almost that entire period. So it’s not like any more investors are jumping out.

We may not be acquiring many new investors, but I think we’re all pushing towards getting this building sold. We’ve we’ve said it all along. We believe that once we get out from under our current lender and get back to having a little more flexibility to run the company the way we see fit, that we could be back back going again. Now we’re we’re stressing that we’re gonna have to be conservative about the start up after we sell this building. So, you know, it’s not gonna be a quick fix.

It’s gonna take some time. We’ve gotta work through our excess inventory while bringing in some more inventory. So, I mean, that implies we’re still gonna be aggressively selling our the inventory that we have now. But I don’t think the investment community is missing anything. I just think we’re all waiting to see what happens with this transaction.

Daniel Bachin, Analyst: Okay. And and the final question on my end. What is the deal with the undeveloped lands? I understand that DG, as the buyer, they want to maximize their return on their capital. But what is the plan for that land?

Because, of course, if we can reinvest capital much more efficiently in inventory or even, say, buying back shares, what’s the use of this unoccupied inefficient land?

Dan O’Keefe, Chief Financial Officer, Educational Development Corporation: Yeah. So the David, the the land recently appraised for a value of about 2,000,000 that but when you we go to market with the the Hilty complex, the buyer really doesn’t value the land because he values the leases that are existing in the complex. So, you know, for us, it’s about, you know, just getting through And then what we decide to do with that land in the future is is really kind of a multi path kinda option. You know, we could sell it in the future.

We could, you know, right now, we have a lot of outside warehouse space that we’re renting. You know, there’s a thought process that, you know, if we, you know, grow back to where we were in the pre COVID days of a hundred million, we’re gonna need some more space than what we have just in the Hilton Complex, and we might use that space to, you know, build a warehouse on it. So just lots of different ideas on what we can do with it, But the key thing is that the buyer wasn’t gonna give us much value at all for it, so we’re our shareholders are better off with us holding on to it for a little bit and and determining the best way to maximize the value of the land.

Daniel Bachin, Analyst: Okay. That’s great.

Craig White, President and Chief Executive Officer, Educational Development Corporation: Well, you you’ve

Daniel Bachin, Analyst: you’ve got my support. So thank thank you for another year.

Craig White, President and Chief Executive Officer, Educational Development Corporation: Yeah. I appreciate you, Daniel.

Heather Cobb, Chief Sales and Marketing Officer, Educational Development Corporation: Thanks, Daniel.

Conference Call Operator: There are no questions at this time. I would like to hand the conference over to Craig. Please go ahead.

Craig White, President and Chief Executive Officer, Educational Development Corporation: Oh, okay. Thank you. Another good call. Appreciate everyone’s engagement and, and your continued support. We look forward to providing another update in July.

Thank you.

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