Educational Development Corporation Q2 FY2026 earnings call

• Craig noted decreased sales in Q2 due to reduced PaperPie brand partners and short-term discount tactics; developed phased approach for new products post building sale, focusing on increasing brand partner counts targeting millennials and Gen Z, and improving technology for mobile-first experience.
• Dan discussed financials, inventory reduction generating cash, bank loan expired with notice of default but no action taken yet.
• Heather reported sales and marketing efforts: StoryMaker Summit events, StoryScape incentive trips, focus on seasonal selling, and steady retail performance in specialty, toy, and gift markets.

In the fiscal 2026 second quarter, net revenues were $4.6 million compared to $6.5 million in the prior year second quarter. Average active PaperPie brand partners totaled 5,800 for the quarter versus 13,900 in the prior year second quarter. Losses before income taxes were $1.8 million compared to a loss of $2.5 million in the prior year second quarter. Net loss totaled $1.3 million compared to a loss of $1.8 million, and loss per share was $0.15 compared to $0.22 on a fully diluted basis. Year-to-date, net revenues were $11.7 million compared to $16.5 million. Average active PaperPie brand partners totaled 6,800 versus 13,700. Losses before income taxes totaled $3.2 million compared to $4.2 million, and net losses totaled $2.4 million compared to $3.1 million. Loss per share year-to-date was $0.28 compared to $0.37 on a fully diluted basis. Inventory levels decreased from $44.7 million at the start of fiscal 2026 to $40.7 million at the end of August, generating $4 million cash flow from inventory reductions.

• Expect sale of headquarters (Hilti Complex) to close prior to Nov 25, 2025, with brokers targeting earlier close.
• Developing options for post-sale financing, starting with conservative $3M to $5M credit line.
• Goal to return to revenue growth by increasing brand partners.

• Bank loan expired, in default status, but notice of default is formality related to building sale.
• Excess inventory and outside warehouse rental costs totaling about $1 million annually.

Q: Can you confirm the buyer group for the real estate is related to 10Mark Holdings?

A: Yes, they are.

Q: How much earnest money are you entitled to?

A: $100,000, which is in escrow until closing.

Q: How confident are you the sale will close at $32.2 million?

A: Very high degree, with third parties knowing the buyer and their familiarity with the area.

Q: How close are you to establishing a new credit line and what's the expected flexibility?

A: Developing several options, starting with conservative $3M to $5M.

Q: What costs have been cut and what's left to cut?

A: Interest expense and aggressive discounting are big impacts; working down excess inventory and exiting outside warehouses are next.

Q: What items are collateralized?

A: All assets including building, AR, inventory, equipment, and land.

Q: What plans are in place to increase brand partner accounts?

A: Multipronged approach including new titles, enterprise IT and marketing initiatives targeting millennials and Gen Z.