Earnings Transcript for POL - Q4 Fiscal Year 2020

Operator: Good afternoon, and welcome to 1847 Goedeker's Fiscal Year 2020 Conference Call. As a reminder, this call is being recorded. . On the call today are 1847 Goedeker's CEO, Doug Moore; and CFO, Robert Barry. I would also like to remind everyone that various remarks about future expectations, plans and prospects constitute forward-looking statements for purposes of safe harbor provisions under the Private Securities Litigation Reform Act of 1995. 1847 Goedeker cautions that these forward-looking statements are subject to risks and uncertainties that may cause our actual results to differ materially from those indicated, including risks described in the company's filings with the SEC. Any forward-looking statements made on this conference call speak only as of today's date, Monday, March 29, 2021, and 1847 Goedeker does not intend to update any of these forward-looking statements to reflect events or circumstances that occur after today. A webcast replay of the conference call will be available on the Goedeker's website at www.goedekers.com. With that, I'd like to turn the call over to 1847 Goedeker's CEO, Doug Moore, for opening comments. Please go ahead, Mr. Moore.

Douglas Moore: Thank you, Alex, and good afternoon to everyone on the call today. Thank you for joining us and taking the time to participate in our 2020 financial results call. I want to first thank my team at Goedeker's for their handling of record orders and customer interactions and doing most of that work from their home office environment while still helping us deliver a substantial increase in cash flow from operations in 2020. We asked our team to make a major pivot in how they work and the amount of work they do, and they met the challenge that exceeded all expectations. Let me state with conviction, I have never been more confident that Goedeker's is on the path to becoming the nation's largest and most profitable online retailer of appliances in the U.S. as we change the way Americans shop for appliances. We are still in the early stage of addressing a $20 billion industry as the only pure-play appliance online retail listed on a major exchange. We are executing on a proven D2C model of current investment driving scalable growth. Over the past year, we've been investing in people, process and systems while developing a best-in-class advertising and marketing platform in order to continue to drive significant revenue growth and dramatically increase our market share. My vision is this

Robert Barry: Thanks, Doug, and good afternoon, everybody. First, I'd like to discuss the restatement we filed today. Like many other companies that sell their products almost exclusively online, we concluded that we should accrue a liability for potential sales taxes that might be payable to the states in which we sell our products. We made this choice upon further review of the U.S. Supreme Court's decision in South Dakota v. Wayfair, which determined that states may require remote sellers to collect sales tax under certain circumstances. With this in mind, we restated our 2019 financial statements to reflect an accrual for sales tax that might be assessed by the states where we sell. We will also restate our 2019 and 2020 second and third quarter results to reflect the accruals. Overall, the changes resulted in accrued noncash charges of $2.9 million in both 2019 and 2020.

Douglas Moore: Thank you, Bob. I have a few more comments before we open up for Q&A. As a leading appliance retailer, our long-standing reputation with vendors and customers provides a strong competitive position. As our order levels are rising, suppliers are engaging with Goedeker's in a more strategic and less transactional way. Beyond COVID-related supply disruptions, this is leading to progress toward better availability, including opportunistic inventory buys and improved financial support. One of our key differentiators is our telephone sales staff, and extensive training and certification is occurring to ensure we are the best in the industry. This rise in professionalism is occurring in our customer service team as well. These strengths are further augmented by ongoing investments in logistics and marketing technologies that place us in a position to offer scalable, repeatable quality process that is second to none in the retail appliance industry. And we will continue to make investments in our infrastructure to support growth. Looking forward, there are 5 key components to our growth strategy

Operator: . Our first question is from Kyle Gallagher, a Private Investor.

Unidentified Analyst: Yes. Thanks for the call and the update. Great to see and congratulations on a good quarter. Just had a question. You guys had put a no doubt about purchasing the extra inventory. And correct me if I'm wrong but I think that note said the interest rate on that was something like 10% per annum. As far as -- should we be thinking along those types of lines as far as the financing terms of the merger? Is there any color? I mean, I know there's certain things you can and can't say, but is there any color on how you can kind of inform investors' thinkings along the lines of the financing there?

Douglas Moore: Let me go straight to the deal structure. The deal structure obviously is confidential, but the deal structure would be nowhere close to those kinds of circumstances. So we're proceeding on a very normal basis for the deal structure in terms of the financing. And Bob, I don't know if you want to comment briefly on the percentage on the note but that would be perhaps helpful. But be brief, please?

Robert Barry: Well, we had an opportunity to get this financing very quickly to meet the rising demand we had for inventory. So we just -- we took that rather than shopping around. So it is higher than we would pay ordinarily, but we wanted to be able to continue buying inventory and not be distracted by shopping around for a better rate. So yes, I do understand it's high, but that is certainly not in the range or anywhere near what we're talking about for the acquisition financing.

Operator: