Educational Development (EDUC) investor relations material

Executive summary

• Q2 net revenue was $4.07M, down 11%; the decline narrowed from 30%+ in recent quarters and beat an internal forecast of a 35% decline.

• Q2 net loss widened to $1.58M from $1.29M, while pretax loss narrowed to $1.56M from $1.75M; the smaller tax benefit contributed to the divergence.

• H1 net revenue fell to $8.83M from $11.73M and net loss widened to $2.97M from $2.37M; active Brand Partners rose from 4,300 to 5,100 during the half.

• Lower PaperPie sales and fewer active Brand Partners weighed on revenue; cost reductions supported segment profitability, while inflation and Usborne distribution issues remained pressures.

Financial highlights

• Q2 gross margin was $2.43M versus $2.69M; diluted loss per share was $0.19 versus $0.15.

• H1 gross margin was $5.25M versus $6.83M; loss per share was $0.35 versus $0.28.

• H1 loss before income taxes was $2.94M versus $3.20M; the income tax benefit was $33.0K versus $829.6K in tax expense.

• Q2 income tax benefit was $16.5K versus $455.5K in tax expense a year earlier.

• August 31 assets were $50.66M, inventory was $34.92M, and shareholders’ equity was $39.84M.

Outlook and guidance

• FY2027 operating expenses are expected to be $1.2M below FY2026; the G&A reduction plan is expected to deliver over $1.2M in savings.

• Inflationary pressure is expected to continue through the rest of FY2027, affecting PaperPie sales and Brand Partner recruitment and retention.

• H2 priorities include growing and engaging Brand Partners, reaching new customers, regular product releases, and improving business tools and technology.

• Conservative inventory reordering, new titles, and PaperPie e-commerce and Backoffice enhancements are intended to encourage existing partners and recruit new ones; profitability depends on sales and partner growth.