Educational Development Corporation Q3 FY2026 earnings call

• Completed the sale of the Hilti Complex, removing bank restrictions and paving the way for growth and profitability in fiscal 2027.
• Launched Gathered Goods, a reimagined fundraising program with custom in-house products, stronger margins, and digital fundraising capabilities.
• Book Friday promotion drove strong engagement across customers and brand partners.
• Active brand partners are more productive, with leader levels declining less than the overall field, indicating stability.
• Plan to increase brand partner counts, with reorder and new title purchases planned, and a refreshed marketing strategy for Gen Z.
• Formed an AI task force to automate rote tasks and explore transformational ideas for competition in retail and direct-to-consumer spaces.

Third quarter net revenues were $7 million compared to $11.1 million in the prior year third quarter. Year-to-date net revenues were $18.7 million compared to $27.6 million in the prior year. Earnings before income taxes in the third quarter were $10.6 million compared to a loss of $1.1 million prior year; year-to-date earnings before income taxes were $7.4 million compared to a loss of $5.3 million prior year. Net earnings for the third quarter were $7.8 million compared to an $800,000 loss prior year; year-to-date net earnings were $5.4 million compared to a $3.9 million loss prior year. Inventory levels decreased from $44.7 million at the beginning of fiscal year 2026 to $39.1 million at the end of November, generating $5.6 million of cash flows from inventory reductions.

• Plan to return to growth and profitability is a carefully developed strategy for long-term growth, not an overnight change.
• New titles are expected to arrive in late spring and early summer to energize customers and sales force.
• Working on a refreshed marketing strategy tailored to Gen Z, with plans to implement soon.
• AI task force aims to utilize automation to save money and drive transformational ideas.

• Concerns about inventory obsolescence if sell-through of certain titles is low, but historical track record shows no inventory write-downs.
• Dependence on establishing a new credit line, as currently in talks with banks for a new relationship.

Q: Do you have evidence the sales force has been reinvigorated since the building sale?

A: New titles and reorders of out-of-stock items, increased activity in leader promotions; energy feels more positive than in while.

Q: Do you have a new credit line in place?

A: Talking to a few banks and local banks, looking for a relationship to be in place in the next few months.

Q: Is inventory insured against risks and at replacement cost?

A: Inventory is insured at replacement cost, and historically, no inventory write-downs have occurred.

Q: Update on relationship with Usborne Publishing?

A: Monthly/quarterly calls with their CFO, no negative change, and new distribution agreement allows not purchasing every title.

Q: Plan for the 17-acre excess land beside the Hilti Complex?

A: Holding it for now, considering development proposals, but current proposals don't meet expected return.