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Operator: Welcome to the Live Ventures Fiscal Year 2024 Year-End Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session. I would now like to turn the call over to Greg Powell, Director of Investor Relations. Please go ahead, sir.

Greg Powell: Thank you, Jen. Good afternoon, and welcome to the Live Ventures Fiscal Year 2024 Conference Call. Joining us this afternoon are Jon Isaac, our Chief Executive Officer and President; and David Verret, our Chief Financial Officer. 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. The actual results could differ materially due to a number of factors, including those outlined in our latest forms our 10-K and our 10-Q as filed with the Securities and Exchange Commission. We have no obligation to publicly update any forward-looking statements after this call, whether as a result of new information, future events, changes in assumptions or otherwise.

You can find our press release referenced on this call in the Investor Relations section of the Live Ventures website. I direct you to our website liveventures.com or sec.gov for historical SEC filings. I will now turn the call over to David to walk us through our financial performance. David?

David Verret: Thank you, Greg, and good afternoon, everyone. Let’s jump right in and discuss the financial results of our fiscal year ended September 30, 2024. Total revenue for the year increased 33.1% to approximately $472.8 million. The increase is primarily attributable to the acquisitions of Flooring Liquidators and PMW, both of which were acquired during fiscal year 2023 and Central Steel, which was acquired in May 2024 that collectively added approximately $118.3 million as well as an increase of approximately $15.2 million in our Flooring Manufacturing segment. The increase was partially offset by decreased revenue of approximately $13.7 million in the company’s other businesses, primarily due to general economic conditions.

Retail-Entertainment segment revenue decreased $7.1 million or 9.1% to approximately $71 million compared to the prior year. The decrease in revenue was primarily attributable to reduced consumer demand and a shift in sales mix towards used products, which generally have lower ticket sales prices with higher margins. Retail-Flooring segment revenue increased $61.1 million or 80.6% to approximately $137 million compared to the prior year. The increase is primarily due to the acquisition of Flooring Liquidators in the second quarter of fiscal year 2023, increased revenue in Flooring Liquidators’ builder design and installation segment Elite Builder Services and the acquisition of Carpet Remnant Outlet during the first quarter of fiscal year 2024.

Flooring Manufacturing segment revenue increased $15.2 million or 13.8% to approximately $125 million compared to the prior year. The increase is primarily due to increased sales related to Harris Flooring Group Brands, which were acquired in the fourth quarter of fiscal year 2023. Steel Manufacturing segment revenue increased $50.7 million or 57% to approximately $139.6 million compared to the prior year. The increase is primarily due to increased revenue of approximately $51.2 million at PMW and approximately $6 million at Central Steel partially offset by a $6.5 million decrease in the company’s other Steel Manufacturing businesses. Gross profit for the year was approximately $144.8 million up from $115.6 million in the prior year. The gross margin percentage for the company decreased to 30.6% from 32.5% in the prior year.

The decrease in margin percentage is primarily due to the acquisition of PMW, which has historically generated lower margins and decreased margins in the Steel Manufacturing segment due to reduced production efficiencies as a result of lower demand. The decrease in gross margin was partially offset by increased margins at Retail-Entertainment and Flooring Manufacturing segments. General and administrative expense increased approximately $31.4 million to $118 million. The increase is primarily due to the acquisitions of Flooring Liquidators and PMW during fiscal year 2023. Sales and marketing expense increased approximately $8.9 million to $22.4 million. The increase is primarily due to increased sales personnel required in connection with the acquisition of Harris Flooring Group Brands, increased convention and trade show activity in the Flooring Manufacturing segment and an increase in sales force in the Retail-Flooring segment.

During the fourth quarter of fiscal year 2024, our Retail-Flooring segment recorded a goodwill impairment charge of $18.1 million. This charge was driven by declining performance at Flooring Liquidators, reflecting the adverse impacts of broader economic conditions that have troubled the floor covering industry as a whole. Specifically, Flooring Liquidators has been impacted by high interest rates, lingering inflation and lower consumer confidence. These factors have affected the housing market, including home resales, new construction starts and renovation activities. Interest expense increased by approximately $4.1 million compared to fiscal year 2023. The increase is primarily attributable to the incremental debt incurred in connection with the acquisitions of Flooring Liquidators and PMW.

Net loss for the year was approximately $26.7 million and loss per share was $8.48 compared with a net loss of approximately $100,000 and loss per share of $0.03 in fiscal year 2023. The decrease is primarily attributable to the goodwill impairment charge, lower operating earnings and higher interest expense compared to the prior year. Adjusted EBITDA for the year was approximately $24.5 million, a decrease of approximately $7 million as compared to the prior year. Turning to liquidity. We ended the year with total cash availability of $33.3 million, consisting of cash on hand of $4.6 million and availability under our various lines of credit totaling $28.7 million. Our working capital was approximately $52.3 million as of September 30, 2024 compared to $85 million as of September 30, 2023.

The decrease is primarily due to increase in current portion of long-term debt associated with PMW. As of September 30, PMW was in default of one of its financial covenants. As a result, PMW’s long-term debt balance and seller finance loans were reclassed to current liabilities. We are currently in the process of resolving the default with our creditors and hope to resolve the issue in a timely manner. As of September 30, total assets were $407.5 million and total stockholders’ equity was $72.9 million. As part of our capital allocation strategy, we may make share repurchases from time-to-time. We believe our stock repurchases represent long-term value for our stockholders. During the year, we repurchased 34,624 shares of common stock. In conclusion, we are pleased that our fiscal year 2024 revenue and gross profit increased 33% and 25% respectively.

However, challenging market conditions on our Retail-Flooring and Steel Manufacturing segments have adversely affected the operating results of these businesses. Despite these specific headwinds, we remain confident in our businesses and our long-term buy, build, hold strategy. We will now take questions from those of you on the conference call. Operator, please open the line for questions.

Operator: Thank you. At this time, we will conduct the question-and-session. [Operator Instructions]

Jon Isaac: Let’s take the question from Joseph please moderator.

Operator: Thank you. Mr. Kowalsky, your line is open.

Joseph Kowalsky: Hello and thank you for taking the question. Thank you for the information and thank you for continuing to work on our business.

Jon Isaac: Hello?

Joseph Kowalsky: Hello. Can you hear me?

Jon Isaac: Yes, we can hear you fine.

Joseph Kowalsky: Okay. So I have a couple of questions. One is, it’s nice to see revenue growth, but there’s the old joke about we’re losing money, but we make it up on volume. And I just want to see where you think things are going to go with regard to the companies that you have that ensures that the expenses stay where they are or come down and the not just the revenue but what we’re making on these things goes up. And specifically the one question I have is with regard to the administrative expense, general and administrative, you said it went up with the acquisition. And I was curious in what regard did they go up? What was it specifically that was going up with those? And then I have one more question after that. I don’t know if you want me to wait.

David Verret: Okay. So the first question, so over the course of this year and especially in the last half of this year, we started doing a lot of cost-cutting, efficiency studies, things like that in order to become kind of turn the tide that we’re facing with these industry-specific economic headwinds. And so specifically at the — in our Flooring Retail and our Steel Manufacturing segments, there’s quite a bit that’s been done. Sometimes it takes a little bit of time to kind of realize some of those changes. So a lot of those will see a decent impact going into future years. And we’re confident that with the cost-cutting measures that we’ve been doing, we’re also been more active in selling. But obviously I think we have to fix our cost structure and that’s really where our focus has been. And I think with that, and hopefully, a little bit of a turn of the tide in the overall economy, I think it will kind of set us up nicely going forward.

Joseph Kowalsky: And the specifics as to what the increase in general and administrative expenses were?

David Verret: Yes. So the general and administrative expenses that you see, especially in the Flooring Retail is going to be made up of all the SG&A cost is going to be like wages, salaries and wages and leases and those types of costs.

Joseph Kowalsky: Got it. Got it. All right. And that leads, I guess, to my second question, my other question, which is Wayne Gretzky and by the way I don’t want in any way suggest that I think the cost cutting alone is an answer that I’m looking for dramatic cost cutting. I’m a long-term investor and my clients are long-term investors. We would much rather see you invest in the businesses and have higher expenses and higher costs now for better results down the road. So please don’t think that I’m a short-term guy who’s looking for just tons of just cost cutting and nothing else. Wayne Gretzky was asked one time why he is such a great player and he said other people go to where the puck is and he goes to where the puck will be.

And I just wondered, I love the concept of buy and hold and what you folks do. My question is the method that you go about for finding these companies because in looking at like with the flooring companies, things like that, we had a tremendous amount of work being done in people’s homes during the whole COVID crisis and then it slowed down afterwards. And I just want to make sure that there’s something in your methodology that’s looking for where the puck will be as opposed to where the puck is. And I just wonder what is the method that you use when you go out and look for a company and I apologize because in some way or another I’ve kind of asked this question in the past, but I still like to hear the reply.

David Verret: I think overall we’re agnostic as far as what industry or what type of company we’re going to buy. Typically, we look for the middle market profitable type companies. And especially over the last few years, I think when you acquire one, then you start getting the attention of others and then you kind of maybe we bought a few companies in the flooring side. And then we also have some companies that are in the steel and they just kind of, I think, come to us based on prior acquisitions. But overall I think we’re agnostic to what they are. We will take a look at kind of those mid-market profitable companies and then see if it’s a right fit for what we’re looking for. Does that answer your question?

Joseph Kowalsky: I don’t know. I guess, I’m asking, how do you — you must have some method of people talk about top-down methodology or bottom-up. How do you find these companies that you’re to talk to in the first place?

Jon Isaac: A lot of times — this is Jon. A lot of times they approach us because they’ve seen what we’ve done with other companies. A lot of times, we just — our phone rings. We have investment bankers or owners of businesses that call us and say, hey, I don’t want to sell to a private equity firm. I want to sell to you because you’re not going to flip my company three years from now and I care about my employees who have been here for decades. So and then in other instances, we have our CEOs of our subsidiaries come in and say, hey, we know this company down the street that I know this guy, Fred, he wants to retire, we should approach him. So it comes from different methods from different — in different ways. There is no silver bullet on how we get — it’s been easier now than it was before because we’ve established a name and we’ve done what we promised.

I can tell you with certainty that there are instances where we have been outbid by private equity firms, but sellers end up aligning with us even though they may be getting less economic value for their business, because of our ideology and what we end up doing with these companies. We reinvest in their growth. And I can’t think of one of our subsidiaries that was bigger before our ownership. We’ve always reinvested and grown all of our companies.

Joseph Kowalsky: I appreciate that.

Jon Isaac: So, yes, CEOs and owners of businesses are very careful to whom they sell for. It’s not just about what’s the dollar figure, how much am I getting because people who do care about their businesses care about their employees and they care about their legacy and they care about their name. And so they do take a careful consideration as to who the buyer is. It’s as important as anything else.

Joseph Kowalsky: It’s interesting you say that because I was just reading about Red Hill Farms, which is a goat farm in California and how they sold their company and how they — what they look for and who they look for and they were saying exactly that, that is was a family-owned large farm and nationwide distribution of goat products. So it wasn’t small, but they definitely were looking for exactly what you’re talking about. So I think that, that is the precisely the right way to go about it. And I guess what I was wondering was, I did understand what you were saying when you had already someone in a particular industry that others would come to you. I didn’t realize that people would come to you who are not in those same industries that they would just that you had the connections, I guess, to attract that type of a —

Jon Isaac: Yes, I mean, our flooring CEOs know — they know almost everybody in the flooring industry. I don’t think you can name anybody that has a substantial company or a company that has any size that they don’t know who that person is. Sometimes, it’s our client. I mean Flooring Liquidators is a prime example. They were and still are a client of one of our other companies with Marquis. So they just come from everywhere. As you know, we’re — we will look for any opportunities that exist out there. And I think our reputation is important that we maintain it and we hold it. So I appreciate the question, Joe.

Joseph Kowalsky: Thank you. Thank you very much for the information. And how many companies would you say that you look at in the recent year for example? And how many have you decided, yes, this is one we’d like to go after and how many have you decided not to go after? And that’s the end of my questions and I’ll be quiet here and out. Thank you.

Jon Isaac: I don’t know that I have an exact number. I mean sometimes we’ll get three to five we look at in a week. Other times, it will be silent for a month or two. So I really don’t know. I mean we maybe a dozen or more a year I would say. And we try to pursue the ones that are interesting. We discuss those opportunities with the CEOs who run it. If it’s a steel company, I’m talking to Tom about what he thinks of this. And then we — if it looks like it’s got potential then we pursue it. But no — so that’s — I can’t give you an exact number. I really don’t know, but it’s less than 1,000, it’s more than 1, somewhere in there.

Joseph Kowalsky: It gives me an idea. Thank you very much.

Jon Isaac: Thank you. Let’s take a call from James, please. The question, sorry, from James.

Operator: Thank you. Mr. Stanford, your line is open.

Unidentified Analyst: Good afternoon, everyone. Thanks for allowing me a chance to ask here. You mentioned Precision Metal Works defaulting on a financial covenant. I was wondering if you wouldn’t mind elaborating on that. And also if you wouldn’t mind carrying if that was discovered post or pre-acquisition and what steps you’re taking to alleviate that default?

David Verret: So it’s related to a fixed charge covenant, just a financial ratio. And that covenant was breached earlier in the year, in the second half of the year. So we’ve been working with the banks and I think we’re really close to kind of getting that resolved. So it was post-acquisition and it’s our fixed charge ratio covenant.

Unidentified Analyst: Thank you. And would you mind sharing the financial institution that you’re working with to work through this?

Jon Isaac: It’s — is it in our filing?

David Verret: It will be in our 10-K but it’s there.

Jon Isaac: It’s in our 10-K I believe.

David Verret: Yes. It will be — but we haven’t filed it yet. But, yes, it’s —

Jon Isaac: You’re with a company called Steel. Who are you with?

Unidentified Analyst: I’m with Mill Steel.

Jon Isaac: You’re with Mill Steel?

Unidentified Analyst: Yes, I’m the Credit Manager at Mill Steel, Jon.

Jon Isaac: Okay. You’re welcome to call us directly. No need to do it in a public forum. But I know Carl and Carl and I have a great relationship. So he’s welcome to ask any questions. But what we have in the filing is what we can share with you right now.

Unidentified Analyst: Understood, sir. And we will certainly look into that. Carl wanted me to represent on the call today.

Jon Isaac: Okay. That’s great. I see two people from Mill Steel, yes. We’ve got great relationships with our suppliers, which you’re one of. I do appreciate your representation being on the call. But what we have in the public filing is what we can share with you. And if there’s anything that’s of concern, I’m happy to discuss it with you or Carl or anyone else.

Unidentified Analyst: Okay. We will do that then. Thank you.

Jon Isaac: Thank you.

Operator: [Operator Instructions]

Jon Isaac: Okay. I just want to thank everyone. It looks like there’s no more questions. So I just want to thank everyone for joining the call and we look forward to giving you an update on our next call for Q1. Thank you.

David Verret: Thank you, everyone.

Operator: And this concludes today’s conference call. Thank you for attending.