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spk00: Thank you for standing by, and welcome to the iPower earnings call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference may be recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your host, Kevin Vasily. You may begin.
spk05: Thank you, Lateef. Good afternoon, everyone. With me on the call today is Lawrence Tan, our chairman and chief executive officer. By now, hopefully everyone has had a chance to access our third fiscal quarter 2021 earnings release in Form 8K that was issued today after the market closed. These documents are available on our website, www.meetipower.com. Before we start, bear with me. You've got to draw your attention to our safe harbor statement. Mandavid's prepared remarks contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, are forward-looking statements, including but not limited to anticipated revenues from the hydroponics equipment and accessories business, the actions and initiatives of current and potential competitors, the company's ability to introduce new products, the company's ability to implement capacity expansion, market acceptance of new products, general economic and business conditions, the ability to attract and retain qualified senior management personnel and research and development staff, and other risks detailed in the company's filings with the Securities and Exchange Commission. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations assumptions, estimates, and projections about the company and the industry. The company undertakes no obligation to update forward-looking statements to reflect subsequent or current events or circumstances or to changes in its expectations, except as may be required by law. Although the company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that these expectations will turn out to be correct, and investors are cautioned that actual results may differ materially from anticipated results. With that over, I'd like to turn the call over now to Lawrence Tan.
spk04: Lawrence. Thank you, Kev, and good afternoon, everyone. We are pleased to report a strong fiscal Q3 in our first earnings release as a public company. Even with lessening shipping times and congestion in the LA port, our revenue grew nearly 35% year-over-year and income from operations grew 132%. Gross margin in the quarter was over 43%, a record high for us as a company. At the end of January, we closed a much-needed $3 million convertible note financing that we were able to immediately deploy into our supply chain As a result, we had a very strong sales month in March and one of the best sales months in company history. iPower is a data and technology-driven company. Data informs all of our business decisions. This is a very evident quarter in our gross margin performance, which benefited from the contribution of our in-house blended product portfolio. Extensive product and market data collection are used to drive our product design, development, and merchandising efforts. We have over 2,600 in-house SKUs, which represent just over 10% of the total SKU we carry, but drove over two-thirds of our revenue in the quarter. We are very good at bringing product to market and have the features and benefits for our customers and at attractive margins for us. Having been an e-commerce business since the founding of the company, we have a deep understanding of how to leverage online channels, and the experience and the footprint we have online will allow us to quickly pivot to adjacent product categories when we see opportunities. We also believe our focus on data and technology positions us extremely well to serve two attractive end markets in the hydroponics industry, the home hobbyist market and the small commercial cultivator market. Both these segments require market-specific products and can be effectively and more efficiently served through an e-commerce solution. Our IPO completed in May was the first meaningful growth financing as a company. iPower now has the capital needed to both drive organic growth as well as pursue strategic acquisitions. Without any meaningful outside capital, iPower was able to grow organically between 25% to 35% annually. With the capital in hand, we are planning to invest more in R&D to accelerate new product introductions, to expand our already robust supply base, to amplify our brand awareness through marketing, and to broaden our sales channels with additional partners. For acquisitions, we plan to target products and brands that complement our in-house portfolio that are good fits for an e-commerce model and can bring talented people into the organization. The good news for us is that this is a large fragmented market with a lot of great companies and brands. We are confident that there will be a number of firms that will be great fits for the iPower model. Finally, I want to say that iPower has a number of tailwinds that make us excited about the future. E-commerce adoption accelerated over the last year. The regulatory environment continues to evolve more favorably, and consumer interest in hydroponics and gardening continues to increase. These tailwinds play to our strength as a company, and we'll plan to take advantage of them. Now I'll turn it over to our CFO, Kevin, to discuss the third quarter financial results in detail and provide some color our full year of fiscal 2021. Kevin?
spk05: Thanks, Lawrence. We are pleased to report our third fiscal quarter of 2021. Net revenues for the quarter were $13.1 million, which was higher than the initial projection that we laid out in our S-1 for our IPO and that we communicated during the IPO Roadshow. That projection was $12.25 million at the midpoint of the range that we had provided. We exited the quarter with good momentum thanks to two factors. First, some of the supply chain stresses that we started seeing in December 2020, mainly on shipping times across the Pacific and congestion in the ports in Los Angeles, started to ease. This allowed us to access more product from our suppliers to meet demand. Second, we completed a convertible note financing ahead of our IPO and we were able to immediately use the proceeds of that that, quote, primed the pump with some of our key suppliers. As a result, the month of March was a very strong sales month for us in absolute dollar terms and one of the better months in our company's history. Sales growth of our in-house branded products remained strong as a percent of our total sales in the quarter. Our in-house brands made up 68% of sales, which was similar to the two-thirds of sales we saw for in-house brands in the second half of calendar year 2020. From a channel perspective, approximately 88% of sales went through our e-commerce channels, which includes our third-party channel partners, as well as our own in-house captive channel, zenhydro.com. This was a little higher than what we saw in the second half of calendar year 2020, where we saw approximately 85% of our sales run through e-commerce channels. Sales mix had a favorable impact on gross margin in the quarter. Gross margins were 43.9% as compared to 32.3% in the same quarter last year. While sales mix between in-house brands and third-party products that we sell is the largest variable in our gross margin, there are other factors that can move the needle as well. This quarter, our ability to push larger manufacturing runs with some of our suppliers and to ship in larger quantities helped us. Input costs can also be a factor, and I imagine we'll get some questions about this later, but in this quarter completed, March 31st, input costs did not materially impact margins. And then finally, the mix of products sold within our in-house brand category can have an impact. So product type, product age, volumes, in-stock availability, all these things have impact. In this quarter, these factors all align favorably. Selling general and administrative expense increased to $4.97 million in the quarter compared to $2.82 million in the same quarter last year. The increase was primarily due to an increase in sales volume, increases in cost and preparation to go public, and investments in staff and programs, including marketing programs, to support our longer-term growth strategy. This includes work on overhauling our captive e-commerce platform, zenhydro.com. The biggest increase was in G&A, which increased to 19.5% of net sales from 11.8% of net sales in the prior year quarter. Over time, the G&A line will be the expense line where we expected to be able to generate some operating leverage. Given our third-party e-commerce channel strategy, selling costs are going to scale more or less linearly with sales volumes over the next couple of years until we can bring more of our volumes up on our captive channel. Income from operations increased to approximately $788,000 dollars from approximately $340,000 in the same quarter last year. It's an increase of 131%. This was above the initial estimate of income from operations growth that we provided in our S-1 and on our IPO roadshow of an increase between 87% and 125% over the prior year quarter. The increase was driven by increased sales volume, and the increase over our initial estimate was driven by higher than forecasted sales volume. As a percent of net sales, income from operations was 6% in the quarter. As a note, we do not provide non-GAAP results or financials for comparison purposes, and in particular, we don't provide an adjusted EBITDA metric that some others in our peer group provide. We do think that income from operations is an okay approximation for that metric, at least for now, largely because historically we've had very little DNA in the traditional sense and have not historically had many non-cash or one-time charges. However, in this quarter, we do have some non-cash charges, and I'll walk you through some of those that show up in our other income and expense line. Other net expense in the quarter was made up of interest expense, financing fees and other non-operating income and expenses that totaled $718,000 in the quarter. That was up from $33,000 in the same quarter last year. There are two one-time non-cash items of note in this quarter. First, a net gain of $175,000 in non-operating income from the forgiveness of a PPP loan that we secured during the pandemic. Second, a non-operating expense of $812,434 pertaining to our convertible note offering that we did in January of 2021. It consists of debt discount amortization and a change in fair value of the conversion feature and warrant liabilities associated with this convertible offering. Without these two items, other net expense would have been approximately $97,000 in the quarter, which was made up of interest expense and financing charges. Income before taxes was $30,990. The provision for income taxes was $237,813. And the net loss for the quarter was $206,823 for a fully diluted loss of a penny per share. If you back out the one-time non-cash items, Our income before taxes would have been approximately $691,000. Net income would have been 502,774 for a fully diluted EPS of 2 cents per share. And this compares to EPS of 1 cent per share in the same quarter last year. Moving on to the balance sheet, as of March 31st, we had net cash and equivalents of $474,000. approximately $4.6 million in net working capital. We only have $470,000 of long-term debt on the balance sheet in the form of an SBA loan. From a cash flow perspective, we used approximately $500,000 in cash in the quarter to fund investment into our supply chain. After the end of the quarter, we completed our IPO and received $16.5 million in net proceeds. And we've also begun a process to secure a revolving credit facility So we're now operating in a significantly improved liquidity position. And then finally, before we take questions, I want to provide at least some commentary on how we plan to provide guidance on a go-forward basis. Our plan as a company, at least for the foreseeable future, is to provide annual targets at the beginning of our fiscal year. So we'll start that process with our fiscal year 2022, which will begin after June 30 of this year, and we'll provide those targets when we report our fiscal Q4 2021 results. We're an e-commerce company. We're still small. We've got a significant amount of business that has conducted business to consumer, and sometimes that does make near-term visibility sometimes difficult. However, I would like to provide at least some color around the full year 2021, given that we are most of the way through the year at this point. So what we are comfortable saying is that the order momentum we saw in March carried over to the months of April and May, and this was without the benefit of any incremental investment of our IPO proceeds into our supply chain. We are only now beginning to see that impact take hold. We believe the overall environment remains quite robust for hydroponics, And the tailwinds that Lawrence referenced earlier in his prepared remarks remain in place. We're quite happy with where the business stands right now as we approach the end of the fiscal year. So that concludes our prepared remarks, and we are now happy to answer any questions that you might have. So, operator, please open the line for any questions.
spk00: Yes, sir. As a reminder, to ask a question, please press star 1 on your touchtone telephone. Again, that's star 1 on your touchtone telephone to ask a question. To remove yourself from the queue, please press the pound key. Please stand by while we compile the Q&A roster. Once again, that's star 1 on your touchtone telephone to ask a question. Our first question comes from the line of Scott Fortune of Roth Capital Partners. Your line is open.
spk03: Good afternoon, and thanks for taking the question. Congrats on the quarter. I want to follow up really quickly on providing the strength from the different sales channels and the focus on kind of moving the shift into the small commercial customers and adopting the online direct VIN hydro channel, your own channel there, versus the big shift to Amazon over time. It looked like the Amazon channel was higher, third-party channels were higher on the quarter, but kind of your sense of the movement of your zenhydro.com channel becoming an overall higher percentage of the percentage of revenues. And then the percentage of private label at 68%, kind of fair to say that that's, you know, look to grow that 100, 200 basis points on a quarterly basis, and you're maintaining 45% gross margins on that type of business? Right. So...
spk05: I'll take the first one and then maybe Lawrence can take the second one as it pertains to the mix of products over time. So, you know, I think what we've said in the, you know, the conversations we had around the IPO is that we focused on our third-party channels because, and in particular in Amazon, because, you know, they – are the strongest and most powerful marketing channel that exists in the world at this point. However, we do think that moving more of our sales to our own captive site, both are direct-to-consumer sales, but also over time, some of that small commercial cultivator business that we do offline wholesale to that site you know, make sense. I think, you know, ideally, our target is, you know, somewhere around 15% of our total sales, we would like to go through our Zen Hydro platform. You know, the timeline for that, I think, is still, you know, TBD. But, you know, we do have a lot of headway or headroom to get there over time. But I think that is, I think, the way I characterize it is that's our first you know, goal for Zenhydro to get to 15. And once we get there, we'll, you know, we'll have a better sense of what that entails. Now, when I say 15, that's 15% of our direct-to-consumer. We're still in the process of creating kind of the, what I would call the wholesale, you know, aspect of our captive site where we can, you know, service those small cultivators using an e-commerce solution. We do a little bit of that now, but we have some work to do to build that into a more robust solution for that part of the market. Does that answer the question you were asking?
spk03: Yeah, that's great. Yeah, and then maybe on the private label side, kind of initiatives to continue to move that percentage up and the growth margin cadence as we go out going forward.
spk04: Yeah, so for private label, like what we previously mentioned during the MS calls during IPO, which is not too long ago, Our strategy, which we have been working on and is actually in progress right now, is to increase and upside more in-house product pipeline to get more product coming out and invest more into R&D to create better product for the market. That remains one of our focus for now and for the future. So we're definitely going to see accelerated in-house product coming out. And in terms of a gross margin, I would say it will not job for our in-house branded product. It's not our goal to job it, but to increase it. So better product, better value, but better perceived by the market. That's our goal.
spk03: And then a follow-up to that, you know, we've seen the hydroponic industry pushing to consolidate the nutrient side in the grow BEM categories with competitors, you know, rapidly acquiring in that food fertilizer nutrient segment. Can you provide color on the opportunity to develop or acquire more in-house nutrient brands in that recurring revenue business and kind of the targets? percentage makes that I think on the quarter where around 17% in the nutrients and the longer term sales mix you see for that category?
spk04: Yeah, the in-house branded, we have two strategy plans, right? So we have been actively talking to people about like some nutrients brands and the We're getting in touch. That's the one side for acquisition. Now, for the other side, our in-house branded nutrients also is an ongoing process as a second part of the plan. So if the acquisition works out, that would be fantastic. Otherwise, we have our own in-house products. rather than nutrients under the development. Yeah.
spk03: Is there timing kind of you guys looking at coming on board a little bit quicker in the second half of the calendar year from outside of the category?
spk05: Yeah, so I think what we've said during the IPO process is that we, you know, We're looking at kind of the second half of calendar year 2020 as the, you know, the timeframe to both, you know, bring our in-house development to market and or, you know, identify and potentially bring on board a third-party brand. I think right now, within the next few months, the work that we've done on our in-house development will be coming to market. So I think it's probably likelier that that'll be out the door first than any type of acquisition. I think M&A, for a lot of reasons, takes a little bit longer. And I think the other thing that we also have you talked about during that IPO process was there are multiple avenues of acquisition that we're looking at, right? There are other product categories. There are potential sales channels outside the U.S. And there are the potential to add additional offline, you know, servicers and distributors you know to the small commercial cultivator market which could give us some scale to more quickly you wrap them over the over the you know e-commerce or zen hydro wholesale approach so you know as we evaluate all those it's hard to give you a sense of the cadence and kind of you know what will take precedence but it's going to be a function of you know what's presented to us and and and what makes the most sense at the time that we see it. I think Lawrence's point earlier I think still holds, though, which is it's a fairly fragmented market. There are lots of good brands, product categories, potential sales channels, and certainly lots of offline distributors that we'll have the opportunity to engage with. And like I said, I think we're going to look at everyone kind of on its own merits and can make decisions that way. I think the last thing I want to say, too, is that we just did a pretty big overhaul of our zenhydro.com site. It's in preparation for One, bringing more of our B2C business on our own captive site, but also in preparation for kind of that servicing of the small commercial cultivators.
spk04: And so... Yeah, I'd like to add a few points. So we haven't announced this publicly, but if you go to zenhydro.com, you may have noticed it's completely different than what you saw like last month. So this is the first step of getting the site ready. to post us to services to market, like Kevin just mentioned, the better, like hobbyists and the smart commercial. And also in prepare for like a new feature to be added in later on. So this is completely redo and we have been working on this for a few months and now it's released and we're getting this ready to getting more. This is like cornerstone of the future of Hydro. So check it out. It looks completely different, and we're going to have more features adding on to it later on. We just made the new site live, I think, earlier this week.
spk05: Scott, you had one other question as it pertains to kind of what percentage over time do we think nutrients could be. So right now it's still our biggest category, even though we don't have our own in-house branded products in market. I think there's no question that over time it will be the largest category for us as we bring our in-house developed product and potentially bring a third-party brand in-house. I don't know if we've got a near-term target as to what it could be, but I think it's very clear that it won't ever be one of the major product categories.
spk03: I appreciate the call. If I could say one more quick one in here, you know, great robust demand in the hydroponic industry. You're seeing gardening trends continue to strengthen, as Lawrence mentioned. Do you see from your data a pickup in the do-it-yourself hobbyist activity in states that convert over to, you know, recreational or even medical legal status and kind of the timeline of sales that occur on your website for those states? Does that remain consistent? Do you see that pickup?
spk04: We don't track state-to-state data that closely for the hobbyist market because historically, my experience is that hobbyist doesn't seem to have as much impact on the commercial cultivator side of when the legalization happens, but does pick up over the time. It's not like the commercial market definitely has a much, much big and immediate effect when the states get open, but the residential seems to be like take time and grow this over time it will catch up. So that's what I see. So we don't track like a state to state data historically because we don't see a immediate hiccup or like increase. based on our experience. But I don't have solid data on that one.
spk03: Got it. I'll jump back in the queue. Thank you. Thanks.
spk02: Thanks, Scott. Thank you. And our next question comes from the line of Scott Fortune with Ross Capital.
spk03: One kind of another follow-up question. Are there certain segments or categories within the space that are outperforming here? And then it seems like, can you address the seasonality aspect of the business, you know, from, you know, the pickup in the different quarters, if you're kind of seeing a different seasonality timing that's been occurring now since post-COVID side of things?
spk04: Okay. So before COVID, usually the lighting stuff tends to sell better during the winter season. and the ventilation stuff sells better during the summer season when the weather is hotter. When COVID hits, everything starts to sell. So we are still kind of still at the era of COVID getting away. So it's kind of very hard for us to see post-COVID supermanage at this moment, but I will expect this to So go back to what, you know, pre-COVID behavior. So with, like, summertime for ventilations and winter, like, colder time for lighting and other stuff. So I think it's pretty balanced out for us. So, Kevin, you want to add some more on that?
spk05: Yeah, no, I think it's still probably early for us to determine because I think the demand patterns really do look like they did last spring. And so I think we still have a little ways to go before we emerge out of this kind of post or emerge into a post-COVID kind of situation. So I think the message is kind of stay tuned and we'll provide, as that seasonality starts to unveil itself, we'll provide the appropriate amount of color around that. Right now it seems very much like it did last year.
spk04: The good news is that we now have the capital to properly inventory. So I'm pretty happy on that side.
spk05: Scott, you had a question about product categories. Is that right?
spk03: Yeah, if you can call out certain product categories that not only are maybe growing a little bit faster, but that you guys are looking to do new product innovation or development in those segments from a margin extension side, can you call out certain categories that you think strengthen it?
spk04: Yeah, our ventilation, we introduced the ventilation product line and expanded it quite well over the last couple of years. We expect that part to grow this summer. We're excited about that. Also, the new twin, like we mentioned, is under development. So when it comes out, that will be a major category for our in-house portfolio. And also, we're doing research into adjacent categories. But that's too early to give some information out. But that's the lighting stuff. We are working on some LED-related stuff. But mostly, I think, this coming summer, I will have some to the expectation of our ventilation category.
spk03: Got it. And then I'm not sure if others are on at all, but one question, can you provide any of the online metrics as far as kind of retention of customers? That's one of the biggest concerns investors have is retaining the customer base, but it sounds like they're coming back to purchase equipment and quicker than 18 to 24 months from that standpoint. And then just any metrics from your online business as far as that's concerned.
spk04: Is this a question regarding to repeat customer? I think we mentioned that historically it's I think 13%, 17%, something around there. Now that's an area we haven't focused on and that's something that we have our Our work list, zenhydro.com, is one of the efforts that we are trying to get more of a retained customer nutrient product. This is another angle. We're also building our in-house business analytics product to not only just for this purpose, but this is definitely something that we will look at and focus on in the future. It takes a little time on this front. but it's a multi-angle task and we're working or attacking it from multiple different angles.
spk03: Okay, thanks. That's it for me.
spk02: Thank you. Our next question comes from the line of Mike Baker with DA Davidson.
spk01: Thanks. Yeah, I have no idea what happened in the middle of the call there. I seem to have gotten cut off, but okay, here we go. I wanted to ask you a couple of questions. One, you talked about continued momentum. I'm not sure if you can comment on this, but I'll think about that. I'll ask it a couple of ways. One, for whatever it's worth, the consensus numbers have the fourth quarter down year over year. So to me, that doesn't sound like momentum unless you're talking about it on a two-year basis. You're up against an 86% number from a year ago, which is significantly higher. than the March quarter was against. So could you just flesh that out a little bit more, what you mean by continued strength in near-term momentum, particularly as it relates to the consensus number? Thanks.
spk05: Well, so, you know, I'm going to refrain from making any kind of specific comments on the number, particularly as it kind of might compare against consensus. What I can say is that there was a pretty nice lift in order momentum from February to March. What we've seen in the first two months is that order momentum hasn't waned. We think it reflects a couple things that happened at the end of the first quarter, which was There was some easing of the supply chain constraints that we saw, which means we could get more product and we could build a little bit more inventory. The second piece of that was we actually had capital to put in the supply chain to get that product. And so those kind of tailwind to the kind of sail engine, so to speak, you know, started in March. And, you know, the first two months of the quarter were, you know, that tailwind was still there. So, you know, I know what you're trying to get at in terms of the consensus number and, you know, does momentum mean up or down? I think it's just too early for me to talk about that. We've talked a little bit about kind of, you know, revenue recognition and making sure that how we deal with some of our third-party vendors is reflective of the actual sales performance. I think it's important to point out that in this June quarter, we're lapping one of the best quarters of the company's history. And so we're I think we're tracking in a way that we're comfortable with for the June quarter. But I want to refrain from getting too close to any kind of numbers. Let's just say we're happy where we are.
spk01: Okay. And let me ask one more, and then I'll move on to another topic. Are you happier now than you were, you know, a couple months ago during the IPO process? Are things, you know, getting better, worse, same? Better. Yeah, things are better.
spk05: The other thing I'd say too is that the impact of us using some of the IPO proceeds in the supply chain is just starting to show up. We've had really no meaningful impact yet to our results from being able to prime the pump With additional proceeds, yes, everything feels better. So, you know, again, I think the best way to say it is that we're very happy with kind of the order momentum, and we just want to be cautious around how we talk about revenue, particularly, you know, until we get to the next fiscal year. So let's leave it at that.
spk01: Absolutely, fair enough. Let me ask one more bigger picture question, a question I get. Is there concern or how do you think about crowding out with big commercial enterprises getting more and more into the space? In other words, why do I need to grow this myself in my basement if I can just walk down the street and go to the store that's selling the end product? How do you think about that?
spk04: There are two angles to look at it. First, economically, at like say $10 or $15 or $20 per gram, it still costs like $5,000 to $8,000 or sometimes $10,000 per pound in order to buy. but it costs you a few hundred dollars per month to grow, other than the initial setup, which costs about $1,000, $2,000 to grow. And each light can yield two to three pounds, two and something average right now. So economically, it actually makes sense for people to grow their own. And secondly, hobbyists, just like people doing gardening, or crop their own beer, a lot of times people have an interest on growing the string of their choice, crop a certain way, and try to achieve this to the best they can. It's a hobby work that you can consume. That's the two sides that I can try to explain from this side. The other thing I would add, too, is that
spk05: we've done a little bit of work on kind of the size of some of these other hobbyist markets, like let's use craft beer as an example, or home brewing. I've seen numbers anywhere between one and a half to two million just in the U.S. alone who do this. There is no economic arbitrage associated with growing your own or brewing your own beer. Yet, you know, it's still a really large market. We think the home hobbyist and that not only the setup, but the recurring revenue opportunity, given that same type of kind of mentality, plus the fact that the economic arbitrage is enormous right now, means that this is going to be a robust market. I think the other thing I would say, too, is I'm pretty sure one of the other companies in our I guess in our peer group or what we're being kind of grouped together with has talked about the strength that's being driven by that kind of home hobbyist. And they called it out as one of the reasons that their business has been so good. Now they sell into other distribution markets, but I think there's no question that that is a strong and growing market and people recognize it.
spk01: Sure enough, real quick, in the interest of time, can you comment on input costs as you alluded to during the prepared comments?
spk05: Like materials costs, right? Correct. Our side, yeah. Do you want to take that?
spk04: Yes. Yeah, material costs, we saw some increase like last year, like close to the end of last year, not fiscal year, but calendar year. And if this situation is still like this, we anticipate some more increase into the second half of the calendar year. But again, we have a very strong supplier network and supply chain. So that makes us better than our competitors in general, things like increase the cost, et cetera. But there is a limit that everyone can bear. And sooner or later, if this doesn't get eased off, which I think the government around the globe is trying to address this, but if it doesn't, then it becomes a problem for everyone. And then at a certain point, we will have to pass this to consumers. We already started to raise the price for certain things over the last six months. But we look at a market and we adjust it as the market goes. But like I said, it's not my problem only, but we're doing better than the competition. That's why we see a growth in sales and we also see a growth in gross margin. I think that's a problem for everyone, but it's also an opportunity for us as well.
spk01: Perfect. Great. Thank you for the time. Thank you, Mike.
spk02: Thank you, and I'm showing no further questions.
spk05: Okay, great. Well, thank you much for joining us, and we look forward to talking to you again when we report our June quarter results. Thanks, everyone. Thank you.
spk02: This concludes today's conference call. Thank you for participating, and you may now disconnect.
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