- Hilti Complex Sale Gain: $12.2M gain from the sale boosted Q3 earnings before taxes to $10.6M, reversing a $1.1M loss in the prior year quarter.
- Revenue Decline: Net revenues fell to $7M in Q3 2026, down from $11.1M in the prior year, with active brand partners dropping to 5,100 from 12,400.
- Inventory Reduction: Year-to-date inventory decreased by $5.6M to $39.1M, with $5.6M in cash flows used to pay vendors and reduce bank debt.
- Strong Margins via New Program: Launch of Gathered Goods aims to improve margins through in-house custom product design and digital fundraising expansion.
Operational Performance
The company's average active brand partners totaled 5,100 compared to 12,400 in the prior year quarter, indicating a significant decline in the number of brand partners. The company's inventory levels decreased from $44.7 million at the beginning of fiscal year 2026 to $39.1 million at the end of November, with approximately 50% of the inventory related to Usborne. Management cited a committed leader base, more productive brand partners, and strategic program innovation as positive factors for future growth.
New Initiatives and Future Plans
The company launched its reimagined fundraising program, Gathered Goods, which features custom products designed and created in-house, allowing for better control over quality, storytelling, and brand alignment. Management is optimistic about the path ahead, planning to focus on increasing brand partner counts, introducing new products, and implementing a refreshed marketing strategy. The company has also formed an AI task force to explore ways to utilize AI as part of its overall strategy.
Valuation and Outlook
With a P/E Ratio of -2.68 and an EV/EBITDA of -19.31, the company's valuation metrics indicate a challenging earnings environment. However, the company's Free Cash Flow Yield of 31.08% suggests a potential opportunity for investors. As the company moves forward with its growth plan, investors will be watching to see if the company can execute on its strategy and return to profitability. The actual EPS came out at $0.91, significantly higher than estimates, driven by the gain from the sale of the Hilti Complex.