Educational Development Corporation (NASDAQ:EDUC) Q3 2020 Earnings Conference Call - Final Transcript
Jan 16, 2020 • 04:00 pm ET
Just going to say, in 45 seconds, explanation answered every question anybody had. Okay.
And we have a question from the line of Paul Dwyer with Punch. Please go ahead, sir.
Hi guys, good afternoon. I wanted to ask you about your inventories. It looked like the purchases are down pretty materially in the quarter related to Usborne. Could you just talk a little bit about how inventory management has gone and maybe any benefits you've seen over the last two years here?
Well, inventory management in last two years. Well, a lot of things come into that. We were growing at a high -- fast rate and you have to, when you realize we have about six to seven months lead time on inventory, we have to guess. And we were guessing in down the line [Phonetic] because we know what we've done, but we don't know for sure where we're going. So we had to buildup an inventory and then the sales didn't meet them. So then in a period, we have a period of reducing our inventory. It's a battle every day to try to keep inventory to meet the demand. And it's mostly important in a company like this because the bulk of our sales are prepaid and when people pay you before you send them the product, we need to have the product because it's very difficult to get the money back to them, and they [Phonetic] not to get the money back the way our organization is set up in a multilevel organization. So the inventory management, yeah, we're on it because that complements our cash flow. Dan thinks he wants to tell me something. What is it?
No, I was just going to add to that Randall, that the third quarter, Paul, we started off this fiscal year kind of at a high inventory level because of a couple of reasons. One is we started off the year in March with, we just received in our Spanish titles, which was a block of about $2.5 million of new inventory and so that increased our inventory. We hadn't been selling it before then. And now, we were at a point where that's a more of a staple of our inventory and we've been able to work some of that beginning inventory down. And then last year at this time, we acquired a little more inventory from Usborne because we were looking at a volume rebate that they gave us at the end of last year. And so we bought a little more towards the end of the year because we were getting a rebate threshold that had a good return on it. So we were a little heavy on inventory in March of the beginning of this year and then now, we're kind of at a low point, because after the third quarter, which is our business season of the year, typically inventory is at its lowest point of our full quarter cycle.