Item 2. Management’s Discussion and Analysis
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For a description of our significant accounting policies and an understanding of the significant factors that influenced our performance during the three and six months ended March 31, 2024, this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (hereafter referred to as “MD&A”) should be read in conjunction with the condensed consolidated financial statements, including the related notes, appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year ended September 30, 2023 (the “2023 Form 10-K”).
Note about Forward-Looking Statements
This Quarterly Report on Form 10-Q includes statements that constitute “forward-looking statements.” These forward-looking statements are often characterized by the terms “may,” “believes,” “projects,” “intends,” “plans,” “expects,” or “anticipates,” and do not reflect historical facts.
Specific forward-looking statements contained in this portion of the Annual Report include, but are not limited to: (i) statements that are based on current projections and expectations about the markets in which we operate, (ii) statements about current projections and expectations of general economic conditions, (iii) statements about specific industry projections and expectations of economic activity, (iv) statements relating to our future operations, prospects, results, and performance, (v) statements that the cash on hand and additional cash generated from operations together with potential sources of cash through issuance of debt or equity will provide the Company with sufficient liquidity for the next 12 months, and (vi) statements that the outcome of pending legal proceedings will not have a material adverse effect on business, financial position and results of operations, cash flow or liquidity.
Forward-looking statements involve risks, uncertainties, and other factors, which may cause our actual results, performance, or achievements to be materially different from those expressed or implied by such forward-looking statements. Factors and risks that could affect our results, future performance and capital requirements and cause them to materially differ from those contained in the forward-looking statements include those identified in our 2023 Form 10-K under Item 1A “Risk Factors” and Part II, Item 1A. "Risk Factors" below, as well as other factors that we are currently unable to identify or quantify, but that may exist in the future.
In addition, the foregoing factors may generally affect our business, results of operations and financial position. Forward-looking statements speak only as of the date the statements were made. We do not undertake and specifically decline any obligation to update any forward-looking statements except as required by federal securities laws. Any information contained on our website www.liveventures.com or any other websites referenced in this Quarterly Report are not incorporated into and should not be deemed a part of this Quarterly Report.
Our Company
Live Ventures Incorporated is a holding company of diversified businesses, which, together with our subsidiaries, we refer to as the “Company”, “Live Ventures”, “we”, “us” or “our”. We acquire and operate companies in various industries that have historically demonstrated a strong history of earnings power. We currently have five segments to our business: Retail-Entertainment, Retail-Flooring, Flooring Manufacturing, Steel Manufacturing, and Corporate and Other.
Under the Live Ventures brand, we seek opportunities to acquire profitable and well-managed companies. We work closely with consultants who help us identify target companies that fit within the criteria we have established for opportunities that will provide synergies with our businesses.
Our principal offices are located at 325 E. Warm Springs Road, Suite 102, Las Vegas, Nevada 89119, our telephone number is (702) 939-0231, and our corporate website (which does not form part of this Quarterly Report Form 10-Q) is located at www.liveventures.com. Our common stock trades on the Nasdaq Capital Market under the symbol “LIVE”.
Retail-Entertainment Segment
Our Retail-Entertainment Segment is composed of Vintage Stock, Inc., doing business as Vintage Stock, V-Stock, Movie Trading Company and EntertainMart (collectively, “Vintage Stock”).
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Vintage Stock is an award-winning specialty entertainment retailer that offers a large selection of entertainment products, including new and pre-owned movies, video games and music products, as well as ancillary products, such as books, comics, toys and collectibles, in a single location. With its integrated buy-sell-trade business model, Vintage Stock buys, sells and trades new and pre-owned movies, music, video games, electronics and collectibles through 70 retail locations strategically positioned across Arkansas, Colorado, Idaho, Illinois, Kansas, Missouri, Nebraska, New Mexico, Oklahoma, Texas, and Utah.
Retail-Flooring Segment
Our Retail-Flooring Segment is composed of Flooring Liquidators, Inc. (“Flooring Liquidators”).
Flooring Liquidators is a leading retailer and installer of flooring, carpeting, and countertops to consumers, builders, and contractors in California and Nevada, operating 20 warehouse-format stores and a design center. Over the years, the company has established a strong reputation for innovation, efficiency and service in the home renovation and improvement market. Flooring Liquidators serves retail and builder customers through two businesses: retail customers through its Flooring Liquidators retail stores, and builder and contractor customers through Elite Builder Services, Inc.
On October 13, 2023, Flooring Liquidators acquired certain assets and assumed certain liabilities of Carpet Remnant Outlet, Inc. ("CRO"), a floor covering retailer and installer serving residential and commercial customers throughout Northwest Arkansas.
On November 30, 2023, CRO acquired certain assets and assumed certain liabilities of Johnson Floor & Home ("Johnson"), a floor covering retailer and installer serving residential and commercial customers through locations in Tulsa, Oklahoma and Joplin, Missouri.
Flooring Manufacturing Segment
Our Flooring Manufacturing segment is comprised of Marquis Industries, Inc. (“Marquis”).
Marquis is a leading carpet manufacturer and distributor of carpet and hard-surface flooring products. Over the last decade, Marquis has been an innovator and leader in the value-oriented polyester carpet sector, which is currently the market’s fastest-growing fiber category. Marquis focuses on the residential, niche commercial, and hospitality end-markets and serves thousands of customers.
Since commencing operations in 1995, Marquis has built a strong reputation for outstanding value, styling, and customer service. Its innovation has yielded products and technologies that differentiate its brands in the flooring marketplace. Marquis’s state-of-the-art operations enable high quality products, unique customization, and exceptionally short lead-times. Furthermore, the Company has recently invested in additional capacity to grow several attractive lines of business, including printed carpet and yarn extrusion.
On July 1, 2022, Live acquired certain assets and intellectual property of Better Backers, Inc., a Georgia corporation, which was accomplished through an Asset Purchase Agreement.
Steel Manufacturing Segment
Our Steel Manufacturing segment is comprised of Precision Industries, Inc. (“Precision Marshall”), its wholly-owned subsidiary The Kinetic Co., Inc. (“Kinetic”), and Precision Metal Works, Inc. (“PMW”) .
Precision Marshall is the North American leader in providing and manufacturing, pre-finished de-carb free tool and die steel. For over 75 years, Precision Marshall has served steel distributors through quick and accurate service. Precision Marshall has led the industry with exemplary availability and value-added processing that saves distributors time and processing costs.
Founded in 1948, Precision Marshall “The Deluxe Company” has built a reputation of high integrity, speed of service and doing things the “Deluxe Way”. The term Deluxe refers to all aspects of the product and customer service to be head and shoulders above the rest. From order entry to packaging and delivery, Precision Marshall makes it easy to do business and backs all products and service with a guarantee.
Precision Marshall provides four key products to over 500 steel distributors in four product categories: Deluxe Alloy Plate, Deluxe Tool Steel Plate, Precision Ground Flat Stock, and Drill Rod. With over 5,000 distinct size grade combinations in
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stock every day, Precision Marshall arms tool steel distributors with deep inventory availability and same day shipment to their place of business or often ships direct to their customer saving time and handling.
On June 28, 2022, Precision Marshall acquired Kinetic. Kinetic is a highly recognizable and regarded brand name in the production of industrial knives and hardened wear products for the tissue, metals, and wood industries and is known as a one-stop shop for in-house grinding, machining, and heat-treating. Kinetic is headquartered in Greendale, Wisconsin. Kinetic manufactures more than 90 types of knives and numerous associated parts with modifications and customizations available to each. Kinetic employs approximately 100 non-union employees.
On July 20, 2023, we acquired PMW. Founded nearly 76 years ago in 1947 in Louisville, Kentucky, PMW manufactures and supplies highly engineered parts and components across 400,000 square feet of manufacturing space. PMW offers world-class metal forming, assembly, and finishing solutions across diverse industries, including appliance, automotive, hardware, electrical, electronic, medical products, and devices.
Corporate and Other Segment
Our Corporate and Other segment consists of certain corporate general and administrative costs, Salomon Whitney LLC, which was shut down during the three months ended June 30, 2023, and operations of certain legacy products and service offerings for which we are no longer accepting new customers .
Critical Accounting Policies
Our condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Preparation of these statements requires us to make judgments and estimates. Some accounting policies have a significant and material impact on amounts reported in these financial statements. Estimates and assumptions are based on management's experience and other information available prior to the issuance of our financial statements. Our actual realized results may differ materially from management’s initial estimates as reported. Our critical and significant accounting policies include Trade and Other Receivables, Inventories, Goodwill, Revenue Recognition, Fair Value Measurements, Income Taxes, Segment Reporting and Concentrations of Credit Risk. For a summary of our significant accounting policies and the means by which we develop estimates thereon, see Part II, Item 8 – Financial Statements - Notes to unaudited condensed consolidated financial statements Note 2 – summary of significant accounting policies in our 2023 Form 10-K.
Adjusted EBITDA
We evaluate the performance of our operations based on financial measures such as “Adjusted EBITDA”, which is a non-GAAP financial measure. We define Adjusted EBITDA as net income (loss) before interest expense, interest income, income taxes, depreciation, amortization, stock-based compensation, and other non-cash or nonrecurring charges. We believe that Adjusted EBITDA is an important indicator of the operational strength and performance of the business, including the business’ ability to fund acquisitions and other capital expenditures, and to service its debt. Additionally, this measure is used by management to evaluate operating results and perform analytical comparisons and identify strategies to improve performance. Adjusted EBITDA is also a measure that is customarily used by financial analysts to evaluate a company's financial performance, subject to certain adjustments. Adjusted EBITDA does not represent cash flows from operations, as defined by GAAP, and should not be construed as an alternative to net income or loss and is indicative neither of our results of operations, nor of cash flows available to fund all our cash needs. It is, however, a measurement that the Company believes is useful to investors in analyzing its operating performance. Accordingly, Adjusted EBITDA should be considered in addition to, but not as a substitute for, net income, cash flow provided by operating activities, and other measures of financial performance prepared in accordance with GAAP. As companies often define non-GAAP financial measures differently, Adjusted EBITDA, as calculated by the Company, should not be compared to any similarly titled measures reported by other companies.
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Results of Operations Three Months Ended March 31, 2024 and 2023
The following table sets forth certain statement of income items and as a percentage of revenue, for the three months ended March 31, 2024 and 2023 (in $000’s):
Three Months Ended
March 31, 2024 Three Months Ended
March 31, 2023
% of Total
Revenue % of Total
Revenue
Selected Data
Revenues $ 118,626 $ 91,122
Cost of revenues 83,159 70.1 % 59,514 65.3 %
General and administrative expenses 29,824 25.1 % 22,617 24.8 %
Sales and marketing expenses 6,481 5.5 % 4,039 4.4 %
Interest expense, net 4,167 3.5 % 3,235 3.6 %
(Loss) income before provision for income taxes (4,498) (3.8 %) 2,108 2.3 %
(Benefit) provision for income taxes (1,217) (1.0 %) 550 0.6 %
Net (loss) income $ (3,281) (2.8 %) $ 1,558 1.7 %
Adjusted EBITDA (a)
Retail-Entertainment $ 2,153 $ 2,652
Retail-Flooring (1,849) 1,111
Flooring Manufacturing 2,897 3,363
Steel Manufacturing 2,331 3,670
Corporate & Other (1,075) (1,609)
Total Adjusted EBITDA $ 4,457 $ 9,187
Adjusted EBITDA as a percentage of revenue
Retail-Entertainment 12.8 % 13.8 %
Retail-Flooring (5.8 %) 5.3 %
Flooring Manufacturing 8.5 % 11.1 %
Steel Manufacturing 6.6 % 18.4 %
Corporate & Other N/A N/A
Consolidated adjusted EBITDA as a percentage of revenue 3.8 % 10.1 %
(a) See reconciliation of net income to Adjusted EBITDA below.
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The following table sets forth revenue by segment (in $000’s):
For the Three Months Ended March 31, 2024 For the Three Months Ended March 31, 2023
Net
Revenue % of
Total
Revenue Net
Revenue % of
Total
Revenue
Revenue
Retail-Entertainment $ 16,842 14.2 % $ 19,188 21.1 %
Retail-Flooring 32,032 27.0 % 20,769 22.8 %
Flooring Manufacturing 34,180 28.8 % 30,340 33.3 %
Steel Manufacturing 35,488 29.9 % 19,916 21.9 %
Corporate & Other 84 0.1 % 909 1.0 %
Total Revenue $ 118,626 100.0 % $ 91,122 100.0 %
The following table sets forth gross profit earned by segment and gross profit as a percentage of total revenue for each segment (in $000’s):
For the Three Months Ended March 31, 2024 For the Three Months Ended March 31, 2023
Gross
Profit Gross
Profit % of Total Revenue Gross
Profit Gross
Profit % of Total Revenue
Gross Profit
Retail-Entertainment $ 9,836 8.3 % $ 10,654 11.7 %
Retail-Flooring 11,702 9.9 % 7,742 8.5 %
Flooring Manufacturing 8,760 7.4 % 7,328 8.0 %
Steel Manufacturing 5,090 4.3 % 5,647 6.2 %
Corporate & Other 79 0.1 % 237 0.3 %
Total Gross Profit $ 35,467 29.9 % $ 31,608 34.7 %
Revenue
Revenue increased approximately $27.5 million, or 30.2%, to approximately $118.6 million for the quarter ended March 31, 2024, compared to revenue of approximately $91.1 million in the prior year period. The increase is primarily attributable to the acquisitions of PMW, which was acquired during the fourth quarter of fiscal year 2023, and Flooring Liquidators, which was acquired during the second quarter of fiscal year 2023 which collectively added approximately $29.6 million, as well as an increase of approximately $3.8 million in revenue in the Flooring Manufacturing segment. The increase was partially offset by decreased revenue of approximately $5.9 million in the Company’s other business segments due to general economic conditions.
Cost of Revenue
Cost of revenue as a percentage of revenue was 70.1% for three months ended March 31, 2024 as compared to 65.3% for the three months ended March 31, 2023. The increase was primarily attributable to the acquisition of PMW, which historically has generated lower margins, as well as a decrease in margins in our Steel Manufacturing segment as a whole due to decreased production due to a slow down in sales, partially offset by an increase in margins in our Flooring Manufacturing segment due to increased sales of Harris Flooring Group® brands, which generates higher margins.
General and Administrative Expense
General and Administrative expenses increased by 31.9% to approximately $29.8 million for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. The increase is primarily due to the acquisitions of Flooring Liquidators and PMW during fiscal 2023.
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Sales and Marketing Expense
Sales and marketing expense increased by 60.5% to approximately $6.5 million for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, primarily due to expanding the sales force in connection with the acquisition of the Harris Flooring Group® brands from Q.E.P, increased convention and trade show activity in our Flooring Manufacturing segment, as well as the acquisition of Flooring Liquidators.
Interest Expense, net
Interest expense, net, increased by approximately $925,000 for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, primarily due to increased debt balances related to the acquisitions of Flooring Liquidators and PMW, and to fund operations, and increased interest rates during the period.
Results of Operations Six Months Ended March 31, 2024 and 2023
The following table sets forth certain statement of income items and as a percentage of revenue, for the six months ended March 31, 2024 and 2023 (in $000’s):
For the Six Months Ended March 31, 2024 For the Six Months Ended March 31, 2023
% of Total
Revenue % of Total
Revenue
Statement of Income Data:
Revenues $ 236,219 $ 160,108
Cost of revenues 164,425 69.6 % 106,556 66.6 %
General and administrative expenses 57,503 24.3 % 37,217 23.2 %
Sales and marketing expenses 11,588 4.9 % 6,816 4.3 %
Interest expense, net 8,330 3.5 % 5,282 3.3 %
Income before provision for income taxes (5,404) (2.3 %) 4,567 2.9 %
Provision for income taxes (1,441) (0.6 %) 1,165 0.7 %
Net income $ (3,963) (1.7 %) $ 3,402 2.1 %
Adjusted EBITDA (a)
Retail-Entertainment $ 5,867 $ 6,656
Retail-Flooring (546) 1,111
Flooring Manufacturing 4,774 5,147
Steel Manufacturing 5,133 6,195
Corporate & Other (2,075) (2,382)
Total Adjusted EBITDA $ 13,153 $ 16,727
Adjusted EBITDA as a percentage of revenue
Retail-Entertainment 15.7 % 15.7 %
Retail-Flooring (0.8 %) 5.4 %
Flooring Manufacturing 7.5 % 9.1 %
Steel Manufacturing 7.5 % 16.3 %
Corporate & Other N/A N/A
Consolidated adjusted EBITDA as a percentage of revenue 5.6 % 10.4 %
(a) See reconciliation of net income to Adjusted EBITDA below.
The following table sets forth revenue by segment (in $000’s):
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For the Six Months Ended March 31, 2024 For the Six Months Ended March 31, 2023
Net
Revenue % of
Total Revenue Net
Revenue % of Total
Revenue
Revenue
Retail-Entertainment $ 37,428 15.8 % $ 42,461 26.5 %
Retail-Flooring 66,351 28.1 % 20,769 13.0 %
Flooring Manufacturing 63,425 26.9 % 56,772 35.5 %
Steel Manufacturing 68,841 29.1 % 37,897 23.7 %
Corporate & other 174 0.1 % 2,209 1.4 %
Total Revenue $ 236,219 100.0 % $ 160,108 100.0 %
The following table sets forth gross profit earned by segment and gross profit as a percentage of total revenue for each segment (in $000’s):
For the Six Months Ended March 31, 2024 For the Six Months Ended March 31, 2023
Gross
Profit Gross
Profit % of Total Revenue Gross
Profit Gross
Profit % of Total Revenue
Gross Profit
Retail-Entertainment $ 21,364 9.0 % $ 22,864 14.3 %
Retail-Flooring 24,734 10.5 % 7,742 4.8 %
Flooring Manufacturing 15,182 6.4 % 11,989 7.5 %
Steel Manufacturing 10,352 4.4 % 10,040 6.3 %
Corporate & other 162 0.1 % 917 0.6 %
Total Gross Profit $ 71,794 30.4 % 0.30392982782926 $ 53,552 33.4 %
Revenue
Revenue increased approximately $76.1 million, or 47.5%, to $236.2 million for the six months ended March 31, 2024, as compared to the prior year period revenue of $160.1 million. The increase is primarily attributable to the acquisitions of PMW and Flooring Liquidators, which collectively added $81.4 million, as well as an increase of approximately $6.7 million in revenue in the Flooring Manufacturing segment. The increase was partially offset by decreased revenue of approximately $11.9 million in the Company’s other business segments due to general economic conditions.
Cost of Revenue
Cost of revenue as a percentage of revenue was 69.6% for six months ended March 31, 2024 as compared to 66.6% for the six months ended March 31, 2023. The increase was primarily attributable to the acquisition of PMW, which historically has generated lower margins, as well as a decrease in margins in our Steel Manufacturing segment as a whole due to decreased production due to a slow down in sales, partially offset by an increase in margins in our Flooring Manufacturing segment due to increased sales of Harris Flooring Group® brands, which generates higher margins.
General and Administrative Expense
General and Administrative expenses increased by 54.5% to approximately $57.5 million for the six months ended March 31, 2024, as compared to the six months ended March 31, 2023. The increase is primarily due to the acquisitions of Flooring Liquidators and PMW during fiscal 2023.
Sales and Marketing Expense
Sales and marketing expense increased by 70.0% to approximately $11.6 million for the six months ended March 31, 2024, as compared to the six months ended March 31, 2023, primarily due to expanding the sales force in connection with the
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acquisition of the Harris Flooring Group® brands from Q.E.P, increased convention and trade show activity in our Flooring Manufacturing segment, as well as the acquisition of Flooring Liquidators.
Interest Expense, net
Interest expense, net, increased by approximately $3.0 million for the six months ended March 31, 2024, as compared to the six months ended March 31, 2023, primarily due to increased debt balances related to the acquisitions of Flooring Liquidators and PMW, and to fund operations, and increased interest rates during the period.
Results of Operations by Segment for the Three Months Ended March 31, 2024 and 2023
For the Three Months Ended March 31, 2024 For the Three Months Ended March 31, 2023
Retail-Entertainment Retail-Flooring Flooring
Manufacturing Steel
Manufacturing Corporate
& Other Total Retail-Entertainment Retail-Flooring Flooring
Manufacturing Steel
Manufacturing Corporate
& Other Total
Revenue $ 16,842 $ 32,032 $ 34,180 $ 35,488 $ 84 $ 118,626 $ 19,188 $ 20,769 $ 30,340 $ 19,916 $ 909 $ 91,122
Cost of Revenue 7,006 — 20,330 — 25,420 — 30,398 — 5 83,159 8,534 13,027 — 23,012 — 14,269 — 672 59,514
Gross Profit 9,836 11,702 8,760 5,090 79 35,467 10,654 7,742 7,328 5,647 237 31,608
General and Administrative Expense 7,919 13,469 1,866 4,048 2,524 29,826 8,164 7,873 1,438 2,676 2,466 22,617
Selling and Marketing Expense 133 1,256 4,916 170 4 6,479 163 85 3,484 157 150 4,039
Operating Income (Loss) $ 1,784 $ (3,023) $ 1,978 $ 872 $ (2,449) $ (838) $ 2,327 $ (216) $ 2,406 $ 2,814 $ (2,379) $ 4,952
Retail-Entertainment Segment
Retail-Entertainment segment revenue for the quarter ended March 31, 2024 was approximately $16.8 million, a decrease of approximately $2.3 million, or 12.2%, compared to prior year period revenue of approximately $19.2 million. Revenue decreased primarily due to reduced consumer demand and a shift in sales mix toward used products, which generally have lower ticket sales with higher margins. The shift in sales mix also contributed to the increase in gross margin to 58.4% for the quarter ended March 31, 2024, compared to 55.5% for the prior year period. Operating income for the quarter ended March 31, 2024 was approximately $1.8 million, compared to operating income of approximately $2.3 million for the prior year period.
Retail-Flooring Segment
The Retail-Flooring segment consists of Flooring Liquidators, which was acquired in January 2023. Revenue for the quarter ended March 31, 2024, was approximately $32.0 million, an increase of approximately $11.3 million, or 54.2%, compared to prior year period revenue of approximately $20.8 million. The increase is due to the acquisition of Flooring Liquidators in the second quarter of fiscal year 2023 and the acquisitions of CRO and Johnson by Flooring Liquidators during the first quarter of fiscal year 2024. The gross margin for the quarter ended March 31, 2024 was 36.5%, compared to 37.3% for the prior year period. Operating loss for the quarter ended March 31, 2024 was approximately $3.0 million, compared to an operating loss of approximately $0.2 million for the prior year period. The increase in operating loss was primarily due to temporary inefficiencies associated with the acquisitions of CRO and Johnson in the current period.
Flooring Manufacturing Segment
Revenue for the quarter ended March 31, 2024 was approximately $34.2 million, an increase of approximately $3.8 million, or 12.7%, compared to prior year period revenue of approximately $30.3 million. The gross margin was 25.6% for the quarter ended March 31, 2024, compared to 24.2% for the prior year period. The revenue and gross margin increases are primarily due to increased sales associated with the acquisition of the Harris Flooring Group® brands in the fourth quarter of fiscal year 2023. Operating income for the quarter ended March 31, 2024 was approximately $2.0 million, compared to operating income of approximately $2.4 million for the prior year.
Steel Manufacturing Segment
Revenue for the quarter ended March 31, 2024 was approximately $35.5 million, an increase of approximately $15.6 million or 78.2%, compared to the prior year period revenue of approximately $19.9 million. The increase is primarily due to increased revenue of approximately $18.3 million at PMW, partially offset by a $2.9 million decrease in the Company’s other Steel Manufacturing businesses. The gross margin was 14.3% for the quarter ended March 31, 2024, compared to 28.4% for the prior year period. The increase is primarily due to increased revenue of approximately $18.3 million at
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PMW, partially offset by a $2.9 million decrease in the Company’s other Steel Manufacturing business. The gross margin was 14.3% for the quarter ended March 31, 2024, compared to 28.4% for the prior year period. The decrease in gross margin is primarily due to the acquisition of PMW, which has historically generated lower margins, as well as an overall decrease in margins in the Steel Manufacturing segment due to reduced production efficiencies as a result of lower demand. Operating income for the quarter ended March 31, 2024 was approximately $0.9 million, compared to operating income of approximately $2.8 million in the prior year period.
Corporate and Other Segment
Revenue for the quarter ended March 31, 2024 was approximately $0.1 million, a decrease of approximately $0.8 million, or 90.8%, compared to the prior year period revenue of approximately $0.9 million. The decrease was primarily due to the due to the closure of SW Financial in May 2023. Operating loss for both quarters ended March 31, 2024 and March 31, 2023 was approximately $2.4 million.
Results of Operations by Segment for the Six Months Ended March 31, 2024 and 2023
For the Six Months Ended March 31, 2024 For the Six Months Ended March 31, 2023
Retail-Entertainment Retail-Flooring Flooring
Manufacturing Steel
Manufacturing Corporate
& Other Total Retail-Entertainment Retail-Flooring Flooring
Manufacturing Steel
Manufacturing Corporate
& Other Total
Revenue $ 37,428 $ 66,351 $ 63,425 $ 68,841 $ 174 $ 236,219 $ 42,461 $ 20,769 $ 56,772 $ 37,897 $ 2,209 $ 160,108
Cost of Revenue 16,064 41,617 48,243 58,489 12 164,425 19,597 13,027 44,783 27,857 1,292 106,556
Gross Profit 21,364 24,734 15,182 10,352 162 71,794 22,864 7,742 11,989 10,040 917 53,552
General and Administrative Expense 16,074 25,491 3,471 8,204 4,263 57,503 16,549 7,873 2,928 5,468 4,399 37,217
Selling and Marketing Expense 317 2,178 8,788 293 12 11,588 324 85 5,903 302 202 6,816
Operating Income (Loss) $ 4,973 $ (2,935) $ 2,923 $ 1,855 $ (4,113) $ 2,703 $ 5,991 $ (216) $ 3,158 $ 4,270 $ (3,684) $ 9,519
Retail-Entertainment Segment
Retail-Entertainment segment revenue for the six months ended March 31, 2024 was approximately $37.4 million, a decrease of approximately $5.0 million, or 11.9%, compared to the prior year period revenue of approximately $42.5 million. The decrease in revenue is primarily due to reduced consumer demand and a shift in sales mix toward used products, which generally have lower ticket sales with higher margins. The shift in sales mix also contributed to the increase in gross margin to 57.1% for the six months ended March 31, 2024, compared to 53.8% for the prior year period. Operating income for the six months ended March 31, 2024 was approximately $5.0 million, compared to operating income of approximately $6.0 million for the prior year period.
Retail-Flooring Segment
The Retail-Flooring segment consists of Flooring Liquidators, which was acquired in January 2023. Revenue for the six months ended March 31, 2024 was approximately $66.4 million, an increase of approximately $45.6 million, or 219.5%, compared to the prior year period revenue of $20.8 million. The increase is due to the acquisition of Flooring Liquidators in the second quarter of fiscal year 2023 and the acquisitions of CRO and Johnson by Flooring Liquidators during the first quarter of fiscal year 2024. The gross margin for both of the six months ended March 31, 2024 and March 31, 2023 was 37.3%. Operating loss for the six months ended March 31, 2024 was approximately $2.9 million, compared to an operating loss of approximately $0.2 million for the prior year period. The increase in operating loss was primarily due to temporary inefficiencies associated with the acquisitions of CRO and Johnson in the current period.
Flooring Manufacturing Segment
Revenue for the six months ended March 31, 2024 was approximately $63.4 million, an increase of approximately $6.7 million, or 11.7%, compared to the prior year period revenue of approximately $56.8 million. The gross margin was 23.9% for the six months ended March 31, 2024, compared to 21.1% for the prior year period. The increase in revenue and gross margin are primarily due to increased sales associated with the acquisition of the Harris Flooring Group® brands in the fourth quarter of fiscal year 2023. Operating income for the six months ended March 31, 2024 was approximately $2.9 million, compared to operating income of approximately $3.2 million for the prior year period.
Steel Manufacturing Segment
Revenue for the six months ended March 31, 2024 increased approximately $31.0 million or 81.7% to approximately $68.8 million, as compared to the prior year period revenue of $35.8 million. The increase is primarily due to increased revenue
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of approximately $35.8 million at PMW, partially offset by a $4.8 million decrease in the Company’s other Steel Manufacturing businesses. The gross margin was 15.0% for the six months ended March 31, 2024, compared to 26.5% for the prior year period. The decrease in gross margin is primarily due to the acquisition of PMW, which has historically generated lower margins, as well as overall decreased margins in the Steel Manufacturing segment due to reduced production. Operating income for the six months ended March 31, 2024 was approximately $1.9 million, compared to operating income of approximately $4.3 in the prior year period.
Corporate and Other Segment
Revenue for the six months ended March 31, 2024 decreased by approximately $2.0 million. The decrease was primarily due to the closure of SW Financial in May 2023. Operating loss for the six months ended March 31, 2024 was approximately $4.1 million, compared to a loss of approximately $3.7 million in the prior year period.
Adjusted EBITDA Reconciliation
The following table presents a reconciliation of net income to Adjusted EBITDA for the three and six months ended March 31, 2024 and 2023 (in 000's):
For the Three Months Ended For the Six Months Ended
March 31, 2024 March 31, 2023 March 31, 2024 March 31, 2023
Net (loss) income $ (3,281) $ 1,558 $ (3,963) $ 3,402
Depreciation and amortization 4,188 3,647 8,483 6,297
Stock-based compensation 50 109 100 109
Interest expense, net 4,167 3,235 8,330 5,282
Income tax (benefit) expense (1,217) 550 (1,441) 1,165
SW Financial settlement gain — (1,000) — (1,000)
Acquisition costs 468 1,088 874 1,472
Debt acquisition costs — — 183 —
Other non-recurring charges 82 — 587 —
Adjusted EBITDA $ 4,457 $ 9,187 $ 13,153 $ 16,727
Adjusted EBITDA¹ for the quarter ended March 31, 2024 was approximately $4.5 million, a decrease of approximately $4.7 million, or 51.5%, compared to the prior year period. The decrease is primarily due to decreases in gross profit and operating income.
Adjusted EBITDA for the six months ended March 31, 2024 was $13.2 million, a decrease of approximately $3.6 million, or 21.4%, compared to the prior year period. The decrease is primarily due to decreases in gross profit and operating income.
Liquidity and Capital Resources
As of March 31, 2024, we had total cash on hand of approximately $4.5 million and approximately $31.5 million of available borrowing under our revolving credit facilities. As we continue to pursue acquisitions and other strategic transactions to expand and grow our business, we regularly monitor capital market conditions and may raise additional funds through borrowings or public or private sales of debt or equity securities. The amount, nature, and timing of any borrowings or sales of debt or equity securities will depend on our operating performance and other circumstances; our then-current commitments and obligations; the amount, nature and timing of our capital requirements; any limitations imposed by our current credit arrangements; and overall market conditions.
Based on our current operating plans, we believe that available cash balances, cash generated from our operating activities and funds available under our asset-based revolver lines of credit will provide sufficient liquidity to do the following: fund our operations; pay our scheduled loan payments; ability to repurchase shares under our share buyback program; and, pay dividends on our shares of Series E Preferred Stock as declared by the Board of Directors, for at least the next 12 months.
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Working Capital
We had working capital of approximately $79.0 million as of March 31, 2024, as compared to working capital of approximately $85.0 million as of September 30, 2023; a decrease of approximately $6.0 million. The decrease is primarily due to increases in accrued liabilities, the current portion of long-term debt, and the current portion of operating lease obligations, and a decrease in income taxes receivable, partially offset by decreases in the current portion of notes payable to related parties and accounts payable, and an increase in accounts receivable.
Cash Flows from Operating Activities
The Company’s cash, as of March 31, 2024, was approximately $4.5 million compared to approximately $4.3 million as of September 30, 2023, an increase of approximately $0.2 million. Net cash provided by operations was approximately $2.1 million and $14.2 million for the six months ended March 31, 2024 and 2023, respectively. The decrease was primarily due to decreases in net income and deferred income tax liabilities, and an increase in accounts receivable, partially offset by increases in depreciation and amortization expense, reserve for inventory obsolescence and income taxes payable.
Our primary sources of cash inflows are from customer receipts from sales on account, factored accounts receivable proceeds, receipts for securities sales commissions, and net remittances from directory services customers processed in the form of ACH billings. Our most significant cash outflows include payments for raw materials and general operating expenses, including payroll costs and general and administrative expenses that typically occur within close proximity of expense recognition.
Cash Flows from Investing Activities
Our cash flows used in investing activities of approximately $4.9 million for the six months ended March 31, 2024 consisted of the acquisitions of CRO by Flooring Liquidators, and Johnson by CRO, and purchases of property and equipment. Our cash flows used in investing activities of approximately $36.8 million for the six months ended March 31, 2023 consisted of purchases of property and equipment.
Cash Flows from Financing Activities
Our cash flows used in financing activities of approximately $3.0 million during the six months ended March 31, 2024 consisted of net borrowings under revolver loans of approximately $7.7 million, payments on notes payable of approximately $3.4 million, proceeds from related parties of $1.0 million, purchases of treasury stock and payments for finance leases of approximately $0.4 million, and payments of related party notes payable of $0.6 million.
Our cash flows provided by financing activities of approximately $22.2 million during the six months ended March 31, 2023 consisted of proceeds from notes payable of approximately $5.7 million, partially offset by payments of notes payable and financing leases of approximately $1.8 million, and purchases of treasury stock and net borrowings under revolver loans of approximately $670,000.
Currently, we are not issuing common shares for liquidity purposes. We prefer to use asset-based lending arrangements and mezzanine financing together with Company provided capital to finance acquisitions and have done so historically. Occasionally, as our Company history has demonstrated, we will issue stock and derivative instruments linked to stock for services or debt settlement.
Future Sources of Cash; New Products and Services
We may require additional debt financing or capital to finance new acquisitions, refinance existing indebtedness or other strategic investments in our business. Other sources of financing may include stock issuances and additional loans; or other forms of financing. Any financing obtained by us may further dilute or otherwise impair the ownership interest of our existing stockholders.