教育發展公司 (EDUC) 2027 財年第二季業績電話會議：營收降幅收窄至 11%

Educational Development Corporation (NASDAQ: EDUC) 公布 2027 財年第二季淨營收為 410 萬美元，年減 11%。該降幅較近幾季報告中超過 30% 的降幅有所收窄，且顯著優於公司內部預期的衰退約 35%。

重點總覽

• 財年第二季淨營收年減 11% 至 410 萬美元，去年同期則為 460 萬美元。
• 稅前虧損從 180 萬美元收窄至 160 萬美元，但淨虧損從 130 萬美元擴大至 160 萬美元。每股稀釋虧損為 0.19 美元，去年同期為 0.15 美元。
• 活躍品牌夥伴從 2026 年 2 月底的約 4,300 人增加近 19% 至 2026 年 8 月底的 5,100 人，但總數仍低於去年同期的 5,800 人。
• 上半財年存貨減少 280 萬美元至 3,490 萬美元，所產生的現金大幅彌補了公司在該六個月期間 290 萬美元的稅前虧損。
• 管理層將銷售趨勢的改善歸因於熱銷商品補貨、恢復推出新產品以及品牌夥伴參與度提升。
• 公司預計 2027 財年營業費用將比前一年減少約 120 萬美元，其中包括自 11 月起開始節省的每月倉庫租金。

關鍵財務數據

由於歷史虧損以及轉型期內的預期，公司繼續對遞延所得稅資產淨額計提備抵評價。管理層表示該調整對現金流量無影響，但會影響所得稅費用、淨利益與每股盈餘。

業務與營運表現

新產品推出於 6 月中下旬恢復，推出了公司首批完整的全新書目組合。Educational Development Corporation 正朝向每年推出兩次主要季度產品與兩次中季產品邁進，旨在為 PaperPie 及其零售部門建立更一致的銷售節律。

管理層表示，新書目在銷售額中佔比相對較小，但能刺激包含既有舊書目錄產品在內的更廣泛訂單。公司還補足了數款先前缺貨的熱銷書目與系列。

在 EDC Pub 部門內，管理層報告 Kane Miller Books、Learning Wrap-Ups 和 SmartLab Toys 展現出強烈興趣與大量訂單。另外還有更多的 Kane Miller 與 SmartLab Toys 新書計劃於 1 月推出。

PaperPie 的活躍品牌夥伴人數從會計年度初的約 4,300 人增至 8 月底的 5,100 人。公司利用 6 月的啟用優惠與針對性的夏季銷售活動來支持招募和互動。公司也已開始聯繫前品牌夥伴，宣傳產品、計畫與技術方面的改進。

技術創新舉措包括增強行動購物、願望清單與禮品登記功能。PaperPie 還推出了 Read，這是一個 AI 輔助的圖書搜尋與發現工具，旨在實現個人化的產品搜尋。管理層表示，AI 將用於提升員工效率與參與度，而非用於進一步裁員。

管理層展望

管理層預計 2027 財年營業費用將比前一年減少約 120 萬美元。節省金額包括高階主管薪酬削減、財年初期執行的裁員，以及計劃於 10 月退出外部倉庫。預計自 11 月起退租該設施將每月減少 1.5 萬美元的租金支出。

在季節性最強的銷售旺季支持下，公司預計第三財季末的現金將超過當前水準。管理層拒絕提供第四財季的現金流量展望。

Educational Development Corporation 計劃維持更一致的產品推出時程，同時擴大品牌夥伴社群、獲取新客戶並提升營運效率。管理層表示，轉型將需要數個季度與數年時間，而非實現即刻復甦。

風險與關注領域

• 營收仍低於去年同期水準，且公司繼續報告營業虧損與淨虧損。
• 儘管較 2027 財年初期有所改善，但活躍品牌夥伴仍低於 2025 年 8 月的水準。
• 存貨仍維持在 3,490 萬美元的高水準。管理層表示，Usborne 通常不接受退貨，使得公司必須依賴銷貨來消化現有存貨。
• 儘管本季公司未在其 200 萬美元的信貸額度下進行借款，但上半財年現金已降至 110 萬美元。
• 促銷與折扣仍是降低存貨的工具，但管理層希望減少使用頻率，以免讓客戶養成僅在促銷期間購買的習慣。
• 遞延所得稅資產備抵評價將持續存在，直到公司展現恢復盈利的跡象。

分析師問答亮點

管理層表示，由於先前不活躍的賣家回歸，品牌夥伴數量在歷史上會在秋季銷售旺季增加。夏季通常較弱，因為在前六個月內沒有銷售記錄的品牌夥伴可能會變成不活躍狀態。

關於現金流量，管理層解釋稱，存貨減少所產生的 280 萬美元大部分被上半財年 290 萬美元的稅前虧損所抵銷。這解釋了該期間現金小幅下降的原因。

關於 Usborne 存貨，管理層表示與該出版商就退貨進行的討論有限，並不預期 Usborne 會收回產品。公司計劃消化存貨、補充熱銷商品，並依靠提高品牌夥伴參與度與銷售額來加速存貨的減少。管理層補充道，大多數 Usborne 書目仍可在其他市場發售，且不受短暫流行趨勢影響。

Educational Development Corporation 不直接銷售給 Amazon 或大型連鎖零售商。然而，第三方零售客戶可能會在公司制定的價格與折扣參數下，透過線上商城轉售其產品。

管理層同意就上半財年整體而言毛利率已不再惡化。促銷活動可能會定期持續進行，但公司意圖減少對折扣的依賴，並使銷售額恢復至全額零售定價。

完整法說會逐字稿

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完整財報電話會議逐字稿

管理層陳述

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.

分析師問答

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.