Q1 2023 Upexi Inc Earnings Call
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Good afternoon, I will be your conference operator today at this time I would like to welcome everyone to the <unk> 2023 fiscal first quarter financial results Conference call.
Please be advised that today's call is being recorded I will now turn the call over to Valter Pinto managing director of <unk> Strategic Communications. Please go ahead.
Thank you operator, good evening and welcome everyone to the <unk> 2023 fiscal first quarter financial results Conference call I'm joined today by Alan Marshall, Chief Executive Officer, and Andrew Nordstrom, Chief Financial Officer, before we begin I'd like to remind everyone that statements made during today's call.
This call maybe deemed forward looking statements within the meaning of the safe Harbor of the private Securities Litigation Reform Act of 1995, and actual results may differ materially due to a variety of risks uncertainties and other factors <unk>.
For a detailed discussion of some of the ongoing risks and uncertainties in the company's business I refer you to the press release issued this evening and filed with the SEC on form 8-K, as well as the company's reports filed periodically with the SEC.
<unk> disclaims any intention or obligation to update or revise any forward looking statements, whether as a result of new information future events or otherwise unless otherwise required by law.
Addition, during the course of this call we may refer to non-GAAP financial measures that are not prepared in accordance with accounting principles generally accepted in the United States and then may be different from non-GAAP financial measures used by other companies investors are encouraged to review <unk> current report on form 8-K furnished with the SEC.
<unk> reasons for including these non-GAAP financial measures in its earnings release, a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures are contained in our earnings release issued this evening unless otherwise noted here with them.
I would now like to turn the call over to your proxy CEO Alan Marshall.
Thank you and welcome to our 2023 first quarter operating results conference call.
<unk> is a vertically integrated brand owner and multiple high growth industry verticals, including health wellness.
Beauty and most recently choice our model is to acquire build and scale through direct to consumer and Amazon sales channels brands. We acquire are accretive with room for margin expansion as we scale and drive operational efficiencies.
Success to date is deeply rooted in our technology and data we implement our in house.
Gas platform add technology.
Into all of our brand marketing to help achieve a lower cost per acquisition. We have also amassed a significant amount of consumer data, allowing us to increase cross selling between our growth.
Our portfolio of brands.
I joined <unk> as CEO in May of 2019 that year. The company generated approximately $7 4 billion in revenues I am proud that we have executed a model.
Strategy effectively to project over $100 million in revenues for calendar 2023.
It's a testament to our execution business model and expertise as a management team.
For our most recent fiscal quarter ending September 30 revenue totaled 11 point.
$6 million, an increase of 199% as compared to $3 9 million for the same period. The prior year predominantly driven by meaningful growth for our brands across most of our product categories and sales platforms.
I am pleased we were able to deliver these results even while we like many others are still faced with macroeconomic challenges. Although we have seen average total card value pullback with consumer discretionary income coming down and inflation continuing to rise our direct to consumer direct.
Direct to consumer sales continued to be strong.
We have successfully closed on several important acquisitions over the last 12 to 18 months.
In April we completed our acquisition of Cigna online LLC, a well established secondary market seller on Amazon with over 200, Skus, a branded OTC products and supplements in health wellness and beauty verticals.
During the first quarter in August we completed the asset purchase of vital Medical Corporation, a leading online seller and supplements for surgery recovery skin beauty health and wellness.
Vitamin a vitamin Anika has been a leading revenue driver for our company with triple digit growth year over year, mostly led by performance on Amazon.
In October we completed our acquisition of interactive offers a S. A S. Programmatic advertising company that has operated successfully in the Fintech space for numerous years with recent expansion into e-commerce to boost platform profits and growth.
And lastly, during the quarter, we entered the 200 billion dollar plus pet vertical market with the closing of Lucky sale, a balanced business with direct to consumer unlucky tell dot com and Amazon distribution with double digit year over year growth.
Lucky tell currently sells products domestically in the United States and internationally in Canada, and Australia markets.
All cash acquisition is a great example of our ability to acquire a great brand that will be accretive to both top line growth and EBITDA the pet vertical vertical fits with our focus on what we consider essential consumer.
Good people spend money on in all economies.
Until recently, a large portion of our business with focus on our CBD segment for which we have been exploring strategic options in late October 2022, we announced the sale of these select CBD assets for approximately $23 5 million to streamline our business for more focus on high margin growth areas and dependable.
Sales and profit visibility.
The proceeds from the sale allowed us to close the acquisitions of <unk> and our subsidiaries Titan products and New England technologies in early November adding over $40 million in trailing 12 month sales and increasing our projected 2023 sale to $100 million.
As the children toy brand and micro Poplar magnetic tiles, and building blocks and new England technologies as a national distributor for branded consumer products.
Titan is of high quality eco conscious toy company that has grown 100% over the past two years. They are continuously expanding our network of retail partners with new initiatives offerings and their products are currently available through online through Walmart Dot Com Sams club dot com and in stores through leading retailers such as Walmart.
Sam's club Bj's wholesale new England technology is one of the most competitively priced distributors from name brand consumer electronics in the industry with several innovative distribution.
Distribution model specializing in e-commerce business to business and business to consumer marketplaces.
We expect both transactions to close during our fiscal first quarter ending September 30th timing affected our financial performance. During the quarter. For example, these delays affected sales decisions in new product launches as well as making investments in advertising campaigns, all of which needs to be planned 30 to 60 days out.
Now that we have closed we're expecting another triple digit growth year.
Thank you to all our team at <unk> as well as our investors and customers and partners I will now pass the call over to <unk> CFO , Andy <unk> to discuss our financial results in more detail.
With the rules regarding the presentation.
Continued operations the assets liabilities and that fit into the infusions and certain manufacturing operations have been reclassified as discontinued operations for all periods presented.
Revenue for the three months ended September 32022 totaled 11, 6 million, an increase of 199% as compared to $3 9 million for the same period prior year.
The revenue growth was primarily driven by the <unk> acquisition, including vitamin Interactive offers stigma and lucky sale. This.
This was offset by the sale of infusions.
The Companys growth strategy, we will continue to focus on both acquisition and organic growth, while also expanding to international markets.
Cost of revenue during the quarter totaled $5 five months, an increase of 334% as compared to $1 3 million for the same period the prior year.
Cost of revenue increase was primarily related to the acquisitions.
And offset by the sale of infusions.
Gross profit for the quarter was $6 million, an increase of $3 4 million compared to the same period in the prior year.
Gross margins declined to 52% as a result of the products being sold through distributors and the increase of discounts used in our direct to consumer market.
Operating expenses totaled $9 million, an increase of 159% as compared to $3 5 million for the same period in the prior year.
The increase in operating expenses was primarily related to an increase in sales and marketing of $1 million, an increase of distribution costs, including the use of third party distributors of $2 4 million.
An increase in general and administrative costs of 900000 to support the growth of the business and an increase of $1 2 million in noncash expenses, which were share based compensation the amortization of acquired intangible assets and depreciation these costs were offset by the sale of infusions in the classroom.
<unk> of these expenses as part of discontinued operations.
The company had net losses from continuing.
Operations of $2 7 million compared to net income of approximately.
511000 for the three months ended September 32022.
Sir just 2021.
The decrease in net income was primarily related to the reclassification of the discontinued operation and the increases in the operating expenses mentioned above.
The company had cash and cash equivalents of $3 3 million and stockholders' equity of $27 million.
End of September 2022 as of November 11, 2022, there were.
$17 million 960748 shares of common stock outstanding.
Subsequent to the quarter as Alan mentioned, we sold select CBD assets were $23 5 million.
The transaction eliminated certain intangible assets and provided the company with $5 5 million in cash $9 5 million and loan receivables and $8 5 million in preferred equity and Bolivia, Inc.
In addition on October 19, 2022, the company obtained a three.
$3 million 10 year mortgage and interest rate of four 8% on its headquarters in Florida.
Are used to reduce the outstanding short term acquisition loan signed on June 28 2022.
Increasing amounts available for future acquisitions to $10 8 million.
The main assets sold were originally acquired for approximately $6 3 million in cash and stock.
Company value increase through organic growth and value partnerships.
Additionally, subsequent to the quarter.
We paid off the outstanding balance of our $15 million.
On your secured debt facility and terminated the registration.
David covering the loan and the agreements with the lenders elimination of alone is expected to reduce our annualized interest expense by approximately 900000.
Management expects revenue to increase in the 2023 calendar year through both organic growth of the core business acquisitions completed during 2020 fiscal year and additional strategic acquisitions that align with management's long term strategic strategies for calendar 2023 management estimates based.
<unk> annual revenue totaled $100 million.
At this time I'd like to turn the call back over to Alan for closing remarks.
Thank you Andrew our fiscal second quarter ending December 31.
2022 will be used to work through the agreed transition period needed to handoff to select CBD assets to the buyer and began consolidating our announced purchase of <unk> and tightened health businesses.
Calendar 2023 looks promising with opportunities to grow revenue across our brands and business segments organically post the sale of these select CBD assets the business as a much leaner entity with lower head count and higher revenue run rate.
We can drive sales higher with limited need to add additional employees our brands have good margins.
And we see an opportunity to grow both our direct to consumer and Amazon sales.
In the double digits through 2024.
In the past we are focused on a balanced approach of growth with major focus on control.
On cost control to maintain profitability.
<unk> continues to be our approach in 2023, However, we will look to invest a higher amount in marketing and brand advertising to increase increasing overall growth in 2023 and 24.
Our current business model is more predictable with a lean organizational structure to control costs, while maintaining growth.
This is not to say, we will operate with losses or spend responsibly, we intend to maintain to remain profitable and grow the business.
However, we are willing to invest more on overall brand and corporate brand awareness when it makes sense for longer.
Term higher growth.
The business is strategically positioned for success in almost any market each of our businesses scalable for growth.
As the market expands and adjustable to offset minor corrections and consumer spending.
The health wellness pad children's toys, and liquidation businesses are all somewhat recession recession resistant and the consumer prioritizes these products.
Overall consumer spending contracts.
The company's acquisition opportunities are improving and we are seeing valuation come in line with our strategic guidelines, we remain disciplined with acquisitions and look for attractive opportunities at a valuation that makes sense for overall shareholder growth.
In closing we have made significant strides over the last two years in the company today is best positioned for growth and profitability has ever been.
As announced we are projecting over $100 million in sales in calendar 2023, even after the sale of select CBD.
And manufacturing assets, which contributed approximately $20 million in 2022.
The overall opportunity for 2023 24 causes us to believe that we are just getting started and looking forward to continued growth in the future.
I'd now like to open the call for questions operator.
Operator.
We would like to ask a question. Please press star one on your telephone keypad now you'll be placed into the queue in the RBC. Please prepare to ask your question when prompted once again to ask a question. Please press star one on your phone now.
Our first question comes from Ben <unk> from ear button. Please state your question.
Hey, Alan Congrats on <unk>.
Portfolio shop, when you guys have done just a quick question.
<unk> historically bought back stock as well in terms of kind of that path.
Hello allocation philosophy.
No attractiveness of the stock relative to the acquisition opportunities that youre seeing out there just given the.
The balance sheets.
Shane.
With the divestiture of the CBD assets. Thanks.
Okay.
Okay.
Hello.
Could you guys gave my question.
Yes.
You went blank.
The last time I'll repeat.
Okay.
I'll repeat it.
Question was you guys have a history of <unk>.
Doing smart M&A as well as buying back stock and it's really just a kind of a capital allocation.
And at this point, where you look at where the shares are at Bell.
The M&A opportunities that youre seeing and understanding that those are getting better as the market is softening just kind of talk to us about capital allocation priorities.
Especially in light of having a much stronger balance sheet with the divestiture of the CBD assets.
Yes.
Kind of are talking about that internally on.
As some of these notes come due and the pay down and pay down the debt for for what we saw we definitely have a lot of opportunity to make.
To reinvest in the business. So again, the past acquisitions are super expensive and it didn't make a lot of sense.
<unk> pays 70, whatever whatever multiples that are out there today I would kind of multiples.
Much more attractive and more accretive than ever been.
We're not.
Not in a hurry to do something but we're definitely seeing opportunities that would make sense.
Even on the.
It's the overall value for the company acquisitions, probably make a little more sense of buying stock today, but as that changes.
On the debt gets paid off and as we buildup.
Cash and profitability will definitely we're definitely open to making sure our investors.
Yes.
Recognize the best value they can so.
I hope that answers that question for you Ben.
That's helpful. Thank you.
Our next question comes from Luke Richner from a private Investor. Please state your question.
Hey, Alan Congrats on another great quarter, just kind of piggybacking off what Ben was mentioning also.
I was just wondering how you see the competition right now in the brand aggregator space I would assume you guys are.
Given your strong balance sheet are in a pretty good position of strength compared to others based on what I've been reading. So are you seeing.
Kind of a lesser competitive landscape out there right now.
Yes, it's definitely for the people who have had to use like the high price debt.
The market has completely dried up for them. So if they can't raise equity theyre not doing not going be able to do acquisitions I'm not sure. They can raise equity with the amount of debt they have on the books today.
<unk> seen a lot more opportunity where before you were getting.
Multiples that just didn't make any sense now we see I see them coming down every day I get different offers a different multiple than before they werent willing to talk like hey, listen it's laid out is 30 million cash or we will sell to someone else, but we definitely definitely don't see.
The ability the need to chase anything and a desk and it's everyone's coming back into line, where historically you can still do an acquisition and a b.
Oh <unk>.
<unk> for the company overall.
And most of the other players we're talking to the other aggregators, we still taco are struggling with high debt.
High debt loads.
Yes, hi interest payments.
Got you. Thanks that makes sense and then I just had one more question on my end.
The guidance that you gave for Cal 'twenty three.
And revenue is there potential for that.
To be even greater if there is.
Some acquisitions down the line.
What does that number kind of include.
That kind of includes what we from what we own today after kind of spending this next month and a half transitioning out the rest of the CBD business.
And growing each of the individual business we have.
I'd say individual businesses.
They're all combined together, we're all working together, but so thats kind of what we feel like we have in our pocket today.
If we see the right opportunity acquisition that would be accretive to that number.
That would that would be additionally, we would let you know if we did that.
Got you. Thank you.
Okay.
Once again, if you would like to ask a question. Please press star one on your phone now.
At this time, we have no further questions.
Would you like to give some closing remarks.
Sure I want to thank everyone for joining the call.
Thanks to all our shareholders for the support they've given us and our team.
And look forward to the next quarter and next year and we hope to see everyone back on the next call.
Thank you very much this conference call. Thank you for attending.
The host has ended this call goodbye.