Q1 2025 iPower Inc Earnings Call
Good afternoon, everyone and thank you for participating in today's conference call to discuss <unk> financial.
<unk> financial results for its fiscal first quarter 2025 ended September 30th Twenty-twenty for.
Speaker Change: Joining us today are high powers, Chairman and CEO, Mr. Lawrence Tan.
Speaker Change: And the company's CFO, Mr. Kevin Vasily Mr. Bachelor Lake. Please go ahead.
Speaker Change: Thank you Liz good afternoon, everyone by now everyone should have access to our fiscal first quarter 2025 earnings press release.
Speaker Change: Which was issued earlier today at approximately 405 P M eastern time.
Speaker Change: Our releases are available in the Investor Relations section of our website at meet the high power Dot com.
Speaker Change: This call will also be available for webcast replay on our website.
Speaker Change: Following our prepared remarks, we'll open the call for your questions.
Speaker Change: Before I introduce Laurence I'd like to remind listeners that certain comments.
Speaker Change: Made on this conference call and webcast are considered forward looking statements under the private Securities Litigation Reform Act of 1995.
Speaker Change: Looking statements are neither historical facts, nor assurances of future performance instead, they are based on.
Our current beliefs expectations and assumptions regarding the future of our business future plans and strategies projections anticipated events and trends the state of the economy and other future conditions.
Speaker Change: Because forward looking statements relate to the future they are subject to inherent uncertainties risks and changes in circumstances that are difficult to predict.
Speaker Change: And many of which are outside.
Our control.
Speaker Change: Our actual results and financial condition may differ materially from those indicated in these forward looking statements.
Speaker Change: 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.
Speaker Change: Including our annual report on Form 10-K.
Speaker Change: Our which was filed with.
Speaker Change: With the SEC today.
November 14th 2024.
Speaker Change: Do not place undue reliance on any forward looking statements, which are being made only as of this date.
Speaker Change: Except as required by law the company undertakes no obligation to revise or publicly release.
Speaker Change: <unk> any revision to forward looking statements.
Speaker Change: With that I'd now like to turn the call over to light towers, Chairman and CEO Lawrence Dann.
Lawrence Dann: Oh, Thank you Kevin.
Lawrence Dann: And good afternoon, everyone.
Lawrence Dann: We maintained a solid momentum in the third quarter, while continuing to refine our cost structure, leading to year over year, while some margin expansion.
Lawrence Dann: And a reduction in operating expenses.
Lawrence Dann: Additionally, we made progress expanding our super Sweet supply chain platform.
Lawrence Dann: By Onboarding key partners across the supply chain, we are enhancing our service capability.
Positioning Super suite as a increasingly valuable solutions for our partners.
Lawrence Dann: We also broadened our cell switch by launching all aliexpress and further strengthened our presence on newer platforms, such as Tictoc shop and people.
Lawrence Dann: Aligning our offerings with a diverse and expanding customer base.
Lawrence Dann: In our Super Sweet business.
Lawrence Dann: We continued to work through a robust pipeline of prospective partners.
Lawrence Dann: Integrating essential components across sales channels.
Lawrence Dann: Marketing merchandising logistics technology and data analytics to enhance our comprehensive service offerings.
Lawrence Dann: By adding these components support suite is equipped to address today's complex supply chain leaders with a seamless end to end solution for E Commerce supply chain management and logistics.
We are committed to strengthening each segment in the supply chain and sales, enabling our partner <unk>.
Lawrence Dann: To navigate market needs scale, effectively and better serve their customers.
Lawrence Dann: At the end of the quarter, we launched our Super Sweet supplier online platform.
Lawrence Dann: Which is designed to optimize supplier interactions streamline operational workflow and better align our partners with evolving market demands.
This platform enables suppliers cookie valuable data insight.
Lawrence Dann: Access multiple sales channels.
Lawrence Dann: Net product offer us optimize shipment and collaborate on merchandising plans among other key features.
Lawrence Dann: This SaaS platform represents a transformative step in unlocking super suites called potential, enabling more seamless and impactful engagement between our suppliers our team and our clients.
Lawrence Dann: As I mentioned earlier, we continued to expand our sales channel by launching on Aliexpress quieting, our supply chain partner access to another major U S marketplace.
Lawrence Dann: I didn't express joins our growing list of U S sales channels, which includes platforms such as Amazon vendor Amazon Sweepy, Walmart Dot com team to talk shop and several others.
Lawrence Dann: We are committed to offering a robust multichannel solution that enables our partners to reach U S consumers more effectively and efficiently.
Launching sales all express further underscore our dedication to a housing market access and driving value across our entire platform.
Lawrence Dann: We continue to benefit from the optimized optimizing.
Lawrence Dann: Initiatives implemented last fiscal year.
Lawrence Dann: Which led to gross margin expansion and lower operating expenses for the corner.
Lawrence Dann: We are also benefitting from a healthier supply chain environment and no longer need to maintain elevated inventory levels as lead times with our international suppliers have normalized.
Lawrence Dann: It's also worth noting that with the growth of a super Sweet we can operate our business with a lower level of inventories leading to.
Lawrence Dann: Improved cash flow generation.
Lawrence Dann: As of September 32024, we've reduced our inventory levels by approximately 18% compared to June 32024.
Lawrence Dann: As we mentioned before we are firmly committed to optimizing our operations to maximize efficiency.
Lawrence Dann: To further this effort with diversified manufacturing base with a new partner in back on <unk>.
Lawrence Dann: Threatening the resilience of our supply chain for both customers and partners in September we completed our first purchase order shipment from this new manufacturer, marking a significant milestone in our own.
Lawrence Dann: Ongoing strategy to diversify our supply chain.
Lawrence Dann: As products begin to arrive in the U S E Commerce sales, we anticipate benefiting from reduced production and logistics expense.
Lawrence Dann: These lower costs will enable us to offer more competitive pricing, while improving margins.
Lawrence Dann: Central factor for long term sustainable growth.
Lawrence Dann: Looking ahead, we will continue to foster each aspect, obviously super suite platform to provide a market leading solution that meets the evolving needs of e-commerce supply chain management and logistics.
Lawrence Dann: By strengthening these areas, we are not only driving efficiencies, but also building a more resilient infrastructure that can adapt to market changes and support scalable growth.
Lawrence Dann: This holistic approach positions us to better serve our partners need from inventory optimization to faster more reliable performance further solid despite our roes as a leader in e-commerce and supply chain innovation.
Speaker Change: I will now turn the call over to our CFO, Kevin <unk> to take you through our financial results in more detail Kevin.
Kevin Vasily: Thanks Lawrence.
Kevin Vasily: Unless referenced otherwise all variance commentary as comparison to the year ago quarter.
Kevin Vasily: Total revenue in the first fiscal quarter was 19 million compared to $26 5 million.
Kevin Vasily: Decrease was driven primarily by higher promotional activity in the year ago period related to selling that inventory.
Kevin Vasily: This was partially offset by growth in our Super Sweet supply chain offerings.
Gross profit in the fiscal first quarter of 2025 was $8 5 million compared to $11 8 million in the same quarter of fiscal 2024 as a percentage of revenue gross margin increased 30 basis points to $44 seven.
Kevin Vasily: Care to 44 four in the year ago period, the increase in gross margin was primarily driven by improved pricing.
Kevin Vasily: Key supplier negotiations and optimizations.
Total operating expenses for fiscal Q1 improved 14% to $11 2 million as compared to $13 million for the same period in fiscal 2024.
The decrease in operating expenses was driven primarily primarily by lower selling and fulfillment expenses, resulting from a combination of lower marketing and promotional activity. This was partially offset by approximately $1 8 million in write downs of certain inventory.
Kevin Vasily: And credit loss reserves.
Net loss attributable to high power in the first quarter was $2 million or <unk> <unk> per share.
Compared to net loss attributable to high power at $1 3 million or four cents per share in the same period of fiscal 2024.
Kevin Vasily: Moving to the balance sheet cash and cash equivalents were $2 6 million as of September 32024, compared to $7 4 million.
Kevin Vasily: At.
Kevin Vasily: At June 32024.
Kevin Vasily: Total debt was reduced by 45% to $3 5 million as compared to $6 3 million.
Kevin Vasily: As of June 32024.
Kevin Vasily: Yesterday, we announced the renewal of our secured revolving credit facility with JP Morgan Chase extends.
Kevin Vasily: Extending the maturity by three years to November 2027.
Kevin Vasily: The new facility has a revolving commitment of $15 million with an accordion feature.
Kevin Vasily: It would allow us to obtain additional lender commitments of up to $40 million.
On a new agreement the interest on borrowing will be.
Kevin Vasily: Sofa, plus two in a quarter to two and a half.
We're pleased with the vote of confidence from a leading institution like JP Morgan Chase and look forward to growing our partnership as we execute on our goals.
Speaker Change: As Lawrence mentioned earlier the work we've put in to optimize our cost structure is starting to bear fruit as reflected in this year's.
Speaker Change: This quarter's year over year gross margin expansion in.
Speaker Change: Reduction in operating expenses.
Speaker Change: <unk> made further improvements to our balance sheet as we reduced our total debt obligations by nearly 3 million.
Speaker Change: In this fiscal first quarter.
In addition to our recently extended credit facility with Jpmorgan Chase.
Speaker Change: We believe these actions combined with the continued growth of our Super Sweet business and optimized cost structure will enable us to deliver on our goals.
Fiscal 2025.
Speaker Change: But that could.
Speaker Change: Our prepared remarks, we'll now open it for questions.
Speaker Change: As a reminder, I'd like to ask a question at this time. Please press star one one on your telephone and wait.
Speaker Change: For your name to be announced to withdraw your question. Please press star one again.
Speaker Change: Our first question comes from Carey <unk> with <unk> research.
Speaker Change: Yes. Good afternoon, maybe let me start with a couple of housekeeping items.
Speaker Change: You had some service income and servicing expenses.
Can you can you give us some information as to what that related to.
Speaker Change: Sure so.
Speaker Change: We've got as part of a super Sweet kind of two components.
Speaker Change: Of the business.
One is kind of a resale or a game.
Speaker Change: Wholesale agreements, we have on the sales side with partners and the other are fee for service related.
Speaker Change: Yeah.
Speaker Change: Business lines, so the service fees.
Speaker Change: Part of that fee for service business line.
Speaker Change: And because it was.
Speaker Change: Think materially enough.
As part of the overall revenue we decided to.
Speaker Change: <unk> disclosed that piece.
Speaker Change: Okay, that's great, let's yes, looking forward to seeing that number.
Speaker Change: Progress.
The other hustle item with you.
Speaker Change: The $1 8 million inventory write down.
Speaker Change: Does that go through the income statement or is it just a balance sheet adjustment.
Speaker Change: Yes, no that goes through the the that goes through the income statement.
So the.
Speaker Change: The roughly 2.7 I think that was.
Speaker Change: In.
Speaker Change: Operating.
Speaker Change: Loss of $1 eight of it was related to the write downs.
Speaker Change: Okay, great great.
Speaker Change: If we look at the top line.
Speaker Change: Feels like you're kind of in the same in the same range as you were in the <unk>.
Speaker Change: In the last quarter.
Speaker Change: Are we is that kind of a baseline we should think of going forward or you had some you had some quarters, where the top line was affected by the different inventory.
Speaker Change: Our strategy from the domain.
Speaker Change: I mean, our main online partner.
Speaker Change: Can you give us some color on.
Speaker Change: Again, we had a baseline <unk> of $19 million a quarter or how should we think of it going forward.
Speaker Change: Yeah. So.
I think it did.
I think it's a good question I think that's the.
Speaker Change: That's probably close to being a baseline.
I think.
Speaker Change: Yeah.
Speaker Change: You kind of rightly pointed out our December quarter last year was.
Speaker Change: Uh huh.
Speaker Change: Extra extraordinarily kind of.
Speaker Change: Seasonal relative to historical patterns.
Speaker Change: And so.
Speaker Change: At least so far not seeing that type of activity, we're only about halfway through the quarter at this point.
Speaker Change: So we don't at.
Speaker Change: At least now expect to see the same type of.
Speaker Change: Seasonal downtrend I think the other thing to point out here too is.
Speaker Change: Well a couple things one in comparison to last year.
Speaker Change: Last year was an extraordinarily strong quarter, but.
Speaker Change: It was impacted by pretty active promotional.
Speaker Change: The work that we did to move inventory so that we could get through.
Speaker Change: Kind of the last stages of the high cost inventory from the prior inventory buildup one.
Speaker Change: Two.
We are.
Speaker Change: As Ken Lawrence was pointing out they've been in the process of.
Negotiating.
Speaker Change: With our supply chain looking for more efficient manufacturing partners.
Speaker Change: And.
Speaker Change: As part of that transition.
Speaker Change: We saw some delays in getting product over the summer.
Speaker Change: And so that had a bit of a dampening effect.
Speaker Change: On the top line there was demand.
Speaker Change: We just didn't have enough product to do that work through that.
Speaker Change: Transition and yeah, we believe it will no longer be a drag on the top line, but that had a little bit of an impact too. So.
Speaker Change: I think from a standpoint of.
Speaker Change: Is it a baseline number I think thats, a reasonable number to think about kind of.
Speaker Change: What the business can do kind of without any of the other levers that we can pull and then from there we expect our ability to kind of continue to grow the top line to kind of resume.
Speaker Change: So just so I understand you switched some production to Vietnam, and and maybe they will there'll be the delay in getting some of that product over during the quarter.
Speaker Change: Well a combination of the.
Speaker Change: Vietnam.
Speaker Change: New supplier coming on it and.
Speaker Change: Uh huh.
Speaker Change: Switching to new suppliers within within China as well okay. Okay.
Speaker Change: Over the last 15 months or so you've announced three new promising channels Teu peak talk and.
Speaker Change: Any buyback CRE ate.
Speaker Change: Any.
Speaker Change: Yeah.
Speaker Change: Any of those three we should really pay attention to or you're still kind of.
This kind of equally.
Speaker Change: Beginning or equally attractive to you I'm kind of wondering if there's going to be a strong kind of a second channel for you beyond your main main partner.
Laurent: Laurent you take this one.
Laurent: Yeah sure I think about the three T. Mo has the best.
Potential D.
Laurent: The platform fits more of our product portfolio.
Laurent: And the marketing efforts they are putting together behind probably the best and strongest among three after.
Laurent: So far aliexpress is pretty new.
Still working with the team we got some orders scan already.
Laurent: But they are small, but still working with their teams to adjust and working.
Laurent: Working with better.
Internal.
Laurent: Policies and.
Laurent: Strategies.
Josh I'll take talk.
Speaker Change: The fate of ticked up wasn't clear now with the New administration I think it has a much much better hope to continue.
Speaker Change: Continue the business.
Speaker Change: But again that.
T Mobile's still fits all our hour.
Speaker Change: Product portfolio better than the other two subs.
Speaker Change: He wants to put them.
Speaker Change: On one of those three optics PMO too.
Speaker Change: Yeah.
Speaker Change: Okay. That's helpful.
Speaker Change: Can you give us an update on Super Sweet I think you were.
Speaker Change: Maybe in the low teens in terms of revenue percentage there in the previous quarter.
Speaker Change: Is that the right trajectory.
Speaker Change: What are your expectations for surplus rate going forward.
Speaker Change: Sure.
Hi, Kevin.
Speaker Change: Can we disclose the percentage of our sales are.
Speaker Change: Okay, Yeah, yeah, yeah, yeah, because we've talked about there.
Speaker Change: Yeah. So so we are super suite today.
Speaker Change: Accounts about 10% of our overall sales.
Speaker Change: The platform is a.
Speaker Change: Connector or central places to connect.
Speaker Change: Every aspect of box successfully come back into the sales.
The U S consumers, including online and and even future offline.
Speaker Change: Now.
By saying that we have lots of partners, we have even though we didn't announce that publicly we are testing two new logistic partners.
Speaker Change: That joined onboard and we are having a partnership with dialog which is subsidiary.
Speaker Change: And international which will.
Speaker Change: Potentially need.
Speaker Change: Half supply chain financial financing products into its super Sweet platform, which enables.
Speaker Change: Which is another benefit for suppliers to work with now for the supplier supply chain side on our supply chain partners. We have made a pretty good progresses, having them on board.
Speaker Change: But having the sales having that supply chain on board is what you're saying on having sales to start to pick up.
Speaker Change: You will see as you start to see.
Speaker Change: The settings are growing snowballing.
Speaker Change: Usually in the three to six months.
Speaker Change: Paradigm after the supply chain on board.
Speaker Change: So.
Speaker Change: And we have a pipeline of them coming coming in we have partners that are helping.
Speaker Change: Growing the base of the supply chains.
Speaker Change: And that platform I'm pretty pretty confident.
Speaker Change: It's for growth in the future that I believe will become the.
Speaker Change: The biggest.
Speaker Change: Gross driver in the future.
Speaker Change: And also having the supply chain.
Speaker Change: Partners onboard will help us in two things one is big enough so that we reduce our.
Speaker Change: Cash need for stocking inventories now secondly, it will help us to prepare for the potential incoming tourists.
Speaker Change: The increase.
Speaker Change: Hum.
As we don't we don't we're not responsibly for importing a purchasing of maintaining the inventories in the United States. So that will help together was efforts.
Speaker Change: Getting manufacturers.
Speaker Change: Replaces all of that in China, We are also researching and getting more.
Potential partners and in the United States.
Speaker Change: So.
The Super Suite is not just for supply change that outside U S is also for the.
Speaker Change: U S branded manufacturer supply chain as well.
Speaker Change: Yeah I mean this is the super suites.
Speaker Change: <unk> platform is meaningful because.
Speaker Change: For for me at least for the next the foreseeable future.
Speaker Change: You mentioned potentially.
Speaker Change: Potentially upcoming.
Speaker Change: Increases in carry some I'm kind of wondering how you're looking at that whole situation how much of your.
I mean would you try to move a greater percentage of your production to Vietnam or.
Speaker Change: I'm also kind of wondering what kind of lessons you learned from the last time around when <unk> introduced and consumers' reaction competitors' reaction I mean, just pass along the price increase and nothing much else happens or how are you looking at the whole situation.
Speaker Change: Right right right. That's that's a great question, we have been preparing it does support our last few years.
Speaker Change: Ever since that we had that impact of 25% incur.
Speaker Change: Increase.
Speaker Change: We started.
<unk> is one of the efforts. So my view on this is that now we have the supply chain partners the week like not not.
Speaker Change: Not only just the winds that working with us in the partnership also the ones that we manufacturer for asthma, we buy inventory.
Speaker Change: Everyone has some plans to.
Speaker Change: Uh huh.
Speaker Change: For this particular event.
Speaker Change: So in the in the worst case, I believe our suppliers and manufacturers. They some of them already have a plan to two product to manufacture alternatively outside China.
Speaker Change: The wines that who who evaluated could not move out of China.
Speaker Change: Every.
Speaker Change: Everyone will face the same problem so.
Speaker Change: Unfortunately for those part of the product categories says no other countries could produce as effectively.
Speaker Change: It's.
Speaker Change: We have no choice, but pasta.
Speaker Change: Pass the cost to the consumers.
Speaker Change: In that case doesn't.
I mean.
Speaker Change: While the raising the price is is is not a good defense to have.
Speaker Change: But end of the day since everyone has to be forced to do that it still comes down to like who can effectively sourcing.
Speaker Change: Be like more effectively.
Speaker Change: Doing the merchandising marketing and fulfillment.
Speaker Change: For Florida, Florida sales now that parts, we do pretty well so what I mean is that Florida for the ones that could avoid the huge tariff people will act on it it's not just us for the ones that I was just no other countries can be.
Speaker Change: Substitutions to.
Speaker Change: China manufacture the price will increase it by its just going to be like a whole market.
Speaker Change: Activity, we are not.
Speaker Change: And the date will be the same just everyone will raise the price.
Yes, yes.
So as long as a week okay great.
Speaker Change: Yeah, sorry, so long as we do our parts.
Speaker Change: It really effectively and quake.
Speaker Change: And maintain a low inventory.
Speaker Change: And b be flexible.
Speaker Change: I think thats, the most important thing to adapt to potential impact.
Speaker Change: Preparer.
Speaker Change: And be able to act quickly.
Speaker Change: And have strong partners.
Speaker Change: Yeah changes, it's always not always bad it suffers race.
Speaker Change: But that's the worst case.
Speaker Change: Maybe China will have a <unk>.
Speaker Change: Could talk with Trump who knows.
Speaker Change: But in case that doesn't talk well.
Speaker Change: Thank our partners and ourselves, we all have certain well well well much better prepared than four years ago.
Speaker Change: Okay. Good maybe a last question for Kevin we talked about.
Kind of the baseline for revenue and then I'm looking at gross margins over the last two or three quarters and you've been in the mid to high Forty's.
Speaker Change: Is that also kind of a kind of a reasonable range going forward.
Speaker Change: So it's a nice pick up from what you were.
12, 18 months ago.
Speaker Change: Yeah, I think so the what youre seeing in that uplift.
Speaker Change: Is a function of.
Speaker Change: The work we did over the last.
Speaker Change: Let's call it year and a half with our with our supply chain Vietnam move will help that.
Speaker Change: The move that.
Speaker Change: I referenced with you know a little bit of this supply issue.
Speaker Change: Yep.
Speaker Change: That move was made with the.
Speaker Change: With the intent on bringing kind of unit cost out as well and so yeah, we feel good about where gross margins are.
Speaker Change: On that side, so yeah, I think that that should be the target.
Speaker Change: The one thing that could swing that.
Speaker Change: Is is container cost, but right now container costs are kind of behaving.
Speaker Change: Quite nicely so.
Speaker Change: I would I would suggest people that are kind of looking at kind of the gross margin line to pay attention there.
Speaker Change: But the work that we can really control word I think we've we've set a higher bar now so I think we feel good about where gross margins are and feel like thats. It.
Speaker Change: A decent place for people to be kind of a.
Speaker Change: Targeting for modeling.
Right.
Speaker Change: One last thing I want to add onto it.
If if our super Sweet start to take off then the gross margin maybe you will see that Laurent because sort of supersede model is different than our traditional in house product model, where we buy and sell so youll see a lot of expenses built in into purchase cost.
Speaker Change: So okay, but until then.
Speaker Change: Just to give you more information.
Speaker Change: Great. That's helpful. Thank you very much.
Speaker Change: That concludes today's question and answer session I would like to turn the call back to Kevin Vaseline for closing remarks.
Kevin Vasily: Okay. Thank you everyone for joining us on the call. We look forward to speaking with you again in the upcoming quarter.
Kevin Vasily: Have a good day bye.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
[music].
Kevin Vasily: Okay.
Kevin Vasily: Okay.