Educational Development Corpora (EDUC) research, news, and more from GeoInvesting

Company description

Wed, 16 Jul 2014 04:00:00 GMT

Educational Development Corporation operates as a trade publisher of the line of educational children’s books in the United States. It offers various books, including Touchy-Feely board books, activity and flashcards, adventure and search books, art books, sticker books, and foreign language books, as well as science and math titles, and chapter books and novels. The company operates through two divisions, Home Business and Publishing. The Home Business division distributes books through a network of independent consultants, who hold book showings in individual homes; and through book fairs, direct sales, and Internet sales. This division markets its products to school and public libraries. The Publishing division markets books to bookstores, toy stores, specialty stores, museums, and other retail outlets throughout the country. The company distributes children’s books published by Usborne Publishing Limited in the United Kingdom. Educational Development Corporation was founded in 1965 and is headquartered in Tulsa, Oklahoma.

Research

Fri, 15 Mar 2024 04:00:00 GMT

Educational Development Corp (NASDAQ:EDUC), announced it executed a letter of intent for a sale leaseback of its headquarters for $37.7 million.

“The agreed upon sale price of the Hilti Complex per the executed LOI totaled $37,750,000. The proceeds from the sale will be utilized to pay off the Term Loans and Revolving Loan outstanding in the Credit Agreement with the Company’s Bank. At closing, EDC will assign the existing third-party tenant lease to the Buyer and will execute a separate Triple-Net Lease (the “Lease”) for its occupied space in the Hilti Complex. The LOI does not include the excess land parcel adjacent to the Hilti Complex which will remain under the ownership of EDC.

“Capitalizing on the appreciated value of the Hilti Complex is in the best interest of our shareholders. The proceeds from the sale will be used to pay off our debts with our bank and we expect to have limited working capital borrowings going forward,” said Craig White, President, and Chief Executive Officer of Educational Development Corporation. “The interest saved on the reduced borrowings will exceed our monthly rental payments and we will no longer have monthly mortgage payments, having an immediate improvement to our financial performance. We also expect our cashflows from operations to be very strong in the upcoming years as we convert our excess inventory into cash.”

–

Research

Thu, 18 Jan 2024 15:40:29 GMT

While it’s too early to get too excited about Educational Development Corp (NASDAQ:EDUC) ($1.69; $14.4M market cap), the stock is back on our radar for several reasons. Yesterday the company announced it has regained NASDAQ compliance as its stock price has maintained the $1 level for over 10 consecutive trading days.

If you recall, EDUC, a publishing company specializing in books and educational products for children, has been in a nosedive after its MLM book selling business revenues took a hit from the abatement of COVID and, more seriously, after their key relationship with a book publisher that the company sourced the majority of its books was terminated (risk we had highlighted in the past).

In response, the company now concentrates on selling books through a publishing book business that it owns and has entered the toy vertical through an acquisition..

The stock had recently hit new lows of $0.80 before rebounding on Q3 2024 results, even though the company continued to lose money.

The uptick in shares may be due to commentary from the related Q3 conference call that relayed some optimism about reaching operating profitability, plans to aggressively pursue its online strategy and reinstating a dividend. While the financial results for Q3 were not impressive, the conference call had some key takeaways:

Online sales channel to begin:

“Another significant upcoming improvement will be the launch of our new e-commerce platform later this month for PaperPie. We are thrilled with the opportunity to share with our brand partners and our customers a more intuitive, efficient and visually stunning platform allowing for a mobile friendly experience.”
Getting back to profitability:

“Question – Paul Carter: Okay, great. And just sort of a bigger picture. So your third quarter net revenue was like $17 million. I know the third quarter is a good quarter for you typically. So seasonally adjusted, it means right now you're running at an annual kind of run rate of somewhere in the neighborhood of like $40 million of net revenues, give or take. So, if you stabilize that net revenue at the $40 million level, you'll be doing something like, I don't know, $27 million, $28 million in gross profits depending on a lot of different factors, of course. But are you confident that you can get to consistent sort of operating profitability at that level, if you, like I guess, just assume no growth even with the increase in the rent expense that you're going to have to take on going forward once you sell your building?

Answer – Daniel E. O'Keefe: Yeah, we do feel confident that we can. We've reduced expenses a great deal just in the last eight months. We anticipate that selling the building, the net from our lease payments and our interest expense will still be a positive. So that's the biggest expense. But I will also say in the last six months, we've had to do things, kind of in a short-term strategy to generate cash to pay back the bank. Some of those things were not as profitable as our historical levels. So we'll have to evaluate that going forward, whether that will still remain to be necessary or we can kind of get back to normal operations.”
Aiming to get back to profitability and restore dividend:

“While there is no magic wand to cut our way to profitability, we look for every opportunity and are laser-focused on improving our bottom line results. Once we return to profitability, we plan to reinstate our past practice of paying quarterly dividends to our shareholders.”

“The company is confident it can reach consistent operating profitability at $40 million revenue through recent cost reductions. However, the company aims to increase sales beyond $40 million.”
Cost savings:

“Capital expenditure is primarily for IT development of internal systems. Non-IT Capex is minimal, but IT Capex was significant last year. It will be greatly reduced going forward as the new e-commerce platform nears launch.”

The company recently saw some insider buying.

Please also be aware of this short report on EDUC in July 2022.

Research

Sun, 10 Jul 2022 04:00:00 GMT

Educational Development Corp (NASDAQ:EDUC), a publishing company specializing in books for children, yesterday announced its fiscal First quarter 2023 result:

Sales of $23.2 million vs $40.8 million in the prior year
EPS of $0.03 vs. $0.41 in the prior year

“Although the nature of the pandemic has created much volatility in comparing our first quarter numbers, I am pleased that we have continued to remain profitable. During this first quarter of fiscal 2023, demand for children's books was negatively impacted by reduced disposable income resulting from record inflation. Although we see continued sales pressure from inflation, historically inflationary pressures have bolstered our UBAM divisions' active consultant count as more families look for non-traditional income streams to offset their rising expenses. We are working diligently to promote the awareness of UBAM's business opportunity to increase our overall active consultant levels," stated Craig White, President and CEO of Educational Development Corporation.

Conference call sheds some light on dividend reinstatement and expansion into educational toys.

“we are continuing to strengthen our balance sheet. As our inventory turns into cash, we will use this cash to first pay down our working capital line. And then we will look to utilize additional cash flow to reinstate investor dividends.

Additionally, I've said over the last several calls that I'm wanting to look to expand to get into educational toys, games and puzzles. And so we've been talking with a few vendors that want to create exclusive content for us. It's early on in that process. We've seen a few samples. We've seen second revisions of presentations. But this would be looking for fiscal 2024 or calendar 2023. But we are aggressively looking at additional projects and products.”

Research

Fri, 06 May 2022 12:07:31 GMT

Educational Development Corp (NASDAQ:EDUC) ($6.29; $54.8M market cap), a publishing company specializing in books for children, yesterday announced its fiscal fourth quarter and full year 2022 results

We previously mentioned in August 2021 that we reduced our exposure as the company was benefiting from COVID lockdowns.

The results stated:

Sales of $23.3 million vs $40.3 million in the prior year
EPS of $0.04 vs. $0.25 in the prior year

“We are pleased to report that we continue to exceed pre-pandemic levels in our fiscal fourth quarter with increases in net revenues and average number of consultants, resulting in continued profitability. Last year, due to multiple circumstances associated with the COVID-19 pandemic, we saw an unusually positive increase in the demand for our products which resulted in record sales and earnings for fiscal 2021.”

Short term challenges/ suspended dividend:

"We are now in our first quarter of fiscal 2023 and are seeing the sales efforts our UBAM division challenged by record inflation resulting in higher fuel and food costs. These inflationary challenges pull back on the disposable income of our customers and have historically had a short-term impact on sales. As an offset to these challenges, our consultant count is typically bolstered by the addition of consultants looking for additional earning streams. These short-term issues have forced us to look at the current fiscal year with a more conservative outlook.

While we expect short term challenges this year, we are taking steps to conserve cash and maintain profitability. In addition, because we have acquired the bulk of our inventory over the past year, we are protected in the short term from rising inventory prices. During this quarter we have increased our working capital borrowings with our bank to support our increased inventory levels and the board has decided to temporarily suspend our dividend to protect our balance sheet. The dividend has always been a priority for the Company as part of our long-term capital allocation strategy to create shareholder returns. This strategy remains unchanged and as our inventory levels normalize later this year, our priority is to reinstate our historical practice of paying quarterly dividends,”

Research

Fri, 07 Jan 2022 14:42:43 GMT

Educational Development Corp (NASDAQ:EDUC) ($9.67; $83.7M market cap), a publishing company specializing in books for children, announced Q3 2022 results:

Sales of $45.1 million vs $66.7 million in the prior year
EPS of $0.31 vs $0.51 in the prior year

Although the headline numbers do not look good, the company’s comparable Q3 2021 was favorably impacted from Covid related sales. The more encouraging stat line is the revenue growth, if you eliminate management estimates of the impact on sales from Covid.

“Last year, due to multiple circumstances associated with the COVID-19 pandemic, we saw an unusually positive increase in the demand for our products which resulted in record sales and earnings for fiscal 2021. This year, many of these circumstances, such as children returning to the classroom, and parents returning to full-time employment, have resulted in our business returning to more normalized levels of growth with associated seasonality," stated Craig White, President and CEO of Educational Development Corporation.

Historically, our third quarter is one of our highest revenue quarters of the year due to the seasonal nature of our business. Due to the significant positive impact of the COVID-19 pandemic on our business last year, we are providing the additional table below to show pre-COVID, COVID impacted and current financial results for the fiscal third quarter and year-to-date results ended November 30."

Regardless, the stock will likely be out of favor until headline numbers portray growth and we can better gauge what the company’s financials will look like on a normalized basis. Furthermore, apples to apples sales growth was still not incredibly impressive for the quarter. Something to consider is that the stock is trading at low P/E multiples (8.5x & 7.9x) on analyst EPS estimates for fiscal 2022 ($1.13) and 2023 ($1.22) and carries a healthy dividend yield of 4%. So, given that growth may resume soon, value investors may start to take notice.

On August 16, 2021 we mentioned that we reduced our long exposure to EDUC to allocate to higher conviction names. Given the boost in sales the company experienced in fiscal 2021, the quarterly comps will be tough for the remainder of its fiscal 2022, ending in February.

Research

Thu, 07 Oct 2021 14:33:39 GMT

Educational Development Corp (NASDAQ:EDUC) ($10.00; $86.5M market cap), a publishing company specializing in books for children, announced Q2 2022 results:

Sales of $33.0 million vs $59.3 million in the prior year
EPS of $0.23 vs $0.51 in the prior year

“As a result of the pandemic, 2020 was a very unusual year for all companies. Ours was no exception. Fortunately, we saw an increase in demand for our products, and we were poised and ready to meet the opportunity. This demand anomaly resulted in record sales and record earnings,” stated Craig White, President and CEO of Educational Development Corporation.

This year, as the pandemic restrictions have lessened, we had a more typical second quarter. Historically, our second quarter is one of our lowest revenue quarters of the year due to the seasonal nature of our business. During the second quarter of last year we experienced a significant increase in the demand for our educational products as parents navigated the COVID-19 pandemic travel restrictions as well as teaching in the home,”

On August 16, 2021 we reduced our long exposure to EDUC to allocate to higher conviction names. Given the boost in sales the company experienced in fiscal 2021, the quarterly comps will be tough for the remainder of its fiscal 2022.

On the positive side, something we want to pay close attention to is that sales and earnings for the quarter were up 34.8% and 89%, respectively, compared to the fiscal Q2 quarter (pre pandemic). At some point, inventors will start focusing on these types of comparisons when evaluating stocks that saw their financials benefit from the pandemic.

Also, EDUC:

Pays a quarterly dividend, which at current prices, works out to a yield of 4%
Trades at a meager run-rate P/E of 10.8, based on Q2 numbers (seasonally slowest quarter)

Research

Thu, 08 Jul 2021 15:31:09 GMT

Educational Development Corp (NASDAQ:EDUC) ($12.10; $104.3M market cap), a publishing company specializing in books for children, announced Q1 2022 results. Please note the company pre-announced Q1 on June 16th 2021.

Sales of $40.8 million vs $38.3 million in the prior year
EPS of $0.41 vs $0.23 in the prior year

“I am truly pleased by our record breaking fiscal 2022 first quarter sales, and the translation of those sales into significant earnings growth for our shareholders,” said Randall White, President and CEO. “This quarter’s results reflect the positive impacts from several strategic changes that were made during our fourth quarter last year. We restructured our freight contract with our small package carrier to reduce price increases and increased the minimum charges on customer orders to further offset our overall net shipping costs on each package. These changes, along with increased discounts and rebates on longer print runs with our publishers, have driven increased profitability for the quarter. We expect continued profitability from these changes, and other future strategic improvements, to further drive shareholder returns...

The Company has a strong financial position and is and expects an increase in revenues and profitability for the fiscal year ending February 28, 2022.”

Research

Thu, 17 Jun 2021 14:55:08 GMT

Educational Development Corp (NASDAQ:EDUC) ($12.10; $104.3M market cap), a publishing company specializing in books for children, announced estimated Q1 2022 results:

Sales of $40.8 million vs $38.2 million in the prior year
EPS to be $0.38 to $0.41 vs $0.23 in the prior year

“We are pleased to announce record first quarter fiscal 2022 net revenues. Along with this revenue growth, we are continuing to achieve operational improvements that are increasing our overall profitability and wanted to share earnings estimates...

...During April and May last year we experienced a large increase in demand for our products from parents needing educational products in the home due to school closures associated with the Covid-19 pandemic. This increase in demand last year resulted in sales growth that does not traditionally occur in our fiscal first quarter... This fiscal first quarter and our second quarter will have challenging comparisons, but we continue to expect the impact of our active sales consultants will offset the unusual demand increase that occurred during the same periods last year.”

While the top line growth was not as robust as some investors may have wanted, it's worth noting that EDUC is trading at a meager P/E 7.3 and price to sales of 1.65. Thus, we think investors will focus more on the superior earnings per share growth the company posted for the quarter, which bodes well for it if revenues resume at a more robust pace once the tough COVID-19 comps are in the rear view mirror.

Research

Thu, 13 May 2021 16:24:50 GMT

Educational Development Corp (NASDAQ:EDUC) ($15.89; $132.6M market cap), a publishing company specializing in books for children announced Q4 2021 results:

Sales of $40.3 million vs $20.2 million in the prior year
EPS of $0.25 vs $0.06 in the prior year

Our sales growth during fiscal 2021 translated into significant earnings growth and significant positive cash flows from operations, We have used the majority of the cash flows generated to strategically invest in additional capacity to support future growth. Additionally, we retired two term loans early which frees up future cash flows, and returned excess cash to our shareholders in the form of increased quarterly dividends. In combination with our existing Usborne Books & More (“UBAM”) consultants and leaders, the addition of almost 30,000 new sales consultants was a key factor of the accelerated growth we experienced in the second half of the year; and that continues into fiscal 2022.

The company provided preliminary results for this quarter in January, which we highlighted here.

Research

Thu, 08 Apr 2021 17:07:47 GMT

Educational Development Corp (NASDAQ:EDUC) ($16.94; $141.4M market cap), a publishing company specializing in books, announced record monthly sales and active sales consultants.

March revenues are expected to be approximately $17.9 million, an increase of 132% over March 2020 sales. The company also finished the month with 56,400 active sales consultants.

“March 2021 represents our twelfth straight month of reporting record monthly net revenue growth over the comparable month of the prior year. And while this growth has been consistently repeating, our March 2021 sales growth is magnified against its prior period, which saw a 25% reduction of sales due to the negative impact of the pandemic...

...Our active consultant sales force has grown from 29,400 in March 2020 to 56,400 at the end of March 2021. This growth of 27,000 active consultants represents a 92% increase in our sales force. It is this expanded consultant sales force that continues to drive our growth; with more consultants introducing our products to more customers, we continue to generate more orders and increased net revenues.”

Research

Tue, 26 Jan 2021 18:37:03 GMT

Educational Development Corp (NASDAQ:EDUC) ($14.50; $121.0M market cap), a publishing company specializing in books, announced revenue and earnings guidance for 2021. The company expects revenues in excess of $200 million and earnings guidance of $1.45 to $1.50 in EPS (prior guidance was the same on revenues and $1.40 to $1.50).

The guidance implies Q4 EPS of $0.20 to $0.25 vs $0.06 in the prior year.

"Our sales growth during the first nine months of fiscal 2021 generated significant earnings growth and significant positive cashflows from operations. We ended the quarter with more than $31.4 million of cash on our balance sheet. We expect to use the majority of this cash flow generated to invest in additional inventory to support our increased sales volumes, to pay down debt and return excess cash to our shareholders in the form of dividends. Our Board has again approved a quarterly cash dividend of $0.10 per share. The fourth quarter dividend of $0.10 will be paid on or around March 11, 2021 to shareholders of record on February 23, 2021. "

As we covered before (here and here), the company experiences seasonality (which some investors may not be aware of), with Q3 being the strongest and Q4 typically the weakest. This being the case, it’s possible that some may interpret the Q4 guidance to be not strong enough, as Q4 will certainly be sequentially down from Q3, but still sharply higher, year over year.

Research

Tue, 12 Jan 2021 19:34:33 GMT

Educational Development Corp (NASDAQ:EDUC) ($15.71; $131.2M market cap), a publishing company specializing in books announced Q3 2021 results:

Sales of $66.7 million vs $40.8 million in the prior year
EPS of $0.51 vs $0.33 in the prior year

“The net revenues of our direct sales division, Usborne Books and More (“UBAM”) totaled $64,169,700 during the quarter ended November 30, 2020, an increase of 68.4% from $38,100,400 for the quarter ended November 30, 2019. While initially this division received a boost in sales last spring from parents at home with children needing educational materials, our sales growth is now driven by our increased number of active sales consultants. During the third quarter we continued to grow our number of active consultants, beginning in September with 50,300 active consultants and ending in November with 60,500 active consultants. Our growth in active UBAM consultants continued to drive our growth in sales during the quarter and we expect this increase in sales consultants will continue to grow revenues in our fiscal fourth quarter and into fiscal 2022.

Our retail divisions net revenues decreased 5.3%, to $2,580,600 in the third quarter of fiscal 2021, from $2,724,200 for the same quarter a year ago. Retail Sales continue to be impacted by the Covid-19 pandemic, which forced several of our customer’s stores to temporarily close during this fiscal year. We expect sales to increase in this division during the upcoming quarters as customers are able to reopen stores.”

The company will host a conference call on January 14, 2021 at 4PM EST.

Research

Thu, 19 Nov 2020 17:48:07 GMT

Educational Development Corp (NASDAQ:EDUC) ($14.64; $122.3M market cap), a publishing company specializing in books for children, released an investor presentation which contains guidance for its full year 2021 (its current fiscal year ends in February)

The company expects to report total sales of $200 million with EPS of $1.40 to $1.50, representing roughly 76% and 215% year over year growth, respectively. For the 6 months of 2021, EDUC Has reported sales and EPS of $97.5 million and $0.74 respectively.

Some investors may not be aware of the seasonality the company experiences, with Q3 being the strongest and Q4 typically the weakest. This being the case, it’s possible that some may interpret the second half guidance to be not strong enough, as Q4 will certainly be sequentially down from Q3, but still sharply higher, year over year.

Research

Fri, 06 Nov 2020 20:16:33 GMT

Educational Development Corp (NASDAQ:EDUC) ($17.34; $144.8M market cap), a publishing company specializing in books for children, announced record October sales and record active sales consultants.

“Sales for the UBAM Division were record-breaking (probably until we finish November) with over $22.3 million worth of orders, a 62% increase over October last year.

The Company had reached a milestone in number of active sales consultants in the Company’s UBAM Division. “I am thankful for each and every one of our Consultants and Leaders who are part of our 56,000 member field sales force. What you do is important, and I appreciate each and every one who is part of our literacy mission.”

The company also announced growth in its retail division which has been down the last several quarters.

“I am very happy to report revenues from our Retail Division were also up 14% for the month, which I believe is excellent in today’s market.”

Caveat:

Although October sales are very strong, we find it a bit odd that to the best of our knowledge, they have not provided September sales.

Research

Wed, 14 Oct 2020 16:52:49 GMT

Educational Development Corp (NASDAQ:EDUC) ($19.17; $160.1M market cap), a publishing company specializing in books for children, announced its huge record Q2 2021 results on October 7, 2020. We covered the results here.

Shares have increased 141% since our initial speculative Long CTA in late May and 102% Since our follow up CTA at $9.47, disclosed in a Weekly Follow Up Email. As you can see below, this is not our first stint with EDUC, having obtained a 262% return in 2015/2016.

Even after this recent strong move, the stock is only selling at P/E of 17.

It remains to be seen if shares will trade at a higher P/E of 20 to 30 since, from our experience, MLM type models tend to top out at a P/E of 10 to 15. However, we do think shares have more juice and could reach a more premium P/E in the near term.

The company typically hosts a conference call a week after the press release. Here is a link to the call and here are a few quotes from CEO Randall White. As usual, Randall gave us some entertaining soundbites as the company moves into its stronger quarters.

“We closed at the highest all-time price in our history, $19.17 is what I show, but that's the first time it’s closed over 19. But the best is yet to come - this is just a start.”

“..all these orders, they were shipping or prepaid. They come in on credit cards or whatever and we're shipping over a million dollars a day, which means we're running out about a million dollars a day, cash. So what happens is we have a lot of cash here and we have no short-term borrowings now. And we paid down $7.2 million of building debt. So the only debt we have left is about $11 million on this building, which is about a $35 million complex.”

“So very nice cash flow and [Indiscernible] what are you going to do with all that money? We, at the end of August, had $22 million cash and very little debt. There's about three choices. You pay down debt, you increase your dividend or you buy back shares, or you can give me a big bonus. This quarter, we chose to pay down debt and then we increased the dividend 67%. The dividend is up $0.10, pretty nice, I think the best use of our cash is to reward the shareholders.”

“we had our largest shipping day in history. We shipped $1.3 million last week in one day and that's without the new line, which will be ready when we're ready. So we're -- October, November, December, our biggest month, and we're today shipping that -- we're gearing up to have a big third quarter.”

Research

Wed, 07 Oct 2020 17:02:08 GMT

Educational Development Corp (NASDAQ:EDUC) ($17.19; $147.2M market cap), a publishing company specializing in books for children, announced record Q2 2021 results:

Sales of $59.2 million vs $24.4 million in the prior year
EPS of $0.51 vs $0.12 in the prior year
Increased quarterly dividend to $0.10 from $0.06

“The net revenues of our direct sales division, Usborne Books and More (“UBAM”) totaled $56,911,600 during the quarter ended August 31, 2020, an increase of 161.8% from $21,735,200 for the quarter ended August 31, 2019. During the second quarter this division also experienced significant growth in active consultants, beginning in June with 36,900 active consultants and ending in August with over 50,300 active consultants. Our increase in active UBAM consultants, the continued demand for educational materials in the home, and our ability to receive orders online and deliver directly to our customers’ homes resulted in our triple digit UBAM sales growth this quarter. In addition, we are excited for continued sales growth in the fall as this is typically our busiest selling season of the year.”

The resulting increase in cashflows from operations allowed us to pay off two long-term debts during the second quarter totaling $7,181,400; and we still ended with $22,636,300 in cash on our balance sheet at August 31, 2020. Our decision to retire these debts early was directly aimed at increasing shareholder value; first through increased future earnings from reduced interest expenses and second, by using the reduction in future debt payments to support increasing our quarterly dividends.”

The company will host its conference call on Tuesday, October 13th at 4:00 PM ET.

Research

Fri, 04 Sep 2020 15:38:47 GMT

Educational Development Corp (NASDAQ:EDUC) ($15.13; $126.4M market cap), a publishing company specializing in books for children, announced record estimated second quarter record revenues.

The Company estimates fiscal 2021 second quarter net revenues between $58.5 million to $60.0 million, compared to approximately $24.4 million in net revenues recorded in the second quarter of fiscal 2020, an increase of approximately 140%-150%.

Second quarter of fiscal 2021 was the largest net revenue quarter in the Company’s history.
Active consultant count in the UBAM division, the largest sales division of the Company, exceeded the milestone of 50,000 active consultants at the end of August 2020, which is the highest active consultant level in the Company’s history.
Continued monthly sales growth, along with active consultant growth, bodes well for the company as it enters its fiscal third quarter, which is historically the largest sales quarter of the year.
The publishing side of the business is finally beginning to experience gains after being temporarily impacted by COVID-19.

Research

Mon, 31 Aug 2020 11:45:58 GMT

Educational Development Corpora (NASDAQ:EDUC) – The company announced it has renewed its revolving credit line of $10 million for another year.

“Due to our recent growth, we have generated increased cash flows from operations. We ended the month of July 2020 with no borrowings on the line of credit and over $23.3 million in cash on our balance sheet. In addition, we expect our cash balances to remain strong through the fall as we experience continued growth in our UBAM division. UBAM sales are primarily generated through prepaid e-commerce orders which have a positive impact on cash flows.

Having this line of credit provides additional security as we are purchasing increased inventory volumes to keep up with our recent sales growth.”

Research

Fri, 07 Aug 2020 19:18:02 GMT

Educational Development Corp (NASDAQ:EDUC) ($14.82; $123.8M market cap), a publishing company specializing in books for children, announced record July sales and record number of active consultants:

"The Company recognized approximately $22.3 million in net revenues, compared to approximately $7.9 million in net revenues recorded in July of last year, an increase of approximately $14.4 million, or 182%. Mr. White also stated that July, 2020 was the largest net revenue month in the Company’s history.

Mr. White added that the active consultant count in the UBAM division, the largest sales division of the Company, grew to approximately 45,200, which is the highest active consultant count in the Company’s history."

We added to our long position in early July as we felt there was a good deal of upside if the company executed over the next several quarters. You can see our full Call To Action note here.

Research

Thu, 16 Jul 2020 16:34:39 GMT

On May 29, 2020, we disclosed that we initiated a small position in the Educational Development Corp (NASDAQ:EDUC) ($12.46; $104.0M market cap) based on some information arbitrage we came across in the Q4 2020 Conference call transcript. In our weekly wrap-up email on July 5, we stated we added to our long position.

EDUC is a publishing company specializing in books for children. Last night, the company announced record June sales and a record number of new consultants for June 2020.

June sales estimated to be $18 million vs $7 million last June
Added 6000 new recruits during June, a record for the company, bringing its total number of active consultants to 39,000.

This information was all given on the company’s Q1 2021 conference call last night, then the company issued a release with the data as well. We encourage you to read the full script here, as CEO Randall White shares his very bullish outlook for the company.

“We've had this extraordinary growth before, and it's in 2016. And we're -- we have many internal data about is it 2016 again or any way I'm saying that. And so we are looking ahead at significant expansion of our facilities to handle the kind of volumes that may be coming. I'm not forecasting it. It may be coming. And our #1 focus is keeping up with increased demand through the fall selling season, which most can be typically 3x what they were in the summertime. And so you guys can do the math on that. So it's been an extraordinary time here. A strain on our facilities in that. In March, we were working 32 hours. This week, we are working 10-hour dailies and Sunday.”

“June is the lowest month of the year. Our big months are October, November, December. And June exceeded our biggest revenue month in history. And if you did a comparison of what June was to June last year, if you move it on into what June was compared to October, November, December, whoa, it’s staggering numbers. So that's what we're looking at. We finished June with the highest number of active consultants in our history.”

Research

Sun, 05 Jul 2020 04:00:00 GMT

Added to our EDUC Long Position

On May 29, 2020, we disclosed that we initiated a small position in the EDUC, based on some information arbitrage we came across in the Q4 2020 Conference call transcript. We are still not comfortable making the stock a core position and are treating it as a short term holding going into the release of Q1 2021. However, we do believe that some of the commentary in the conference call transcript supports the case that the company will have superior sales and earnings growth over the next few quarters.

Although we’re not huge fans of MLM style businesses, Educational Development Corp (NASDAQ:EDUC) ‘s business plan of selling children’s books through an MLM model via “Parties” on Facebook seems to be working right now. It’s apparent that COVID-19 has accelerated their business.

With shares trading at a TTM P/E of 14 and yielding a dividend of 2.5%, we think there is room for a good deal of upside if the company executes over the next few quarters. It also seems that EDUC has rectified many of the issues that stalled its growth over the last 3 years. These problems centered around the company’s suboptimal optimal infrastructure needed to support its growth in its distributor network and overall demand for its books.

For a bit more of a backdrop on our initial experience with EDUC, you can read our 2015 article on which we had built first position in the stock. Over the duration of that particular Call To Action coverage period, between August 27, 2015 and October 11, 2016, the stock rose over 100%, from $5.29 to $10.98, in the interim hitting a high of $17.59, a 230% peak return.

Research

Tue, 09 Jun 2020 20:22:14 GMT

Educational Development Corp (NASDAQ:EDUC) ($7.86; $65.7M market cap), is a publishing company specializing in books for children.

We recently disclosed that we established a small long position on the heels of strong Q4 2020 results and a bullish conference call.

The company just announced the repayment of one of the Company’s outstanding loans and the intent to continue to repurchase shares. Highlights from the release:

The Company has generated excess cash and has used the funds to repay one of the Company’s outstanding loans.
As previously reported, over the past two months we have experienced material growth in our business. This growth has generated additional cash flows from operations.
We determined that using a portion of our available excess cash balance to pay the $2.9 million balance of a term loan, that is collateralized by the building we own at 10302 East 55th Place, Tulsa, Oklahoma, would be in the best interest of our shareholders.
Additionally, the lease payments from the long-term tenant of our main complex at 5402 S. 122nd East Avenue, Tulsa OK, covers the debt amortization of our only remaining debt.”
With this debt reduction, we continue to generate sufficient cash and maintain available borrowing capacity to fund our current growth.
We also expect to continue to pay quarterly dividends and expect to continue to buy back shares in the open market during the current fiscal year.

Research

Fri, 29 May 2020 15:32:41 GMT

Established a small long position based InfoArb from conference call, see full details below. We see around 30% potential upside in the short-term if the stock were to trade at a P/E of 15 on trailing EPS. We are not quite ready to make a long-term commitment to the stock, due to past business volatility the company has experienced operating its MLM like marketing strategy.

Educational Development Corp (NASDAQ:EDUC) ($7.94; $66.4M market cap), a publishing company specializing in books for children, announced its Q4 2020 earnings results on May 21, 2020. We highlighted the company’s results in our morning email that day, which can be seen here. The main takeaway from the release was the strong Q1 2021 guidance, where management expects to report revenues between $36.5 to $38.5 million, representing the largest first quarter in the company’s history. The guidance is also a significant sequential improvement over the $20.1 million Q4 and impies 35% year over year growth at the midpoint of the guidance.

EDUC held its conference call on Wednesday evening, and there are some details from the conference call we believe could ultimately drive shares higher.

CEO Randall White sees a growth trend similar to one it experienced in 2016, a growth trend that ultimately led to shares rising from $5 to over $12, when we actually owned the stock (disclosed on GeoInvesting):

“We see a trend like it was in 2016 and anybody who was here in 2016, it grew so fast, it about killed us. We went from $35 million, went from $25 million to $35 million, $35 million to $65 million and $65 million to $106 million. And that $65 million to $106 million about this. So this year, we're seeing the same growth, and we're prepared for it.”

Other takeaways from the call:

Solid business momentum beginning April

“March revenue was down 25%. April came around. Our business exploded. April was up about, I don't know, 60% over April last year, and that's without any of the school and library business (which typically accounts for 15% of sales).”

“CEO noted that the company has recruited 5,000 new sales people, during March and April. He further stressed “In May, it looks like we're going to have about that number again. So we could very likely have 10,000 new sales recruits in this quarter.”

“We're generating such amazing positive momentum that people are having success, and one of the keys ingredients of continued success in the direct selling industry is early success. And so we're seeing that happen with all of these new consultants that have joined in April and even May, that they're having early success. And while that doesn't specifically guarantee it, you can't ever do that with a salesperson, what it does is it shows us that the potential is there for it to continue, definitely.”

Record order volumes

“Business has grown and ramped up, we have been able to handle it. We went from March only being able to keep our warehouse busy for 32 hours. By April, we were into overtime and a second shift. And we were operating 2 shifts and on overtime to stay up with the demand. We've had a few 14,000 orders in the coming days. And as of yesterday, we shipped 15,000 in between the 2 shifts. So we can certainly handle the volume right now. Most days are between 8,000 and 12,000 incoming orders.”

If you are new to Geoinvesting or haven't read our research on EDUC, you can view a timeline of our research notes on the company here and our Reasons For Tracking the company in 2016 here

Research

Wed, 20 May 2020 04:00:00 GMT

Educational Development Corp (NASDAQ:EDUC) ($5.90; $49.9M market cap), a publishing company specializing in books for children, announced its Q4 2019 results:

Sales of $20.1 million vs $23.6 million in the prior year
EPS of $0.06 vs $0.07 in the prior year

“Fiscal year 2020, while down from fiscal year 2019, is still recorded as the Company’s second- best year in history for net revenue and net earnings; we maintained a strong cash balance and continued to pay dividends. Fiscal year 2020 was also a year of consolidation and investment for future growth. Our IT department allocated significant resources in the development of infrastructure and programs in preparation for future growth. In addition, our Usborne Books & More division developed and implemented a new recruit success program “Climb.” While the development of new programs impacted the fourth quarter of fiscal 2020, the successful results have already been recognized in the 1st quarter of fiscal 2021...

...The dramatic increase in net revenues has continued during May. While we have not historically provided financial guidance, we feel the material changes to our business require us to provide more current information. As such, we currently expect to report net revenues for the quarter between $36.5 million and $38.5 million, which will be the largest first quarter net revenues in our history.”

The company also announced it increased its quarterly dividend to $0.06 from $0.05.

We have a long history with EDUC dating back to 2015. Our first go around with EDUC in August 2015 and October 2016 netted us over 100% gains.

We presume that the company could be benefiting from COVID-19 as people look for extra ways to earn income through the company's direct marketing book selling program.

Research

Fri, 16 Jun 2017 14:50:33 GMT

EDUC ($10.45) announced record Q1 2018 revenue of $27.8 million vs $22.8 million in the prior year. The company also executed a new amendment with its existing lender which expands its borrowing capacity:

We have also recently executed a new amendment with our existing lender which immediately expands our working capital facility from $7.0 million to $10.0M and allows us, upon lender approval, to grow this facility to $15M to support our continued growth in inventory and sales. This new amendment also includes a $3.0M Advancing Term Loan facility which will be used to finance our recent capital expansion project.

In our June 2, 2017 email we stated we would once again keep a close eye on the Company as it attempts to address some of the issues that challenged its growth over the last several quarters. You can see our full note here.

Research

Fri, 02 Jun 2017 14:13:47 GMT

EDUC ($10.05) - Once again we will keep close eye on the company as it attempts to address some of the issues that challenged its growth over the last few quarters. The stock is up 42% in 2 days following strong Q4 fiscal results (ended February 28, 2017) where it reported non-GAAP EPS of $0.30 vs a loss in the prior year. What was not obvious from the earnings press release was that the company failed to adjust for a one time impairment of asset charge, which boosted the EPS number for the quarter.

Even though it’s tough for us to shake off a feeling that something just seems off with the Company, partly due to the very unusual manner in which the CEO conducts himself on earnings conference calls, we continue to track the company’s progress. However, erratic as the conference call may be, CEO Randall White claims the worst is behind them. Erratic CEO’s are a fact of life on Wall Street: take FIZZ, RH or TMUS for example. It is getting a read on the difference between being an asset and being a liability in a CEO that is important from an investing standpoint. We continue to work on that with EDUC by staying up to date with company releases and filings.

In the case of EDUC, the CEO believes fiscal 2018 will be a strong year for the Company. The CEO’s commentary coupled with the recent investment by Red Oak Partners, who disclosed a 7.1% stake in mid April 2017 has us once again watching the stock closely. For those who may be unaware of the unusual conference call events, we encourage you to listen to the last two calls - the only two the Company has ever hosted.

Research

Tue, 04 Apr 2017 14:04:53 GMT

EDUC ($7.05) announced record unaudited net revenues for March 2017 totaling approximately $9.4 million. This revenue level represents an increase of $2.2 million, or 31% over March 2016 revenues of approximately $7.2 million. Quote from management:
“March sales results were very encouraging with double digit growth in both our UBAM and Publishing segments. Our Publishing segment reported sales in excess of $1.0 million, the second highest sales month in the past 17 months. Our UBAM segment sales exceeded $8.4 million, driven by the growth in consultants. Our current active consultant count exceeds 27,000, which is near the highest consultant count in history, despite the challenges associated with delayed shipping that occurred in the fall of 2016. This growth shows the continued strong demand for our products and our success would not be possible without the hard work and efforts of our loyal employees, consultants and publishing sales teams.”

Research

Mon, 06 Feb 2017 16:48:00 GMT

EDUC ($7.35) - On January 31, 2017 we summarized EDUC’s Q3 2017 conference call which was filled with several troublesome quotes regarding its debt covenants, internal controls, cash flow and a few more operational inefficiencies the company was facing. The call also contained some bullish commentary about growth. You can see our summary of Q3 and the conference call here.

Friday after the market closed, EDUC filed an 8-K with the following verbiage:

“On January 27, 2017, during an investor conference call held to discuss the financial results of Educational Development Corporation for the quarter ended November 30, 2016, the Company provided remarks that referred to our capital structure. To clarify these statements, the Company has no plans to issue additional capital at this time.

On February 1, 2017, the Company repaid the previously disclosed advance from its President and Chief Executive Officer.”

We find it strange that the company would issue this statement days after the CEO stated on the conference call that they are looking at a secondary stock offering to boost capital. Quote from the call:

“So looking out ahead we must improve our capital structure and we are currently looking at a secondary stock offering to boost capital. You really can't grow -- you really can't fund a growing Company like this on bank debt…

...So we are looking at a long range how to improve capital structure and someone has got to come up with some equity, so we are looking at that…”

On top of the conflicting need for capital comments, the 8-K did not address if the company is in compliance with its debt covenants or if it plans on maintaining its current dividend payout policy. We will continue to track filings and news flow for any updates.

Research

Tue, 31 Jan 2017 16:30:12 GMT

EDUC ($7.45) - On January 24, 2017 we discussed EDUC’s Q3 2017 results. At the time of our morning email, the company had only filed it’s 10-Q with no press release. A concern we mentioned included that the company may be in violation of one of its debt covenants. Per the 10-Q:

“At November 30, 2016, we were in violation of the debt to worth ratio covenant for which we have not yet received a waiver from the Bank. Accordingly, the related long-term debt has been classified as current. The debt to worth ratio requires the following: (1) For quarters ending August 31, 2016 and November 30, 2016: 3.50:1.00. (2) For quarters ending February 28, 2017, May 31, 2017, August 31, 2017, and November 30, 2017: 3.25:1:00. (3) Quarters thereafter: 3.00:1.00.”

The company held its conference call on Friday, January 27, 2017. There were several troublesome quotes from the conference call that we would like to point out that have to do with:

Funding needs
Cash flow issues and security of dividends
Violation of Debt Covenants
Internal Controls and Operational Inefficiencies
Unhappy distributors on the MLM side of the business
Trepidation from retail customers

We disclosed that we exited our EDUC position October 11, 2016. If EDUC can build the infrastructure to fill orders in a timely fashion and grow earnings the stock could attract our attention again at the right price and/or time. In the meantime EDUC is trading at trailing P/E 14.6 which is at the upper end at which many stocks in the MLM industry trade at. We think there could be downside to $5.10 which equates to a P/E of 10, a lower end multiple in the industry.

Description:

“We have two divisions in the Company; we have a direct selling division called Usborne Books & More where we have the independent consultants selling directly to the marketplace. We have a retail division where we sell to retail stores, toy stores, bookstores, museum stores, etc. We have around 5,000 stores that we currently sell to, Barnes & Noble being our largest single customer.”

Basically, there seems to be more of a portrayal of hope vs. certainty that the company will solve the bottlenecks that came with its explosive topline growth. Shares were down 10% yesterday as the tone of the conference call is probably making its way to investors. Examples of some quotes can give insight into why the stock reacted the way it did::

Funding:

So looking out ahead we must improve our capital structure and we are currently looking at a secondary stock offering to boost capital. You really can't grow -- you really can't fund a growing Company like this on bank debt…

...So we are looking at a long range how to improve capital structure and someone has got to come up with some equity, so we are looking at that…

...Tony, I totally agree with you. It is dilutive, but if you've got a $7 million cap on your bank loan and you're going to go from $110 million to maybe $200 million, you know you are going to do what you've got to do. I don't have the answers all here, but equity is one of them. I do not want

...my plan was if the profits had been comparable to the revenue and we had the stock at $15 to $18, it was $17 a year ago. At $17 you put out 1 million shares from 4 million and get up to 5 million that is not dilutive at all. And that is what I had in mind. $8, I am not crazy about that. I agree with you, but a growing Company cannot be totally funded on bank debt.

See the full conference call breakdown on funding, cash flow and dividend security, debt covenants, internal controls and operational inefficiencies, unhappy distributors, and trepidation of customers here.

Now, we we are not forecasting gloom and doom for EDUC, but management is going to have to prove to investors that it can manage it growth. There is no question that sales are rocking. See the positive comments about the company’s outlook here under the section “Bullish conference call quotes”.

Conference Call Notes

Tue, 31 Jan 2017 14:15:26 GMT

Q3 2017 Conference Call Notes:

Funding:

So looking out ahead we must improve our capital structure and we are currently looking at a secondary stock offering to boost capital. You really can't grow -- you really can't fund a growing Company like this on bank debt…

...So we are looking at a long range how to improve capital structure and someone has got to come up with some equity, so we are looking at that...

...Tony, I totally agree with you. It is dilutive, but if you've got a $7 million cap on your bank loan and you're going to go from $110 million to maybe $200 million, you know you are going to do what you've got to do. I don't have the answers all here, but equity is one of them. I do not want -- my plan was if the profits had been comparable to the revenue and we had the stock at $15 to $18, it was $17 a year ago. At $17 you put out 1 million shares from 4 million and get up to 5 million that is not dilutive at all. And that is what I had in mind. $8, I am not crazy about that. I agree with you, but a growing Company cannot be totally funded on bank debt.

Cash Flow and Dividend Security:

That is still the case. I was discussing this with Peter Usborne last week or this week actually. I told him, I said, this Company has come full circle because when I became CEO in 1986 we had a cash flow problem and we couldn't meet payroll. And on Friday afternoon I called everybody together, which is 22 people, and we didn't have enough money to pay them. But we got money in on Monday and it all worked out. And here we are 35 years, later it came down to a specific payroll that was underfunded. And so, I personally loaned the Company the money. And I have reasonable assurance that they are going to pay me back one of these days -- I hope they will.

Well, I tell you, Jeff, when you have a cash flow problem certain things have to go. I cannot tell you what I am going to do with the dividend. But I am trying to change our capital structure because the last person who wants to stop the dividend is me because I get most of it.

So, I can't tell you what is going to happen with the dividend. I can't tell you what is going to happen with the capital structure. But promise you I am working diligently on that program to get my money back from the Company and a dividend…

Debt Covenants:

...So we think that debt to equity out of compliance will be taken care of now. We think it will be in compliance but I don't have any assurance of that. But that is what we think.

...And I would also like to address an issue we had in the financial statements in November as of November 30. We had two issues which caused a delay. One we were out of compliance with the bank covenants in debt to equity. And that is because debt to equity we have a ratio in there and we were out of compliance. However, I would mention that if you look at our statement, in the debt to equity ratio, which we were about 3.75%, and I think we had to be at 3.5, something like that.

Internal Controls and Operational Inefficiencies:

There is inefficiencies everywhere. And for lack of training we shipped to the wrong people.

Finally got down to over nine months to get for customer service and after 9,000 on the Tuesday before Christmas UPS said that is it, no more from you guys. So we just had to accept the fact that we had failures in our service and do the best to move ahead.

I answer a lot of customer service calls and I got the most irate ones

...Another one was the weakness in controls. And the weakness in controls came about from being flooded with orders and deferred revenue and then trying to reconcile that with the cash that came in and -- with the new software. I take responsibility for it. Yes, it was a nightmare trying to process all those orders. We got them done. We still are having some issues from the software Company in the direct sales to the new financial software. And there are still some reconciling items that are occurring now that we think will not happen when we roll back to our own system. So we are not totally out of the woods yet on the weakness in controls; debt to equity we will see...

I mortgaged my house when I got this Company, I will do it again. There is no problem in me being all in, I am all in. If you had breakfast this morning and you had bacon and eggs, well, that chicken was involved, that pig was committed. So I am the big fat pig. I am all in, brother.

Unhappy Distributors:

But their software did not work and it caused us significant loss of revenue and consultants and customers.

Trepidation of retail customers:

And I will tell you, if you talk to our field salespeople they are so excited about the fact that we have caught up on shipping. And there are people who've been sitting on the sidelines and said I am not going to order anything until they get that straightened out. And by the way, that includes our retail stores. It may take a little bit longer for them, but we have every hope that we will get the retail stores' business back and the customers.

Bullish conference call quotes about growth:

We recorded 35 million in sales two years ago, the past year 65 million, this year we will finish up around 110 million. And the growth continues. I am not going to throw out any large numbers here that will make everybody nervous, but the growth is continuing at least on that pace, if not better.

And that is continuing. Over the weekend we got 10,000 orders. And those orders are, again, increasing daily from last Monday -- two weeks ago Monday they are up about 80%. So, yes, and that is more cash that comes in. But we have bills to pay. We have to pay for inventory and UPS and salaries and so normal stuff. But we didn't stop -- we didn't continue to grow at an exponential rate.

So, today, I will tell you that every order that we have in this building has been shipped as of yesterday with the exception of any possible problem orders through customer service or some other unique situation. But other than that we are totally caught up, which means deferred revenue is gone. So that issue on the balance sheet of deferred revenue, which causes other compliance issues, is gone.

In January we had the largest month in our history, $14 million -- I mean, December. Excuse me, December, I am sorry, December.

The field people, this is not my forecast, but I am telling you the people in the field think that we can do 300 million this year.

Research

Tue, 24 Jan 2017 17:49:17 GMT

EDUC ($9.80) - After a successful bullish run with EDUC, we are now starting to take note of the other side of the coin. The company filed its 10-Q for Q3 2017 and has yet to issue a press release. The 10-Q reveals flat EPS on near 20% sales growth with growing inventory levels. However, investors should more importantly note that the company may be in violation of one of its debt covenants. Per the 10-Q:

“At November 30, 2016, we were in violation of the debt to worth ratio covenant for which we have not yet received a waiver from the Bank. Accordingly, the related long-term debt has been classified as current. The debt to worth ratio requires the following: (1) For quarters ending August 31, 2016 and November 30, 2016: 3.50:1.00. (2) For quarters ending February 28, 2017, May 31, 2017, August 31, 2017, and November 30, 2017: 3.25:1:00. (3) Quarters thereafter: 3.00:1.00.”

Results for Q3 2017:

$30.6 million vs $24.4 million in the prior year
EPS of $0.31 vs $0.31

Geo’s History w/EDUC

We had a good run with EDUC in 2015/2016. On August 26, 2015 we released our reasons for optimism in the EDUC story when the stock was trading at $4.94. On August 28, 2015 we initiated our long position when the stock was trading $5.25 and then added to our position on September 3 and September 29, 2015 stating we felt shares could reach $10 to $12 in the near term. Shares easily surpassed our near term target, reaching a high of $17.59 in December 2015. We closed out our long position in October 2016. To see our full coverage on EDUC, go here.

Research

Tue, 18 Oct 2016 12:16:34 GMT

EDUC ($10.07 marked down to $9.32 pre-market) - We informed our members on October 11, 2016 that we had started to close our long position in EDUC. On August 26, 2015 we released our reasons for optimism in the EDUC story when the stock was trading at $4.94. On August 28, 2015 we initiated our long position when the stock was trading $5.25 and then added to our position on September 3 and September 29, 2015 stating we felt shares could reach $10 to $12 in the near term. Shares easily surpassed our near term target, reaching a high of $17.59 in December 2015.

Shares never regained those highs, bouncing around between $9 and $14 since that initial run. We have decided to move on to other opportunities.

The 10-Q hit the wires for the three months ending August 31, 2016, after hours on Friday prior to the company putting out a press release and we believe the stock’s sharp sell off was purely on the company’s bottom line being down YOY and missed expectations. The company did $25.9 million in revenue versus $12.6 million and $0.08 in EPS versus $0.16 in the same quarter last year.

The company later released a press release, maintaining its guidance and citing logistical issues and service level challenges for the drop in the bottom line:

“During this same period, the Company installed over $4.2 million in software and distribution systems, with more technology and equipment to be in place in the ensuing months. This technology and equipment includes a new warehouse management system to improve controls over inventory movement and a state-of-the-art order fulfillment system for greater efficiency. Also included is a new operating system for UBAM featuring a replicated e-commerce website for each sales Consultant, as well as back office functionality for both Consultants and corporate. The Company has also installed a software package for financial and accounting functions. These new software packages significantly upgrade software that had been operating in excess of 25 years and became obsolete due to the extraordinary growth.”

“In spite of our best efforts, the inordinate demand for our products resulted in a reduction in our service level to our Sales Consultants and their customers as well as our retail distribution outlets. To restore our normal level of service, the Company utilized all available avenues to secure a workforce to process our order commitments. This resulted in inefficiencies
including overtime pay, but resulted in reducing the order fulfillment time from 4-6 weeks to 7-10 days and is improving daily.”

"There are a number of challenges we have faced as we adjusted to our rapid growth, while simultaneously preparing to meet sustained high demand in the months ahead," said White. "With our new facility and additional equipment, we have now tripled the number of daily shipments we can process, compared to our previous facility. Long-term cost savings are expected as the new technology and equipment we have implemented will reduce our cost of labor."

Inventory levels rose from $29.6 million on August 31, 2016, compared to $13.7 million on August 31, 2015.

EDUC also reiterated its guidance:

“The Company recorded net revenues in Fiscal Year 2015 of $32.5 million, and $63.6 million in Fiscal Year 2016. The Company is on pace to record net revenues of $120-140 million for Fiscal Year ending February 28, 2017. The Company has previously reported expected earnings per share in the range of $1.00-1.10 per share, and with the improved supplier terms and efficiency, this remains the Company's expectation.”

If the company achieves its guidance, EPS performance for the back half of its fiscal 2017 year ending February will be impressive. In 2016 sales and EPS were $24.4M in sales and $0.31 in EPS for Q3 and $16.9M in sales and ($0.03) for Q4.

Looking at past seasonality for 2016, 2015 and 2014, we were able to make the estimate that Q3 will represent about 59% of the company’s remaining guidance (we expect Q3 revenue to be about $45.8M) and Q4 will represent about 41% of the company’s remaining guidance (we expect Q4 revenue to be about $31.87M).

We are not sure how EPS guidance will fall across these quarters since it is unclear how fast margins will rebound.

Research

Thu, 13 Oct 2016 17:24:06 GMT

In our Ocotober 11, 2016 email we stated we had closed out our long position in EDUC.

After a strong one year run, we have started closing out our long position in $EDUC ($10.80). On August 26, 2015 we released our reasons for optimism in the EDUC story when the stock was trading at $4.94. On August 28, 2015 we initiated our long position when the stock was trading $5.25 and then added to our position on September 3 and September 29, 2015 stating we felt shares could reach $10 to $12 in the near term. Shares easily surpassed our near term target, reaching a high of $17.59 in December 2015.

Shares never regained those highs, bouncing around between $9 and $14 since that initial run. We have decided to move on to other opportunities. In the meantime, we’ll wait to see if Q2 results will start to reflect the margin improvements that management has been forecasting since the end of its fourth quarter. We will potentially reestablish a long position in EDUC.

We took a closer look at the Company's sales reporting data. Now we may be reading into this a bit much, but we noticed that for fiscal 2016 afer reporting preliminary Q1 resutls, the Company issued montly sales data for the first two months leading up to the following quarterly reports. For fiscal 2017, the Company issued preliminary Q1 data prior to releasing its actual Q1 results but then offered no sales data until its most recent announcement for the month of August, which is the last month of its Q2 (Fiscal year ends Feb 28). We find it odd the Company elected not to give the full quarerly update as it has in the past. Again, we could be over analyzing the issue, but we will await the Q2 2017 results and re-evalute the stock to determine if a re-entry is warranted espeically if the Company reports weak fiananical results and the stock sells off.

Research

Tue, 11 Oct 2016 17:46:06 GMT

Closing Out Our Long Position In EDUC

After a strong one year run, we have started closing out our long position in EDUC ($10.80). On August 26, 2015 we released our reasons for optimism in the EDUC story when the stock was trading at $4.94. On August 28, 2015 we initiated our long position when the stock was trading $5.25 and then added to our position on September 3 and September 29, 2015 stating we felt shares could reach $10 to $12 in the near term. Shares easily surpassed our near term target, reaching a high of $17.59 in December 2015.

Shares never regained those highs, bouncing around between $9 and $14 since that initial run. We have decided to move on to other opportunities. In the meantime, we’ll wait to see if Q2 results will start to reflect the margin improvements that management has been forecasting since the end of its fourth quarter. We will potentially reestablish a long position in EDUC.

Research

Tue, 14 Jun 2016 17:34:49 GMT

Pullback In EDUC Shares Offers Opportunity

The recent pullback in $EDUC ($9.95) shares may present an opportunity for us to add to our long position. We will alert you if we decide to add. We recently highlighted EDUC in our Mock Portfolio 2.0 that we released on May 31, 2016. See our full Mock Portfolio research note here.

Research

Wed, 08 Jun 2016 17:33:03 GMT

EDUC Shares Get Boost On Q1 2017 Preliminary Results

On May 31, 2016 we issued our Mock Buy on Pullback Portfolio 2.0. EDUC ($11.91), which was part of our first buy on pullback portfolio and returned 60% in 3 months, was also part of portfolio 2.0. EDUC was added at $10.85 after the stock fell on what many viewed as weak Q4 EPS results. We stated:

“we believe that nonrecurring costs negatively impacted the quarter that will not be present moving forward. While Q4 sales were $20.4 million vs $11.1 million in the prior year period, the Company reported a slight loss in the quarter due to what appears to be one-time costs associated with an internal shift between two divisions of the corporation that put pressure on margins for the quarter.

We expect the Company to quickly return to normalized margin levels.”

Yesterday, EDUC provided preliminary results for Q1 2017 with sales of $22.9 million vs $9.6 million in the prior year. More importantly, the Company stated they expect to return to normalized pre-tax earnings for the quarter and expect margins to improve in the coming quarters. The Company maintained its previously issued revenue range of $140 to $170 million with EPS of $1.00 to $1.50 for fiscal 2017.

Research

Tue, 31 May 2016 14:50:08 GMT

Note from Mock Portfolio 2.0

EDUC ($10.85) – a trade publisher of a line of educational children’s books in the United States.

EDUC has been one of our best performing stocks over the last 9 months. We initially alerted investors that we were buying shares at around $5 on August 28, 2015. We were attracted to the company’s high dividend yield of 7% at that time and strong growth prospects. By December 9, 2015 the stock hit a high of $17.59. During the ensuing market correction that began toward the end of December 2015 the stock retreated to a low of $8.63 on January 14, 2016, even after reporting strong financial progress. We promptly added EDUC to our first “buy on pullback” mock portfolio at $9.22. By April 22, 2016 the stock hit a high of $15.03. Now, we are adding it to our second pullback-themed mock folio. Late in the trading day on May 26, 2016 EDUC reported year-end sales and earnings. The stock quickly fell as much as 15% to hit $10.29 and settled down 11% by the end of the trading session, closing at $11.00. At first glance, Q4 numbers disappointed on the bottom line even though sales rose sharply.

Q4 sales of $17.0 million vs $7.6 million in the prior year
Q4 net loss per share of $0.03 vs EPS of $0.02 in the prior year

However, we believe that nonrecurring costs negatively impacted the quarter that will not be present moving forward. While Q4 sales were $20.4 million vs $11.1 million in the prior year period, the Company reported a slight loss in the quarter due to what appears to be one-time costs associated with an internal shift between two divisions of the corporation that put pressure on margins for the quarter.

We expect the Company to quickly return to normalized margin levels. History indicates the Company will likely have an update for its Q1 2017 report covering the period ending May 31, 2016 some time in the next week or two. Hopefully, management will offer more clarity on margins.

Implied guidance using historical net margins of 5%:

Q1 2017 sales of $24 million with EPS of $0.28 vs $9.6 million and $0.08 in the prior year
Full year 2017 sales of $155 million (midpoint of full year 2017 guidance) with EPS of $1.79 vs $63.6 million and EPS of $0.52.

Using a conservative forward P/E of 10 on our estimated EPS of $1.79 based on the midpoint of Company sales guidance of $140 to $170 million results in a price target of $17.90.

Research

Fri, 27 May 2016 16:02:22 GMT

EDUC ($11.00) Shares fell 12% late in the trading day yesterday when the Company filed its fiscal 2016 10-K. While Q4 sales were $20.4 million vs $11.1 million in the prior year period, the Company reported a slight loss in the quarter due to a one time internal shift between two divisions of the corporation that negatively affected margins for the quarter.

“EDC Publishing has discontinued wholesale business and will supply directly to the retail market going forward in order to give our direct sales force an opportunity to better compete in the school and library market.”

We expect the Company to return to normalized margin levels promptly. History indicates the Company will likely have an update for its Q1 2017 report covering the period ending May 31, 2016 sometime in the next week or two.

The Company offered updated guidance for fiscal 2017. The Company expects Q1 2017 net revenues to be 2.5X net revenues of Q1 2016. The Company expects annual sales for fiscal year 2017 to be in the range of $140 to $170 million up from previously issued guidance of $110 million.

Implied guidance using historical net margins of 5%:

Q1 2017 sales of $24 million with EPS of $0.28 vs $9.6 million and $0.08 in the prior year
Full year 2017 sales of $155 million (midpoint of full year 2017 guidance) with EPS of $1.79 vs $63.6 million and EPS of $0.52.

We may look to add to our long position.

Comments & Business Outlook

Tue, 15 Mar 2016 18:23:40 GMT

TULSA, Okla., March 14, 2016 (GLOBE NEWSWIRE) -- Educational Development Corporation (“EDC”) (NASDAQ:EDUC) (http://www.edcpub.com) today reports historic record net revenues for the fiscal year ended February 29, 2016 (unaudited).

Randall White, CEO of Educational Development Corporation, announces that the Company achieved record net revenues of $63.7 million for the fiscal year ended February 29, 2016, which surpassed last year’s previous record of $32.5 million. Both divisions of the Company had excellent net revenue results with the home business division, Usborne Books & More (UBAM) leading the way with $52.8 million compared to $21.1 million a year ago, an increase of 151%.

UBAM had an excellent year attracting new sales associates which now total over 19,600, compared to 7,800 at the end of fiscal year 2015. This division has now posted 33 consecutive months of net revenues gains over the same month the previous year.

This unprecedented sales growth is primarily the result of eliminating sales to Amazon and wholesale accounts four years ago to support our retail accounts and our sales consultants.

Preliminary unaudited results indicate a marked increase in pre-tax earnings for the quarter and fiscal year ending February 29, 2016. In addition, the Company had $2.4 million in orders received in February which were unable to be processed for the month due to the heavy influx of orders and will be included in results for March and the fiscal year ending February 28, 2017. The Company has monitored the extraordinary growth in sales, which has continued in the first month of fiscal year 2017, and expect sales to exceed $110 million for fiscal year 2017.

To accommodate this escalating growth, the Company moved to our new location during the month of February, while continuing to ship product. The Company continues to look for improved efficiencies in operations. A new small-package processing machine is being installed today which should more than double our quantity shipped each day, allowing us to minimize our backlog. UBAM will introduce new ecommerce and consultant software in the first fiscal quarter of 2017, which, along with new accounting software, is an investment of over $750,000.

Comments & Business Outlook

Thu, 11 Feb 2016 19:05:19 GMT

TULSA, Okla., Feb. 11, 2016 (GLOBE NEWSWIRE) -- Randall White, CEO, Educational Development Corporation (“EDC”) (NASDAQ:EDUC) announces record net revenues for January 2016.

Net revenues for the month ended January 31, 2016, were a Company record for January of $4,753,100 when compared to $2,016,100 for the same month last year, an increase of 136%.

Net revenues for the home business division, Usborne Books & More (“UBAM”) were $4,037,200 for January 2016, compared to $1,199,900 for the same period in fiscal year 2015, up 236%. The net revenue gain was primarily driven by the continued increase in the number of sales associates joining the organization, with 1,200 new consultants during the month of January 2016, compared to 200 in January last year. At January 31, 2016, Usborne Books & More had just under 18,000 active consultants compared to 7,900 active at the same time last year.

As previously reported, the extraordinary growth in sales necessitated the Company to acquire larger facilities to accommodate the distribution of its products. The new facilities will be operational on Monday, February 15, 2016. Our current facility, previously for sale, has been removed from the market as it has been determined that the continued sales growth necessitates retaining the existing facility to accommodate the increased operational requirements.

Comments & Business Outlook

Fri, 15 Jan 2016 17:02:04 GMT

EDUC ($9.30) - In our December 23, 2015 email, we stated that EDUC released preliminary Q3 2016 results. Yesterday, after the close the company released actual Q3 results:

Sales of $24.4 million vs $10.9 million in the prior year period
EPS of $0.31 vs $0.13 (preliminary guidance range was $0.34 to $0.37)

The company also provided sales figures for December which came in at another record level. December sales were $7.8 million vs $3.2 million in the prior year. The company also finally talked about its recent facility expansion we informed members about on December 4th, 2015:

“The extraordinary growth in sales necessitated the Company to acquire larger facilities to accommodate the distribution of its products. In December, the Company purchased, for $23,000,000, a 40 acre, 401,000 square foot combination warehouse and office space. The Company has entered into a favorable agreement that allows the former owner to lease back their currently occupied office space of 181,000 square feet for 15 years. The lease payments over the 15 years will exceed the mortgage payments incurred in the purchase of the building. The Company will occupy 220,000 square feet of office and warehouse space which will more than double the current space. The property has 15 acres of vacant land that can be utilized for future expansion. The Company has also entered into a Purchase Agreement for the sale of our existing property and expects to close the sale in February.”

Comments & Business Outlook

Wed, 23 Dec 2015 05:00:00 GMT

EDUC ($12.79) Reports Record Q3 2016 Results

Yesterday, during the trading day EDUC reported record Q3 results. (Preliminary Results)

The company reported record net revenues for the Quarter ended November 30th, 2015, of $24,427,000 compared to $10,936,700 for the same quarter last year, an increase of 123%.
Net income for the quarter to surpass the net income for the full previous year with estimates of $0.34-0.37 for the quarter, compared to $.013 for the quarter last year

The strong sales trend has continued into December. Quotes from release:

“The increase in net revenues has continued and the Company expects another record for the month of December 31, 2015, as December net revenue month-to-date has already doubled this month last year.”

Research

Fri, 04 Dec 2015 14:35:42 GMT

Likely Cause For Recent Strength in EDUC Shares

Shares of $EDUC ($17.08) are up 23% in the last two days likely due to a news story we found from the Tulsa Worldwebsite stating that EDUC has bought 401,000 square feet of warehouse space as the company has outgrown its existing space. Quotes from the article:

“Hilti Corporation has sold its entire 401,000-square-foot Tulsa headquarters for an undisclosed sum.

As part of the sale, the Liechtenstein-based tool-maker will immediately lease back 180,000 square feet of office space for its Tulsa operations, according to a report from CB Richard Ellis Inc.

The buyer was Educational Development Corporation, an educational children’s book publishing company based in Tulsa. EDC plans to use the remaining 41,000 square feet of office space and 180,000 square feet of warehouse space at 5400 S. 122nd East Ave. as its new corporate headquarters...

...Randall W. White, chairman, president and CEO of EDC, said he believes the property will be a great fit for the future needs of his company.”

“EDC had literally outgrown our existing space,” he said. “The Hilti property is a great fit for our office and warehouse operations and will provide room for our continued growth. Over the last few months, our sales increased so rapidly that we borrowed some space from Hilti even before we closed the transaction.”

Research

Tue, 24 Nov 2015 16:29:16 GMT

EDUC Announced Record Sales For October

EDUC ($11.60) announced record October sales of $8.5 million compared to $3.6 million for last October. Momentum has carried into November, the company expects to announce record sales for November in excess of $10.0 million and Q3 sales in excess of $24.0 million with EPS of $0.37 to $0.40 for the third quarter vs $0.13.

On August 26, 2015 wereleased our reasons for optimism in the EDUC story when the stock was trading at $4.94. On August 28, 2015 weinitiated our long position when the stock was trading $5.25 and then added to our position onSeptember 3 andSeptember 29, 2015 stating we felt shares could reach $10 to $12 in the near term. As the stock has recently surpassed initial price targets, we will likely look to lighten up our long position.

Today in the AM, this positive Seeking Alpha came out detailing the financials and why the stock is a good value at current prices. It’s worth noting that we think at some point EDUC is going to attract negative attention due to its use of the multi-level marketing model for its main revenue producing segment.

Research

Thu, 08 Oct 2015 14:55:57 GMT

Will look to add EDUC on record Q2 2016 results

On August 26, 2015 we released our reasons for optimism in the EDUC story when the stock was trading at $4.94. On August 28, 2015 we initiated our long position when the stock was trading $5.25 and then added to our position on September 3 and September 29, 2015 stating we felt shares could reach $10 to $12 in the near term. Yesterday, after the close EDUC report record Q2 2016 results:

Sales of $12.6 million vs $6.8 million in the prior year
EPS of $0.16 vs $0.00 in the prior year

Bullish outlook from management:

“The record net revenue months continued in September. The Company has achieved record net revenue results for July and August, and September continued that trend with net revenue of $6.1 million compared to $2.9 million in September last year. Traditionally, October and November are the Company's largest net revenue months and the Company expects those months to also be our largest net revenue months in our history. This explosive growth has necessitated the Company begin negotiations for new facilities to accommodate this extraordinary growth in net revenue.”

In related news, a Seeking Alphaarticle released this morning highlights EDUC’s explosive sales and earnings growth as it heads into its seasonally strongest quarter (Q3 ending November 30). The author believes a $20 million revenue quarter with $0.25 to $0.30 in EPS is possible.

Research

Tue, 29 Sep 2015 14:48:30 GMT

Added to our long position in EDUC ($7.51)

We also added to our long position in EDUC during yesterday’s trading session. See why we think the stock could reach $10 to $12 in the near term here.

Acquisition Activity

Thu, 17 Sep 2015 14:11:17 GMT

TULSA, Okla., Sept. 16, 2015 (GLOBE NEWSWIRE) -- Educational Development Corporation ("EDC") (NASDAQ:EDUC) (http://www.edcpub.com) would like to announce we have acquired Demibooks Inc. EDC is the United States publisher of Usborne and Kane Miller books and operates a direct-to-consumer sales division, Usborne Books & More. EDC was an early investor in Demibooks.

As part of the acquisition, EDC will continue to operate Demibooks Storytime, a curated marketplace for children's picture book apps. Publishers can create content for Storytime using Demibooks Composer Pro, the premier book app authoring platform on the iPad. Demibooks will discontinue Demibooks Composer Studio and a service to publish apps to the App Store. CEO Rafiq Ahmed and CTO Dan Hotop will consult with EDC during a transition period.

Demibooks CEO Rafiq Ahmed said, "It has been a fantastic journey since Demibooks Composer first launched in 2011. We are grateful to everyone who has helped build Demibooks along the way. We pioneered interactive book app authoring on the iPad, and have reached amazing customers in digital publishing, schools and beyond. We have had a close working relationship with EDC since their early investment in us, and are confident the Demibooks brand and digital publishing business will continue to grow within the EDC family."

Randall White, President and CEO of EDC, stated: "We are excited for the opportunity to distribute these products through our direct marketing division. We also see potential for licensing the Composer platform to schools and other publishers."

- See more at: http://globenewswire.com/news-release/2015/09/16/768819/10149652/en/Educational-Development-Corporation-Announces-Acquisition-of-Demibooks-Inc.html#sthash.cjiSKEQc.dpuf

Comments & Business Outlook

Thu, 03 Sep 2015 16:27:34 GMT

TULSA, Okla., Sept. 3, 2015 (GLOBE NEWSWIRE) -- Randall White, CEO, Educational Development Corporation ("EDC") (EDUC) (http://www.edcpub.com) announces record net revenues for the month of August 2015 of $5,042,200 compared to $2,454,800 for August last year, an increase of 205%. Both divisions of EDC posted significant increases in net revenues with Usborne Books & More (UBAM) leading the way with $3,893,000 compared to $1,339,900 for August last year, an increase of 191%. EDC Publishing had net revenues of $1,149,300 compared to $1,114,900 for August last year, a 3% increase.

The Company also recorded the largest net revenue for any quarter in our history of $12,620,500. The previous record was quarter ending November 30, 2014 of $10,936,700.

Mr. White states that preliminary, unaudited results for July and August indicate a significant improvement in operational margins which resulted from the increased net revenue and cost saving programs previously implemented. The increase in UBAM's net revenue was partially due to 5,000 new sales associates joining the organization from June 15 through July 31, 2015.

Mr. White announces his purchase of EDUC stock in the open market of 5,152 shares in his individual account and 4,296 shares in his IRA.

The Board of Directors had previously authorized a $0.09 per share cash dividend, a 12.5% increase, which will be paid on September 18, 2015 to shareholders of record September 11, 2015.

Research

Thu, 03 Sep 2015 16:26:16 GMT

Added to our EDUC long position

Today, via premium tweet we stated we added to our long position on release just out that the company reported record August sales and the CEO is buying shares in the open market. On August 26, 2015 when EDUC was trading at $4.94 we stated we were beginning to track the story based on the company benefiting from an aggressive expansion of its multi level marketing sales channel. On August 27, 2015 we alerted premium members that we initiated a long position in EDUC at $5.29.

Our other reasons for optimism included:

Announced record monthly revenues for July of $4.3 million vs $2.4 million last July
Indicated a significant improvement in operational margins for July
Increased its quarterly dividend to $0.09, a 12.5% increase (7% yield)
Recently announced record Q1 2016 results:
- Sales: $9.6 million vs $7.1 million
- EPS: $0.08 vs $0.06

Caveats:

MLM business models such as Herbalife have been receiving immense scrutiny from investors and regulators.
We have not interviewed management
One of the company’s two divisions operates through a licensing relationship with a book publisher. We need to perform more due diligence on the nature of this relationship
Until recently, EDUC sales and performance had been dismal. We would like to understand what is behind an improved growth trend that began in Q2 2014.
We would like to gain an understanding of how big of a threat the internet is to the company’s brick and mortar business.
We are continuing to perform more due diligence.
Book value of $3.08 per share
Trading at a price to sales of 0.57 much lower than the industry average of 1.63

We are continuing to perform more due diligence.

Research

Fri, 28 Aug 2015 16:45:23 GMT

Initiated a long position in EDUC

Yesterday we released our reasons for optimism on EDUC. After further due diligence we have begun to initiate a speculative long position. It should be noted that the stock is very illiquid and operates in the highly controversial MLM industry. MLM business models such as Herbalife have been receiving immense scrutiny from investors and regulators, including private MLM Vemma recently being temporarily shut down by Federal regulators while the FTC takes the company and its CEO to court, alleging it’s a pyramid scheme. The court’s decision to grant or deny an injunction to halt the business is scheduled for September 3, and the result of this decision will likely have an impact on all public MLM companies.

Reasons For Tracking

Wed, 26 Aug 2015 04:00:00 GMT

Beginning to track EDUC

EDUC ($4.94) operates as a trade publisher in the line of educational children’s books in the United States. We have no position in EDUC.

Here are some of our reasons for optimism:

It appears that the company is benefiting from an aggressive expansion of its multi level marketing sales channel.
Announced record monthly revenues for July of $4.3 million vs $2.4 million last July
Indicated a significant improvement in operational margins for July
Increased its quarterly dividend to $0.09, a 12.5% increase (7% yield)
Recently announced record Q1 2016 results:
- Sales: $9.6 million vs $7.1 million
- EPS: $0.08 vs $0.06
Book value of $3.08 per share
Trading at a price to sales of 0.57 much lower than the industry average of 1.63

Caveats:

MLM business models such as Herbalife have been receiving immense scrutiny from investors and regulators.
We have not interviewed management
One of the company’s two divisions operates through a licensing relationship with a book publisher. We need to perform more due diligence on the nature of this relationship
Until recently, EDUC sales and performance had been dismal. We would like to understand what is behind an improved growth trend that began in Q2 2014.
We would like to gain an understanding of how big of a threat the internet is to the company’s brick and mortar business.