Q4 2024 Ispire Technology Inc Earnings Call
Hello, everyone and welcome to today's conference call to discuss I spires financial results for the fiscal year 'twenty 'twenty four ended June 30th 'twenty 'twenty four.
Speaker Change: At this time I would like to inform you that this conference call is being recorded and that all participants are in a listen only mode. There.
Speaker Change: We will be facilitating a question and answer session. Following prepared remarks from the company.
Speaker Change: Joining us today are Mr. Michael Wang the company's co CEO and Mr. Joe Mccormack the company's CFO.
Speaker Change: First Mr. Wang will brief you on the Companys key highlights and then Mr. Mccormick will review the company's financial results.
Speaker Change: Before we begin I would like to remind you that this conference call contains forward looking statements within the meaning of the private Securities Litigation Reform Act.
Speaker Change: All statements other than statements of historical facts in its announcement are forward looking statements.
Speaker Change: Forward looking statements are based on estimates and assumptions made by the company in terms of its experience and its perception of historical trends.
Speaker Change: Current conditions and expected future developments as well as other factors that the company believes are relevant.
Speaker Change: These forward looking statements involve known and unknown risks and uncertainties that many factors could cause the company's actual results or performance to differ materially.
Speaker Change: Those expressed or implied by the forward looking statements.
Speaker Change: Further information regarding this and other risk factors are included in the company's filings with the SEC.
Speaker Change: Company undertakes no obligation to update forward looking statements to reflect subsequent or current events or circumstances or changes in its expectation, except as maybe required by law.
Speaker Change: I would now like to turn the call over to Mr. Michael Wang Wang. Please go ahead.
Speaker Change: Thank you operator, and thank you all for joining us this morning.
Speaker Change: Fiscal year 'twenty to 'twenty four was a foundational year for ice bonds.
Speaker Change: We achieved strong results with record breaking revenue and the sustainable margin expansion.
Speaker Change: We reported record revenue of 151.9 million dogs.
Speaker Change: That's 31, 4% a year over year growth.
Speaker Change: All of which was organic.
Speaker Change: This organic growth was primarily driven by an increase in sales in the United States.
Speaker Change: Europe and South Africa.
Speaker Change: This increase in revenue was accompanied by a notable margin expansion.
Speaker Change: And we reported a gross margin that's a 19.6%.
Speaker Change: The increase from 18.0% in the previous fiscal year.
Speaker Change: And then they driven by product mix and the sales leverage as well as the beginning effects how far our Malaysian operations.
Speaker Change: Well I'll just a year, we also made significant advancements across the company.
That have positioned us for future margin expansion.
Speaker Change: Improved profitability.
Speaker Change: And increase their revenue generation.
Speaker Change: Those highlights, which I will go into <unk>.
More details shortly include.
Speaker Change: One Paul Malaysian operation as we aim to drive down our internal product cost.
Cool.
Batsman he ends up point of use age verification technology joint venture.
Speaker Change: Three.
Speaker Change: Our intentional focus on cannabis multi state operators.
Speaker Change: Msos.
Speaker Change: And Paul increased partnership in the global nicotine space.
Speaker Change: We have also adjusted our approach to credit management as we aim to improve our customer portfolio.
Speaker Change: Making it a more reliable as we limit our exposure to extend its outstanding balances.
Speaker Change: As we head into the fiscal year of 275.
Speaker Change: We remain optimistic about our future growth and the momentum.
Speaker Change: I believe we are well positioned to capture further growth and margin upside with the new cannabis and nicotine projects.
Speaker Change: A stronger cuts come more portfolio.
Speaker Change: And the continued expense discipline.
Speaker Change: So last fiscal year, we secured several significant strategic partnerships too.
To expand our market presence and distribution channels.
Speaker Change: Most recently with acreage holdings.
Pak: Thanks Pak.
Speaker Change: Confidential eating as E Cig brand and get a health club all in 2024.
Speaker Change: In April we secured a long term agreement with acreage holdings, a multistate operators in the cannabis industry.
Speaker Change: I aspire for supply acreage with the companies I aspire one vape.
Speaker Change: Paper products and filling machines as acreage aims to streamline its abate production and enhance reliability across its retail facilities in the United States.
Speaker Change: Furthermore, we also secured an exclusive distribution agreement with the bank pack.
Speaker Change: South Africa's leading candidates hardware supplier in May.
Speaker Change: This partnership marks I spikes in trade.
Speaker Change: In terms of rapidly growing South Africa.
Speaker Change: Market, our South African cannabis market.
Speaker Change: And there's a deal.
We will supply tank pack with a wrench into paper products and accessories.
Including the ice fire, one line and various ice by our signature products.
Speaker Change: This collaboration aligns with ice fires global expansion strategy.
Speaker Change: And a commitment to deliver a high quality Bay Ping solutions.
Speaker Change: This partnership has the potential to revolutionize.
Speaker Change: The South African cannabis market and elevate the industry standards.
Speaker Change: We also entered into an original design manufacturing relationship.
Speaker Change: Commonly called ODM.
So we are as far as signs and economic <unk> limited a subsidiary.
This is with a leading global E Cigs brand in June.
Speaker Change: Hi, Squire well received monthly purchase orders of 3 million units per mile which are expected to be consistent over the next 12 months.
And an additional $400 million in revenue to our topline.
Speaker Change: In August.
Speaker Change: Our subsidiary.
Speaker Change: Asked by our North America L. L C.
Speaker Change: Entirety into a 30 year global licensing agreement with a hidden Hills club.
Speaker Change: Marching our expansion into the global nicotine products market.
Speaker Change: Under this agreement.
Speaker Change: Ice firewall manufacture.
Speaker Change: It's to build and commercialize hidden hills branded and nicotine products worldwide.
Speaker Change: Talking with our lunches in the UAE and South Africa, followed by <unk>, followed by the U K and the EU.
Speaker Change: This collaboration builds on call earlier partnership in the cannabis and hemp banking sector.
The leverage is iceberg expertise in vaping technology, and global distribution network, while capitalizing on hidden hills, our strong brand reputation and presence.
Speaker Change: This strategic move positions us to capture a larger share of the rapidly growing E vapor and the cannabis vaping markets worldwide.
Speaker Change: We continue to make significant progress in our joint venture with verified and Camelot.
Speaker Change: Well create a next generation.
Speaker Change: Point of use age verification technology or E cigarettes that would prevent and their age to excess.
Speaker Change: And improve the user experience.
Speaker Change: This is a first of its kind for vape hardware innovation, as we and standards of safety and security.
Speaker Change: His immediate for the industry.
Speaker Change: And we are excited to share that we have received.
Speaker Change: The fastest ever meeting request acceptance.
Speaker Change: So F D. A with all force meetings scheduled for early November.
Speaker Change: We recently submitted a force P M T application in four years.
Speaker Change: For a disposable and product with a four flavors.
Speaker Change: This is an important milestone for highest spot.
Speaker Change: At this signals, our reentry into the U S and market.
Speaker Change: We intend to amend our resubmit this application in the coming months.
Speaker Change: Once we have finalized the age gating technology solution with our joint venture I pack.
Speaker Change: That is a joint venture with a verified and Camelot.
Speaker Change: Our team continues to focus on submitting additional P. M P applications for pod based and systems.
Speaker Change: Which will include age gating technology.
Speaker Change: In the.
Speaker Change: Coming month.
Speaker Change: We are doing this to ensure that our best in class E. Cigarette acknowledged you can't access additional next to markets and customers.
Speaker Change: As the 80 billion U S dollar.
Speaker Change: U S nicotine market.
Speaker Change: Ultimately driving worldwide demand for our technology and creating long term value.
Another key highlight during this fiscal year, it's a successful closing of how far $12 3 million dollar.
Speaker Change: Public offering in March.
Speaker Change: We are very encouraged by our achievements as our team was able to overcome.
Speaker Change: It's very volatile macro environment to successfully complete this transaction.
Speaker Change: Creating additional growth opportunities for ice pack.
Speaker Change: Gross proceeds from the offering founded as a previously mentioned that joint venture was a buyer if I and Chandler.
Speaker Change: As well as helped establish and streamline operations in our Malaysian manufacturing facility.
Speaker Change: Since its opening in February 'twenty to 'twenty four.
Speaker Change: Our Malaysian facility continues to trend in alignment with our operational initiative.
To achieve a higher gross margin.
Speaker Change: Well I'm all states for our facility, we continue to ship products generally to revenue and see a tremendous impact on our gross margins.
Speaker Change: I can't stress this enough.
This facility will be a significant advantage for ice spire going forward as we aim to capitalize on the international nicotine market.
Speaker Change: And his considerable market size.
Speaker Change: While streamlining our business.
Speaker Change: And further driving down our product costs.
Speaker Change: Additionally.
We strengthened our leadership team.
Speaker Change: With the key appointments, including Jim Mccormick as.
Speaker Change: Chief Financial Officer.
Speaker Change: Jon Patterson as our senior Vice President of International nicotine.
Speaker Change: And Dennis later.
Dennis: As our senior Vice President for cannabis products sales.
Dennis: These strategic moves have positioned ice fire further for continued success.
Dennis: The value equation for our shareholders as we move forward.
Speaker Change: Fiscal year 'twenty to 'twenty four it was a both a foundational year and a transformative year for ice pack.
Speaker Change: Marked by record breaking revenue from our organic growth across all markets and the significant margin expansion.
Speaker Change: Our focus on innovation.
Speaker Change: And the market leadership drove the successful implementation of our key strategic initiatives and nicotine and the candidates.
Speaker Change: We continue to forge new partnerships.
Speaker Change: And sprint and existing relationships.
Speaker Change: They're expanding our reach globally.
Speaker Change: By introducing our leading edge technology to new markets here in the U S and globally.
Speaker Change: We have exceeded our growth expectations.
This year's achievements are truly raised the bar for all product opportunities.
Speaker Change: We are proud of our progress and remain committed to driving innovation and capitalizing on our expanding market potential.
Speaker Change: Looking ahead, we are well positioned to build on this momentum and to continue our trajectory of growth and market leadership.
Speaker Change: With that I'll turn the call over to our CFO, Jim Mccormick, who will review and comment on our financial results.
Speaker Change: Yeah.
Jim Mccormick: Thank you Michael I would like to take this opportunity to summarize our key financial results for the fiscal year 'twenty 'twenty four.
Jim Mccormick: In my comments I will refer to the fiscal year 2024 at the year ended on June 32024.
Jim Mccormick: All comparisons are to the prior year ended June 32023, unless otherwise stated.
Speaker Change: As Michael mentioned, we achieved significant organic growth for the fiscal year 2024 overall.
Speaker Change: Overall, our total revenue for the fiscal year increased to $151 9 million or by 31, 4% compared to the same period last year.
Michael Wang: This was driven by the following performance across all key regions.
Michael Wang: European revenues of $65 3 million in fiscal year, 2024 increased by $6 5 million or 11% over the previous fiscal year.
Michael Wang: This was primarily as a result of increased sales of open banking system in the region.
Michael Wang: North America fiscal year, 'twenty 'twenty four revenues.
Michael Wang: $3 1 million, representing an increase of $21 5 million or 55% over fiscal year 2023.
Michael Wang: The year over year growth was driven by the expansion of our campus April hardware sales to existing customers as well as the expansion of our overall customer base for these products primarily in the U S.
Michael Wang: Asia Pacific revenues were $17 6 million, an increase of $2 7 million over fiscal year 2023.
Michael Wang: Rest of the World revenues were $6 million, an increase of $5 7 million year over year, primarily an increase in sales in South Africa related to our licensing arrangement with international tourist song writer, but boy and the breakfast brand.
Michael Wang: During the 12 month period ended June 32024.
Michael Wang: Gross profit increased to $29 8 million or by 43.3% year over year.
Michael Wang: At the same time, our gross margin grew to 19, 6% in fiscal year, 'twenty 'twenty four compared to 18% at fiscal year 2023.
Michael Wang: Gross profit and gross margin improvement can be attributed to our overall revenue increase as well as an improved product mix greater purchasing power, resulting from higher stainless bottle.
Michael Wang: And the initial benefits of lower product costs being sourced from our Malaysia production facility.
Michael Wang: Total operating expenses for the fiscal year ended June 32024.
Michael Wang: For $43 7 million as compared to $25 3 million for fiscal year 2023.
Michael Wang: This increase was primarily due to expenses required to support the expanded international business footprint.
Michael Wang: These expenses were reflected in higher payroll and contract wages.
Marketing expenses professional fees as well as increased stock based compensation.
Michael Wang: As a result of these activities our fiscal year 2020 core net loss for the 12 month period, ending June 32024 was $14 8 million.
Michael Wang: <unk> to a loss of $6 million in fiscal year 2023.
Michael Wang: Turning to the balance sheet and liquidity.
Michael Wang: As of the end of our fiscal years that being June 32024, and June 32023, with cash balances of $35 1 million at the end of fiscal year 2024, compared to $40 1 million at the end of fiscal year 2023 at the.
Michael Wang: Same periods, we break handful balances up $16 6 million and $29 million respectively.
Michael Wang: Net cash used in operating activities was $18 3 million for the 12 month period ended June 32024, compared to $8 5 million.
Michael Wang: Fiscal year, 2020 three.
Michael Wang: Net cash provided by investing activities of $3 million compared to $10 2 million used in investing activities in fiscal year 2020.
Michael Wang: In fiscal year 'twenty 'twenty four net cash provided by financing activities was $10 1 million.
Michael Wang: Compared to $15 6 million used in financing activities in fiscal year 2023.
Michael Wang: With that this concludes the review of our first fiscal year 2024 financial results I will now turn the call back over to Mike.
Mike: Thanks, Jim.
Mike: Before we open the call to questions I would like to expand on how our key strategies related to our long term financial goals.
Mike: That's the way we move forward into fiscal year 'twenty to 'twenty five we believe all statistically investment and the continued innovation position us for sustained future profitable growth.
Mike: I would like to reiterate that our focus at ice fire remains on innovation.
Mike: We strive to be a leader in the industry using our technology to help redefine what best in class products off.
Mike: I didn't set a new standard for excellence.
Mike: We are evaluating potential partnerships.
Mike: Growth opportunities and ways to streamline our supply chain, so that they align with our overall mission on a consistent basis.
Speaker Change: We look forward to sharing future updates on the progress I'd say default.
If you have any questions. Please contact us through our email at I R at ice biotechnology Dot com.
Speaker Change: Otherwise I'll tell you. This completes our prepared remarks, and we are now open to questions. Please go ahead.
Speaker Change: Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Speaker Change: You May press star two if you'd like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: Our first question comes from the line of Scott Fortune with Roth Capital Partners. Please proceed with your question.
Speaker Change: Good morning, and thank you for the questions Chris.
Speaker Change: First of all want to focus on margins and the recent improvement in the gross margins over the last two quarters here. Once you brought on in house manufacturing in Malaysia.
Scott Fortune: Basically can you unpack the gross margins by the categories in the fourth quarter tobacco versus cannabis and how should we look at the cadence in fiscal year 'twenty five as you ramp up more lines currently.
Malaysia here and just a little more color on gross margins and trajectory for each cat are going how much of the improvement.
Speaker Change: You've mentioned it a little bit is round from savings in Malaysia, it's product mix or <unk> re negotiating the sources in China, just kind of unpack some of course find yourself did that'd be great.
Speaker Change: Okay. Scott. Thank you for the question.
Yeah.
Speaker Change: As far as the gross margin.
Speaker Change: By category overall.
Speaker Change: Overall I would just takes our most recent quarter Q4.
Speaker Change: As a reference a cannabis and E. Cig side are both all were both seeing a increased gross margin.
Speaker Change: And in fact for Dev QUADRA or both.
Speaker Change: Our sector saw over 20% of the gross margin and then cannabis side saw higher.
Speaker Change: In fact overcome to 5%.
Speaker Change: So for both Easter and the cannabis a Q4 was really a record quarter in gross margin right.
Now looking ahead into this new fiscal year, our world So trends hold up our waste strongly believe so on one hand, our gross margin for both segments will continue to expand on the other hand.
Speaker Change: We strongly believe towards end of this fiscal year gross margin for both sectors will actually get a real close.
Speaker Change: We of course are aiming high 20%.
Speaker Change: For both on both side.
Speaker Change: Scott I don't know does that answer your question.
Scott Fortune: Yeah, No. That's helpful. Just remind us kind of savings you are getting in Malaysia.
Speaker Change: I would point out as you move more in house.
Speaker Change: On products coming from Malaysia.
Speaker Change: But yeah for Malaysia.
Speaker Change: It is a slight I would say re pivoting in terms of a priority.
Speaker Change: Previously we wanted to.
Speaker Change: Utilize the Malaysia, primarily for candidates hardware production.
Speaker Change: However, things change quite a bit.
Speaker Change: In the last four Mark.
Speaker Change: Especially after the June our world the Vape Expo in Dubai.
Speaker Change: We see a tremendous requests and demand.
Speaker Change: From a brand and distributors for us to produce these cigarette for worldwide.
Our kids from Malaysia.
Speaker Change: Partially because our worldwide a lot of today players realize that there is going to be a geopolitical risk associated with factories in China.
Speaker Change: And given such high demand, we internally have decided we are shifting Malaysia. It's a priority are more in the direction.
Speaker Change: High quality premium E cigarette products. So Scott I think that's one part of my answer to a question.
Scott Fortune: But certainly from a gross margin.
Scott Fortune: Our point of view.
Scott Fortune: <unk> is the same to continue to handle more production into Malaysia, So that we can benefit.
Speaker Change: From the higher gross margin, whether it's E cigarettes are a cannabis hardwood.
Speaker Change: Scott. Thank you for that David you had this great details there.
Speaker Change: Next question can you provide kind of an update on the global vape sales as the tobacco sales it looks like a ramped up 18% year over year, but the expansion of your brands. You know you have your own brands you had third party brands see you've added on distribution and adding on hidden hills here.
Speaker Change: But just kind of get a sense for the tobacco opportunity as you move into Africa continue to expand into Europe and in the Middle East.
Speaker Change: From that standpoint, and Additionally are you currently producing that 3 million units with your new ODM partner, just kind of the ramp up of that Odeon partnership that would be great.
Speaker Change: Oh I'll answer your second question first Oh, I'm bad ODM deal.
Speaker Change: We are in the month of July and August we were increasing production capacity.
Speaker Change: Yeah.
Speaker Change: Especially when there's a relationship with a forum in June.
Speaker Change: We didn't have enough.
Speaker Change: Just say collection.
Speaker Change: Tooling all malls.
Speaker Change: <unk> says the malls.
Speaker Change: Available to immediately produce three meal in units, but in the.
Speaker Change: First to model for the new fiscal year.
Speaker Change: We rapidly increase that so starting with the month of September we have is the $3 million a mop capacity. Finally, so it all go forward that way in fact.
Speaker Change: Based on the demand.
Speaker Change: Toward the end of this calendar year, we may even need to further increase our production capacity. So we are already Oh standing where we are today, we already where we upgrade our promise towards our customers.
Speaker Change: We certainly are hoping that the products will be received well by consumers.
Speaker Change: Consumers so that we could further increase beyond the screaming all goodness about rather quickly. So that's on that front as far as a global a global nicotine.
Speaker Change: Overlook and scratchy.
Speaker Change:
Speaker Change: On one hand, as we launch our global Nicotine initiative. We started there was a burn of boys a breakfast, Brad and that brand certainly.
Speaker Change: Just statistically we decided to launch it in.
Speaker Change: <unk> South Africa's first.
Speaker Change: Followed by our north.
Speaker Change: Africa countries our market.
Speaker Change: And the Middle East and then.
Speaker Change: Yeah.
Speaker Change: Early next year or expanding into Europe and.
Speaker Change: We're on track there.
Speaker Change: Of course like any launch of a new brand.
Speaker Change: It market.
Speaker Change: Initial momentum.
Speaker Change: Building phase.
Speaker Change: Critical so ways.
Speaker Change: <unk> South Africa.
Speaker Change: Launching a market for this product so.
Speaker Change: So far there.
Speaker Change: Reception has been tremendously positive.
Speaker Change: Just in South Africa, South Africa alone, we expect demand for breakfast branded product will ramp up from.
Speaker Change: Initial Ah.
Speaker Change: That's just estimate it at about a million units a mile.
Speaker Change: Who are towards the end of this fiscal year.
Speaker Change: To mail units come up.
Speaker Change: As we.
Speaker Change: Continue with the build out in South Africa.
<unk> already <unk>.
Speaker Change: Tablets are assigned the supply agreement a distribution agreement in.
Speaker Change: It's the middle East.
Speaker Change: Egypt and several north Arlington.
Speaker Change: Our country.
Speaker Change: So that is proven to be very successful.
Speaker Change: We are mindful Scott to what brand, it's the best suited in what market.
Speaker Change: That's why he Didnt Hills club comps to a picture and a complete you know way as it completes our.
Speaker Change: Global Oh roadmap very nicely.
Speaker Change: Hidden hills is absolutely well.
Speaker Change: We see in the Middle East in Europe, and more importantly in Latin America, so with that it really gives us a very competent mentally brand.
Speaker Change: In combination with breakfast tool give us just a global footprint.
Speaker Change: <unk> global footprint is important plus also because.
Speaker Change: That's the way no.
Speaker Change: Thanks, tobacco, let's just say whether it be a T a.
Speaker Change: Our imperial and so Oh PMI their attention often does not focused on some of the market that we are attacking right. Now. So we do feel we have a strong advantage in this exercise where we can become.
Speaker Change: Oh wind up with the top players in those markets.
Speaker Change: Taking advantage of let's say lack of focus from the Pittsburgh called competitors.
Speaker Change: Scott.
Scott Fortune: Does that answer your question.
Yes, no that's great and then one quick one one last one here.
Speaker Change: Here around the balance sheets and priorities as you have meaningfully improved your gross margins.
Speaker Change: As you mentioned now that your execution from last year, but can you provide your timeline now to reach breakeven and generate cash flow over the next quarters here from that standpoint, and then also address your accounts receivable and accounts payable and the activities towards improving.
Speaker Change: That sounds a business too.
Speaker Change: Okay, I will briefly touch on the.
Speaker Change: Profitability and breakeven part.
Speaker Change: And then I will turn to Jim to talk about.
Speaker Change: Uh huh.
Speaker Change: Yes.
Speaker Change: Yeah.
Sure.
Speaker Change: As far as the breakeven target, we are aiming, especially now with the heavy investment in tools H gating technology.
Speaker Change: And the P. M T E applications as we all know PMT applications.
Speaker Change: Our expenses are exercises.
Speaker Change: And more importantly, our investment into our global nicotine initiatives.
Speaker Change: Our breakeven target is now a more of a tool a fiscal third quarter. So we are aiming to breakeven by.
And for March a 10 25.
Speaker Change: However, just.
Speaker Change: Another data point I want to share it with you.
On a non-GAAP basis.
Speaker Change: I do want to share just a piece of the data because it's indicative for where we are and where we are headed.
Speaker Change: On a non-GAAP basis.
Speaker Change: Even though.
Speaker Change: For the quarter for the June quarter.
Speaker Change: We reported a bonds to $8 $4 million in Nast loss, but on a non-GAAP basis, we are actually we were making $1.3 million in profit.
Speaker Change: The key factors there are really at as Jim mentioned earlier.
Jim Mccormick: Stock option based compensation expenses actually wasn't significant.
Speaker Change: And has some other like patent related expenses Ora amitabh.
Speaker Change: Amortization and some other noncash a probation.
Speaker Change: <unk> contributed to that.
So it's just as important partially because you know from operating activities.
Speaker Change: We are actually are in a good track solid track toward profitability. So it's a 1.3 me on a non-GAAP profit a gate truly gave us the.
Speaker Change: Confidence that we can get to a GAAP base profitability by the March quarter.
Speaker Change: Right.
Speaker Change: A $10 five so.
Speaker Change: Jim.
Jim Mccormick: Can you answer the HR related questions from Scott.
Speaker Change: Sure.
Scott Fortune: So Scott you know.
Speaker Change: We look at the balance sheet and managing the balance sheet is it's obviously, a very high priority of mine and Michaels and the whole company. We saw a significant increase in accounts receivable to a $59 7 million from $24 5 million last year that was largely the result of our expansion into the U S.
Speaker Change: S cannabis market.
And and getting new customers on board and getting them into our ecosystem. If you will now.
Speaker Change: Now that comes at a price because I think most people on this call will know the challenges faced by the U S cannabis industry with the banking banking issues are high levels of taxation etcetera, etcetera. So it's a very cash strapped industry at the moment and we see that reflected in our accounts receivable.
Speaker Change: So you know getting that market share are you know came in a bit of a price in terms of the cash flow coming into the company, but where we're aggressively working with our customers to get that that figure is down we are collecting on those accounts are not as quickly as we'd like in all cases, but our customers are.
Speaker Change: Doing their best and we're staying on top of them to get that so that accounts receivable down I will say going forward and I think it's in the release that we talk about refocusing our efforts in the U S cannabis market.
Speaker Change: And with that increased scale comes the opportunity to serve a larger customers. The one that those at the level that they need to be serviced and we're confident we can do that so we're looking at improving the overall quality of our of our receivable base going forward. So.
You have to get that cash flow coming in quickly to the company in terms of accounts payable the increase there.
Speaker Change: And the related party Ah.
Speaker Change: Line item and that's really really.
Speaker Change: Really went hand in hand, with what I, just thought about getting an expansion into the until the U S. Market. So we have you know favorable terms with our related party factory and that will carry forward and be taken down as we collect on that going forward.
Scott Fortune: Good point Scott.
Scott Fortune: I appreciate it.
Scott Fortune: But by the way, it's Scott I'll add one more element to our a R.
Scott Fortune: I guess in that book going forward.
Scott Fortune:
Scott Fortune: In addition to what Jim said about our focus on the larger customers Msos and so while on the cannabis side.
That's another reason we are more determined than ever to push forward with a full force on say global nicotine side.
Aside.
Speaker Change: Because our opinion.
Speaker Change: Terms on the Mexican side, it's just far more favorable to us.
Speaker Change: And it will certainly help with overall you are as a percentage of total sales.
Speaker Change: Scott.
Speaker Change: That's helpful. Thank you and I'll jump back in the queue.
Speaker Change: Thank you. Our next question comes from the line of Bo Pei with U S. Tiger Securities. Please proceed with your question.
Bo Pei: Hi management, Thanks for taking my question can.
Bo Pei: Can management give us some sort of outlook or.
Bo Pei: Even guidance for fiscal year 2025, especially.
For the revenue growth for both cannabis and E cigarette. Thank you.
Speaker Change: Oh, Thank you for the question.
Speaker Change: We are.
Speaker Change: This is the first time I will not be able to give you.
Speaker Change: And Sir on that topic, where we decided that given so many.
Speaker Change: Projects and opportunities that we're pursuing.
Speaker Change: This fiscal year would be really hard to predict.
Speaker Change: It could have.
Speaker Change: Growth rates cut us when.
Speaker Change: 30% to 50% to 100%, it's really hard to tell right now we don't want to share any numbers.
Speaker Change: Because we honestly we don't.
Speaker Change: Even though if its going to swing all the way it's 100%.
Speaker Change: They are a 30, 50% level.
Speaker Change: So I.
Speaker Change: My apology apologies for that.
Speaker Change: Yeah, Yeah, that's totally understandable with bands for that kind of application.
Speaker Change: But can you also maybe just briefly talk about the.
Speaker Change: Ill take each opportunity you see the revenue uptick that you see in 2025 does that come from Cannibalized or you think of that in terms of a geographic distribution.
Speaker Change: Well with the incremental demand coming from.
Speaker Change: Yeah.
Speaker Change: I certainly can add some color too.
First of all on the cannabis side as Jim mentioned.
Speaker Change: We all are aware of the challenges facing the cannabis industry.
Speaker Change: Not only because let's say tweedy.
Speaker Change: But also because they are sometimes oversupply and price war, among the brands and retailers.
Speaker Change: So it's not the most desirable macro environment for anyway.
Is good for US is that we have a.
Speaker Change: Global nicotine strategy that we are executing so well we are probably going to.
Speaker Change: See a much higher.
Speaker Change: Higher.
Speaker Change: Of course E cigarette side from international market.
Speaker Change: In this fiscal year are I think as I mentioned, it's the ODM deal alone is going to contribute a significant revenue.
Speaker Change: And does that alone will likely.
Speaker Change: A double or a past Easter.
Speaker Change: E cigarette revenue.
Speaker Change: By itself.
Speaker Change: With that we have.
Speaker Change: The other branded business like breakfast and hidden heroes, and we will soon launch or other brand worldwide.
Speaker Change: Worldwide, So oh back.
Back to the simple answer to a question.
Speaker Change: Vast majority of our growth will come from our global nicotine and of course, Oh, we are hoping.
In the fiscal year 'twenty 'twenty six.
Speaker Change: And meaning.
Speaker Change: You know by this time next year, we are hoping to see start seeing some of these facts F. R. O P. M T E applications.
Speaker Change: In the U S market.
Speaker Change #100: As we all know when that comes it will be absolutely a monumental because was appointed to use age gating technology, we will be able to finally, all for a variety of four flavors.
To consumers and they yes, they all protect miners from.
Speaker Change #100: Getting their hands on E cigarette.
Speaker Change #101: Which is Uh huh.
Speaker Change #101: Of course Uh huh.
Speaker Change #101: Fda's and consumers on the parents primary concern right now so we are confident with our age gating technology.
Speaker Change #101: Oh, we will finally be able to supply a variety of flavor I think that will really position ice bar Ah well into future years.
Speaker Change #101: So.
Speaker Change #101: Got it that's why it helpful. Thank you.
Speaker Change #102: All my questions.
Thank you, ladies and gentlemen, as a reminder, if you'd like to join the question queue. Please press star one on your telephone keypad.
Speaker Change #103: Our next question comes from the line of Papillon Sonic waves you wanted <unk> Associates. Please proceed with your question.
Speaker Change #104: Thank you for taking my question and good morning, everyone. Mr. <unk> can you give more color in terms of the age gating technology. For example, how unique is these would be the would you be the first to market with this product.
Speaker Change #105: Roughly by when do you expect to have it in the market. If you can answer that first thank you.
Pablo: Yeah Pablo Thank you.
Speaker Change #107: Oh right now are all of the market that there are several proposed solutions to our 8-K T.
Speaker Change #108: But I will say, though we do have a unique advantage with our solution.
For a variety of reasons number one it's.
Speaker Change #108: A block 10 base.
Speaker Change #108: Technology.
Speaker Change #109: So that is not.
Speaker Change #109: Not packable.
Speaker Change #109: Meaning are.
Speaker Change #110: You know our young people teenagers.
Speaker Change #109: If you have any south of our solution.
Speaker Change #109: They will figure out a way to Hackett and Blake jailbreak, it but because this is a blockchain based solution.
Speaker Change #109: Very unique in that you can not.
Speaker Change #109: Break.
Speaker Change #109: And even if you break it you can only break one device you cannot cannot mass break because each device has its own unique tokens.
Speaker Change #111: So that's a strong advantage I think that's important to parents important tool to F D. A <unk> as well.
Speaker Change #111: The other key advantage that we have over everybody else is.
Speaker Change #111: We all are working with already existing Uh huh.
Speaker Change #111: Technology out there as our backbone.
Speaker Change #111: Solution.
Which is.
Speaker Change #111: Very different from all other sources other solutions are all a so called a web based.
Speaker Change #111: Rather simple web based you verify your age.
However, it's hard.
Speaker Change #111: Hard to use hard pool.
Speaker Change #112: A man, it's so it'll create high friction for consumers and their experience with our solution is very easy to use it.
Speaker Change #113: Thanks, very easy to use we work with our trusted backend AR technology partners like clear this is.
Speaker Change #113: Airport security system clear and with Ah another platform like I D knee and and so on and so forth. So Uh huh.
Speaker Change #113: Bottom line is it's a friction less power.
Speaker Change #113: Process.
Speaker Change #113: E. R age is a very fine so based on that are we.
Speaker Change #113: We feel very confident about this solution and we presented as a solution.
Speaker Change #114: A few.
Speaker Change #114: Conferences, and that's why as I stated earlier.
Speaker Change #114: We see the answer.
Speaker Change #114: From the F D a for a meeting.
Speaker Change #114: Within three weeks of a request team for this meeting which is for anyone who knows how.
Speaker Change #114: Long it usually takes for FDA to respond to them.
Speaker Change #114: <unk>.
Speaker Change #115: This is unheard of so Oh, we strongly believe this will be well received.
Speaker Change #115: We are going to work with the FDA closely.
Speaker Change #115: To move this technology forward, if everything goes well.
Speaker Change #116: To answer your second half of your question, where our whole king buys.
Speaker Change #116: By the end of our next calendar year 'twenty.
Speaker Change #116: 2025 would be at a point are close to launching products in the U S.
Speaker Change #116: That's great. Thank you and then just Mike one for you Mike as well.
Jim Mccormick: Can I add just one thing hi, Pablo Jim Mccormick here.
Jim Mccormick: I just I'll just add that this is a global product.
Speaker Change #117: It's going through the FDA process. This product also has application around the world, especially Europe, where obviously the.
Jim Mccormick: They use to access as much of an issue than it is here and it has application not just in the E cigarette, but also in the cannabis hardware. So I just thought I'd add that.
Jim Mccormick: Oh, Great point, Jim Pablo.
Speaker Change #118: I I.
Speaker Change #119: Did I mention that Jim is totally right in fact this technology.
Speaker Change #120: We presented it who are some European regulators. They are absolutely excited about it so from that point of view, it's highly likely we would they use this technology in our products.
Speaker Change #121: For the European market much sooner.
Speaker Change #121: And for the U S market.
Speaker Change #122: Uh huh.
Jim: Jim Thank you.
Speaker Change #122: Pablo.
Speaker Change #124: Thank you for that and then just following up on the P. M. T. J you mentioned four flavors.
Speaker Change #125: Can you roughly you know talk about the timeline there I know, it's hard to predict where the F. D. A R. We don't you most of you all disposables and you know if he gets approved you know roughly what could be the sales.
Speaker Change #125: Contribution from those four flavors in the U S market for the MTA.
Speaker Change #126: Yeah, Pablo that's great question.
Speaker Change #126: As we all know for typical cause.
Speaker Change #126: Consume ourselves smokers stay with the router.
Speaker Change #126: That E cigarette.
Speaker Change #128: Uh huh.
Speaker Change #129: Having flavors or let's say Ford flavors mango flavor for example, right.
Speaker Change #130: The reason today F D a approved products.
Speaker Change #131: Products generally only campaign tobacco flavor or in some cases, a menthol flavor or is it because F. D. A is worried if but you all four of flavor.
Speaker Change #131: And without a educating technology kids are miners will get their hands on their devices. So.
Speaker Change #131: That's their primary concern.
Speaker Change #131: And that's why the <unk> approval, so far only tobacco and menthol.
Speaker Change #131: However, consumer demand for.
Speaker Change #131: Fourth flavored E cigarettes, it's absolutely out of this world as you know in the U S. A market still vast majority of it was the.
The E cigarette sold are not PMT, a pool or essentially are illegal.
Speaker Change #131: Yeah. So that's why it's important to have a technology.
That will enable our flavored devices. This way you can kick the black box players out right.
Speaker Change #131: So I.
Speaker Change #132: I don't want to put a number to it.
Speaker Change #132: By all measure U S total, including Black market total E cigarette retail sales is $80 billion a year.
Speaker Change #132: So if you break down that number.
Speaker Change #132: To let's say wholesale revenue from brands to distributors.
Speaker Change #132: It's a roughly $30 billion. So that is the Tam available to.
To us.
You can just imagine if we are the first with a.
Speaker Change #132: Age gating technology that offer a food flavor.
Speaker Change #132: E cigarette.
Speaker Change #133: How much potential there yes.
Speaker Change #133: Certainly it will be in the billions.
Speaker Change #133: Right right.
Speaker Change #133: Very last one and it took me to a broad question, but for example, you attended the next generation of nicotine delivery in June.
Speaker Change #134: What's new in general in terms of Neogen delivery and I know, it's a very broad question, but you know sometimes you look at the Vapes and its about all in one so at each of our larger formats, but you know when do you think all the nicotine delivery.
Speaker Change #135: What's what are the big things that are coming down the pike. If we're gonna. Thank you. That's it right. Yeah. In addition to age gating technology Ah that's important for consumer protection.
Speaker Change #135: Of course, our product safety is another key concern.
Speaker Change #136: And that's why we are working on technology and new technology.
Speaker Change #137: Who will provide a safe port devices are getting away from the traditional let's say a ceramic.
Speaker Change #137: Based vaporizer technology.
Speaker Change #137: So who are we haven't probably publicly announced our technology, yet, but it's a very safe technology.
Matt Hull: No have you Matt Hull no ceramic.
Speaker Change #139: Our U S a.
Speaker Change #139: Very clean technologies that wore off or towards this market. So I think.
Speaker Change #139: Between age gating and clean technology.
Speaker Change #139: That's what.
Speaker Change #139: So market is looking for in the years to come.
Speaker Change #139: Hey, Michael can I add to that please yeah.
Michael Wang: Probably one of the other dramatic changes we've seen in nicotine delivery is the the emergence of the power sector.
Speaker Change #140: Which then for example in the U S has gone you know ballistic and is out of stack and driven the category in the U S. But it's not just a U S phenomenon, we're seeing that globally.
Speaker Change #140: Especially in Europe, where you know the the nicotine pouches are becoming very popular as an alternative to combustible traditional cigarettes.
Speaker Change #140: And we.
Speaker Change #141: We were jumping on that trend and so we actually have pouches in the pipeline for our launched in South Africa with the breakfast brand and plans due to launch in other markets as well, but that's been a very dramatic you know emergence of a category that's growing at 30 some percent CAGR.
Speaker Change #141: So it's a it's a very interesting phenomenon and something we're going to take advantage of hopefully.
Speaker Change #142: That's great. Thank you very much.
Pablo: Thank you Pablo.
Pablo: Thank you, ladies and gentlemen that concludes our question and answer session I'll turn the floor back to Mr. Wang for any final comments.
Mr. Wang: I just want to thank you all for joining us today and I look forward to the next call, which is only about a mile can have a week for.
Speaker Change #144: For our first quarter tends to 'twenty five.
Mr. Wang: Thanks again.
Speaker Change #145: Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.