Cuộc họp báo cáo kết quả kinh doanh quý 2 năm tài chính 2027 của Educational Development Corporation (EDUC): Mức giảm doanh thu thu hẹp xuống còn 11%

Educational Development Corporation (NASDAQ: EDUC) đã báo cáo doanh thu thuần quý 2 năm tài chính 2027 đạt 4,1 triệu USD, giảm 11% so với cùng kỳ năm ngoái. Mức giảm này đã thu hẹp so với các mức giảm trên 30% được ghi nhận trong các quý gần đây và khả quan hơn đáng kể so với dự báo nội bộ của công ty về mức giảm khoảng 35%.

Điểm tin chính

• Doanh thu thuần quý 2 năm tài chính giảm 11% so với cùng kỳ năm ngoái xuống 4,1 triệu USD, so với 4,6 triệu USD của quý cùng kỳ năm trước.
• Lỗ trước thuế thu hẹp xuống 1,6 triệu USD từ mức 1,8 triệu USD, nhưng lỗ thuần tăng từ 1,3 triệu USD lên 1,6 triệu USD. Lỗ pha loãng trên mỗi cổ phiếu là 0,19 USD so với 0,15 USD.
• Số lượng Đối tác Thương hiệu đang hoạt động tăng gần 19% từ khoảng 4.300 vào cuối tháng 2 năm 2026 lên 5.100 vào cuối tháng 8 năm 2026, mặc dù tổng số vẫn thấp hơn mức 5.800 của cùng kỳ năm trước.
• Hàng tồn kho giảm 2,8 triệu USD trong nửa đầu năm xuống còn 34,9 triệu USD, tạo ra lượng tiền mặt bù đắp phần lớn khoản lỗ trước thuế 2,9 triệu USD của công ty trong giai đoạn 6 tháng.
• Ban quản lý cho rằng xu hướng doanh số cải thiện là nhờ việc bổ sung lại các sản phẩm bán chạy nhất, sự trở lại của các đợt ra mắt sản phẩm mới và mức độ gắn kết mạnh mẽ hơn của các Đối tác Thương hiệu.
• Công ty dự kiến chi phí hoạt động năm tài chính 2027 sẽ thấp hơn khoảng 1,2 triệu USD so với năm trước, bao gồm khoản tiết kiệm tiền thuê nhà kho hàng tháng bắt đầu từ tháng 11.

Dữ liệu tài chính quan trọng

Công ty tiếp tục ghi nhận khoản dự phòng giảm giá trị tài sản thuế hoãn lại ròng do các khoản lỗ trong quá khứ và kỳ vọng của công ty trong giai đoạn tái thiết. Ban quản lý cho biết điều chỉnh này không ảnh hưởng đến dòng tiền nhưng ảnh hưởng đến chi phí thuế, lợi nhuận thuần và lợi nhuận trên mỗi cổ phiếu.

Kết quả kinh doanh và hoạt động

Việc giới thiệu sản phẩm mới được khôi phục vào giữa đến cuối tháng 6 với nhóm đầu sách mới đầy đủ đầu tiên của công ty. Educational Development Corporation đang hướng tới việc ra mắt sản phẩm vào hai mùa chính và hai mùa giữa hàng năm, nhằm tạo ra nhịp độ bán hàng đồng đều hơn giữa PaperPie và bộ phận bán lẻ của mình.

Ban quản lý cho biết các đầu sách mới chiếm tỷ lệ doanh số tương đối nhỏ nhưng lại kích thích các đơn hàng rộng lớn hơn, thường bao gồm cả các sản phẩm danh mục cũ đã khẳng định được vị thế. Công ty cũng đã bổ sung lại một số đầu sách và bộ sách bán chạy nhất từng bị hết hàng.

Trong bộ phận EDC Pub, ban quản lý báo cáo sự quan tâm mạnh mẽ và các đơn hàng lớn đối với Kane Miller Books, Learning Wrap-Ups và SmartLab Toys. Các đợt phát hành bổ sung của Kane Miller và SmartLab Toys dự kiến diễn ra vào tháng 1.

Số lượng Đối tác Thương hiệu đang hoạt động của PaperPie đã tăng từ khoảng 4.300 vào đầu năm tài chính lên 5.100 vào cuối tháng 8. Công ty đã sử dụng ưu đãi kích hoạt tháng 6 và sự kiện bán hàng mùa hè có mục tiêu để hỗ trợ tuyển dụng và tăng cường gắn kết. Công ty cũng đã bắt đầu liên hệ với các Đối tác Thương hiệu cũ để nhấn mạnh những cải tiến về sản phẩm, chương trình và công nghệ.

Các sáng kiến công nghệ bao gồm những nâng cấp cho mua sắm trên thiết bị di động, danh sách yêu thích và danh sách quà tặng. PaperPie cũng ra mắt Read, một công cụ tìm kiếm và khám phá sách hỗ trợ bởi AI được thiết kế để cá nhân hóa việc tìm kiếm sản phẩm. Ban quản lý cho biết AI sẽ được sử dụng để cải thiện hiệu suất và sự gắn kết của nhân viên thay vì hỗ trợ cắt giảm thêm nhân sự.

Triển vọng từ Ban quản lý

Ban quản lý dự kiến chi phí hoạt động năm tài chính 2027 sẽ thấp hơn khoảng 1,2 triệu USD so với năm trước. Khoản tiết kiệm này bao gồm việc cắt giảm thù lao của ban lãnh đạo, giảm nhân sự thực hiện vào đầu năm tài chính và kế hoạch chấm dứt thuê một kho ngoài vào tháng 10. Việc trả lại cơ sở đó dự kiến sẽ giảm chi phí thuê 15.000 USD mỗi tháng bắt đầu từ tháng 11.

Công ty dự kiến tiền mặt vào cuối quý 3 năm tài chính sẽ vượt mức hiện tại, nhờ được hỗ trợ bởi giai đoạn bán hàng mạnh nhất theo mùa. Ban quản lý từ chối đưa ra triển vọng dòng tiền cho quý 4 năm tài chính.

Educational Development Corporation có kế hoạch duy trì lịch ra mắt sản phẩm đồng đều hơn, đồng thời mở rộng cộng đồng Đối tác Thương hiệu, thu hút khách hàng mới và cải thiện hiệu quả hoạt động. Ban quản lý cho biết quá trình tái thiết sẽ mất nhiều quý và nhiều năm chứ không thể phục hồi ngay lập tức.

Rủi ro và các điểm cần theo dõi

• Doanh thu vẫn ở dưới mức của cùng kỳ năm trước, và công ty tiếp tục ghi nhận lỗ hoạt động và lỗ thuần.
• Số lượng Đối tác Thương hiệu đang hoạt động vẫn thấp hơn mức tháng 8 năm 2025 mặc dù đã cải thiện so với đầu năm tài chính 2027.
• Hàng tồn kho vẫn ở mức cao là 34,9 triệu USD. Ban quản lý cho biết Usborne thường không chấp nhận trả lại sản phẩm, khiến công ty phải phụ thuộc vào việc bán hết lượng hàng tồn hiện có.
• Tiền mặt đã giảm xuống 1,1 triệu USD trong nửa đầu năm, mặc dù công ty không có khoản vay nào theo hạn mức tín dụng 2 triệu USD trong quý.
• Khuyến mại và giảm giá vẫn là các công cụ để giảm hàng tồn kho, nhưng ban quản lý muốn sử dụng chúng ít thường xuyên hơn để tránh tạo thói quen cho khách hàng chỉ mua hàng trong các đợt giảm giá.
• Khoản dự phòng giảm giá trị tài sản thuế hoãn lại sẽ tiếp tục cho đến khi công ty thể hiện các dấu hiệu có lãi trở lại.

Điểm nổi bật trong phần Hỏi & Đáp với chuyên gia phân tích

Ban quản lý cho biết số lượng Đối tác Thương hiệu theo lịch sử thường tăng trong mùa bán hàng mùa thu do các người bán ngưng hoạt động trước đó quay trở lại. Mùa hè thường yếu hơn vì các Đối tác Thương hiệu không ghi nhận doanh số trong 6 tháng đầu năm có thể trở thành không hoạt động.

Về dòng tiền, ban quản lý giải thích rằng 2,8 triệu USD tạo ra từ việc giảm hàng tồn kho phần lớn đã bị bù đắp bởi khoản lỗ trước thuế 2,9 triệu USD trong nửa đầu năm. Điều này giải thích cho mức giảm tiền mặt khiêm tốn trong giai đoạn này.

Về hàng tồn kho Usborne, ban quản lý cho biết họ chỉ có các cuộc thảo luận hạn chế với nhà xuất bản về việc trả lại hàng và không kỳ vọng Usborne sẽ nhận lại sản phẩm. Công ty có kế hoạch bán hết hàng tồn kho, bổ sung lại các sản phẩm bán chạy nhất và dựa vào sự tham gia cùng doanh số cao hơn của Đối tác Thương hiệu để đẩy nhanh việc giảm hàng tồn kho. Ban quản lý nói thêm rằng hầu hết các đầu sách Usborne vẫn có sẵn ở các thị trường khác và không gắn liền với các xu hướng ngắn hạn.

Educational Development Corporation không bán hàng trực tiếp cho Amazon hay các nhà bán lẻ quy mô lớn (big-box retailers). Tuy nhiên, các khách hàng bán lẻ bên thứ ba có thể bán lại sản phẩm của công ty thông qua các sàn thương mại điện tử trực tuyến theo các tham số về giá và mức giảm giá do công ty thiết lập.

Ban quản lý đồng ý rằng biên lợi nhuận gộp không còn tiếp tục suy giảm trên cơ sở tổng hợp nửa đầu năm. Hoạt động khuyến mại có thể tiếp tục diễn ra định kỳ, nhưng công ty dự định giảm bớt sự phụ thuộc vào giảm giá và đưa việc bán hàng trở lại mức giá bán lẻ đầy đủ.

Toàn văn Biên bản Cuộc họp Báo cáo Kết quả Kinh doanh

Toàn văn cuộc gọi công bố kết quả kinh doanh

Phần trình bày của ban lãnh đạo

Operator

Good afternoon, everyone, and thank you for participating in today's conference call to discuss Educational Development Corporation's financial and operating results for its fiscal 2027 second quarter and year-to-date results. As a reminder, this conference is being recorded.

On the call today are Craig White, President and Chief Executive Officer; Heather Cobb, Chief Sales and Marketing Officer; and Dan O'Keefe, Chief Financial Officer. After the market closed this afternoon, the company issued a press release announcing its results for the fiscal 2027 second quarter and year-to-date results. The release will be available later today on the company's website at www.edcpub.com.

Before turning to the prepared remarks, I would like to remind you that some of the statements made today will be forward-looking and are protected under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those expressed or implied due to a variety of factors. We refer you to Educational Development Corporation's recent filings with the SEC for a more detailed discussion of the company's financial condition.

With that, I would like to turn the call over to Craig White, the company's President and Chief Executive Officer. Craig?

Craig White

Thank you, Alan, and welcome, everyone, to the call. We appreciate your continued interest. I will start today's call with some general comments regarding the quarter, then I will pass the call over to Dan to run through the financials, after which Heather will provide an update on sales and marketing and IT projects, and then I will provide an update on our plans for the rest of fiscal 2027.

First, I would like to remind everyone that our second quarter is typically our softest quarter of the year and our quarters cannot be analyzed sequentially. During the quarter, we saw progress in the execution of our turnaround strategy. This is most evident by a reduction in our sales decline. Over the past quarters, we have reported sales declines of 30% or more, and our forecasts have been for 35% down. During the second quarter, our sales decline decreased to 11%. This shows that our strategies and turnaround plan is working. During the quarter, we were able to replenish some existing best-selling titles that were out of stock as well as introduce several new titles, both energizing our sales force.

The overall results for the quarter were driven by our lower revenue levels, offset by lower expenses. The focus of our fiscal 2027 turnaround plan remains on growing our revenue and brand partner levels back to pre-pandemic levels, and I'm happy with the progress we have made in the second quarter, which, as I said, is our softest period of the year. Heather will talk more about this progress in her marketing update. As I've said before, our turnaround plan is not an overnight change, but a carefully developed plan for growth over the next few quarters and years.

With that, I will now turn the call over to Dan O'Keefe to provide a brief overview of the financials.

Dan O'Keefe

Thank you, Craig. Our fiscal 2027 second quarter results compared to the second quarter last year include net revenues were $4.1 million compared to $4.6 million, a decrease of approximately 11%. Average Active Brand Partners totaled 5,100 compared to 5,800 at the end of August 2025. Our average Active Brand Partners increased from 4,300 at the end of February 2026 to 5,100 at the end of August 2026, an increase of approximately 19%. Our loss before income taxes were $1.6 million compared to a loss in the second quarter last year of $1.8 million. Net loss totaled $1.6 million in the second quarter compared to $1.3 million in the second quarter last year. Loss per share totaled $0.19 compared to a loss of $0.15 on a fully diluted basis.

Now for an update on our working capital. Inventory levels have decreased from $37.7 million at the beginning of the fiscal year to $34.9 million at the end of August, generating $2.8 million of cash flow from inventory reductions. Our cash balance decreased slightly from $1.3 million at the end of February 2026 to $1.1 million at the end of August. We had no borrowings under our $2 million line of credit during the quarter. I would also like to mention an unusual accounting adjustment that continues through the second quarter. Due to our historical losses and operational expectations during our turnaround period, we evaluated the need for a valuation allowance for our net deferred tax assets.

Based on this evaluation, we continue to recognize a valuation adjustment offsetting the deferred tax asset and eliminating the tax benefit on our income statement. This adjustment has no cash flow impact, but had a direct impact on our tax expense, net earnings and earnings per share. When the company shows signs of returning to profitability, this valuation adjustment will be reversed. The reversal will have no cash flow impact, but it will have a direct impact to our tax expense, net earnings and earnings per share.

That concludes the financial update. I'll now turn the call back over to Heather Cobb for a sales and marketing update. Heather?

Heather Cobb

Thanks, Dan. As Craig mentioned earlier, our second quarter is traditionally our slowest selling period. As we entered June, our internal sales projections anticipated a decline of approximately 35% compared to the prior year, reflecting the trends we've seen in recent quarters. Instead, we finished the quarter with an overall revenue decline of approximately 11%, significantly outperforming those internal expectations. While we recognize there's still work ahead, we're encouraged by this progress, especially as several important initiatives began coming together during the quarter.

One of the most significant developments was the return of new product intros. In mid- to late June, we released our first full group of new titles. And over the past several months, we've also replenished inventory for several of our best-selling titles and series. We've shared previously that new titles are an important sales driver for our business, and we believe the sales results we are seeing continue to reinforce that. Even more importantly, we're moving back toward a consistent release schedule with 2 main season and 2 mid-season product intros planned each year. This is an integral step forward because it creates a more predictable flow of new products and gives our brand partners and retail sales reps more opportunities to reconnect with customers, generate excitement and drive repeat purchases throughout the year.

We're seeing encouraging activity within our EDC Pub retail division, where our retail partners continue to respond positively to our offerings across Kane Miller Books, Learning Wrap-Ups and SmartLab Toys. We're receiving strong interest and sizable orders across these brands, reinforcing the demand we're seeing for our educational products. The response to our recently introduced new titles has been enthusiastic, and we're already seeing excitement surrounding additional releases planned for January from both Kane Miller and SmartLab Toys. As we return to a more consistent product intro schedule, we believe these offerings will create additional sales opportunities across both our sales channels.

Alongside product availability, another key priority remains rebuilding and strengthening our PaperPie Brand Partner community. During the quarter, we offered a special activation opportunity in June, along with a targeted summer sales event designed to encourage engagement, generate customer activity and support our brand partners during a traditionally slower season. And while our brand partner population remains below where it was a year ago, we're encouraged that we've grown from approximately 4,300 Active Brand Partners at the beginning of the fiscal year to approximately 5,100 at the end of August. As Dan mentioned, that represents an increase of nearly 19% over the first 6 months of our fiscal year.

We recognize that growing our brand partner community is only one part of the equation. Equally important is helping those brand partners become active, productive and successful in building their businesses. We continue to focus on both growth and new customer acquisition because those 2 priorities are closely connected. We're also taking a renewed strategic approach to social media and communications, focusing on strengthening our PaperPie Brand presence, creating more consistent and engaging content and expanding our reach to new audiences. We've added team members to support these efforts with an emphasis on connecting with today's consumers and the next generation of brand partners.

And looking beyond the quarter, we've begun additional outreach directly to former brand partners, highlighting the many improvements we've made to our products, programs and technology and inviting them to take another look at the opportunities available with PaperPie today. That brings me to our IT and enterprise initiatives where we've continued to make significant progress. Over the past several months, our team has successfully completed and launched numerous enhancements to our e-commerce platform and supporting systems. These improvements are an important part of our overall strategy because we're not simply focused on bringing more people to PaperPie. We're also focused on making it easier for them to shop, share and build their businesses.

We continue to enhance our mobile shopping experience, knowing it's where most shopping trips happen today. We've also introduced [ Read ], our new AI-assisted book discovery and search tool on the e-commerce site. [ Read ] helps customers navigate our product selection and discover books based on their interests, needs and preferences, creating a much more personalized and intuitive shopping experience. Additionally, we've launched new wish lists and registry features, making it easier for customers to save and share their favorite products with family and friends. While these may all sound like individual website enhancements, collectively, they represent something much more important. We are building a much more modern, accessible and efficient shopping platform that supports both the customers and the productivity of our brand partners.

As we move into the second half of our fiscal year, our priorities remain clear. We're focused on growing and engaging our brand partner community, reaching new customers, maintaining a consistent flow of new products and continuing to improve the tools and technology that support our business. We're especially encouraged to enter our stronger selling season period with improved product availability, new titles in the market and these additional new releases on the horizon. We understand that sustainable growth won't happen overnight, and we recognize that we still have work to do. But we're encouraged by the progress we've made this quarter, not only in our sales performance relative to our expectations, but also in restoring important elements of our business and strengthening the foundation that we have for future growth.

We believe our products, people and increasingly modernized tools and systems position us to keep making meaningful progress in the quarters ahead. As we continue to develop these things, we're placing an increased emphasis on improving internal efficiencies, simplifying processes and creating technology solutions that can support this growth without requiring proportional increases in operating costs, which Craig will share a bit more about.

With that, I'll turn the call back over to Craig.

Craig White

Thank you, Dan and Heather. As I mentioned before, we are happy with the initial results of our turnaround plan. Specifically, we are building our brand partner levels and they are excited about our new titles and our IT improvements. You heard from Heather about some of our recent IT initiatives that are focused on making it easier to do business with us and improving the shopping experience. I believe you've also heard me say that I am a big proponent of AI, not as a solution to all our problems, but as a tool to assist in achieving our strategic goals.

It is also not part of the plan to further reduce headcount as part of our AI strategy. I want it to be used to make our current employees more efficient so that we can -- so that we do not need to hire as many new employees as we get back to growth. Part of my overall strategy is to help us more effectively build community. AI can assist with this by recognizing patterns, good or bad, very quickly. I began using AI to help me create more touch points with our brand partners by recognizing certain achievements much closer to real time. I send weekly e-mails for large orders recognizing effort and impact and e-mails when new brand partners make their first sale. It has been very well received.

Another key initiative is to be recognized by customers and the greater community as experts in providing educational resources, our books and toys, for their children. This in part can be achieved by establishing blogs or social media posts to build trust in our brands. This will, in turn, strengthen our positioning in AI LLMs recommendations of our products, which is becoming the new search engines. This is a major undertaking that we have many, many assets available for use and a clear path to get there aided by our 2 new hires. And then in general, I support any employee or department in their AI exploration process to transform EDC. I believe that AI can help automate processes to free up employees to do more critical thinking work.

We have also engaged a company who has created their own front end sitting on our data, which will allow us to ask natural language questions without IT involvement to make more informed, timely decisions. For example, I can use the software to provide me daily morning briefs of milestones that were achieved overnight as a result of posted sales. It just provides readily useful data more quickly. Many companies in the direct selling industry are evaluating their recruiting and engagement methods to attract and retain brand partners and customers. I can tell you that our brand -- our PaperPie sales and marketing teams and the IT department are working actively to analyze our strategies to engage this target group as well.

I really feel like we are rebuilding from a position of strength. What our small, scrappy staff throughout the building can accomplish is really amazing, and we have solid short-term strategies that everyone can get behind. We are truly all pulling in the same direction. Lastly, I want to thank our shareholders for their patience, our employees for their commitment to our mission and our customers and brand partners for their loyalty. I'm confident that the steps we have taken and will continue to take will result in sales growth and our return to profitability.

Now that we have provided a summary of some recent activity, I will now turn the call back over to the operator for question and answer. Alan?

Operator

[Operator Instructions] Your first question comes from Igor Novgorodtsev of Lares Capital.

Phần hỏi đáp

Igor Novgorodtsev

Nice to see that deterioration is declining. So I understand it will take some time to come around. I have quite a few questions, and I'll probably ask a few and if nobody else behind me [indiscernible]. So let me get started by asking about the new versus titles already in your inventory. So you started selling new titles in June. How much -- like what percentage of the titles that were sold as new titles? And how -- what percentage of the titles in the inventory? And what is your inventory level looks like after this quarter?

Heather Cobb

I'll take the first part as far as the percentages. The percentage of new titles that go into actual sales of overall sales is actually relatively small. What it does is it provides that excitement and bump of enthusiasm to get out and share with customers. And what we consistently see over time is that when those new titles are placed on an order, they are almost always accompanied by what we call backlist titles, which are the additional titles that have always been there and available for purchase but that people are going ahead and taking advantage of buying while they're on the site and doing so.

Igor Novgorodtsev

Okay. We do not have the inventory levels yet. I assume I have to wait for the 10-Q, right?

Craig White

No, I think, Igor, you joined just a little bit late. We said that early on. Our inventory levels decreased from $37.7 million at the beginning of fiscal year 2027 to $34.9 million. So...

Igor Novgorodtsev

Okay. Yes. So my next question is about the current quarter in active members. Now this is obviously right now is the most important quarter of the year. How is it looking? What is like active members are increasing? What does the sales look like as much as you guys can tell us at this point now that we're halfway through?

Heather Cobb

Sure. I referenced that a little bit in my conversation, and Dan mentioned it as well. While the Active Brand Partner count year-over-year is lower than it was at the same time last year, we've seen an almost 20% increase since the beginning of fiscal year '27, which is promising and something that we look at as extremely positive.

Igor Novgorodtsev

So maybe we can just dig in a little bit more. I believe you ran a promotion in the last quarter. And at one point of time, you had 5,300 members. Now I understand there is something that's churning off and now it's 5,100 members. Should we expect that the numbers will start increasing or stabilize? Or how should we look at that?

Dan O'Keefe

Igor, I will tell you that historically, in the fall, we have an increase in brand partners because it's the strongest selling season of the year. So we have some brand partners that go inactive during the year, but come back to us in the fall. So typically, our fall is our time frame where our brand partner numbers increase. The summer is typically a time when they actually decrease because a lot of the fall people that join in the fall, fall off in the summer because they don't make a sale during the first 6 months of the year. But then they come back in the fall each year. So fall is typically our highest brand partner levels.

Igor Novgorodtsev

Okay. Fair enough. Maybe you can talk a little bit about the operating expenses. I know that you've been doing a good job reducing your operating expenses. I'm just curious, is the job less done at this point? Or are you still working on significantly reducing operating expenses going forward? I mean, I assume everything stays more or less equal.

Dan O'Keefe

Yes. I'll take this one, too. We kind of mentioned in -- at our fiscal year-end, our 10-K call and our Q1 call that we reduced our operating expenses during -- for the budget for the fiscal 2027 year by $1.2 million. That includes some expense reductions immediately. Our executive team took compensation reductions. We were able to -- we actually did a staff reduction immediately in the beginning of the fiscal year. But we also have expenses that are dropping off during the year. For example, we have an outside warehouse facility that we're vacating in October, and it will save us $15,000 a month in rent expense by not using that outside warehouse, and that will start in November. So throughout the year, we're doing expense cutting. But cumulatively, we expect our operating expenses to be about $1.2 million below where they were last year.

Igor Novgorodtsev

Okay. My next question is, and then I'll get in queue and see if anybody else wants to ask questions. I'm a bit confused about the cash flow. Your press release specifically said that you had a positive cash flow, yet the cash has been reduced, I believe, by $100,000 from the beginning, $1.3 million to $1.2 million, and you had $1.8 million in May, if I'm not mistaken. Could you just kind of walk me through this? I understand that I would need to see your cash flow statement to fully understand this. But what did you allude to in the press release when you said that the cash flow in the first half was positive?

Dan O'Keefe

Well, the cash flow in the first half of the year is positive because we're reducing our inventory levels. So from a simple standpoint, we reduced our inventory levels $2.8 million and reducing -- and all that inventory is fully paid for, Igor. So that just generates positive cash for us. Now over the first 6 months, we've lost our earnings before taxes were negative $2.9 million. So from a simple math perspective, $2.8 million of positive cash flow offset by $2.9 million of operating losses is negative $100,000, and that's what our cash decreased over the first 6 months. But I will also tell you that the fall selling season is our busiest selling season of the year, and we expect cash to be higher at the end of this quarter than it is right now.

Igor Novgorodtsev

No, I understand. So I would need to -- I see this. But do you expect -- you're fairly confident that on the trailing 12 months, your operating cash flow will be positive this year, it seems, right? I mean, it's fair to say that given that there's one quarter left and it's your strongest quarter. So your -- basically cash at the end of the year should be higher than it was in the beginning of the year. Is that -- are you on target on that?

Dan O'Keefe

I don't want to give forward-looking statements to Q4 since it's kind of -- but I can tell you that typically, at the end of Q3, we -- is our biggest cash position of the year.

Igor Novgorodtsev

Sorry, I -- Q3, right? Correct. Sorry. Okay. I'll try to get back in queue and if nobody else is on, then I'll ask more questions. And if not, then I'll ask at the end.

Operator

[Operator Instructions] The next question comes from Igor Novgorodtsev of Lares Capital.

Igor Novgorodtsev

Okay. I guess it's me again. All right. So let me ask a couple of more questions, if you don't mind. Usborne inventory. Last time I checked, it looks like about half of your inventory is from Usborne. Correct me if I'm wrong. Are you -- and it seems to be about 1/3 of your sales. Do you guys have any active conversations with Usborne? Because I would imagine some of the inventory is moving a little bit better, but some of it should be very, very slow moving. I did a little bit of a deep dive into Usborne titles, and it seems to be that the titles do not change that much.

Would they be interested in, let's say, maybe taking back some of the inventory and giving you credit and replacing with some other inventory? Or is any kind of the deal to basically push your slow-moving inventory through their channels, so you don't have to basically spend years trying to sell it off? Or what are your conversations right now with Usborne, if any?

Craig White

We have, at this point, limited conversations with Usborne. Dan has frequent regularly scheduled conversations with them. It's not been a regular practice that they ever take back titles. So we're not counting on that. And so our sales plans are like any of our other titles, just to sell through them best we can, replenish the best sellers and keep moving forward.

Heather Cobb

Yes. And Igor, I'll jump in there as well and say they do offer new titles just as any publisher does. But as you potentially heard Craig say before, our books are on topics and in formats that don't go out of style. They're not necessarily trending topics, but more ABCs and 123s and all of the things that all parents want or should want to have in their homes for their kids. And so we don't have any concern of them not lasting to a point that we would not be able to sell them.

Igor Novgorodtsev

But let me just understand this, because it seems to be -- I just did a little projection, you have several years at the current sales level of Usborne inventory. Wouldn't they want to take this inventory at a discount? If I was Usborne, I would be all over it and say, give you a credit, so you can get some [indiscernible] because they sell it on Amazon, through HarperCollins, and through stores and so on. So they have other channels where they can actually move it through much quicker. And then in the end, they can potentially give you credits and you guys can buy the much higher hot items from them. It just seems strange that you guys don't have any active conversations. It's not policy-based, talking about an unusual situation and kind of a deal where you guys have several years' worth of inventory.

Craig White

Well, we have several years of inventory at current sales levels. If we increase brand partners and increase sales, then the inventory will come down much quicker. But I mean, let's be realistic. They've already made that sale to us. There's no incentive for them to take it back. So we'll sell through it. We're not concerned about that at all, us being able to sell through it. And again, like I said, if we increase brand partners and sales, it will reduce more rapidly.

Igor Novgorodtsev

Like just for me to understand the inventory from their perspective, do they have -- do you have -- what's like -- what kind of -- do you have a lot of titles that's no longer being sold, except the new inventory or pretty much the vast majority of Usborne titles are still being actively sold, let's say, by you and elsewhere? And they still...

Heather Cobb

Yes, that's a great question. The vast majority are still being sold. You could find them in other markets. And like I said, they're not on trending topics that are going to expire. And so yes, just as a whole, the publishing industry doesn't tend to rotate through where they stop selling titles after 2 years. As long as those titles are still available, they will sell them and make them available to customers.

Igor Novgorodtsev

Right. And my last question is, I know that you said no to Amazon and to others, and I can kind of understand that you don't want to be competing with discount and the race to the bottom. But again, given your high inventory level, did you guys talk to any third parties of potentially moving some of your inventory through Internet? Not necessarily explicitly as you, but perhaps to third parties or something like that? Because I see a lot of titles that you carry on the Internet. There is obviously a significant market for this. Is that a consideration?

Heather Cobb

While our overall strategy is not to sell to Amazon or big box stores, we do work with third parties already that are selling significant quantities of our titles and making those available to the market in a variety of different ways.

Igor Novgorodtsev

I see. So you -- potentially somebody on Amazon may be selling your titles. It just would be a third party buying from you, something like this, right, or eBay or that's...

Heather Cobb

Yes. Through our retail division, we opted not to sell direct to Amazon because that gives us a little bit less control of the sales price that it can go for and things like that. And so as we sell to a customer that may or may not have a storefront on Amazon, we can give them more parameters and guidelines of strict discounting opportunities or different things like that. And so yes, they could be available on Amazon.

Igor Novgorodtsev

Okay. And my last question, and I'm sorry for asking so many questions, but I think, hopefully, it's useful for other people who will read the transcript. Gross margins and promotions. So last year, you mentioned several times that you have to do promotional activity and your gross margins were particularly good. I haven't had a chance to see your gross margins, but maybe you can talk a little bit, have your gross margins improved or you expect them to improve now that you don't have a bank breathing down your neck, so to speak?

Craig White

Well, we don't have a bank breathing down our neck, but we do have lots of inventory. So we do have to discount or we've employed that tool or tactic in the past. Our plans are to do those fewer and farther between, right? We don't want our customers only thinking they want to purchase from us when they're on discount. We need to get back to full retail, but it's still been a tactic that we've used periodically.

Igor Novgorodtsev

Okay. So do you -- so the gross margins are no longer deteriorating, would be fair to say that, right? If I look at the aggregate as far as the first half of the year.

Heather Cobb

Right.

Igor Novgorodtsev

Okay. All right. I don't have anything else.

Craig White

Yes. No problem. Like you said, I think others would probably have the same question. So I appreciate it.

Operator

There are no further questions at this time. I would hand over the call to Craig White for closing comments. Please go ahead.

Craig White

Yes. I think we're not raising the banner that says mission accomplished. We know we have work to do, but we feel this has been a positive step in the right direction. So we're feeling better right now. So anyway, I appreciate everyone being on the call. Thank you.

Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.