iPower Inc.

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. 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 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 forward-looking statements. With that, I'd like to turn the call now over to iPower's Chairman and CEO, Lawrence Tan. Lawrence?

Thank you, Kevin. Good afternoon, everyone. We had a challenging come this quarter. Given the record 74% revenue growth, we achieved a fiscal Q3 2022. Nonetheless, we demonstrated a continued momentum in setting through inventory build up from prior period as reflected by our 16% reduction of inventory from last quarter and 36% reduction from our fiscal year end. Throughout the quarter, we continued to emphasize our in-house brand, which made up more than 90% of the revenue and the scoring, the consistent demand for our market-leading products. Some of our strongest brand sales come from several of our newer products, most notably in our shopping category. Consumer feedback for our product remains strong, and we expect those categories to grow further as we add new in-demand products to our catalog. As mentioned on prior calls, we have made the strategical decision to diversify our product portfolio beyond hydroponics. What once was the vast majority of our business now accounts for approximately 35% of sales. Although hydroponics has become a smaller segment of our business today, it remains an important catalog, and we will continue to invest in the product line as the market dictates. Investing resources in new product development has been and will always be a key focus for us to keep our portfolio stocked with high-quality products our customer has come to expect. In the next few weeks, we are planning to unveil our new countertop hydroponics line, iFarm. iFarm provides consumers with an easy to operate space-saving appliance to grow herbs, green leafy vegetables, tomatoes, peppers, and other produce in their kitchen year-round. After extensive research and data collection, we saw a niche in the market that was not being well served, and we built the product with attributes consumers were demanding and at a compelling price. We are excited to launch this new product line and look forward to releasing additional products later this year. In recent months, we have experienced promising traction on the services side of our business as well. Our focus is to leverage our supply chain and merchandising expertise to drive sales growth from partners with cutting edge product portfolios. This is a small segment of our business today. However, the early demand is encouraging, as reflected by recent partnership we formed with companies in home goods and electronic categories. We are providing merchandising and sales services, as well as some logistics support for these initial pilots. Since launching the program two months ago, we have already begun to see strong momentum with increasing order volumes. We will have more to say about these programs in the next several quarters and look forward to offering our sales, marketing, and merchandising expertise to service more brands and partners in the future. As mentioned earlier on the call, we proactively stockpiled inventory in calendar 2022 to offset supply chain challenges and to account for increased demand for our in-house products. This led to a surplus of inventory with very high associated freight costs and the need for additional warehousing space, which increased our operating expenses impacted the probability. The supply chain began stabilizing in late calendar 2022, so we no longer required the access inventory levels or the associated warehousing space. To date, We have sold through the majority of the inventory carrying the elevated cost of goods sold. However, we still have a small portion to work through. Our selling and marketing costs have been higher than usual to move through the excess inventory. However, we expect that to normalize in the quarters ahead, which will lower our total operating expenses. These savings combined with the continued strong demand for our in-house product will enable us to return to profitability in fiscal 2024. Moving ahead, we will focus on future diversifying our product mix while adding depth to our in-house offerings. We are also optimistic about our services business and looking forward to utilize our best in-class sales, marketing, and merchandising capabilities to accelerate the growth for high-quality brands looking to elevate their sales channels. These initiatives, coupled with a normalized supply chain environment and lower operating expenses, will enable us to improve our financial and operating results as we enter our next fiscal year. I'll now turn the call to our CFO, Cameron Bethely, and take you through our financial results in more detail. Kevin?

Thanks, Lawrence. As mentioned earlier, fiscal Q3 of last year was a period of record growth for iPower. It made this quarter a pretty challenging comp on a year-over-year basis. Given the circumstances, though, we were pleased with our results in this quarter, so diving right in. Total revenue was $20.2 million compared to $22.8 million in the year-ago period. The decrease was primarily driven by fewer third-party branded sales to our channel partners. Our fiscal third quarter revenue mix from in-house brands increased to over 90% compared to 82% in the year-ago period. Gross profit in the fiscal third quarter was $7.8 million compared to $9.2 million in the year-ago quarter. As a percentage of revenue, gross margin was 38.5% compared to 40.4% in the year-ago quarter. but the decrease in gross margin primarily driven by higher cost of goods sold resulted from selling inventory that previously incurred much higher freight costs. As we have mentioned, freight and container shipping costs have normalized this year, and we expect gross margin to improve as we work through our older inventory. Total operating expenses for fiscal Q3 were 9.6 million compared to 7.8 million for the same period in fiscal 2022. The increase in operating expenses was primarily driven by higher selling fulfillment and marketing costs related to the sale of inventory we built up over the summer of last year. As our inventory normalizes, we expect lower OpEx levels along with improved working capital as we no longer have to carry that higher cost inventory and our excess warehouse expenses that we had shown in the prior two quarters. Net loss attributable to iPower in the fiscal third quarter was $1.5 million or $0.05 per share compared to an income of $1.2 million or $0.04 per share for the same period in fiscal 2022. In our bottom line was primarily driven by lower gross profit and the aforementioned higher selling fulfillment marketing and marketing costs. Moving to the balance sheet, cash and cash equivalents were 1.4 million as of March 31st, 2023, compared to 1.8 million at June 30, 2022. As of March 31st, 2023, total debt at 9.7 million compared to 16 million as of June 30, 2022. The decrease was driven by our decision to pay down a significant portion of our revolving credit facility. As a result, our net debt position was reduced 42% to 8.2 million compared to 14.2 million as of June 30, 2022. As Lawrence mentioned earlier, we expect to improve both on our gross and operating margins, given the stabilization of the supply chain and the reduction in our excess inventory and the lowering of our excess warehousing costs. We believe these initiatives, in addition to the continued strong demand for announced products, will enable us to return to growth and profitability in our fiscal 2024. So with that, that concludes our prepared remarks.