iPower Inc. (NASDAQ:IPW) Q2 2024 Earnings Call Transcript
iPower Inc. (NASDAQ:IPW) Q2 2024 Earnings Call Transcript February 14, 2024
iPower Inc. misses on earnings expectations. Reported EPS is $-0.06 EPS, expectations were $-0.05. IPW isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
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 Ended December 31, 2023. Joining us 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, 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 4:05 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, the 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 difficult to predict 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. 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 the date of this call. 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 would like to now turn the call over to iPower's Chairman and CEO, Mr. Lawrence Tan. Lawrence?
Lawrence Tan: Thank you, Kevin, and good afternoon, everyone. In our fiscal second quarter, we continue to expand gross margin, drive down operating costs and generated another period of positive cash flow from operations. We also gained further traction in our SuperSuite 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 the preferred level, and we are well equipped to meet the demand with the high-quality 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 SuperSuite supply chain offerings. We have also created a strong brand presence on social channel -- commerce channel like TikTok shop, where we are an approved seller for both short-form videos and live shopping. 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 SuperSuite business, which is growing at a strong clip. The acceleration of revenue alongside a growing pipeline of prospects, reflects the strength of our 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 SuperSuite business, we have also continued to pursue additional sales channel in the U.S. to expand our reach, diversify our client base and explore omnichannel opportunities. For example, we currently have relationships with Home Depot and Lowe's, allowing us to sell product through their captive e-commerce sites. Although we have initiated the -- with a small subset of our 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 these partnerships 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 fulfillment operations. We no longer bear the burden of additional warehousing expenses as we have sold through the bulk of our excess inventory. With the normalization of supply chain, we can run our business with lower levels of inventory, specifically due to faster overseas shipping lead times. As of December 31, we have brought down inventory level by 23% compared to June 30, 2023. We have also begun to outsource our warehouse staffing to a third party, lowering our production overhead we will -- 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 position for future growth. We are seeing early signs of normalized order volume with our largest channel partner and look forward to continue providing them with our high-quality products. These actions, coupled with the acceleration of our SuperSuite 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 Vassily, and take you through our financial results in more detail. Kevin?
Image by BrightAgrotech from Pixabay
Kevin Vassily: Thanks, Lawrence. Unless referenced otherwise, all variants 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. The decrease was 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 SuperSuite supply chain business. Gross profit in the fiscal quarter of 2024 was $7.3 million compared to $8 million in the same quarter of 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. The decrease was primarily driven by lower selling fulfillment and marketing expenses. 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. Net loss attributable to iPower in the fiscal second quarter improved 42% to $1.9 million or $0.06 per share loss compared to a net loss of $3.3 million or $0.11 per share loss for the same period in fiscal 2023.
The improvement in net loss was driven primarily by the higher gross margin and lower operating expenses. Moving to the balance sheet. Cash and cash equivalents were $1.5 million as of December 31, 2023, compared to $3.7 million in June of 2023. Total debt 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, 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 operations. As Lawrence mentioned above, the work we put in place to reduce our supply of high-cost inventory and optimize our cost structures to -- sorry, continues to bear fruit as we have achieved another period of 40% 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've 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?
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