Educational Development (NASDAQ:EDUC) executives used the company’s fiscal 2026 third-quarter earnings call to emphasize a major balance-sheet milestone and lay out operational priorities aimed at returning the business to growth. Management highlighted the completed sale of the company’s Hilti Complex, which it said removes bank restrictions that had limited flexibility in recent years and positions the company to pursue a longer-term strategy focused on rebuilding sales and improving profitability.
Hilti Complex sale removes bank restrictions, management says
President and CEO Craig White said the company completed the sale of its Hilti Complex during the third quarter, describing the transaction as “a big achievement” for the company and shareholders. White said selling the property “paves the way” for Educational Development to enter fiscal 2027 with “no bank restrictions,” enabling the company to execute its strategy to return to growth and profitability.
Results reflect building sale gain amid lower revenue and partner counts
O’Keefe reported that third-quarter net revenues were $7.0 million, down from $11.1 million in the prior-year quarter. Average active brand partners totaled 5,100, compared with 12,400 a year ago.
Educational Development posted earnings before income taxes of $10.6 million, compared with a loss of $1.1 million in the prior-year quarter. O’Keefe said results included a $12.2 million gain from the building sale; excluding that gain, the company would have reported a loss before income taxes of $1.6 million.
Net earnings were $7.8 million, compared with an $800,000 loss a year earlier. Earnings per share were $0.91, versus a loss of $0.10 on a fully diluted basis in the prior-year period.
For the year to date, net revenues were $18.7 million, down from $27.6 million in the prior year. Average active brand partners were 6,200 versus 13,300. Earnings before income taxes were $7.4 million compared with a loss of $5.3 million in the prior-year period; excluding the $12.2 million building sale gain, the company would have recorded a loss before income taxes of $4.8 million.
Year-to-date net earnings totaled $5.4 million, compared with a $3.9 million loss last year, and earnings per share were $0.63 versus a loss of $0.47 on a fully diluted basis.
Working capital: inventory reduced; debt eliminated
O’Keefe said inventory levels decreased to $39.1 million at the end of November from $44.7 million at the beginning of fiscal 2026, generating $5.6 million of cash flow from inventory reductions. He said the cash was used to pay down vendors, reduce bank debt, and fund operational losses.
At quarter end, O’Keefe reported the company had:
- $3.4 million of cash
- $800,000 of receivables
- $39.1 million of inventory
- $2.0 million of accounts payable
- $0 owed to its bank
During the Q&A, investor Paul Carter of Capstone Asset Management asked about inventory risk. O’Keefe said the inventory is insured at replacement cost and that the amount on the books is what it is insured for. He also said the company has historically carried certain titles for more than 10 years before selling through them and that Educational Development has “never historically written down inventory” or used the remainder market to offload titles. O’Keefe said reserves are small for both short-term and long-term inventory based on that history.
Asked how much of the $39.1 million inventory balance is Usborne-related, O’Keefe said about 50%.
Sales and marketing: fundraising relaunch and promotion strategy
Chief Sales and Marketing Officer Heather Cobb said the company launched “Gathered Goods,” a reimagined fundraising program. Cobb said the program replaces the previous “Cards for a Cause” fundraiser and features custom products designed and created in-house, which she said allows better control of quality and brand alignment while delivering stronger margins. She also highlighted a digital fundraising component intended to expand participation beyond a single event or community.
Cobb also discussed the company’s Black Friday initiative, which it calls “Book Friday,” describing it as a major site-wide sale and a cornerstone of the third-quarter marketing strategy. She said Book Friday drove strong engagement across customers and brand partners. While she characterized discount-driven events as “not our priority or preferred strategy,” she said the promotion remains an important visibility and volume driver during the holiday season.
On the brand partner base, Cobb acknowledged a significant decline in brand partner count but said revenue did not fall proportionally, which she interpreted as evidence that remaining brand partners are “more productive and more engaged.” She also said declines among leader levels have not matched the drop in the broader field, noting that leaders tend to be loyal and are key drivers of new recruitment.
Fiscal 2027 priorities: new titles, refreshed messaging, and AI automation
White said that since fiscal 2024 the company has had to prioritize cash, and he described a renewed focus on increasing brand partner counts. He said bank restrictions and related company actions had raised red flags with the sales force, contributing to reduced activity. White also pointed to a lack of new products as a major factor in lowered engagement.
With the building sale closed, White said the company developed a conservative, phased plan to reorder and purchase new titles and quickly executed the first phase by placing reprint orders for key out-of-stock items and ordering several new titles. He said the company expects the arrival of those titles beginning in late spring and early summer.
White also said the company is working on a refreshed marketing strategy aimed at adapting to what Gen Z seeks in a business opportunity, including changes in marketing language and onboarding, without requiring an overhaul of the company’s model.
In addition, White said he has formed an AI task force to explore how the company can use artificial intelligence within its broader strategy. He said early implementations have focused on automating rote tasks to save money, with continued work on “transformational ideas” aimed at competing in both retail and direct-to-consumer channels.
In the Q&A, management said it is speaking with banks and other potential providers about establishing a new banking relationship and possibly a credit line, adding that the company is currently “okay” from a cash-position standpoint and hopes to have something in place within the next few months.
White also addressed a question about the company’s 17-acre tract of excess land next to the former Hilti Complex, saying the company is currently holding it and considering options, including development, a sale, or developing it while retaining ownership. He said recent inquiries have increased, but a proposal received did not offer a return he found attractive.
Management said it expects to provide an additional update on its banking relationship and growth plan on a future call, with White telling participants the company would “talk again in May.”
About Educational Development (NASDAQ:EDUC)
Educational Development Corporation, through its subsidiaries, engages in the direct marketing and digital retailing of educational and inspirational reading materials, including books, Bibles, devotionals, and related gift items. The company’s product portfolio extends to children’s literature, music, and home décor, targeting consumers in the faith-based and human-interest segments. Products are sold under proprietary brands across multiple online and catalog platforms.
Central to the company’s operations are its e-commerce websites and print catalogs, which support both retail and wholesale distribution channels.
