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Operator
Thank you for standing by and welcome to the I power Q4, 2021 earnings conference call at this time, all participants and others, and only mud after the speaker's presentations, there'll be a question and answer session. To ask a question at that time, please press star then one on your touchstone telephone. As a reminder, today's conference call may be recorded. I would now turn the conference over to your host, Mr. Kevin vastly chief financial officer where you may begin.
Kevin
Yeah. Thanks, Valerie. Good afternoon, everyone. By now, everyone should have access to our fiscal fourth quarter and full year 2021 earnings press release, which was issued earlier today at approximately 4 or 5 p.m. Eastern Time. The release is available in the investor relations section of iPower's website at www.meetipower.com. This call will also be available for webcast replay on the company's website. Following management remarks, we'll open the call for your questions. Before I introduce our CEO, Lawrence Tan, 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. These forward-looking statements are subject to certain known and unknown risks and uncertainties, as well as assumptions that could cause actual results to differ materially from those reflected 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. Do not place undue reliance on any of these forward-looking statements, which are being made only at 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. Today's conference call will also include certain non-GAAP financial measures, including non-GAAP net income and EPS, as supplemental measures of performance of iPower's business. All non-GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with SEC rules. You'll find reconciliation charts and other important information in the earnings press release in Form 8K, furnished by iPower to the SEC today. With that, I'd like to turn the call over to iPower's Chairman and CEO, Lawrence Tan.
Valerie
Thank you, Kevin, and good afternoon, everyone. Fiscal year 2021 was a very good year for iPower, highlighted by strong revenue growth of more than 35% and gross margin expansion due to a growing mix of in-house product sales. The growing demand for our in-house products which made up around 70% of the sales in fiscal year 2021 compared to 55% in fiscal year 2020. That is a testament to our superior product research, design, and merchandising expertise. We were able to grow our proprietary product revenue over 70% plus in fiscal year 2021. We design and build products. where the data tell us we have real market share opportunity. In fiscal year 2021, we clearly had the right products with the right features to address the needs of our target customers. During our fiscal fourth quarter, we utilized the growth capital raised from our IPO to make significant investments and lay the groundwork for continued growth in the coming years. This included increasing advertisement on new products launched in the second half of fiscal year 2021, expansion of our performance infrastructure, and multiple new programs with our co-engineering and supply chain logistics partners. I am particularly happy with our proprietary product catalog. In fiscal year 2021, we continued to introduce new proprietary SKUs into the market. Most notably, roughly two-thirds of those SPUs launched in the last six months of this year. So we are still in the early stages of capturing the full potential. Although I'm incredibly pleased with our progress as a company, we are still in the early days of capitalizing our unique model in the hydroponics industry. I want to give credit to our fantastic iPower staff, whose hard work and dedication allowed us to perform at the level we did this past year. We look forward to another year of strong execution ahead. I'll now turn the call back to our CFO, Kevin. Kevin, can you take us through our financial results?
Kevin
Thank you, Lawrence. So diving into the financials, overall we were Pleased with our fiscal fourth quarter financial performance. Total revenue was in line with our expectations and slightly up from a year ago period at $14.7 million. Recall that our fiscal fourth quarter of 2020 benefited from heightened e-commerce demand due to the COVID-19 stay-at-home mandates that was a very, very challenging comp for us. For the full year of fiscal 2021, revenues grew 35.4% year over year, which is at the high end of our historical organic growth range of 25% to 35%. As we've stated in the past, we continue to emphasize selling more of our in-house brands. During the quarter, in-house products accounted for approximately 71% of sales compared to 65% in the prior year quarter. For the full year, in-house products made up approximately 70% of total sales versus 55% in the prior fiscal year. and sales of in-house products were up nearly 80% over fiscal 2020. From a channel perspective, roughly 90% of our sales were through our e-commerce and third-party partners, with the remainder being our offline wholesale business. Amazon remains far and away our largest and most important channel partner. Gross margin for the quarter was essentially flat at 44.4% compared to 44.7% in the year-ago period Our focus on selling more in-house brands benefited margins during the quarter. As we've stated in the past, gross margins for our in-house products on average are around 20% to 25% higher, percentage points higher, excuse me, than the third-party products that we carry. Our margins can still fluctuate based on a number of factors, including sales mix, channel program mix, product input costs, and freight costs. For the full fiscal year, Gross margin was 42.2%, and that was up from 37.9% the prior year. Total operating expenses for our fiscal fourth quarter were $6.3 million, compared to $4.8 million for the same period in fiscal 2020. The increase was primarily driven by several factors, including higher merchant fees related to our channel program mix, increases in advertising, particularly around new SKUs that were launched in the second half of our fiscal year that ended June 2021, and some catch-up spending with our co-engineering partners to accelerate our product development. We do not think operating expenses as a percentage of sales this quarter represents a new watermark for us going forward. Some of this expense was specific to the circumstances of this quarter. Net loss in the quarter was $1.9 million or $0.08 a share compared to net income of $1.2 million or $0.06 per share for the same period in fiscal 2020. Non-GAAP net income, which excludes certain one-time and non-cash items, was $0.6 million or $600,000 or $0.02 per share during our fiscal fourth quarter compared to $1.2 million. for $0.06 per share in the year-ago period. The decrease was driven by the higher merchant fees and increased advertising and partner spend. Moving on to the balance sheet, cash and cash equivalents were $6.5 million at the end of June 2021, compared to $1 million at the end of June in 2020. The increase attributed to the proceeds raised from our IPO earlier this year Net inventories were just over 13 million versus 5.7 million, and total debt was 0.7 million compared to 1.8 million in the prior year period. Before we take questions, I want to give just a quick word on guidance for fiscal 2022. As referenced in our press release earlier today, we are very comfortable with setting a baseline for growth expectations, which should be, at a minimum, 25% organic revenue growth for the year. However, from a margin and cost perspective, the supply chain environment remains quite volatile, particularly in and around input costs and freight costs. So we believe it's prudent to avoid forecasting specific margin targets at this point. What we can say is that we have a number of ways to push back on some of the supply chain and input cost pressures that exist in the marketplace. These include... channel program mix, some bulk procurement, some of which we did actually in this last quarter, as well as larger production runs with some of our contract manufacturing partners. In addition, we will continue to emphasize a greater mix of in-house product sales and introduce new proprietary SKUs, including our own in-house developed nutrient line, which we hope to launch by the end of this calendar year. We expect all of these initiatives to provide positive benefits to margin and profitability over the course of the year. So at this point, that concludes our prepared remarks, and now we will open it up for any questions that you might have. Operator?
Operator
Thank you. Again, ladies and gentlemen, if you'd like to ask a question, please press star then 1 on your touch-tone telephone. Again, to ask a question, please press star then 1. One moment for our first question. Our first question comes from Mike Baker of DA Davis in the line of software.
Mike Baker
Okay. Hi. Thanks, guys. A number of questions here we could ask. Let's start with this one. Can you talk about your in-stock levels? Your inventory is obviously up, but, you know, it's been hard for a lot of companies, even big companies, to get products in from Asia today. did that impact your quarter at all? In other words, were there areas where you would have liked even more inventory? And so that's the June quarter. Has it impacted the September quarter at all as well? You know, you're, what, 95% through this quarter, so you should have some.
Kevin
Right. Lawrence, maybe you should take a shot at kind of, you know, how we're dealing with kind of supply right now.
Valerie
Sure, let me repeat the question because it was a little bit broken up. But the question was that the logistics and supply chain, does it had an impact on our quarter for last 2020 2001 and, and the September quarter that we we currently ending? Is it right?
Kevin
Okay. Yeah, you're breaking up a little bit, Mike. That's right, Lawrence. I think that's the question.
Valerie
Great. Okay. So for June quarter, one of the interruptions we saw is that our Amazon partner, they had to pull back, as far as I remember properly, that they had very little direct import purchase orders in the April, May, June month compared to other times of the year and also historically. We believe it's due to their logistic problem, but then we saw recovering in the July, August, September quarter. So I believe the problem has been resolved by them. So we did see interruptions in Q4 2021, but I believe that problem has been resolved, either resolved or mostly recovered. So in terms of our own supply chain and logistics, we had, like I mentioned before, that we have an extensive manufacturing network in Southeast Asia, mostly in China. Those manufacturers have been working with us for years. We have really good leadership, and we have a pretty good planning. So we tend to now help work with our partners to further extend our cooperations deeper into their supply chain to mitigate and forecast the inventory need and mitigate the risk of interruptions. So we did all that work. We don't see our supply chain has any capacity issue to supply the products. We have been able to secure enough transportation power to get the products for ourselves. But it does have, we also, we are facing the difficulty of longer than before or longer than usual transportation time as well as higher transportation costs from overseas.
Operator
Thank you. Our next question comes from Scott Fortune of Ross Capital. Your line is open.
Scott Fortune
Thanks for taking the questions. Real quick, can you provide a channel mix kind of post-COVID and seasonality around the do-it-yourself hobbyists and this tough comp coming up here in the third quarter? And we've seen a number of hydroponic competitors have seen needed growth here in the commercial side in the third quarter. A little color on your commercial business, if you can provide kind of what you're seeing on both those segments of the channel mix here.
Kevin
Right. So, yeah, let me take that real quick. So, from a mix perspective, we didn't see much change from our last quarter or the mix that we had kind of coming into the IPO. The commercial side of our business is still roughly 10%. And when I say commercial, that's offline wholesale sales. The rest of it is e-commerce, a combination of our website, which still remains very small and kind of future opportunity for us. The largest channel partner remains Amazon. They are kind of running at about the same kind of percentage of sales as we saw kind of earlier in the year and kind of what we had published in and around the IPO. So there wasn't really much change in mix. Some of the things that did change, and I think Lawrence referenced this in his answer to the question that Mike Baker asked, is that within our third-party channel relationships, there are a number of different programs for each of them. And so the program mix definitely changed a bit. I think Lawrence referenced as it pertains to our largest partner, There was a lot more drop ship from our inventory that took place in the fourth quarter than is normal. And we're seeing a normalization back to kind of our more traditional mix. And, in fact, it might be pushing a little bit more in the other direction where we're doing a lot more direct import. But from a seasonality standpoint, you know, we didn't, Again, I think we're still in early days of trying to figure out if there is a new seasonality to the business, but we didn't notice anything in this quarter and we haven't noticed anything for the current quarter, which is our first fiscal quarter of FY 2022 that suggests anything or any kind of pattern that's meaningful. I think our biggest Our biggest potential growth propeller is our ability to have product and as you look at our balance sheet, we added a lot of inventory since the end of our fiscal Q3. So it was a pretty meaningful move and a pretty big move up from last year. So we feel pretty good about where we are going into the next the next fiscal year. Did I get all your questions, Scott? Yeah, that's all. I appreciate the call. Oh, actually, sorry, you asked about commercial business. Yeah. Lawrence, you might want to answer that one. I think you're a little closer from a sales standpoint.
Valerie
So what's the question for commercial business? I was going to chip in a few sentences on the parts that you just referenced all. Yeah.
Kevin
Actually, why don't you answer those first, and then we can come back to the commercial, the wholesale business.
Valerie
Right. So we were at 85% plus to the retail business. So that hasn't changed. We are majorly a retail B2C house here. So the... The challenges we were facing today, generally, the commercial business, I believe, they are softening a bit. Two of the things I want to point out is why don't we sell mostly our in-house product? That consists of more than 70% of our total sales. So we have a much, much better control of our own supply chain versus some other competitors on the market. I won't name them for now, but they sell mostly 3P parts. So by saying that, we have a much, much better control on supply chain, especially during a period of time where everybody is facing external challenges. And since we had successfully executed the IPO in May, we had more resources to work with our partners to strengthen our supply chain even further. And like we mentioned, we secured a new warehouse space in Los Angeles County. That's 100,000 square feet compared to 70,000 total we have now. That's more than doubling what we have because we realized early in the year that in order to be able to execute in such a tough environment of today, spacing, efficiency, and logistic and supply chain, these are very important, essential. That's why we could still, and based on our own internal data forecasting capability, we can quickly react to if there is a problem from anywhere. Like before, when Amazon stopped importing, we had enough ports in the United States to were mostly competent for what they left off. So we have been prepared, and we are pretty strong at doing all this kind of work. So these two, a very strong execution operation with data-backed decision-making and in-house product, that's the majority of our sales, I think these two help a lot for us to navigate through this type of environment. Now, in terms of commercial business, they are softening. We all get signals and data in the industry that they are cooling down a bit. That's, I think, particularly because there was a lot of hype going on in the industry for the second half of 2020 kind of year and first half of 2021. You know, people are getting to more like a kind of normal, but... With more states opening up, I think there's still a lot of opportunities going there.
Scott Fortune
No, I appreciate that. It's a great color. That's kind of what obviously we're hearing in the space on the commercial side, a lot of stuff being there, but you're online. You definitely offset that with your strengths. And just a follow-up question, kind of you mentioned in-house products made up about 72% of sales in 2021. Due to 100 new SKUs coming on board here in the second half, you had a ramp up in advertising in the second half. How can we view kind of continuing to expect in-house products to continue to increase? Can we look at it as maybe 100 basis points a quarter continuing to increase, or do you have to continue that ramp up in SKUs and advertising to keep it at that level? How can we look at that cadence going forward?
Kevin
So you're asking mix, not margin, right?
Scott Fortune
Yes, a mix of 72% of the products. And I know you guys have targeted getting up to higher than that, but how should we look at that? Yeah, I mean, right.
Kevin
You know, so every quarter has its own kind of, you know, puts and takes. You know, our goal is definitely to continue to drive that number up. I think, you know, we're comfortable, you know, as we go out over the next several years wanting to get that, you know, to an 80% to 85% range. So, you know, I don't know if it necessarily makes sense to think about it, you know, inching up, you know, quarter to quarter to quarter to quarter. We tend to think of our business in terms of a full year, but there's no doubt that we'll be introducing a host of new proprietary SKUs over the course of the year. I referenced we have our own in-house nutrients brand that we hope will be launched and Well, it's launched, I should say, that will start to generate revenue by the end of this calendar year. And so the direction should be up. Is it 100 basis points a quarter? Hard to know. We're also at the mercy of our customers, including our largest channel partner. One thing I would say, though, too, is one opportunity that we have that could really help is in that commercial business, our wholesale business that's offline. We still largely sell third-party products there. And so the penetration of our products into that part of the market still represents an opportunity to keep driving that percentage up.
Valerie
Okay, that's great. I have a couple of questions here. So we all know that in-house products are very, very important for any of the retailers or brand owners or distributors. But at the same time, I want to point it out, even though these have higher gross margins, the 3P products, they contribute, they are very important parts of our business. We don't see them at admin. We see that they are our friends. So they help us getting better customer experiences. So we want to carry more and more 3P products. So what you're going to see is that you will see our in-house product grow with new SKU, and you will see the 3P products grow as well. So both of these parts will grow. So whether it becomes 80%, 85%, or stay at 75%, it really depends on what makes sense. We're already at a very, very dominated position where we continue to add great products, including nutrients. We're going to do more. We continue to invest into that front line. But what I want to point out is that it doesn't necessarily mean that 85% is better than 80%, right? It may be because we have... partnered with a grade 3P, like, for example, fertilizer line, right? And then it become a huge, you know, selling category for us that we didn't, you know, capture before. It may happen. You know, I'm just giving you an example. It doesn't mean that we, you know, you know, I'm just giving you an example saying that, okay, these products are our friends. They're not our animals. So we got to invest into both. And for in-house products, the most of the new SKU we introduce, we're going to provide better value to customers. So we're going to be increasing our SKU and introducing new SKU through innovation and through advancing technology through better customer experiences. So that's how I look at it. And, you know, I think like Kevin mentioned, when commercial business opens up, it doesn't mean that we will just sit there and look at it. We're going to take the opportunity. So there may be chances that our 3P products start to have a boost. So in terms of the percentage, I never really set a goal myself to achieve certain in-house sales products, but I think we're already at a pretty good position. My best estimation is it will continue to go up, I don't know where it will end up being, but it's going to be going up on here. That's my best guess.
Scott Fortune
Thank you for the detailed answers. I will jump back in the queue.
Operator
Thank you. Again, ladies and gentlemen, if you'd like to ask a question, please press star then 1 on your touchtone telephone. Our next question comes from Mike Baker of Davidson. Your line is open.
Mike Baker
This time I'm on a landline, so it should sound better. So I'll ask a couple questions in a row because I got cut off last time, so I'll jump them all together here. One, you mentioned, Kevin, that some of the costs incurred this quarter won't be, we should consider ongoing or more sort of one-time, if that's the right term, in nature. Could you sort of quantify that a little bit? Secondly, can you talk about the 25% plus growth you expect this fiscal year? Should we assume that that would be more back-end loaded, just given the comparisons and the You know, again, I don't know if you're comfortable talking about this, but, you know, September quarter, it's September 27th, you know, any additional color in how we should think about growth for this quarter. And then lastly, that nutrient business, can you remind us how big that is for you and what percent of that do you think could become private label? Thank you.
Kevin
Okay. Let's start with – let me start with the last one first since that's fresh on my mind. So I – Well, correct me if I'm wrong, but I think nutrients is around 15% to 20% of our total sales, and that is all right now third-party products that we sell. We don't have revenues generated from in-house. So the opportunity for us is quite large, both from a kind of revenue standpoint and But more importantly, from a kind of margin standpoint, you know, the nutrient business is a very gross margin rich business. And, you know, it's a natural place, you know, for us to play given the other products that we have. Do I have that mix right? Is it around 15% to 20%, Lawrence? You're right. You're right. Okay. Okay. As it pertains to the cost, let me just give just a little bit of a little bit of color so one of the biggest quarter to quarter and quarter over quarter changes was some of the fees that we pay we call them merchant account fees to our channel partners in this quarter we were significantly higher and this was really a function of program mix you know I don't want to get into too much detail but Lawrence referenced you know, what's what clearly was some supply chain distress that, you know, our biggest partner was having in the period, April to June. That's our air. Yeah, they, yeah, they tend to, you know, they have a mix of business they do with us that includes direct import from our partners overseas, as well as shipping from our inventory, our warehouse here in the U.S. We can speculate as to why it happened, but they were needed to ship almost exclusively from our inventory in our warehouses. So that's us drop shipping on their behalf. And the programs that were kind of supporting that were some of the higher merchant account fee programs. So that was probably the highest mix of that type of business we've had. It just so happened that it generated higher than normal fees. We think that is not going to – or going forward, that mix where we have no direct imports and all dropship from our locations won't continue. And as such, those fees will come down. So that's one. Two, on the advertising side, we essentially, because we were waiting for the IPO to happen, had held off on advertising for a lot of the new products that got introduced in the first half of the year, largely because we were capital constrained. And once the IPO was complete, we went and ramped that fairly quickly. Now, that, again, was meant to play some catch-up. I think we had anticipated an earlier-in-the-year kind of IPO completion. And then lastly, we had some catch-up spending to do with our – you know, get our product development back up to speed. So some of that will, you know, come down as well. But, you know, we were long overdue to getting that in the queue with them. So, again, the biggest part was the merchant account fee that was driven by program mix. And, you know, I think that is back to a more normal environment this quarter. And then I think you had one question about the outlook and kind of the cadence of revenue for the year. Is that right, Mike?
Mike Baker
Yes, exactly.
Kevin
Yeah. So I want to kind of avoid, you know, specific quarter-to-quarter color or commentary. Okay. But I think maybe the best way to answer it is, yes, we do have the benefit of seeing kind of much of the first three months of this fiscal year, which gave us more than enough comfort to say that our floor for growth should be 25% for this year. How it exactly plays out, I think I'd rather refrain from speculating. But we're in good – let's just put it this way. We're in good shape as we kind of close out this quarter. I mean, we have some puts and takes on the way that we work with our channel partners to kind of close that actual number. But it helps that we have inventory. It helps that – we're able to get a product and, uh, you know, have it available when people want it. So we feel good about where we are.
Mike Baker
Okay. Thanks, Kevin. That's helpful. I appreciate it.
Operator
Sure. Thank you. I'm sure no further questions at this time. So I'd like to turn the call back over to management for any closing remarks.
Kevin
Great. Uh, well, uh, I want to thank everyone for joining us today. And, you know, we look forward to talking to you about our fiscal Q1 and, you know, the rest of the year on our next call. Thank you.
Operator
Thank you. Ladies and gentlemen, this ends today's conference. Thank you all for participating. We all disconnect. Have a great day.
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