Thank you. Good afternoon, and welcome to the Live Ventures Incorporated first quarter fiscal year 2019 conference call.

This morning the company filed its Form 10-Q for the first quarter ending December 31, 2018, for fiscal year 2019 with the SEC. This filing can be found on our website www.liveventures.com in the Investor Relations section as well as on the SEC website at www.sec.gov.

My name is Virland Johnson, Chief Financial Officer of Live Ventures Incorporated. And joining me today is Jon Isaac, Chief Executive Officer of Live Ventures Incorporated.

Please note that some of the remarks you will hear today may contain forward-looking statements about the company’s performance, as well, there may be forward-looking statements made during the Q&A session that follow our prepared remarks. These statements are neither promises nor guarantees, and there are a number of risks and uncertainties that could cause actual results to differ materially from those set forth in these forward-looking statements.

Additional information concerning factors that could cause actual results to materially differ from those in these forward-looking statements is contained in our filing and periodic reports filed with the SEC, copies of which are available on our website or may be requested directly from the company. Forward-looking statements are made as of today’s date, and we do not undertake any obligation to update any forward-looking statements made during today's call.

Thank you everyone joining us today for our first quarter fiscal year 2019 call. During our call today, we will briefly cover our company's operating and financial results for the quarter, and then answer your questions at the end of our comments.

Operating results and highlights for the first quarter fiscal year 2019. This quarter's results include a full quarter of ApplianceSmart results versus only one day’s results in the same period last fiscal year.

The company reported record year revenue of $53.2 million, representing an increase of 31.8% over the same period last fiscal year, and first quarter fiscal year 2019 earnings per basic share of $0.79. For the quarter, gross profit was $19.3 million, which is up 17.9% for the same period last fiscal year.

In addition, our operating income was $2.1 million compared to the same period last fiscal year of $2.9 million, and net income was $1.5 million compared to $1.9 million same period last fiscal year. For the quarter, our gross profit margin percent was down to 36.4% and operating income margin percent was down to 3.9%.

This compares to the same period prior fiscal year when our gross profit margin percent was 40.6% and operating income margin percent was 9.7%. Cost of new product, sales levels and mix of products negatively affected gross margins realized in the quarter for both Vintage and ApplianceSmart.

Interest expenses decreased to $1.7 million for the first quarter from $2.5 million for the same period prior fiscal year due to pay down and revolving-in term debt. On December 21, 2018, Marquis Industries sold two synthetic turf extrusion lines for $4.75 million plus the book value of the raw material, operating and packing inventories associated with the synthetic turf extrusion lines for a total purchase price of approximately $5.5 million, plus $0.10 per pound of nylon sold by the buyer during the 36 months’ period after December 21, 2018.

Gain on the sale was 1.5 million recorded in other income. As of December 31, 2018, the company reported approximately $3.54 million of cash on hand, plus an additional $12.6 million of available credit into the company's consolidated revolving lines of credit.

Net cash provided from operating activities for the three months ended December 31, 2018 was $8.2 million, an increase of 30.8% or $1.9 million. Stockholders’ equity increased approximately 3.9% to $41 million over our quarter and year end September 30, 2018.

Total liabilities decreased by $11.5 million for the first quarter of fiscal year 2019. This decrease was largely a decrease in accounts payable and accrued liabilities of $1 million, and long-term debt of $10.5 million.

For additional financial information and details, I invite you to review our press release filed this morning and view our SEC filings on either our website or on the SEC's website. Thank you very much for your participation on this call and your continued interest in Live Ventures Incorporated.

At this time, John is going to open up the call and may have some comments after this point. We welcome any questions that you may have.

Thanks everyone for joining the call, and I get that questions all the time from various people. My response is always please save your question for the quarterly call, so this is your opportunity to ask a question.

Operator, maybe you can remind our listeners how to ask a question?

Generally speaking, overall it's been a really good quarter, another record quarter with $53.2 million in sales. We’re growing pretty drastically, pretty quickly as a company.

We've had Vintage that performed very well and Marquis as well, ApplianceSmart is another area where we keep focusing on. We are looking at increasing operational efficiencies, cutting costs, and moving things around, but this contributed to some losses to this quarter's earnings.

So, this is work in progress, and it's really very high upon our list. Had it not been for the losses from ApplianceSmart, obviously our earnings would have been higher this quarter.

So I think this is something that's noteworthy for all of our shareholders, our potential shareholders. If you notice as well quarter-over-quarter this quarter versus the quarter from September 2018, 90 days prior, our assets decreased by about $10 million but our liabilities as well.

We paid off a lot of debt over the quarter. Our liability decreased by about $11.5 million, so and of course our equity increased more as a result of retained earnings.

So, overall as a company, we -- our balance sheet shrunk a little bit, but that's for the good of the company. We’re still always looking for acquisitions, and I’m always asked question what are you going to buy, what are you looking at, are you looking at something to buy?

The answer is at all times we’re always looking at different opportunities. We get opportunities from people from all over the country, investment bankers, sometimes from sellers directly.

So, we’re always looking at opportunities. And of course, we will make it public and make the public aware once the transaction closes, so really that is the only answer that I can give for that question.

We're always looking for different acquisition opportunities, but our favorites are ones that could be potentially bolt-on opportunities, so something that could be related to our carpet operation Marquis or it could be related to our Vintage Stock, and we’re constantly evaluating different opportunities. With us on the call actually joined just a just a few seconds after the moderator was speaking is Mr.

Rodney Spriggs from Vintage Stock, CEO of Vintage Stock. If anyone has questions related to Vintage, especially if they are specific questions, we have him as well on the call, and he would be able to answer those for you.

In terms of share buybacks, we did just a little bit this quarter. It was obviously a funny quarter, because we had our year-end report at the end of December, so our blackout period of course we as a company are restricted to blackout periods, customary blackout periods.

And of course as the company is in possession of inside information, then just like I couldn’t buy the company as well, cannot buyback shares. And even then we have to follow certain rules from the SEC as to how much we buy, when we can buy, and all sorts of things that our investment bankers handle.

Maybe we'll turn it to Rodney. Rodney how was the holiday period?

This is for the quarter ending December 31. Give us some thoughts on how Vintage did especially since it impacts you the most really because of the seasonality in your business.

Thanks, Jon. We had strong fourth quarter, a few of the things that you would see on what has been released is that we actually increased our gross profit margin in used products, movies, music, games and other over 2% and that's a combination of things, again selling a little higher margin.

We are working on our buy prices so against some extra management in that area has helped us to move margins even better on a high margin line of products. Also the rental concession was up and we were actually down slightly in new products in the fourth quarter on our gross profit margin from 24.8 the previous year to 23.1 this year.

That was mainly due to a competition and a lot of what I’ll call backend rebates, where we actually received rebates later from the manufacturers and the studios. So it was heavy this year, so everybody likes good deals at Christmas time and the videogame industry was exceptionally heavy on that in the fourth quarter and there was even more titles this year than instead of paying $300 for a PS4 system, they had a $100 rebate and we’re selling it for $199.99.

So sometimes we don't get full credit for that until it can drop into a next quarter situation but we’re very satisfied with the numbers. We had great fourth quarter.

We’re still pushing for new customers and to be able to contact those customers with the new text messaging system that has not been in place for a year yet and we're still getting 10,000 plus new repeat customers, subscribers to that program every week. And that has done very well for us during sales.

We had the anniversary sale the first weekend of November that we have every year and sales were up double-digits year-over-year and it's the exact same sale and a lot of that’s attributed to the better communication with our customers by sending a direct text to them and reminding about these sales. Same thing with the online also.

We have seen double-digit increases in the online sales because of the same thing being able to have better communication with our customer base.

How’s your new store outlook looking like for new store and growth?

The newer stores that we have, which would be stuff say in the last 18 months, we've had two of those and they both came out of the gate profitable almost from day one. So that's good.

We did have a ramp up where they actually operated in a loss for any period of time. We have a couple more that are in the pipeline and that because of our covenants we can only have three in the previous 12 months cycle.

So we're basically at the point when we open one more store that we will be there. There is one [indiscernible] open in Oklahoma City, looks like it will open here in the next 60 days, and it's a former competitor locations, now is in an entertainment spot for the past two decades.

So hopefully in those types situations, we do green space and new store openings, we acquire competitors sometimes, or we will take a competitor’s location. So that's one of those things that helps you come out to gate a little bit faster.

So we’re kind of excited about the opportunity in that.

We will open it to some -- any -- if the audience has any questions?

Let’s take the question from Joseph please.

Thank you again for another good performance, I really appreciate you taking the time to talk with us about these things and all the good information. I’m just wondering with regard to the types of acquisitions that you're looking for.

Are they going to continue to be smaller, private companies, do you also look at public companies, presumably smaller public companies? That's number one.

And number two, have you any -- have you looked at all within the hemp industry now that that's been legalized federally?

So to answer your first question, we look at all sorts of opportunities whether it's private or it’s public, we will look at anything. Our criteria is the company needs to be profitable and have a pretty strong historical performance in terms of its financials and a good and able management team.

So, whether it’s public or private, it really doesn’t matter to us, we will look at anything. Regarding your question regarding hemp no, we haven't really been looking at that space.

I don't think there are many companies out there. Our criteria is pretty stringent, in addition to that is really we’re contained in terms of size, the pool of companies that generate $1 million in earnings a year is a very, very large pool.

However, as numbers get bigger, the pool gets much, much smaller. So, that’s going to be one of the challenges we will face as a company.

When we've got the cash being generated from several fronts and we can afford to buy bigger and bigger companies, the pool of available companies will shrink every time we’re looking for something that's large. So, we haven't looked specifically at hemp companies, but we will look at anything.

I haven't studied the legality of it and what’s federally legal and what’s not, but we're really looking right now for companies that are very easy to understand and that generate a good profit and that come with a good management team. There are two types of companies we look for, of course there is the bolt-on acquisitions which we love, and of course if it's a new platform-type company, on a standalone basis then we’ll -- we would evaluate that differently.

Let’s take the question from David.

I just had a quick question. On ApplianceSmart, you said that the margins would have been improved -- that your overall performance would have improved year-over-year on EPS and on margins were it not for ApplianceSmart.

And so, I'm assuming that you were pretty much aware of that going in and what is your strategy to -- and your timeframe that you think that there will no longer be a drag?

Our timeframe is roughly a quarter the -- in terms of not being a drag on operations. It's a combination of things.

It's mix, and it's volume. And right now, we're addressing both issues and I think based on what management is working on right now, I think it will turn within a quarter, but probably outside two quarters.

What I had mentioned at first David was it's not that margin compressed, it's Marquis was profitable, Vintage was profitable, ApplianceSmart wasn't, so that's where the drag came. It was a hit to earnings, and the earnings would have been higher had it not been for ApplianceSmart, but we have – we’re confident that it will turn around and it will be a contributor in future quarters.

Does that answer your question?

Yes, sir. It did.

And just one more quick one, what is the status of your LiveDeal platform or is it still operational?

It is operational, but what we’re not dedicating a lot of resources to it, it is there but we’re focused on the Live Ventures business since 2015 since we've rebranded from my LiveDeal to Live Ventures. So it is there and operational but we are not dedicating a lot of resources to it.

If there are no other questions, then we will end the call, and we will be having another call in for the next -- for Q2, fiscal Q2 2019. Thank you everyone for joining.

We will see you on the next call.