Upexi Inc. Q3 2023 Earnings Call
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Yes.
Good day and welcome to the <unk> you Pepsi, Inc. 2023 fiscal third quarter financial results Conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad after too.
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I would now like to turn the conference over to vet Your Pinto managing director at K C. S. A strategic communications. Please go ahead.
Thank you operator, good evening and welcome everyone to the <unk> 2023 fiscal third 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'm going to remind everyone that statements made during today's conference 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.
For a detailed discussion of some of the ongoing risks and uncertainties in the company's business I'll 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. The company disclaims any intention or obligation to update or revise any forward looking statements whether as a result of new information future.
Vince or otherwise unless otherwise required by law.
In addition, during the course of the 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. The reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures.
Contained in our earnings release issued this evening unless otherwise noted.
I'd now like to turn the call over to you've actually CEO Alan Marshall.
Thank you and welcome to our 2023 fiscal third quarter financial results Conference call.
For the quarter was $24 2 million, an increase of 447% year over year.
As compared to $4 4 million for the same period in the prior year.
Revenue growth was predominantly driven by strong sales across our health and wellness brands vitamin acre children's educational toy brand tightened titles.
Pet category.
E tail brand Lucky tail.
<unk> and <unk>, continuing to perform and remain poised to drive growth across our liquidation business segment.
Gross profit during the quarter totaled $9 6 million, an increase of 52% year over year, yielding approximately 40% margins.
Our business continues to expand and as the organic growth of our core brands strives towards calendar year of 2023 projections of $100 million of sales.
The $24 million of revenue this quarter and taking into account the natural seasonality of many of our brands. We see calendar Q4 to calendar Q1, we remain confident in our ability to meet or exceed this goal.
Additionally, our focus on cost cuts improved efficiencies and optimization has allowed us to achieve 671000 and positive adjusted EBITDA a substantial.
<unk> improvement over 877 negative adjusted EBITDA for the same period last year.
We anticipate adjusted EBITDA to grow for the remainder of the calendar trending towards our target of 8% to 12% margin at the end of calendar 2023.
We see both continued organic topline growth and additional benefits from our cost cutting and efficiencies efforts to support this trend without taking into account further M&A.
During the during and subsequent to the fiscal third quarter, we have made significant progress across each of our brands and operationally.
A diverse business mix of non discretionary health wellness and pet products and liquidation and wholesale.
Direct to consumer and Amazon gives us a well rounded revenue stream that provides opportunity in most economic environments.
Highlighting some of our high performing brands vital medical or health and wellness brand was purchased in late 2021 and has seen 88% organic growth since the acquisition.
<unk> revenues for the third quarter $1 $96 million as compared to $1, one 6 million for the.
The same period in 2022.
An approximate.
The 800 or 69% improvement in 2022, it had a growth rate of 50% and we look forward to additional growth with the launch of new complementary products like acting treatments and later in 2023.
This is a perfect example of execution of our model with vital medical we have successfully taken already growing brand and a key non discretionary vertical optimize their sales through our performance and expanded margins year over year.
Lucky tail.
Category brand with both Amazon and direct to consumer platforms saw 50% organic growth in 2022 Lucky tail revenues for the fiscal third quarter were $1 $36 million, we anticipate additional growth in 2023 with the launch of a pet supplement to a significant existing customer base.
Tightened house, our children stem toy brand had led the pack with a 100% organic growth in 2022, and we expect 50% plus organic growth in 2023 and with the launch of four new products.
<unk> revenue for the fiscal third quarter was $1 million to $5 million as compared to 165000 for the same period in 2022, an approximate 656% improvement from.
The milestones for tightened tiles.
Walmart launch and 1900 stores additional order was placed in February due to accelerated sales to double that order.
Full 30, 911, Walmart store launch for the second half of 2023 as a result of the launch success.
Subsequently, we announced the Disney license agreement for top tier franchises.
We will be developing and launching new branded products under disagreement the.
The products will be launched on Amazon direct to consumer and it's a big box retail channels with initial launch planned for 2023 holiday season.
In April we announced an agreement to acquire the remaining 45% interest in Cigna online one year ahead of schedule.
The deal solidifies, our U Z Amazon reseller strategy for the future reduces the overall structure for the bit of the cost structure for the business.
Closing the deal early offer significant G&A savings and the opportunity to purchase cigarettes.
The discount to next year's overall anticipated costs.
Regarding M&A, we continue to be in a buyer's market internally, we don't feel any urgency to do M&A. Therefore, we continue to be strategic and patient in our strategy.
Have a very specific mandate in terms of industry verticals growth rates profitability and structure that we will hold firm on it we continue to focus on high growth recession resistant cash flowing businesses that are accretive to our future.
The profile of the non binding letter of intent to acquire a wellness and nutrition brand, we signed in April falls within that category.
<unk> has generated trailing 12 month revenues of $15 million in positive EBITDA. The acquisition falls squarely in line with our strategy to acquire a founder owned and operated high margin profitable brands.
We see tremendous cost synergies and value and high margin data rich brands and are non discretionary product product category.
Lastly, before I turn the call over to Andy.
Our teams remain keenly focused on growth management of cost and efficiencies to maximize margins.
We were able to achieve higher adjusted EBITDA.
<unk> revenue base this quarter as compared to last sequential quarter by implementing aggressive cost savings and growth in our high margin brands Cal.
Calendar 2023 is off to a tremendous start and incremental improvement should continue.
With very strong growth potential for the second half of the year.
Each of our brands have significant opportunity to perform to outperform our expectations with Disney for tightened.
New product categories for Lucky tail, and new product launches for biomedical.
I will now pass the call over to the pack C. CFO , Andrew North tried to discuss our financial results in more detail.
Andrew.
Thank you Alan and in accordance with the rules regarding the presentation of discontinued operations, the assets liabilities and activities and infusions and certain manufacturing operations have been reclassified as discontinued operations for all periods presented.
The three months ended March 31, 2023 include three acquisitions completed after March 31, 2022. These acquisitions were signaled online LLC.
Amazon aggregation business Lucky tail, our initial brand in the pet industry with products and sales channels, both domestically and internationally.
And our most recent on equal or a product distribution business, which also includes Titan tiles, a children's toy brand. These acquisitions, coupled with the elimination of the discontinued operations from the sale of infusions and certain manufacturing operations has significantly reduced the value of direct comparisons of the prior year to the <unk>.
Current year operations.
Revenue for the three months ended March 31, 2023 totaled $24 2 million, an increase of 447% as compared to $4 4 million for the same period the prior year.
The revenue growth was primarily the result of these three acquisitions and the offset of the sale of infusions management believes that there is a significant opportunity in the next 12 months for organic growth within the newly acquired businesses and we will focus the acquisition targets on the business that will enhance our current products are allowed the business to act.
Celebrate growth.
Cost of revenue during the quarter totaled $14 6 million compared to $1 1 million for the same period the prior year.
Cost of revenue growth was primarily related to the acquisition of three companies and the offset with the sale of infusions.
Gross profit for the quarter was $9 6 million, an increase of 190% as compared to $3 3 million for the same period the prior year.
Management will seek to improve the gross profit and overall gross margin in the next 12 months as we are able to leverage the significant increase in our purchasing requirements and continue to consolidate operations.
Sales and marketing expense were approximately $3 5 million, an increase of $2 4 million or 220 per cent compared to the same period last year.
The increase in sales and marketing expense was primarily related to the acquisitions. Our management is aligned the marketing expenditures with our expected quarterly growth strategy to decrease the overall percentage of sales and marketing cost sales.
Anticipate our advertising expense will continue to fluctuate in the following quarters as we fully implement our overall brand marketing strategy.
Distribution costs were $3 5 million, an increase of $2 million or 326% compared to the same period last year.
The increase in distribution cost is primarily related to the three acquisitions offset by the sale of infusions and the classification of these expenses as part of discontinued operations in.
In addition, there continued to be increases in transportation costs, and third party provider rates, which management has implemented.
Our strategy to change promotions increased prices and adjust packaging to decrease the overall percentage of distribution cost to sales.
General and administrative expenses were $2 5 million, an increase of 900000 or 46% with the same period last year.
As the company has changed with the acquisitions and the sale of Infusions management has managed the general and administrative expenses and we will continue to implement strategies to decrease the percentage of G&A costs compared to the total sales.
The company had a loss from continued operations of $2 1 million for the three months ended March 31, 2023 compared to a net loss of 200000 for the same period in the prior year.
As of March 31, 2023, the company had cash of approximately $1 2 million a line of credit with four point in mind.
And available.
Stockholders' equity attributable to stockholders of $36 7 million on.
On May 12, 2023, the company announced the registered direct offering of common stock to for gross proceeds of approximately 7 million.
Before deducting placement agent fees and other operating expenses the closing of the offering is expected to occur on or about may 16 subject to customary closing conditions.
At this time I'd like to open up the call for any questions operator.
We will now begin the question and answer session.
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At this time, we will pause momentarily.
To assemble our roster.
Yeah.
The first question comes from Aaron Grey with Alliance Global partners.
Please go ahead.
Good evening and thank you for the questions nice to see the EBIT improvement sequentially, despite the seasonally lower quarter.
So just on that on the EBITDA margin as we look for the remainder of the year Youre looking for EBITDA margin improvement to continue just based off of your guys' slide deck, but you do caution somewhat on various marketing spend.
You mentioned within your prepared remarks, Andrew So just wanted to get some color you know as we look at it today, how do you think about potentially pulling that lever on marketing to drive topline growth versus letting it drop down to the bottom line potentially up for sake of higher gross sales. Thanks.
Yeah.
Andrew are you on you want me to grab that.
You can go ahead.
I can either way.
Go ahead, Doug I'll comment on it as well.
Go ahead.
Yeah, I mean, basically when when Theyre looking at the marketing, they're looking at the cost per acquisition of the customer and so what you saw in the second quarter ending December was that the market Department decided to take advantage of some things and spend a little bit of extra money and we've got we saw some very good results of that in this quarter and will continue so there are times that.
Management, and the marketing Department decided to spend that has an opportunity to capitalize on that cost per ton.
Customer required and we spend more in the beginning which causes that to take up the EBITDA to the bottom line. That's basically what I'm glad you noticed that it's not going to be a perfect situation, where it's always going to be.
EBITDA growth because they decided to spend more in one quarter than the other.
It's kind of Erin just to close the file.
How we we made higher EBITDA this quarter on a lower base like last quarter, we talked about that how do we spend extra money going into the end of the year. It did drive sales, but it takes a little longer for that.
And of that to pay off so for US we really look at it.
Success in this quarter or being able to drive that knowing that 3 million more of sales in another quarter.
Could drive a significantly more margin to us. So we're really at that point, where everything we have the opportunity to let everything flow above above this number and maybe even a little bit lower.
The increase that margin throughout the year.
No I appreciate that detail that's helpful.
And then second just them into one segment with tightened <unk> nice to see for Walmart launch coming in you've got Disney on there as well and how do you look at potential additional partnerships for the remainder of the year and are there anything we should think about in terms of inventory and as you look to bring on and get ready for full Walmart or the Disney inventory as well.
<unk>.
Inventory has been.
It's really been a hindrance in this quarter and still continues to be we are on our call today, we talk about being sold out we're really low.
Volume.
Amazon so that we never.
I guess.
We never really intended to see this amount of success as quickly but.
But it's being cured everything's being shipped or roughly all of our shipments. So we should see incremental improvement.
Both currently what's going on now and then even.
Especially in the second half of the year will be more prudent on on ordering additional inventory.
Especially for a launch with with Disney and those opportunities so and I believe that we're launching four new category new products.
Coming sometime mid summer as well, so we won't let it happen again.
It's a good problem to have to be.
Demand to outsource, but obviously, we'd like to be selling at all right now.
Yes, certainly high quality problem, but want to get remedied. So so glad to hear that you've got that comment last question for me and I'll jump back in the queue.
<unk> got some M&A that you announced you talked about you know potential other M&A.
Theres no. One was wellness you had done tightens in toys December just as you look at the M&A pipeline.
What type of business lines do you think about kind of going forward between the more discretionary and staples and how do you think about now the bar for M&A. As you are looking to absorb some of the recent acquisitions that you've done and versus maybe doing too much and trying to integrate the ones you've already accomplished versus adding new ones to the plate.
I think the bar would be pretty high for US right now to add another acquisition we've got.
Just just different Disney launch could be as big as an acquisition and all the things we have going across really each of our brands, we talked about heightened by the each of the brands has initiatives that could be superb.
Accretive to us are Pat Brad is going to be launching our pet supplement brand, we're launching new products into that category.
Designing the whole new platform to increase sales.
Across quite America, entering new categories really we'd become a leader in certain categories and now we're starting to spread that out.
I think that you're right.
To sum it up the bar would be very high right now we've got we've got a lot to do here and a lot of opportunities, we're going to kind of really really put the pedal down on until the end of the year.
Okay, Great makes sense, thanks for the color I'll jump back in the queue.
The next question comes from Jon Mccullough with Paulson investments. Please go ahead.
Thanks.
Andrew Hayek.
Hey, Alan how are you doing.
Congratulations.
And for you and kind of related to the first question is now that youre getting more and more data how is your ability to manage it and even use.
AI, perhaps to keep.
Keep costs, low, but still be able to manage and enhance the products introduced into your channels.
Yes.
Yes, Joe.
People are kind of reducing head.
Head count and stuff we've added a couple of key employees. This quarter really looking at all of those opportunities putting together, even a more robust team like I said are our problem right now is selling all our products not selling all the products, we have but trying to get enough product to sell.
And entering each new category, so data is becoming more and more important.
We are integrating our new ERP and this core which is.
A lot of work is very cumbersome for our team, but each of the steps. We're taking right now is really to maximize the opportunities that we currently have.
That's why our projections seem to <unk>.
Progress in go up for EBITDA and revenue throughout the year.
Takes a little time to do those things.
But where we're making great progress and I think now throughout the year and especially by the time, we get to the end of year, leaving and going into next year, we should be set.
For even stronger.
Opportunities next year.
Great. Thank you.
Yeah.
Again, if you have a question.
<unk> Press Star then one on a touchtone phone.
Yeah.
Again Star then one if you wish to ask a question.
This concludes our question and answer session I would like to turn the conference back over to Alan Marshall for any closing remarks.
Thanks, operator.
<unk> continues to execute our strategy and our growth continues to meet or exceed our expectations.
We have multiple opportunities across our brands and business that should help drive overall growth in 2023 and even into 2024.
I wanted to take a minute to thank our team our team deserves a lot of credit for all the work and effort has gone into the current success and for all the initiatives they have coming to drive our future growth.
I want to summarize everything about it thank you and our investors and thanking everyone for joining the call.
We look forward to more calls in the future and really appreciate everyone's time, so have a great evening.
Everyone in your packs are thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Yeah.
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