Live Ventures Incorporated Reports Financial Results for the Quarter Ended December 31, 2024

Financial Performance Overview

Vintage Stock, a leading retailer of entertainment products, and its subsidiaries in the retail flooring, flooring manufacturing, and steel manufacturing industries, have reported their financial results for the three months ended December 31, 2024. The company’s overall performance showed mixed results, with some segments performing better than others.

Revenue and Profit Trends

The company’s total revenue decreased by 5.2% to $111.5 million in the quarter, compared to $117.6 million in the same period of the previous year. This decline was primarily attributable to decreases in the Flooring Manufacturing, Retail Flooring, and Steel Manufacturing segments, which saw aggregate revenue reductions of $6.7 million.

Despite the revenue decline, the company’s gross profit margin improved to 31.7% from 30.9% in the prior-year quarter. This increase was mainly driven by improved margins in the Steel Manufacturing segment, as well as the acquisition of Central Steel Fabricators, LLC in May 2024, which has historically generated higher margins.

However, the company’s overall profitability was impacted by an 8.6% increase in general and administrative expenses, primarily due to higher compensation costs related to new store openings at Flooring Liquidators. Sales and marketing expenses decreased by 11.3%, mainly due to reduced activities at Flooring Liquidators.

The company’s net income for the quarter was $0.5 million, compared to a net loss of $0.7 million in the same period of the previous year. Adjusted EBITDA, a non-GAAP measure used to evaluate the company’s performance, decreased by 33.9% to $5.7 million, down from $8.7 million in the prior-year quarter.

Segment Performance

The company’s operations are divided into four segments: Retail-Entertainment, Retail-Flooring, Flooring Manufacturing, and Steel Manufacturing.

Retail-Entertainment Segment The Retail-Entertainment segment, which includes the Vintage Stock business, reported a 3.3% increase in revenue to $21.3 million, driven by increased consumer demand for used products. Gross margin improved to 56.6% from 56.0% in the prior-year quarter, contributing to an increase in operating income to $3.4 million, up from $3.1 million in the same period of the previous year.

Retail-Flooring Segment The Retail-Flooring segment, which includes Flooring Liquidators, saw a 7.5% decrease in revenue to $31.7 million, primarily due to reduced demand. Gross margin declined to 37.2% from 38.0% in the prior-year quarter, driven by changes in product mix. The segment reported an operating loss of $2.2 million, compared to an operating income of $0.1 million in the same period of the previous year, primarily due to increased wages and other costs related to new store openings.

Flooring Manufacturing Segment The Flooring Manufacturing segment, comprising Marquis Industries, experienced an 11.1% decrease in revenue to $26.0 million, also due to reduced consumer demand. Gross margin declined to 21.2% from 22.0% in the prior-year quarter, primarily due to changes in product mix. The segment reported an operating loss of $0.1 million, compared to an operating income of $0.9 million in the same period of the previous year.

Steel Manufacturing Segment The Steel Manufacturing segment, which includes Precision Marshall, Kinetic, PMW, and Central Steel, saw a 2.8% decrease in revenue to $32.4 million, primarily due to reduced customer demand, partially offset by $3.1 million in revenue from the acquired Central Steel business. Gross margin improved to 18.3% from 15.8% in the prior-year quarter, driven by price increases and the Central Steel acquisition. Operating income for the segment increased to $1.2 million, up from $1.0 million in the same period of the previous year.

Corporate and Other Segment The Corporate and Other segment, which includes certain corporate general and administrative costs and legacy product and service offerings, reported a revenue decrease of 36.0% to $57,000 and an operating loss of $1.6 million, consistent with the prior-year quarter.

Liquidity and Capital Resources

As of December 31, 2024, the company had $7.4 million in cash on hand and $23.7 million in available borrowing under its revolving credit facilities. However, the company concluded that its subsidiary, PMW, was in default of its Fixed Cost Coverage Ratio covenant, which provides the creditor the right to accelerate the borrowings under the Revolving Credit Facility and Fifth Third M&E Loan. As of the filing date, the creditor has not exercised these rights, and the company is actively working to resolve the default.

The company’s working capital decreased from $52.3 million as of September 30, 2024, to $51.0 million as of December 31, 2024, primarily due to decreases in accounts receivable, prepaid expenses, and inventories, as well as increases in the current portion of related party notes payable, income taxes payable, and lease obligations.

Cash provided by operating activities increased to $9.4 million for the three months ended December 31, 2024, compared to $7.9 million in the prior-year period, primarily due to increases in net income, accounts receivable, inventories, and accounts payable, partially offset by decreases in adjustments to net income, accrued liabilities, and income taxes receivable.

Cash used in investing activities decreased to $1.8 million for the three months ended December 31, 2024, from $3.2 million in the prior-year period, as the company did not make any acquisitions during the current quarter.

Cash used in financing activities increased to $4.8 million for the three months ended December 31, 2024, from $3.4 million in the prior-year period, primarily due to net borrowings under revolver loans, payments on notes payable, finance leases, and related party notes payable, as well as purchases of treasury stock.

Strengths and Weaknesses

Strengths:

• Diversified business model with operations across multiple segments, including retail, manufacturing, and steel production
• Strong market positions in the Retail-Entertainment and Steel Manufacturing segments
• Improved gross margins in the Steel Manufacturing segment due to increased efficiencies and the acquisition of Central Steel
• Positive cash flow from operating activities, providing liquidity for the company’s operations and strategic initiatives

Weaknesses:

• Declining revenue in the Flooring Manufacturing, Retail Flooring, and Steel Manufacturing segments, indicating potential challenges in these markets
• Decreased profitability, as evidenced by the 33.9% decline in Adjusted EBITDA
• Increased general and administrative expenses, primarily due to new store openings in the Retail Flooring segment
• Default on the Fixed Cost Coverage Ratio covenant by the PMW subsidiary, which could potentially lead to the acceleration of borrowings and impact the company’s liquidity

Outlook and Future Considerations

The company’s overall financial performance in the three months ended December 31, 2024, was mixed, with some segments performing better than others. The Retail-Entertainment segment continued to show strength, while the Flooring Manufacturing and Retail Flooring segments faced challenges due to reduced consumer demand.

The company’s liquidity position remains relatively strong, with $7.4 million in cash on hand and $23.7 million in available borrowing capacity. However, the default on the Fixed Cost Coverage Ratio covenant by the PMW subsidiary is a concern and could potentially impact the company’s access to capital if the creditor chooses to exercise its rights.

Going forward, the company will need to focus on addressing the weaknesses in its Flooring Manufacturing and Retail Flooring segments, potentially through cost-cutting measures, product diversification, or strategic initiatives to regain market share. The company should also work diligently to resolve the covenant default with its creditor to maintain its financial flexibility.

Additionally, the company may need to consider additional financing options, such as debt or equity issuances, to fund future acquisitions, strategic investments, or to refinance existing indebtedness. The company’s ability to successfully navigate these challenges and capitalize on its strengths will be crucial in determining its long-term financial performance and growth prospects.