Fitell Corporation

Good day, everyone, and welcome to FITEL Corporation's fiscal year of 2023 financial results conference call. All participants will be in a listen-only mode. Should you need assistance, please see a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one on your touchtone telephone. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. And at this time, I'd like to turn the floor over to Yuru Xu with Investor Relations. Ma'am, please go ahead.

Thank you, operator. Thank you all for joining us for FITEL's physical year of 2023 financial results conference call. FITEL has issued a press release announcing the physical year of 2023 financial results yesterday afternoon. A copy of FITEL's annual report on Form 20F can be found on SEC.gov. Please note that this call is being recorded live and will be available for replay. I ask that you please take a moment to review our forward-looking statements. During the call, we will be making forward-looking statements about companies' performance and business outlook. These statements are based on how we see things today and contain elements of uncertainty. For additional information concerning the factors that can cause actual results to differ materially from our forward-looking statements, please refer to our cautionary statement and risk factors stated in our annual report on Form 20-F. Joining me today on the call are the CEO of the company, Ms. Yingying Sanlu, and CFO, Ms. Jonathan Kong. I will now turn the call over to our CEO, Sam. Please go ahead.

Thank you. Thank you everyone for joining us today. I will begin today's call by providing an overview of our business performance during the fiscal year of 2023. We will then provide a detailed overview of our fiscal year 2023 financials, highlighting the financial performance of each product category. Now please turn to slide six. I'd like to briefly introduce our company for those who are new to our story. Fitout is an online retailer of quality gym and fitness equipment. We also provide other complimentary fitness service. Our mission is to build an ecosystem with a whole fitness and wellness experience powered by technology. In 2021, we've launched the following three new business verticals. First, Smart Connect equipment, which includes interactive bites and workout mirror. Second, AI power interactive platform. It is an online training content to interact with trainers, follow members, and track workout progress. Third, our Protech Fitness Club licensing, we target at health conscious customer with high disposable incomes. Now please turn to slide seven. I would like to briefly discuss our fitness brand, Mastermotion. which is a supplier of home gym and commercial strength training equipment. I emphasize on weights, bar, power reps, and et cetera. Rapid motions, it is cover the products that are similar to muscle motions, but with a strong focus on commercial items. Freetech is focused on cardio equipment, such as doing machine exercise bike and treadmill. In May 2021, we have initiated our Smart Connect equipment that includes interactive bike, treadmills, and walk-out mirrors with built-in touchscreen and training content platforms. Expect to launch in actually March 2024. We have launched our licensing business with My Steps Training Clinic in late 2021. We have helped MICEPS opening six field centers in Eastern China as of April 25th, 2022. Going forward, we are seeking opportunities to expand our licensing partnership footprint in the Asia-Pacific regions. We are also developing an AI-powered interactive platform called One Final Round, elite and customized solution which comes with pre-installed with our interactive fitness equipment, visual and trackable workout progress, personalized one-on-one remote coaching, and online and offline user participating in the training either on their own schedule or while live streaming to interact with other subscribed members. And this slide will be going to the scrolls strategy as you can see. which is that we have going to increase fitness equipment product marketing, develop of private label cardio equipment, development of gym direct mobile applications, expansion of licensing business, development of smart connect equipment and digital fitness program. And the last but not least is opportunity to explore others remedy screen. Thanks for your time. Now I'll pass on to our CFO, Jameson, who gets the financial highlights.

Thank you, Sam. Hi, I'm Jameson Kong, the CFO of FITEL. I will review the fiscal year of 2023 financial with you, and I will also be available for the Q&A session if you have any questions afterwards. Before I review the numbers, let me remind you that all the figures I discussed are for this reporting period, which is the fiscal year and June 30th, 2023, unless I state otherwise. Anyway, additionally, any year-over-year comparison is to the same period last year, which is June 30th of 2022. Now, let's go over our 2020 financial results. I will begin with an overview of our consolidated results first. In the fiscal year of 2023, FITEL generated approximately $4.8 million in revenue. Our gross profit is about $2.2 million, with a net loss of approximately $1.6 million. Our gross profit margin is fairly consistent with last year, which is about 45.3%. I will deep dive into each category and segment in the next slide. In this slide, I will dive deeper into the financial performance of each of our product categories. Our revenue consists of three product categories, which includes merchandise revenue, sales of consumable products, and revenue from licensing customers. Merchandise revenue represents the sale of our gym and fitness equipment products. Consumable products are wellness lifestyle products, last but not least. The licensing business includes licensing and management consulting income and agency fee for distributing other miscellaneous items. Merchandise revenue was about $4 million for the fiscal year end June 30th, 2023. It accounts for approximately 84% of our total revenue. The decrease was mainly attributable to the decrease in sales order. It was due to the drop in disposal income of Australian households in general caused by the inflation and increasing interest rate in the Australian market. In addition, there is also a slight increase in the average revenue per order by roughly 3%. Consumable products includes but not limited to coffee and other nutritional supplement products. The sales of consumable products was about $223,000 in fiscal year 2023 which account for about 4.7% of the total revenue. And the sales of consumable products increased about 11.6% compared to the same period last year. The increase was mainly due to our efforts in diversifying our revenue stream to mitigate other electric effects. Our licensing business generated approximately $540,000, and it accounts for approximately 11.2% of our total revenue The decrease was mainly due to the temporary suspension of our overseas expansion plan due to the inflation also raising interest rate in the global markets Our growth in both number of customer and orders from FY2022 to FY2033 was affected by invasion and also the rise of interest rates in Australia. We have received about 15,000 orders and acquired approximately 23,000 customers in 2023, a decrease of 42.6% and 41.1% respectively, compared to the same period of 2022. The average order value per sales order has slightly decreased by 3% in fiscal year 2023 compared to the same period last year. By the end of fiscal year 2023, we have 172,000 members possibly, compared to only roughly 167,000 members at the end of FY2022. Despite it was a challenging year with declining revenues for us, especially in the merchandise sales and licensing business segment, our management team remains dedicated to working tirelessly to promote our products and retain our loyal customers. And instead of being disappointed by the downfall of the global economic market, we have doubled down our efforts to promote business growth. We are committed to innovative strategies market research and we will continue to expand the licensing business surface again in the Asian market when we identify the beneficial opportunity. We believe that the community will slowly make a turn of one so resilient and with the rewards of growth and success in the near future. Next, I would like to go over some of the key subsequent events after our fiscal year 2020. On August 8th, 2020, we have successfully listed on Nasdaq and raised a net profit of approximately $13.6 million for the issuance of a 3 million share of common stock. And also on October 10th, the board has promoted Sam Yingying Lu, the general manager of GK Wellness, to the CEO of Fitel, the parent company, and also the list goal. With that, I... I will now turn the call back to our investor relation, Yin Yu. Thank you.

Thank you, Jamartin. We will now begin the question and answer session. Operator, please.

Ladies and gentlemen, at this time, we'll begin the question and answer session. To ask a question, you may press star and then one on your touchscreen telephones. If you are using a speakerphone, we do ask that you please pick up your handset prior to pressing the keys to ensure the best sound quality. To withdraw your questions, you may press star and 2. Once again, that is star and then 1 to join the question queue. We'll pause momentarily to assemble the roster. Once again, that is star and then 1 to ask a question. And we do have a question from Stephanie Wang from System 1. Please go ahead with your question.

Hello, good morning. I see that there was a significant decline in the revenue for the company. If you could please elaborate more on the significant decline and also, has the company taken any strategy or plans to implement to reverse the declining trend? Thank you.

Okay, thanks for the question. As I've already mentioned, when I go to the slide, one of the main reasons why we are facing the decline in revenue in the past fiscal year was mainly due to the inflation and also the sharp increase in interest rate in Australia. In fact, not only in Australia, it's also applicable to the whole global markets. So, all in a sudden, most of our potential customer, the disposal income has dropped significantly. So this is one of the main reasons why our revenue has been dropped by around 40% as compared to the previous fiscal year. Going forward, we are going to undertake a few strategies. For example, with the new capital we raised from the IPO, we are also planning to expand our business both within Australia and also to the global market. Within Australia, because right now we are more focusing on in the state, but with the new capital we have raised from the IPO, hopefully we can also improve our logistics and also our warehouse management also in other states to provide better sales support to other states. So hopefully we can also see some organic growth from this area. And on top of that, we are also planning to apply our business model on to other countries, including but not limited to Sub-Saharan Asia country and also maybe to the United States as well. But all of these are in the VDP stage. But our management, we have a diversified background. We also have management and business experience in the other jurisdictions before. So hopefully we can reapply our business model on those jurisdictions as well. Sam, let us see whether you have anything, whether you would like to add. Thank you.

Thanks, Jameson. I think you pretty much covered most of them. Apart from the extra 3PL in different regions like Brisbane and Melbourne, we also actually plan to have a 3PL in the USA market as well. We have already started the process and have connections to get to know the pricing and the rates in the USA. So now we actually, we're just about to decide which port we are going to do the market test, so either LA or actually San Francisco, because those two ports are the one actually quite economical, and so it's actually close to the sea-wide. So for the shipment purpose, and also obviously it's close to China, obviously supplier, manufacturer. And on the other hand, I understand there will be a concern about the decrease in revenue, However, we have, as Jonathan said, we have done effort to boost the market and also there's so many changes happening internally of the operation to boost the sales. For instance, just for the October, which is not officially October just passed, we have already had a 24% increase in revenue compared to 2022. Yes, the result should be finalized obviously later on this stage. but just wanna share some news with you guys first. So hence, I strongly believe the last quarter of the 2023, we have really see the positive results of all those strategies in place. So moving forward, I do believe... Okay, all right.

Thank you so much for the detailed and thorough answer. I guess my next question and my last question would be that, like, how do you manage to, how do you plan to manage the cash flow in the future? Do you plan to reinvesting, paying dividends, or does the company have any plans for pursuing any acquisition in the future?

In the short run, I think we are focused on reinvesting our internal generative fund onto our business. because we believe that we are still in the growing stage despite the economic downturn in the last 12 months. So most likely we will focus more on reinvesting ourselves going forward and all the development plans we mentioned just now we will also leverage some of our cash. So that's why in the short run we don't think we will issue any dividends, but we are sure want to reward our shareholders in the form of capital appreciation. And we are also going forward also in the middle terms, we are also constantly evaluating different M&A opportunities. If there's suitable targets arise, we will also make a move and try to increase our shareholders' value. But at this moment, we haven't identified any sort of MIA target yet, but we are keep looking. Thank you.

Okay. Okay. Understood. Thank you so much. And that's all the question I have.

And once again, if you would like to ask a question, please press star and then one. And ladies and gentlemen, that concludes our question and answer session. I'd like to turn the floor back over to Yuru for any closing remarks.

On behalf of FITEL, we want to thank you for your interest and participation in this call. If you would like to speak with us further, please contact Investor Relations. The contact information is listed at the end of the press release. Operator, you may conclude the call.

Ladies and gentlemen, the conference has now concluded. We thank you for joining today's presentation. You may now disconnect your lines.