Q2 2024 iPower Inc Earnings Call
Operator: Good afternoon, everyone, and thank you for participating in today's conference call to discuss iPower's financial results for its fiscal second quarter 2024 and December 31st. Joining us are iPower's chairman and CEO, Mr. Lawrence Tan and the company's CFO, Mr. Kevin Vest. Mr. Vasily, please go ahead.
Okay.
Good afternoon, everyone and thank you for participating in today's conference call to discuss <unk> financial results for its fiscal second quarter 2024, and at December 31 23.
Joining us are my power as chairman and CEO, Mr. Larson and the Companys CFO, Mr. Kevin vastly Mr. Vasily. Please go ahead.
Mr. Vasily: Thank you, operator, and good afternoon everyone. By now, everyone should have access to our fiscal second quarter 2024 earnings press release, which was issued earlier today at approximately 4 or 5 pm Eastern time. The release is available in the investor relations section of our website at meetipower.com. This call will also be available for webcast replay on our website, following our prepared remarks.
Yeah.
Thank you operator, and good afternoon, everyone by now everyone should have access to our fiscal second quarter 2024 earnings press release, which was issued earlier today at approximately 405 P M Eastern time.
At least it is available in the Investor Relations section of our website at <unk> Dot com.
This call will also be available for webcast replay on our website.
Mr. Vasily: We'll open the call for your questions. Before I introduce Lawrence, I'd like to remind listeners that certain comments made on this conference call are webcast, are considered forward-looking statements under the Private Securities and Litigation Reform Act of 1995. Forward-looking statements are neither historical facts nor assurances of future performance, said they are based only on our current beliefs, expectations, and assumptions, regarding the future of our business, future plans and strategies, projections, anticipated events and trends, state of the economy, and other future conditions, because forward-looking statements relate to the future and they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict, many of which are outside our control, or actual results in financial condition may differ materially from those indicated in these forward-looking statements.
All of our prepared remarks.
On the call for your questions.
Before I introduce Laurence I'd like to remind listeners that certain comments made on this conference call and webcast.
Are considered forward looking statements under the private Securities Litigation Reform Act of 1995.
Forward looking statements are neither historical facts.
Assurances of future performance instead, they are based only on our current beliefs expectations and assumptions regarding the future of our business.
Plans and strategies projections anticipated events and trends the state of the economy and other future conditions.
Because forward looking statements relate to the future of it yourself.
Alright, uncertainties risks and changes in circumstances.
Okay.
And many of which are outside our control.
Our actual results and financial condition may differ materially from those indicated in these forward looking statements.
Mr. Vasily: These forward-looking statements are also subject to other risks and uncertainties that are described from time to time in the company's filings with the SEC, including our annual report on Form 10-K, which was filed with the SEC on September 15th, 2023. No person should place undue reliance on any forward-looking statement, which is being made only as of the date of this call, unless step is required by law. The company undertakes no obligation to revise, or publicly release as a result of any revision to any forward-looking statement. With that, I'd like to now turn the call over to iPower's Chairman and CEO, Mr. Lawrence Tan. Thank you, Kevin. And good afternoon, everyone.
These forward looking statements are also subject to other risks and uncertainties that are described from time to time in the company's filings with the SEC, including our annual report on Form 10-K.
Each has filed with the SEC September 15th 2023.
Place undue reliance on any forward looking statements, which are being made only as of the date of this call.
Sept as required by law the company undertakes no obligation to revise or publicly.
<unk> released results of any revision to any forward looking statements.
With that I would like to now turn the call over to <unk>, Chairman and CEO Mr.
Mr. Lawrence Dann.
Thank you, Kevin and good afternoon, everyone.
Mr. Lawrence Tan: In our fiscal second quarter, we continued to expand gross margin, drive down operating costs, and generate another period of positive cash flow from operations. We also gained further traction in our super sweet supply chain business, which represents an exciting opportunity for us as we continue to work through a robust pipeline of prospects with compelling product portfolios. Due to the improvement in the supply chain environment, our largest channel partner has progressively tightened their inventory management as shipping lead times have become more favorable. Although our order volumes were impacted for the quarter, we believe this channel partner's inventory is now at a preferred level. And we are well-equipped to meet the demand with the high-quantity, market-leading products that our customers expect. Over the past several quarters, we have placed a strong emphasis on diversifying revenue, as evidenced by the launch of our super sweet supply chain offering. We have also created a strong brand presence on social channels and commerce channels like TikTok Shop, where we are an approved seller for both short form videos and live shopping.
In our fiscal second quarter, we continue to expand gross margin drive down operating costs and generated another positive cash flow from operations.
We also gained.
Are those traction in our Super Sweet supply chain business.
Which represents an exciting opportunity for us as we continue to work through a robust pipeline of prospects with compelling product portfolios.
Due to the improvement in the supply chain environment.
Our largest channel partner has progressively tightened their inventory management as shipping lead times have become more favorable.
Although our order volumes were impacted for the quarter. We believe this channel partners' inventory is now at a preferred level and we are well equipped to meet the demand with the high quantity market leading products that our customers expect.
Over the past several quarters, we have placed a strong emphasis on diversifying revenue showcased by the launch of our Super Sweet supply chain offerings.
We have also created a strong brand presence on social channels E Commerce channel like ticked up shop, where we are approved center for both short form videos online shopping.
Mr. Lawrence Tan: Although the sales channel is now in its infancy, the early results are compelling, and we will continue to invest in the channel as it grows both in the U.S. and abroad. As I mentioned earlier, we are building positive momentum in our Super 3 business, which is growing at a strong clip. The acceleration of revenue alongside a growing pipeline of prospects reflects the strength of a superior supply chain, warehousing, and merchandising expertise. We are optimistic about this area of our business and hope to have a few more partners in the coming quarters. In addition to evaluating new partners for our super sweet business, we have also continued to pursue additional sales channels in the U.S. to expand our reach, diversify our client base, and explore omni-channel opportunities. For example, we currently have relationships with Home Depot and Lowe's, allowing us to sell products through their captive e-commerce sites.
Although the sales channel is now in its infancy. The early results are compelling and.
And we will continue to invest in the channel as it grows both in the U S and abroad.
As I mentioned earlier, we have building positive momentum in our Super Sweet business, which is growing at a strong clip.
Acceleration of revenue alongside our growing pipeline of prospect reflects the strengths our superior supply chain warehousing and merchandising expertise.
We are optimistic about this area of our business and I hope to have a few more partners in the coming quarters.
In addition to evaluating new partners for our Super Sweet business.
We have also continued to pursue additional sales channel in the U S to expand our reach diversify our client base.
While our omnichannel opportunities.
For example, we currently have relationships with the home depot and Lowe's.
Boeing has to sell products through their captive e-commerce sites.
Mr. Lawrence Tan: Although we have initiated with a small subset of categories, we believe our portfolio is well-aligned with Lowe's and Home Depot's in-store and online customer base. We are optimistic that this partnership will bring future omnichannel opportunities, specifically in brick and mortar. We look forward to deepening our relationship with Lowe's, Home Depot, and other current partners, as well as expanding into new channels across the United States. Turning to OPEX, we continue to drive material savings in our selling and performance operations. We no longer bear the burden of additional warehouse expenses.
Although we have initiated.
With a small sub set off a couple of weeks, we believe our portfolio is well aligned with lowes and home depot's in store and online customer base.
We're optimistic that this partnership will bring future omni channel opportunities.
Specifically in brick and mortar.
We look forward to deepening our relationship with Lowe's home depot, and other current partners as well as expanding into new channels across the United States.
Turning to Opex, we continue to drive a material savings in our Sally Apple Puma operations, we no longer are bearing the burden of additional warehousing expenses.
Mr. Lawrence Tan: As we have sold through the bulk of our access in the, with the normalizations of the supply chain, we can run our business with lower levels of inventory, specifically due to faster overseas shipping lead times. As of December 31st, we have brought down our inventory level by 23% compared to June 30, 2023. We have also begun to outsource our warehouse stuffing to a third party.
As we have sold through the bulk of our excess inventory.
With the normalization of our supply chain.
It kind of run our business with lower levels of inventory.
Specifically due to faster overseas shipping lead times.
As of December 31.
Brought down inventory level by 23% compared to June 32023.
We have also begun to outsource our warehouse stopping to a third party.
Mr. Lawrence Tan: Lowering our production overhead, we expect to realize cost savings from this initiative over the medium to long run. Looking ahead. We will continue to evaluate each segment of our business to ensure our cost structure is both lean and positioned for future growth. We are seeing early signs of normalized order volume with our largest channel partner and look forward to continuing providing them with our high-quality products. These actions, coupled with the acceleration of a super sweet business, will enable us to deliver on our goals with the aim of returning to profitability in 2024. I'll now turn the call over to our CFO, Kevin Vesely, and take you through our financial results in more detail. Kevin?
During our production overhead.
We will have we expect to realize cost savings from this initiative over the medium to long run.
Looking ahead.
We will continue to evaluate each segment of our business to ensure our cost structure as both Lee and to position for future growth.
We are seeing early signs of normalized order volume.
Our largest channel partner and look forward to continue providing them with our high quantity parks.
These actions coupled with the acceleration of our Super Sweet business will enable us to deliver on our goals with the aim of returning to profitability in 2024.
I'll now turn the call over to our CFO, Kevin Vasily and take you through our financial results in more detail Kevin.
Kevin Vest: Thanks, Lawrence. Unless referenced otherwise, all variance commentary is in comparison to the prior quarter last year. So, let me dive into the fiscal Q2 results. Total revenue was $16.8 million compared to $19.3 million in the prior period last year.
Thanks Laurence.
Less referenced otherwise all variance commentary is in comparison to the prior quarter last year.
So let me dive into the fiscal Q2 results.
Total revenue was $16 8 million compared to $19 3 million.
The prior period last year.
Kevin Vest: Decreases driven primarily by lower promotional activity as compared to last year, given our normalized inventory level right now, as well as lower order volumes from our largest channel partner who is more tightly managing inventory levels due to the improved supply chain environment and shorter lead times to receive product. This was partially offset by growth in our super sweet supply chain. Gross profit in the fiscal quarter of 2024 was $7.3 million compared to $8 million in the same quarter of fiscal 2023.
Decrease was driven primarily by <unk>.
Promotional activity as compared to last year, given our normalized inventory level right now.
As well as lower order volumes from our largest channel partner who is.
More tightly managing inventory levels.
Due to the improved supply chain environment.
And shorter lead times to receive product.
This was partially offset by growth in our super sweep supply chain business.
Gross profit in the fiscal quarter of 2024 was $7 3 million compared to eight.
<unk> 8 million in the same quarter of fiscal 2023.
Kevin Vest: As a percentage of revenue, gross margin increased 220 basis points to 43.6% compared to 41.4% in the year-ago period. The increase in gross margin was primarily driven by favorable product; we have worked through the bulk of our higher priced inventory. Total operating expenses for Fiscal Q2 improved 18% to $9.9 million, compared to $12.1 million for the same period in Fiscal 2023.
As a percentage of revenue gross margin increased 220 basis points to 43, 6% compared to 41, 4% in the year ago period.
The increase in gross margin was primarily driven by favorable product mix as we have worked through the bulk of our higher priced inventory.
Total operating expenses for fiscal Q2 improved 18% to $9 9 million compared to $12 1 million for the same period in fiscal 2023.
Kevin Vest: The decrease was primarily driven by lower selling fulfillment in the market. As Lawrence mentioned earlier, we've reduced our warehousing space now that we can keep lower levels of inventory on hand. Given the improved supply chain environment, loss attributable to iPower in the fiscal second quarter improved 42% to $1.9 million or a six cent per share loss, uh, compared to a net loss of 3.3 million or an 11 cent per share loss for the same period in fiscal 2023. The improvement in net loss was driven primarily by a higher gross margin.
The decrease was primarily driven.
By lower selling fulfillment and marketing expenses.
As Lawrence mentioned earlier.
Reduced our warehousing space now that we can keep lower levels of inventory on hand, given the improved supply chain environment.
Net loss attributable to high power in the fiscal second quarter improved 42% to $1.
9 million or <unk> <unk> per share loss.
Net loss of $3 3 million or <unk> 11 per share loss for the same periods in fiscal 2023.
<unk> net loss was driven primarily by the higher gross margin.
Kevin Vest: Moving to the balance sheet, cash and cash equivalents were 1.5 million as of December 31st, 2023, compared to 3.7 million in June of 2023. Total debts stood at $5 million, compared to $11.8 million, as of June 30, 2023. The decrease was driven by our continued efforts to pay down debt, which resulted in a 56% reduction in net debt to $3.6 million, compared to 8.1 million as of June 30, 2023. And for both fiscal Q2 and year-to-date, we continue to generate positive cash flow from operators. I Lawrence mentioned above that the work we put in place to reduce the supply of high-cost inventory and optimize their cost structures continues to bear fruit. We have achieved another period of 40 percent plus gross margins and some meaningful OPEC savings. In addition, we reduced total debt by approximately $2 million compared to the last quarter, demonstrating our commitment to strengthening the balance sheet where we can.
And lower operating expenses.
Moving to the balance sheet cash and cash equivalents were $1 5 million.
As of December 31, 2023.
Appeared to $3 7 million.
In June of 2023.
Total debt stood at $5 million compared to $11 8 million.
As of June 32023.
The decrease was driven by our continued efforts to pay down debt.
And that 56% reduction in net debt to $3 6 million.
Compared to $8 1 million as of June 32023.
And for both fiscal Q2 and year to date, we continue to generate positive cash flow from operations.
As Lawrence mentioned above the work we've put in place to reduce.
Our supply of high cost inventory and optimize our cost structures to can you sorry.
Sorry continues to bear fruit.
We have achieved another period of 40.
Sent plus gross margins.
And some meaningful opex savings.
In addition, we reduced total debt by approximately $2 million compared to the last quarter.
Demonstrating our commitment to strengthening the balance sheet, where we can.
Between these efforts we built the foundation.
To continue to deliver on our growth objectives and profitability objectives in 2024.
This concludes our prepared remarks.
And we'll now open it up for questions operator.
Thank you at this time, we will conduct a question and answer session to ask a question.
You will need to press star one on your telephone and wait for your name to be announced to enjoy a question. Please press star one again, please standby when compile the Q&A roster.
Operator: Between these efforts, we built a foundation to continue to deliver on our growth objectives and profitability objectives in 2024. This concludes our prepared remarks. And we'll now open it up for questions, operator. Thank you. To ask a question, you will need to press star 1-1 on your telephone and wait for a name to be announced.
One moment for your first question.
Yeah.
Okay.
Our first question comes from the line of Scott Fortune from Ross Your line is open.
Yes, good afternoon, and thanks for the questions.
You mentioned lower promotional activity and tightening inventory.
Largest channel partner leading to Canada.
Order volumes here.
The seasonality play into this.
Operator: To withdraw your question, please press star 1-1 again. Please stand by when you pop out of the Q&A roster. One moment for our first question. Our first question will come from the line of Scott Fortune from Roth. Your line is open. Yeah, good afternoon.
Where are we in the progression of reaching normalized levels. We just wanted to get a sense of how youre viewing overall health of the consumer and the sustainable trends kind of in your non hydroponics category and then a follow on on that and looking at that and do it yourself hydroponics side of the business.
Scott Fortune: And thanks for the questions. You mentioned lower promotional activity and tighter inventory by your largest channel partner leading to kind of these lower order volumes here. Did seasonality play into this? And where are we in the progression of reaching normalized levels?
Has that stabilized or sales still decreasing net segment with the nine non hydro product sales as a percentage increasing the overall mix and just kind of follow up on.
Are you investing in the hydroponics space kill and then kind of any further updates on the big partnership Big box partnerships, you mentioned, Lowe's and home depot and kind of meaningfully moving that forward sorry, a lot there, but just kind of again for <unk>.
Scott Fortune: We just want to get a sense of how you view the overall health of the consumer and the sustainable trends kind of in your non-hydroponic category. And to follow on that, and looking at the kind of do-it-yourself hydroponic side of the business, has that stabilized, or is sales still decreasing in that segment with non-hydroponic sales as a percentage increasing the overall mix? And just kind of follow up on, are you still investing in the hydroponic space?
This quarter.
Revenue and Ken normalization, where we can expect that kind of moving forward here.
Sure right.
Yeah, Yeah go ahead.
And then I can add in after.
Okay.
So we are we start.
The first to answer your question I think the inventory level from our channel partner.
Scott Fortune: And then kind of any further updates on the big partnership, big box partnerships, you mentioned those in Home Depot and kind of meaningfully moving that forward. Sorry, a lot there, but just kind of getting a sense for this quarter's revenue and kind of normalization where we can expect that kind of moving forward here. Sure, right. Yeah, yeah, go ahead. Take it first and then I'll like it.
All normalized I think in the level, where they will start to ordering.
A pre pandemic.
Our paces, so we haven't seen a.
Inventory is being pile up.
Haven't seen the reduction inventory efforts are now I believe that the sample quarter finally.
To reduce the level of two two.
Two a pretty normalized level that would prefer to see so that's pretty healthy.
Mr. Lawrence Tan: Oh, okay. So, first to answer your question, I think the inventory level from our channel partner is now normalized. I think at the level where they will start to order on a pre-pandemic basis. So we have seen inventories being piled up. We have seen the inventory reduction effort, and now I believe the sample quarter finally did reduce the level to a pretty normalized level that we prefer to see. So that's pretty healthy.
The second question for Hydroponics, the hydroponics overall market has been pretty stable for us of our past couple of years.
I don't see the sales job, but I don't think it will substantially expand in the near future.
So more coal with the.
The overall bigger market segments.
Mr. Lawrence Tan: The second question for hydroponics, the overall hydroponics market has been pretty stable for us over the past couple years. I don't see a sales drop, but I don't think it will substantially expand in the near future. It will more go with the overall bigger market cycle.
By saying that during the pandemic, we have captured some of the market share even though the whole market second Manhattan has gone down and.
And we have been able to keep the cells in dollar amount, but as the organization grow.
Mr. Lawrence Tan: But I think that, you know, during the pandemic, we captured some of the market share, even though the whole market segment has gone down, and we have been able to keep the sales in dollars. But as the organization grows, the percentage of hydroponics will keep decreasing as it does not grow as fast as other parts of the organization.
<unk> Shukla hydro possible keep.
Decreasing as it does not grow as fast as other parts of the.
The organization.
Is that.
Does that answer your question.
Just a follow up on the Big box partnerships you mentioned.
That's going to become more meaningful here in 2020 for how you view that.
Scott Fortune: Um, does that answer your question? Yeah, just to follow up on the big box partnerships you mentioned, is that going to become more meaningful here in 2024? How do you view that? It's still in the early days.
It's still in the early days, we're making.
Slow per west by study.
What's the right direction, we have those relationships and we have got the vendor and we've been working with multiple vendors through the online platform first.
Mr. Lawrence Tan: We're making slow progress but steady towards the right direction. We have built relationships, and we have got vendor IDs, and we've been working with multiple vendors through the online platform first. Should the online sales take off, it will naturally introduce our product into their preferred buying channel for their offline sales channel, meaning going to the store. So it's a working progress compared to 12 months ago, where we had nothing. Now we have sales; we have channels. I think it's making good progress. Hey Scott, it's Scott. It's Kevin.
Should the online sales take off.
It will naturally introduce our product into their.
Preferred.
For for their offline sales channel, meaning going into the store. So it's working.
Working progress compared to.
12 months ago, where we had nothing now we have sales of behalf channels.
It just I think it's making good progress.
Hey, Scott.
Got it Scott as Kevin just real real quickly on.
Your first question as it pertains to the seasonality too so.
Kevin Vest: Just real, real quickly, the first question pertains to seasonality, too. So I think we've talked about this. For and you, the December quarter is historically our weakest quarter seasonally. The reference to promotional activity was with reference to last year's December quarter. If you recall, we entered that December quarter pretty close to our peak in inventory levels, and we were pretty aggressive at promoting portions of that product catalog in an effort to bring that inventory level down. The December quarter last year probably was a little stronger than it would have otherwise been. Now that our inventory levels are back to what we think is a healthy level, you know, we made the decision this quarter not to promote because we are trying to make progress getting back to that pre-gaven level and then to the profitability threshold. So I think that those were the two.
We've talked about this before.
The December quarter as Hess has historically been.
Our weakest quarter seasonally.
The reference to promotional activity was was with reference to.
Last year's December quarter, if you recall.
Entered that December quarter.
Pretty close there are peak in inventory levels and we.
We were pretty aggressive.
At promoting.
Portions of that.
Catalog in an effort to bring that inventory level down so.
The December quarter last year, probably was a little stronger than would've otherwise been had we not been so promotional.
Now that our inventory levels are back.
What we think is at a healthy level.
We made the decision in this in this quarter not to promote.
Because we.
We are trying.
Trying to make progress getting back to that breakeven and then too.
The profitability threshold.
And so I think that those.
Scott Fortune: Drivers as it pertains to kind of what happened last year and kind of, I appreciate that color that's helpful, and then shipping gears kind of obviously last year you rolled out the business services offering, and you brought on two partners. But can you provide more of an update on the super sweet supply chain growth and the partnerships kind of moving forward here? I believe last quarter you were generating about 600 K a month or about 7 million annualized in revenue run rate.
These are the two drivers as it pertains to kind of what happened last year and kind of the seasonality of the business.
I appreciate that color. That's helpful. And then shifting gears kind of obviously last year you rolled out the business services offering and you brought on to partners.
But can you provide more of an update on the super Sweet supply chain growth and the partnerships moving forward here.
I believe last call you are generating about 600, K, a month or about $7 million annualized revenue run rate just a little additional color on the next steps or the traction offering by adding new partnerships and what categories are really taking more interest from that as a business here.
Mr. Lawrence Tan: There's a little additional color on the next step or the traction of the offering by adding new partnerships and what categories are really taking more interest from that side of the business here. Yeah, Lawrence, yeah, why don't you take that as it pertains to kind of who we're looking at and kind of what we think could happen over the next couple of quarters.
Yeah, Laurence wondering yeah, why don't you take that as it pertains to kind of who we're looking at and kind of what we think could happen over the next couple of quarters.
Yes.
That part of the business has been growing.
Mr. Lawrence Tan: That part of the business has been growing. It's been growing substantially quarter over quarter. And for the existing partners, we've been working well, particularly well with one of them. And I believe we'll expand our portfolio with more consumer electronics, as well as some other consumer goods, including food and beverage. We have signed more contracts, supply chain, and for the bearish part. That part, I think SuperSweep is working well as planned. Go ahead
It's been growing substantially quarter over quarter.
And.
For Florida existing partners, we've been working well, particularly well with Biopharma and I.
Believe it will expand our.
Ah portfolio with more.
Consumer electronics.
As well as some other consumer goods, including food and beverage.
We have assigned.
Sure.
Our supply chain.
The bearish part.
That part I think super Sweet as is working well too.
As planned.
Yeah.
Kevin Vest: Okay, and last one for me, just on the operational side, obviously, you're up against higher cost inventory, higher inflation costs, freight that you mentioned, and warehousing, but that seems to all be cleared now. Are we going to see kind of steady improvement in margins, just kind of provide an update on the growth margin drivers here, and then kind of the cadence throughout 24, but more importantly, as you bring on higher service margins there, the improvement towards returning to profitability, and any color or view on the timing of profitability throughout 24 here? Sure, let me take that.
Got it okay and lesson for me.
Just on the operational side, obviously youre up against higher cost inventory higher inflation costs freight you mentioned warehousing does that seems to all be cleared now.
Or are we going to see kind of steadily improvement in margins just kind of provide an update on the gross margin drivers here and then kind of cadence throughout 'twenty four but more importantly, as you bring on higher service margins there.
Improving towards returning to profitability and any color or view on the timing of profitability throughout 'twenty four here.
Sure let me take that so.
Kevin Vest: So, you know, we don't give specific guidance, but I think we're still committed to the goal of getting to profitability in 2024. I think the things that we've put in place to help take expenses out where we can. These aren't short-term fixes, but we're making progress on one front. We'll talk about the cost of product. We've put in place a number of initiatives with some of our key contract manufacturing partners to help lower the cost of goods sold for us, which will, over time, provide us with even healthier gross margins. I think that's one of the areas where, you know, given our experience with the supply chain and our long relationships there, our ability to..., improve on that front is a real one.
We don't give.
Specific guidance I think we're still committed to the goal.
<unk>.
Getting to profitability in 2024 I think.
The.
Things that we've put in place to help take expense out where we can.
Aren't short term fixes, but we're making progress on one.
On one front.
I'll talk about the cost of product.
We've put in place a number of initiatives with some of our key contract manufacturing partners.
To help lower the cost of goods sold through us.
Which will.
Over time provide us with even healthier gross margins I think thats, one of the areas where given our experience.
With the supply chain and our long relationships there are our ability to.
To improve on that front.
As a real one one and secondly.
Kevin Vest: And secondly, we've never been either the lowest cost provider or the highest premium provider, which means our prices... you do have some, some room to go up if we choose to selectively do that. So there are some areas where we could pursue and will pursue very small price increases that will help also boost that gross margin line. So, while there's going to be variability from quarter to quarter, we still feel good about the idea that we can continue to push gross margins upward here. So that's one area I can improve on.
We've never been either the lowest cost.
Provider.
Or the highest premium provider, we've been like what we like to call kind of the sweet spot of Av.
<unk>.
Value for customers, which means our prices.
You do have some.
Some room to go up if we choose to selectively do that so there are some areas, where we could pursue and we'll pursue.
Very small price increases that will help also boost that gross margin line. So.
Uh huh.
There is going to be variability from quarter to quarter, we still feel good about the idea that we can get to.
To push gross margins upward.
From here so that's one area.
Kevin Vest: Secondly, we are working on a number of other initiatives on the OPEC side that we think can help bring costs down as well. You know, one that I think we can talk about is, you know, we've engaged with another kind of logistics-slash-shipping partner where we feel like we can take meaningful costs out of the cost of shipping products out to customers. We just kind of inked the contract over the last couple of months.
Secondly, we are working on a number of other initiatives on the Opex side that we think can help bring costs down as well.
The one that I think we can talk about as we've engaged with another.
Kind of logistics last shipping partner.
Where we feel like we can take meaningful costs out of the call.
Cost of shipping product.
Out to customers.
That.
We just kind of inked the contract over the last.
Probably in the last two months and so.
Kevin Vest: And so as the balance of this calendar year rolls out, you know, some of that cost savings will roll through as well. So, you know, I think the foundation has been laid for improvement. But I mean, you hit on a pretty important point; some of the hard work is in the rear view mirror for us.
As the balance of this calendar year rolls out some of that cost savings will roll through as well.
So I think the foundation has been laid in.
To continue to improve but I mean.
You hit on a pretty important point some of the hard work.
Kevin Vest: We have reduced that inventory. Our inventory now sits at a more normalized level. Aside from some pockets, we haven't completely cleared all of it out, but, you know, we can bleed some of the rest of that out in a way that won't be hugely detrimental. And then, you know, just the cost of operating with that lower inventory accrues benefits to us as well. I still think that we see profitability kind of on the horizon. The question will be how quickly we get that horizon, but it's there.
Is in the.
Rearview mirror for Us now.
Half reduce that inventory our inventory now sits at a more normalized level.
Aside from some pockets, we haven't completely cleared all of it out but we can believe some of the rest of that out in a way that.
Won't be hugely detrimental.
And then.
Just the cost of <unk>.
Operating with that lower inventory.
Accrues benefits to us as well so.
I still think that.
We see profitability kind of on the horizon.
The question will be how quickly we get to horizon, but it's there so.
Scott Fortune: So Uh, we're up. Thank you. I appreciate the update. Thank you. One moment for our next question. And our next question will come from Thierry Willoud from Water Tower Research. Your line is open. Hi, good afternoon, gentlemen. This is Sean Severson on behalf of Terry.
We're optimistic.
Thank you I appreciate the update.
Thank you one moment for our next question.
Yeah.
And our next question will come from the line of theory Willard from water Tower Research. Your line is open.
Hi, Good afternoon, gentlemen, this is Sean Peterson in for Terry.
Sean Severson: Just had a question about the move into the bricks and mortar side, and when and when you're talking about going from online to retail, what are some of the criteria that you're looking at over the near term? I guess how would that rollout look? And are there certain metrics or decisions that need to be made by retailers? Or what's the framework for a rollout there? It's pretty much based on two things.
Just had a question about the move into kind of a bricks and mortar side and when youre talking about going from online to in retail what are some of the criteria that you're looking at over the near term I guess, how would that rollout.
And are there certain metrics are decisions that need to be made by the retailers or what's the what's the framework for a rollout there.
What once the.
Mr. Lawrence Tan: One is the sales on particular SKUs. Now, once the sales reach a certain volume, the retailer will have the data to support their decision making. Now secondly is the product roadmap. How well the line is for products that we can bring in in the future as well, not just the ones that lead our way into the store. So we're working on the first step and the second step at the same time, where once the sales volume has achieved a certain level, we will get more attention, and potentially some SKUs will get opportunities. Now, would this be just for a limited number of stores initially, or is this kind of going to be looking across a region or, you know, a small region or large region? How would they address the size of a rollout? It depends on the specific retailers and the category manager. Usually, I think it will be a trial order to a certain number of stores, and then it depends on whether the product is a national product; it will go to all the stores.
Pretty much based on two things one is the.
Sales.
On particular Skus now once the cells become.
Certain volume.
The Bowl.
The retailer will have the data.
To support their decision, making now secondly is the product roadmap.
How.
Well the lineup of products that we can bring in the future as well not just the ones that.
Lead our way into the store so we.
We are working on the first step in the second stay at the same time.
Once the.
Sales volume has achieved a certain level.
We'll get more intentions potentially.
Suddenly skus get opportunities.
Into the store.
That would be just for a limited number of stores initially or is it kind of be going to be looking across a region or.
Small region or large region, how would they address the size of the rollout.
Okay.
It depends.
Specific retailers in the.
The category manager, usually I think it will be a trial appeal to certain number of stores and their dependents on whether the product is a national product. It will go to all the stores.
Mr. Lawrence Tan: Great, thanks for my last question. Is there any update on international in the quarter? Um, I. There's nothing particular. I think it's kind of similar to what before.
Great. Thanks, and my last question is any update on international in the quarter.
Aye.
There's nothing particular I think it's.
It's kind of similar to what before there is not much.
Mr. Lawrence Tan: There's not much that I can mention. Okay, great. Thank you, gentlemen. Thank you, Sean. Thank you. A moment for any more questions. Looks like we have a follow-up from Scott Fortune on Ross, from Roth, that your line is open. Scott, your line is open, care.
Convention here.
Okay, great. Thank you gentlemen.
Thank you Sean.
Thank you.
Ah moment training more questions.
Yes.
It looks like we have a follow up from Scott portion from RASK from Roth at your line is open.
Scott Your line is open.
Okay.
Operator: And there are no further questions in the queue. I'll turn it back to Kevin for any closing remarks. Okay, I just wanted to say thank you again to everyone for joining us today. We look forward to speaking with you again next quarter or at an upcoming conference. Thanks again, bye. Thank you for your participation, and today's conference does not include the program. You may now disconnect. Everyone have a great day. Thanks for watching!
And there are no further questions in the queue I'll turn it back to Kevin for any closing remarks.
Okay I just wanted to say thank you again to everyone for joining US today, we look forward to speaking with you again next quarter.
Or at an upcoming conference. Thanks again bye.
Thank you.
Thank you for your participation in today's conference. This does conclude the program you may now disconnect everyone have a great day.
Okay.
[music].
Yeah.
Okay.
Yes.
[music].