Educational Development Corporation (NASDAQ: EDUC) reported fiscal third‑quarter 2026 results that showed a sharp 37% year‑over‑year drop in net revenues to $7.0 million, while earnings before income taxes swung to $10.6 million from a $1.1 million loss a year earlier. The turnaround was largely driven by a $12.2 million gain on the sale of the company’s headquarters and distribution warehouse, a one‑time event that masks underlying operational weakness.
The decline in revenue was concentrated in the company’s core direct‑sales channel, PaperPie, which generated $3.73 million—down 31.5% from the prior year. Active Brand Partners fell to 5,100 from 12,400, a 59% reduction that underscores the erosion of the company’s customer base. The loss of partners and the weaker PaperPie performance explain the overall revenue contraction.
When the one‑time gain is excluded, the company would have reported a $1.6 million loss before income taxes, highlighting that core operations remain unprofitable. Management noted that the sale of the Hilti Complex eliminated all bank debt and removed restrictive covenants, improving liquidity and freeing the company to focus on growth initiatives.
CEO Craig White emphasized that the asset sale “paves the way for us to move forward into fiscal year 2027 with no bank restrictions,” while CFO Dan O’Keefe highlighted the company’s new cash position of $3.4 million and the ability to pay down inventory. Marketing chief Heather Cobb announced the launch of the “Gathered Goods” fundraising program, which is expected to deliver stronger margins and broaden digital fundraising capabilities.
The market reacted positively, with the stock closing up 4.38% on the announcement day. Investors appeared to focus on the debt elimination and liquidity boost rather than the revenue decline, viewing the asset sale as a critical step toward financial stability.
Despite the positive cash flow, the company still faces significant risks. Inventory stood at $39.1 million at quarter‑end, and the Altman Z‑Score of 1.26 signals potential distress if revenue does not recover. Management’s emphasis on new programs and cost discipline suggests a cautious outlook, with the company needing to rebuild its partner base and reverse the revenue decline to achieve sustainable profitability.
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