iPower Inc. (NASDAQ:IPW) Q1 2024 Earnings Call Transcript
iPower Inc. (NASDAQ:IPW) Q1 2024 Earnings Call Transcript November 14, 2023
iPower Inc. beats earnings expectations. Reported EPS is $-0.04, expectations were $-0.06.
Operator: Good afternoon, everyone, and thank you for participating in today’s conference call to discuss iPower’s Financial Results for its Fiscal Year First Quarter 2024 ending September 30, 2023. Joining us today are iPower’s Chairman and CEO, Mr. Lawrence Tan; and the company’s CFO, Mr. Kevin Vassily. Mr. Vassily, please go ahead.
Kevin Vassily: Thank you, operator. Good afternoon, everyone. By now, everyone should have access to our fiscal first quarter 2024 earnings press release, which was issued earlier today at approximately 4.05 p.m. 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, 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 and webcast are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither historical facts nor assurances of future performance.
Instead, 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, they are subject to inherent uncertainties, risks and changes and circumstances that are often difficult to predict, maybe outside of our control. Our actual results and financial condition may differ materially from those indicated in these forward-looking statements. 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 15, 2023.
Do not place undue reliance on any forward-looking statements, which are being made only as of this date. Except as required by law, the company undertakes no obligation to revise or publicly release the results of any revision to any forward-looking statements. With that, I’d like to turn the call now over to iPower’s Chairman and CEO, Lawrence Tan. Lawrence?
Lawrence Tan: Thank you, Kevin and good afternoon everyone. During the quarter, we continued to generate revenue growth overcoming a record comp in the year ago period. This was due to in part to the continued strong demand for our high-quality products as well as material growth in our super suite supply chain partnerships, which is now generating approximately $7 million in annualized run rate revenue. Sales of our in-house products were resilient and once again, present over 90% of our revenue. Diving deeper, we delivered strong results across the categories of fans, shelving and outdoor pergola furniture. On previous calls, we have stated our desire to diversify our product sales mix beyond hydroponics, and fiscal Q1 marked the second consecutive quarter that non-hydroponics accounted for over 75% and of the total revenue.
That said, we remain committed to providing high quantity hydroponics products and will continue to invest in the space as dictated by the consumer demand. We also began to tap into social commerce channels to fortify our brand reputation, while fostering a virtuous ecosystem of content-driven drive to our product. For example, we are an approved seller of TikTok’s short-form video platform, which will allow us to leverage TikTok’s feed algorithm to present our product to the right users based on their activity. The short-form videos featuring our products present by influencers in the program will not only drive high-quality impressions but will also build a repertoire of our trusted review and testimonials. As I mentioned earlier, we are pleased with the ramp of our super suite supply chain partnerships, which is now generating approximately $600,000 in monthly revenue.
As a reminder, the goal of our super suite supply chain partnership offering is to add value to strategic partners with innovative product portfolio that could benefit from our rich expertise in supply chain, fulfillment and merchandising. The super suite business is gaining solid momentum and we are working with us through a growth pipeline of prospective partnerships. We are pleased with the early results from these efforts as well as invaluable insights that we are gaining from this accelerating area of our business. Turning to OpEx. We continue to make headway with our reduction of warehousing and inventory expenses. We are also now beginning to realize the benefit of our efforts to reduce our level of higher cost inventory through gross margin expansion.
Image by BrightAgrotech from Pixabay
That said, at the operating levels, we have begun to see a shift in demand between sales programs at 1 of our key sales platforms, which is having an impact on operating margin. We are working through various action items and have several levers to pull to offset these fees moving forward. As we look to calendar 2024, consumer demand is resilient for our portfolio of high-quality, affordable product. We are taking the right steps to diversify our revenue mix, achieve greater operational efficiencies and have made material improvements to our balance sheet, which Kevin will highlight shortly. We are well positioned to capitalize on prospective acquisition opportunities as well, as we continue executing our profitable growth initiatives. I’ll now turn the call over to our CFO, Kevin Vassily, and take you through our financial results in more detail.
Kevin?
Kevin Vassily: Thanks, Lawrence. Unless referenced, otherwise, all variance commentary is compared to the prior year quarter when we dive into our fiscal Q1 results. Total revenue increased 2% to $26.5 million compared to $26 million in the prior year. The increase was driven in part by growth from our super suite supply chain offerings as well as strong sales from our in-house product portfolio. Lawrence mentioned earlier, the year ago quarter was an all-time record sales for the company. So we’re proud to have continued to drive growth on a year-over-year basis. Gross profit in the fiscal first quarter of 2024 increased 18% to $11.8 million compared to $10 million in the same quarter of fiscal 2023. As a percentage of revenue, gross margin increased 600 basis points to 44.4% compared to 38.4% in the year ago period.
The increase in gross margin is primarily driven by more favorable product mix as well as having worked through much of our higher-priced inventory. Total operating expenses for fiscal Q1 improved 11% to $13 million compared to $14.6 million for the same period in 2023. Decrease was driven primarily by a $3.1 million decrease in impairment loss on goodwill, partially offset by increased selling and fulfilling expenses. Net loss attributable to iPower in the fiscal first quarter improved $1.3 million or a loss of $0.04 per share compared to a net loss of $4.2 million or a loss of $0.14 per share for the same period in fiscal 2023. The improvement in net loss was driven by the aforementioned higher gross profit and lower operating expenses. Moving to the balance sheet.
Cash and cash equivalents were $2.7 million as of September 30, 2023, compared to $3.7 million on June 30, 2023. Total debt stood at $7 million compared to $11.8 million as of June 30, 2023. The decrease was driven by our continued efforts to pay down debt, resulted in a 48% reduction in net debt to $4.3 million as compared to $8.1 million as of June 30, 2023. Cash flow from operations for fiscal Q1 improved significantly to $4 million compared to less than $400,000 in the prior fiscal year. Increase was primarily driven by improving supply chain conditions that have allowed us to run the business with lower levels of inventory. As Lawrence mentioned earlier, our inventory levels are in better alignment with what we view as a stable state. As of September 30, we’ve successfully brought down our inventory by 26% to approximately $15 million compared to June 30, 2023.
Between the warehouse savings, lower cost of goods sold to improve gross margins, coupled with we think is continued strong demand for our portfolio of in-house products as well as a promising start to our super suite business, we feel like we’ve got a strong foundation in place to continue to drive flow in 2024 and return us to profitability. This concludes our prepared remarks, and we’ll now open it up for questions.
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