Earnings call transcript Q1 2023

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Operator

Good morning and welcome to the Polished Conference Call. Please note that certain statements made during the call constitute forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. These risks and uncertainties are described in the Company's financial statement press release and its filings with the SEC. The forward-looking statements today are made as of the date of this call and the Company does not undertake any obligation to update the forward-looking statements. call recorded. today's that note is being Please

I CEO, Bob Rick turn the Barry. to Polished call over Bunka; go will ahead. now Please and Polished CFO,

John Bunka

investors, start Good Since period. year, I fourth thanking going we’ve everybody. the and patience to in of morning, you, this I'm Bob our quarter for joined challenging been your during to by last unable recognize related to this process for everyone with communication extensive company's standard statements. frustrating the We been you financial has due fully preparing extremely you for involved. and have these delayed the audit and

company current the that now its Fortunately, is on filings.

will we efforts plan Relations and followed our three call, cover today's topics main On We to Q&A. normalize by shareholder Investor a engagement.

wire much took audit and First, will we related time. – so address why audit process the

address XXXX what and Second, And XXXX. ahead. our rebuild see for a third, for operating the first year the I'd quarter priorities results like called discuss and we to of opportunities last that to and and we'd like then fix we've the year XXXX

respect in out into it's operations the a audit the under was former of where that of process we worth was investigation October. Board's topic, to when the recap company time, joined team. management committee providing an in With internal carrying the first At the business

refusal their previous The and Shortly their firm's the in started company's historical immediately investigations We and findings. notice complicated of and audit to we the thereafter, to information disclosure new share auditor related resignation. was by the concluded a December of received of The our XXXX, reaudit followed public by results. documents began departing presentation work. a a auditor from onboarding external

were resulting context we as all trying XXXX. not a to the work this required on I'm restating provide today. we in were XXXX process target where an elongated substantially of we As simply and excuse, are and their the date release X/XX. where reaudit audit result, of a This effort for to but

performance operating business say XXXX Regarding very XXXX, the was of the we clarity that the can throughout for results with great disappointing.

prior reliable growth In the As ensure were systems place the in to proper many stated not and XX-K, team all in performance. above controls pursued cases, priorities. management the revenue

the while and company business, and were compressed spent bottom line results third quarters – and showed both volumes personnel caused of were in The reflects on and the achieved. XXXX marketing, that second personnel, not the disruption considerable impact. in the This that extensively marketing margin target and sales

last consumer It's within important inflation to mid-summer year, note performance to impacted spending slow, the interest window, appliance and industry and that time began by the same rising rates. both

housing quarter market, the volume the fourth of The our and all most largely had major in by kitchen strong. driven however, slowed consumer categories, XXXX, liquidity mass, overall remained had which sales but been had In across luxury notably market.

In the response, XXXX, levels. our to inventory continued Throughout and perform. the category while we challenging, luxury of back pulled on quarter volume reduced remained our overall spend first marketing

operational and improve discipline. to was focus Our control expense

more deliver these can note cash volume, operating and flow. to normalized efforts show with even the that reduced important that It's margin company positive

be able strategies. through that several and was to expectation marketing Our tactical volume would in improvements we measured restore

releasing XXXX. for quarter the we results be weeks, two second In will of

margin. for provided have, We however, guidance and revenue

in continues by ability our been and business headwinds Our have industry reverse limited to be impacted trends. we to the these

recapture and for for balance the it reduce our sales was of the ability of to during rest of year. the we year estimates through momentum optimistic the our prudent this EBITDA But thought said, that balance remain the to year. We for

margin a between for low We single-digit are and now $XXX forecasting XXXX. with annualized net million $XXX EBITDA sales million,

steps execute If and to to will profitable to ensure stable that for the and for to we of have future the positioned be has build growth. right duration focus year, company the guide foundation the XXXX. we for are that towards a confident continue in business and to practices be generation growth systems Our this the taking we cash

the on process. our review loan I'd and term points are to strategic Final like touch

term now, options we from is to loan the This are engaged and options. now enable that non-dilutive will step, should with to proactive due we need type XX pursue being timetable. advisers the execution, coupled Given sound financial months have very facing source financial of us that

has discovery to Jefferies we of the to phase like than to because that would work parties of noted value. and maximize evaluate up pick process with factors on. to above, we strategic continue potential expect continue We alternatives a moved can The all slower but

process there is or course, sale. Of transaction any will no this in assurance result that

Now that Q&A for like Bob up to I'd we've for covered I. open it and that overview,

Operator

the We Peters from Morgan begin now question session. Instructions] come [Operator will first will of And question-and-answer go our Please Dempsey. Josh ahead.

Josh Peters

question. Rick my taking morning, Good Bob. for and Thanks

John Bunka

Certainly.

Josh Peters

made pulled everybody. of management in ditch a First, the filings this those done, business like we've delivering team very not short for case that was make good for this here, heavier as than very feel an I experience clear list really as that has and getting been accomplished just not the the I you what although, expecting out tough of congratulate out same previous a they but as to what amount was here, have a you been filings, why you for and time you've

my very express proud you the business in to be now gratitude, and of safe hands. as successful well think is my what I you’ve achieved. And opinion want that as should I

and to So it's as been shareholder. publicly with that wanted I the a last as tough think to best over as express it's gratitude, off year, lead I

John Bunka

Josh. you, thank Well,

Robert Barry

you. Thank

Josh Peters

like questions. let – ask I'd then other and people to Second

And enthusiastic about the very and QX margin on reengage the business. have spending outstanding cost what's low business seems not opportunity and to from to single-digit EBITDA this growth, what like the much be understood terms revenue this them to gross still are that, would sort of sales the relearn it as improvement I'm if going outside have in really largely we're me with ago, we crazy drive what year business unrealistic honestly, in margin to try more accomplished the a Although, seems But recover. you of still management than is a of economics intact. as basic can to to probably me

on doing you margin back. as comment talk come also to And to contribution down sales both breakeven then can what manage what incremental continue and you're the So sales costs fixed point? our is on about

John Bunka

Well, thank Josh, for question. you, your

question, operating point opportunities clarity that I company your forward. higher had So significantly go The volume. asking to expensing to as and you'll with both in toward and of volume the see exist guess higher of much filings recap, and had on the that's margin we think it I quite help clear was you're vendor with the the economics established expectation assumption is the may

the go rebates been the the volume it, with missed, purchased were as represented as was of and those a that well it. that were associated targeted was both to create rebates through we volume upside. years. efforts vendor was to structure As from goals our goals statement But the purchases, significant as stabilize company laboring have missed the Those rippled prior to estimates forward those quarters that flow a that reduction magnified support to receipt and underlying that the handle and cost most inventory by

provide to the with lower these as exceed cash upside also provide set expense also flow levels in. target revenue kick structure So at volume, to would report goals, in result rebates the if we we're forward, but the financial of we revenue the trying the performance going then – those

revenue, forecast line, at level, you the on the that increased volume on our not operating relying margin Josh, throughout. volume we've that margins assumption rebate provided – and So incentives that we’re does the expand rebate is rebate

where performance, leverage exceed occurs. we continue as really So and the grow that's we as to our

Josh Peters

you the then in And you're of of impact outline reduction your go just I the one know down fixed also year? as cost you've reduction, here that Jersey. taken that New the timing and through cost some operating Okay. footprint we quick potential consolidating those warehouse follow-up headcount, Can

John Bunka

continue was has there reductions been throughout that in and that marked have so of that right-size progressively, been to to And mean, and – we we'll headcounts business, both the course the gradual can Bob be try supporting K have that nine in is number the people the over here, the documented I is process organization the I there months it's Yes. expectation that where that year. Q. right of the the happened And to profitable.

was Jersey Louis. Key in do to alluded operate in you St. we within that, as centers to, and distribution two one New

facility, those distribution two stealing one into DMI. centers calls business alongside Our plan for

One facilities today be of highly it's partner, efficient to for DMI, and to them. next to is us next our our

of XXXX. a prepare that single through should our balance the So see we moving to see in expect benefit is any we of in XXXX, that for fiscal And don't that facility. to but will this results expectation year,

Josh Peters

Thank to you floor very team. congratulations cede will to and questions. much. again, your you Okay. I the But other

John Bunka

Thanks, Josh.

Robert Barry

you. Thank

Operator

The next Please Peter question ahead. Rabover comes of Artko from go Capital.

Peter Rabover

Hey, comments. like of us think, balance see too – thank shareholders last team Rick, you see management dark, you've yes, done the a you now there the first, and sheet echo that guys. happens the couple great so think, things by I we guess I with. performance. week for to price a the make, like what I I'll yes, I'd we the you would is for performance previous long keep would left make Well, to what the I the as say, Josh say, can for filings job I that. saw for comment stock one and when in

hope here a is learned so key. disclosure lesson communication And open everyone that's for more and pretty I tough the that

what listening have comment me of that it, the a consulting the given I'd that shocking second they like one things that happened I year to we for think, makes last and of $XXX,XXX make for that that amount a what Board size and the was that, and little you're – fee. The to Ellery, money make, is the of

days make Board your goes I stock Or some comment the from pay would expect window cut. that, some the down, guess price money the or that hope opens is, don't for from like, I seeing I I least would with XX formed when at significant because being XX%, And know. filings next toward bonus. a Board that resignation the the guess, XX% I in I few

previous management really, need at Board we people and on sort did the of watch company. wheel that some the think fall fresh not destroy asleep I the the really

So that's some would hope like a ask said is me questions. sort I that frustration the listening comment to. Board that, Even to of I from

So the first one…

John Bunka

I do, make statement? you can Before a

Peter Rabover

Yes, yes, absolutely.

John Bunka

statement. I parallel that guess to some

Peter Rabover

Yes.

John Bunka

and XX this and recognize a Obviously, an November. by darkness, have as haste insider very have Board in address a Bob you was process. noted months situation acted us as claims this of business coming But respond said. team and But place been later in with vantage have by from tough supportive a quickly from take merger everything quickly in to to this in, appreciate just it's and and order. results a The of I point, and the I Board has the investigation put to can my very in to very to what I this I move and Board, out the difficult. very things been to has Board management October activity

that. So I think it's important to note

Peter Rabover

a is $XXX,XXX, company market including pretty $XX It $XX in consulting cap expenses and $X I is Ellery’s Right. Okay. a almost guess that thing, a with for million egregious. $XXX,XXX, million million

cut a while through I transition. color. So consider a goes they But I pay the appreciate hope he

if by of the that something is questions refinancing Has deposit same policy X. balance XX past, from the the first couple that one just that the any read down the right? refinanced? So so issue customer are guess, in the outflows increase basically increased Obviously, you debt do related have you financial that? in to been big anticipating with seems debt more Has of I So cash reasons resolved? amount. statement to the had we've it to the that that went – Like,

John Bunka

first color. Bob, No, try let of you part provide that – yes, if it me can and the then and

Yes. on. changed is vendor its customer that or company it think strategy, and its very did strategy, that the deposit deposit early I significant

So customer deposits? speaking vendor deposits or of are you

Peter Rabover

be I'm question, about next No, is I'm customer the vendor talking going the my to – deposit deposits. talking

John Bunka

does The was practice revenue this way. company customers This is the – a a the importance recognition is that the right. is topic that of right of real that

and that, is manner There run this and effect major have for business. sheet a from is we the it. adopted We positive that way that balance

respond. I'll And with that, Bob let

Robert Barry

partially part were customer of customer excess deposit proceeds to to Company legacy No, I was And used got rest. in a sometimes – refinance million. the going time that customer of The smaller Television in for long ones Those the remaining to capital that of, deposits money collect debt off builder up a on although took to comment from Connection reduce the the acquisition. of the Goedeker the those And of deposit $XX that was upfront placed some collected order, portion customer portion from off. the that, orders. run a a raise was a when number Appliances proceeds are an to number deposit make the the builder. bank the It from and paid deposits we special business, special

So it. more the doing disbursements are And legacy customer way from related old effectively way legacy gone doing deposits to there'll no the it. be of of

Peter Rabover

Okay.

number a the of a release right? Is is now is guess bit we more And especially the right, DMI I kind that So then going that business. we're forward, to – financials, substantially because Board on little because been deposits, cash is the the happening? the number filed. Albert other is be a problem that's this expect I vendor So that the awkward one question. is assume that of higher, level can flow And relative of have not a to that financials there while

John Bunka

no predominantly yes, longer off, – the are the amount first and vendor as DMI. DMI, is of deposit, And longer vendor no at on DMI the Board a of that explain. deposit Bob November, looking Well, that can as Albert, you

Robert Barry

– up number for to vendor from XX% other allows accounts used borrowed, by and the we builds is XX% borrow and XX%. DMI be deposit. it's deposit builds us rebates balance vendor The up That That the accumulation payable. earned of of deposit vendor to our an that to that vendors, our

off to balance payable. reduce pay of have So if accounts we million that $XX by, we'd say, $X.X million,

secures that on as not issue are money a vendors payable credit secures So result strictly deposits. It's our and to an behalf. then as It's them. accounts a holding indication our that DMI

Peter Rabover

Look, Okay. that is [something is here the look for just important]… I'm theme trying to

Robert Barry

Yes.

the that it's that – backed obligate, main because payables. that's obligations is So we to deposit that of function a have buy vendor generally – goods. is point And it's by of is that

usually like So they amount. a are

Peter Rabover

I operating I debt the lower cash some the that this for assumptions company year to just can that in ways Okay. looking environment. level I'm guess, flow a release or, reduce

the just the you months? next Are are refinancing a theme XX there's the glut potential comment on you credit balance but – that's question at out so get – debt? But my not of the pretty company big And kind worried the I next there. private best have or is maybe of and the the on of can And you there? the We the of that's about maybe but refinancing might all comment terms, sheet.

John Bunka

Yes.

that that XXXX then and of clear I The our the material have of I that response and and in foreseeable opinion – color. the a things to an XX-K, we've concluded that major future. two the XXXX some themes audit statement think super say then very and auditors, you guess, I company for allows is believe main formatted of and and thorough in that it's two very we significant to has – necessary the operate in liquidity this business a the with management produced we looks forward first,

being And the able with facility the and of supportive. They runway process group bank the also been participation as and look been to complement us. have – gives forward. And us to second that we've and we the very amend provide active we comfort, piece their ahead

have the Naturally, a – color. here's we

forward. going work have as to that model results. improved to to expect we produce continue business go this our And a do. refine operating continued primary a We focus is but to We're and good,

Peter Rabover

the that you sure refinance. statement. not if Thank answers question guess for my I I'm the really on Okay.

John Bunka

business. Yes. both mean, question a our and is the our liquidity I of They're – performance refinancing function of the a of

again, So And our confidence level high. confidence our you asked is level.

in along. in we to – specifically, regard you point, I it's as is we'll remarks, – if with don't this – we at keep a much to us But we have the We'll opening engaged go informed structured firm So and have to assist question share. process. mean, to have to said refinancing, as that a and I your process fairly we the my try try

Peter Rabover

Look, a taking now – we think have it's Thanks. for it important. plenty I I have one year. the so think The Okay. I up of more that but talked time, keep we last is

I'm, in, the QX million at to be million, cash So running If if operating $XX like, – give million. the I take. look or seem QX, expenses annualized, the $XX $XX

or And mentioned so this the I'm reduction was headcount just you that consolidation. curious the and before

of the business. that natural guess the that profitable the now do SG&A company's, – And gross on is? rate with OpEx So maybe I confident what you think levels good a feel run the you margin more you're more like, business focused could

John Bunka

see that at Well, to been that fairly think two quarters. our more range to you're our – I to quarter has are structures we're within as first but and a and that results ways out, there's we'll looking at predictable present it see the margin to expense that of bit come at that, you'll that. relative structures give And volume going in second be little our color you're couple the a performing able going

year efficiency continue years we're going the quarter. be that progresses and go gain fourth through to to to able is as as expectation Our third the the –

fixed you So as present looks a the quarters cost is that good is our is heavy margins a this business. see be that opportunity those The the like that – of what expand forward volume. first we expectation at ought to model fixed and what its pretty go of couple to structure indication we fairly

pure volumes rise. quickly the So to move the EBITDA up margin margins when and on side both tend

seek to level volume operating drive higher. going good at it and get at we're this to So

Peter Rabover

at and guess, at business – appreciate I headcount no, I the also stuff Right. and quarter's first million about we substantial it's had breakeven, that just operating that give I'm the single-digit do the, But the beauty $XXX of the to you're right completely the model mentioned SG&A No, run like, take, or seems have. financial millions. warehouse and rate you like and like the consolidation. wondering, leverage going about

impact to color give that. appreciate going structure? I cost that's you guess how any So can fixed at I'd all, if the

John Bunka

to facilities to going and the fixed – longer-term. fixed The going costs Yes. bit costs have are we are a forward our those little biggest related be

those have to And XXXX as I kinds those you going we'll can share enhancements. expectations forward. now. I As go are that to don't that think we I be do said, of with know I

Operator

The next Please Associates. go Vishal of question comes ahead. from Mishra Bard

Vishal Mishra

have the morning, question Good of sales. – on going of reduction Bob. normalized business. a and about also demand macro revenue of something mean, down level are sales in Rick because I the within and numbers I your because

the So do last was of for it a specifically market. what appliances XXXX? sales think you cycle? the about normalized And was trough the your business, have the the for for we normalized Is reached of And sort can say what of demand – year sort levels? it we

John Bunka

as, were industry to questions inflationary hard where XXXX were among There the was in levels negative XXXX a both started that as to industry last September considerable line that asking during results beginning obtain trends. were Well, of the appliances. the availability been That And issues. subsided limited of industry industry growth of it it operating flipped strong and and demand well on supply show the the years – goods. in you're And numbers rising goods. overall only chain for two the and trends have as that's was trend the revenue pressure category of the was there the year the and last categories. The last categories. result, at by Prices reported COVID year industry

and double-digit That through in Those toward and industry were year and away anywhere decline of moved the are it projected all continue. replacement from of categories, major has virtually was decreases. been spring decreases has elements decline from seeing that all remodels refrigeration, discussed this much the more And of investment. single expected to to have cooktop, appliances

the trends are been our national think, everybody is aware and of That I So has experience. that, those two assessing.

started seeing line the through Our declines last the year, there of September are that our happened, have and revenue But expectation trend the clients the for present we still for year. and sure. that still through the basis were has, industry but through growth numbers. September That the balance is numbers stabilized, headwinds moved the – after declines and of

Vishal Mishra

Okay, great. Thank you.

Operator

Greystone of The next go Please question comes ahead. from Capital Adam Wilk Markets.

Adam Wilk

Good me? guys morning. hear Can you

John Bunka

Yes.

Robert Barry

Yes.

Adam Wilk

Can means EBITDA you low year margins XXXX? what help for quantify single-digit fiscal

John Bunka

percentage being want digits with number, see an range, that that revenue positive – know think want but I the quantify I low the a don't in a low-single that's And of to of we to general we sales volume. and we the stay and that's single-digit. number exact

Adam Wilk

Okay.

of the regards also in in independent along more little at press at or involvement you're you're Jefferies to loan, outside financial with with business? review this bank the release of So operating a drive of provide the in stage an looking you your continuation working value mentioned, the your the pull options advisor. any that, leverage to you with sort maybe terms Can on or of color strategic

John Bunka

process, bound participants the by It and the it had been we we've of bound. are been than has hoped. There behind that it all Well, longer purpose it. process. Jefferies And is is confidentiality process in our the itself, public disclosure of the

been We statements doubt, common has the have financial of impact is on request. what been absence a had that the a – without audited asked, And process.

been We important requests was financial from process. in the have need for information this to audited able fill but it, statements

So can process. don't said, that it know the that I comment has specifics. being any I elongated further on And

we of that that retained as firm is in that's us. financing, can that Regarding sheet facility. up cash the or and the will be the related – to working that financing the questions either strategies and balance think, the debt have free that effort surrounded facilitate have an I Its focus a identify with financial help execute to advisor process in to asked we've to

Adam Wilk

I removed your or subsequent the then sort from regarding the like interim with role been moving no your there Is Okay. see guess, has tag – of, title, but you details. things Thanks. any your forward? how And there looks with updates it business

John Bunka

Bob asked, this Well, in of titles yes, we to been we came both back because capacity in it believe and operating Bob the have I business interim. same many we're And brought same We – under excited business about still and of are which the that is have and a both it. great It and is we're to business I this with there felt focused. a familiarity group and had be, reason why Bob was great for people and a why we're in. back

I for in like effort don't believe speak we what is our the we a our that have this I know work work, just Bob is we done. milestone feel of in

under we're stage, this capacity. same at So still operating the

Adam Wilk

Thanks taking That's for my for it Okay. me. questions.

Operator

This conference concludes to for any closing to back like the I Rick turn remarks. our would session. question-and-answer over Bunka

John Bunka

kind Well, a have I'd for call go to we forward. this and not know as I attending. thank, like disruption to we everyone, seek will long this of obviously, has been awaited

we're been As mentioned, that have it under beneficial of color is as intent scrutiny, great and share we we've where I and the these to go. our made headed efforts always

forward look forward. as please So regularly us to move we communicating

So thank everyone. you,

Operator

conference disconnect. now attending and presentation, today's concluded. you now for you The may Thank is

Polished.com (POLCQ) 4 Aug 232023 Q1 Earnings call transcript