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Operator
Good afternoon, everyone, and thank you for participating in today's conference call to discuss iPower's financial results for its fiscal fourth quarter and full year 2024, ended June 30th, 2024. Joining us today are iPower's chairman and CEO, Mr. Lawrence Tan, and the company CFO, Mr. Kevin Vasily. Mr. Vasily, please go ahead.
Vasily
Thanks, Josh. Good afternoon, everyone. By now, everyone should have access to our fiscal fourth quarter and full year 2024 earnings press release, which was issued earlier today at approximately 4 or 5 p.m. Eastern Time. Release is available in the investor relations section of our website at bdipower.com as well. 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 webcasts 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, 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 in circumstances that are difficult to predict, and many of which are outside of 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 filing 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. Our presentation today also includes certain non-GAAP financial measures, including adjusted net income and EPS, as supplemental measures of performance of our business. All non-GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with SEC rules. You'll find reconciliation tables and other important information in the earnings press release in Form 8K we furnished to the SEC this afternoon. With that, I'd now like to turn the call over to iPower's Chairman and CEO, Lawrence Tan.
Lawrence
Lawrence? Thank you, Kevin, and good afternoon, everyone. I'm proud of our team's hard work in fiscal 2024 to drive record levels of gross margin, operating expenses reductions, and another year of positive cash flow from operations. Throughout the year, we delivered on multiple strategic initiatives to lay the foundation for future growth and profitability. For example, we onboarded several high-quality supply chain partners onto our SuperSuite Services platform. We also strengthened the capabilities and the resilience of our supply chain through partnerships with suppliers in Southeast Asia. Additionally, we expanded the channel distribution by launching sales on new platforms like TikTok Shop and Team. Throughout the year, we continued to evaluate our SuperSuite Services platform by integrating key components from value-added partners across logistics, technology, and marketing to enhance our service offerings. This collaborative approach has positioned SuperSuite as a leader in merchandising and sales, supply chain management, and warehousing and fulfillment, attracting a diverse array of new partners to our platforms. As an example, in May, we announced a strategic partnership with the leading provider of comprehensive logistic solutions. Through this collaboration, we integrated the Partners Performance Center network into the SuperSuite platform, enhancing our operational efficiencies and technology capabilities. This partnership not only adds critical depth to our capabilities, but also opens the door to a new portfolio of prospective supply chain and brand partners. We also integrated Amazon Logistics Services in June to bolster our last mile delivery capabilities, enhancing a critical component of SuperSuite's supply chain offerings. With this partnership, SuperSuite clients can deliver products with the speed, reliability, and efficiency that Amazon is renowned for, adding further depth to the SuperSuite value proposition. As I mentioned earlier, in fiscal 2024, we deepened our online presence by launching sales on platforms like TikTok Shop and Tmoov. These additions align with our strategic vision to empower supply chain partners with diversified sales channels poised for sustained long-term growth. We are pleased with the early results and will continue to explore additional sales channels that would further enhance our partner sales offerings. In regarding to supply chain and OPEX, The optimization initiatives we implemented earlier this year to drive the improvements in our selling, marketing, and fulfillment operations are yielding results. With a healthier supply chain environment, we no longer need to maintain high level of inventory, and lead times with our international suppliers have normalized. It's also worth noting that with the growth of SuperSuite, our business can operate with lower levels of inventory, leading to improved cash flow generation. Additionally, we have sold through nearly all our high-cost inventory, enabling us to eliminate short-term warehousing expenses and enhance margins. As of June 30, 2024, we further reduced our inventory levels by almost 50% compared to December 31, 2023. We are deeply committed to optimizing our operation to maximize efficiency. To further this initiative, in June, we announced the addition of a new manufacturer supply partner in Vietnam. Expanding our manufacturing base will help mitigate future risk and strengthen the resilience of our supply chain. Looking ahead, we will be leaning into our core principle as a technology and data-driven company to enhance transparency and operational efficiencies between iPower and its supplier, performance, and channel partners. This approach will streamline processes, reduce cost, and improve information utilization across the supply chain to strengthen our customers' operations. We believe these initiatives, coupled with our optimized cost structure, will enable us to deliver on our growth and profitability objectives in fiscal 2025. I will now turn the call over to our CFO, Kevin Vasily, to take you through our financial results in more detail. Kevin?
Vasily
Thanks, Lawrence. Unless referenced otherwise, all variance commentary is in comparison to the prior year quarter. Diving right into the fiscal Q4 results. Total revenue in the fiscal fourth quarter was $19.5 million compared to $23.4 million in the prior year. Increase was primarily driven by higher promotional activity in the year-ago period relating to selling down inventory. This is partially offset by growth in our SuperSuite supply chain offering. Gross profit in the fiscal fourth quarter of 2024 increased 2% to $9.2 million compared to $9.1 million the same quarter of fiscal 2023. percentage of revenue, gross margin increased 870 basis points to 47.4% compared to 38.7% in the year-ago period. The increase in gross margin was primarily driven by improved pricing through key supplier negotiations as well as favorable product picks in the quarter. Total operating expenses for fiscal Q4 improved 34% to $8 million compared to $12 million for the same period in fiscal 2023. As a percentage of revenue, operating expenses improved 1,050 basis points to 41% compared to 51.5% in the year-ago period. The decrease in operating expenses was driven primarily by lower selling and fulfillment expenses driven by both lower marketing and promotion costs as well as some vendor credits from some of our key vendors. Net income attributable to iPower in the fiscal fourth quarter improved to $0.7 million or $700,000 or $0.02 per share compared to a net loss attributable to IPOWER of $3 million, or a net loss of $0.10 per share in the same period in fiscal 2023. Adjusted net income attributable to IPOWER, which excludes legal fees for arbitration, net of their tax impact, improved to a little under $1 million at $900,000, worth $0.03 per share in the fiscal fourth quarter of 2024, compared to an adjusted net loss attributable to IPOWER of $2.1 million or a net loss of $0.07 per share in the year-ago period. Moving to the balance sheet, cash and cash equivalents were $7.4 million at June 30 compared to $3.7 million at June 30, 2023. Note that this cash balance includes net proceeds of approximately $4.5 million from our previously announced registered direct offering in June. Total debt was reduced by 46% to $6.3 million compared to $11.8 million as of June 30, 2023. Cash flow from operations for fiscal Q4 was a little under $1 million at $960,000, and that's down a bit from our year-ago period. As Lawrence mentioned earlier, our consistent optimization efforts have enabled us to materially expand our gross margin and achieve a consecutive quarter of profitability in this fiscal Q4. We also continue to make some improvements to our balance sheet, reducing our total debt by nearly half compared to fiscal 2023. We are pleased with the progress we've made in this fiscal year and the foundation we've built, and we look forward to delivering on our goals in fiscal 2025. This concludes our prepared remarks, and we'll now open it up for questions. Thanks.
Operator
Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment for questions.
spk03
Our first question comes from Scott Fortune with Roth Capital Partners.
Operator
You may proceed.
Tmoo
Scott Fortune Yes, good afternoon and thanks for the questions. I just want to unpack a little bit on the top line and where that growth is coming from. You're seeing, obviously, you had a big destocking and reordering from your large online partner last quarter. We've seen that probably drop off this quarter. But if you could just provide a little more color on kind of revenue growth, where that's coming from with your large online partner. And then you mentioned, obviously, ramping up Timu and TikTok on that side too. And then I'll set that, you know, last quarter, you know, 10% of sales was coming from the SuperSuite, just kind of a sense where that SuperSuite percentage of sales is on this quarter. Just kind of unpack the whole top line, kind of 19.5 million for this quarter and going forward here, but it'd be great.
Lawrence
Okay. Thank you. The top line, it's the new platform, the TikTok shop and Teemu, they are showing pretty good results initially, but in terms of a total percentage, they're still little compared to the overall sales. Our majority sales are still coming from Amazon platform. And in terms of the super suite platform, we have seen a pretty healthy growth and we have onboarded multiple partners, new partners over the last few months, which I believe it will becoming more and more parts of our revenue. And with the new platforms like TikTok Shop, Tmoo, and also we signed up with AliExpress, which is kind of similar to Tmoo, but it's from Alibaba. Just this month, we're onboarded and they are coming into the competitions of the US online retail market, which we think is a pretty beneficial thing for us, like the sellers and services providers. for online markets. I believe the competitions between platforms will drive very interesting results in the coming year or two until it's kind of settled down again, which is great. So forecasting, I think with the momentums we have in the Super Suite and the new partners we sign on board, We think it's a very great business line, and we'll continue to see its growth. And the smaller platforms, but yet new platforms, some of these competitive marketplaces will become a bigger share of our business.
Tmoo
That's great. Can we just expand, you know, Kevin, provincially, color on the demand side from your large channel partner and kind of the return to normalized ordering, you know, that kind of big, you know, point here is kind of where that partner is from a normalized ordering growth. I know things can be seasonal, but just want to get a sense for kind of that ordering cadence moving forward from that online channel and how that channel is doing. Right.
Vasily
Yeah, so as we had kind of anticipated a bit, we thought there would be some kind of rationalization might be a little strong, but some slowdown in kind of their order rate after such a strong rebound from them in March, which again, for kind of listeners who uh, weren't privy to the last couple of calls. You know, our December quarter was well below kind of what we expected in terms of demand, which was a function of seasonality, you know, some inventory rationalization on the part of our largest channel partner. And it was our belief that they had essentially kind of over rationalized their inventory and that they would, uh, uh, and that they would snap back. We did see the snapback in the March quarter, but, you know, we were a little surprised of the strength of the snapback suggesting that, you know, they were still trying to find their bearings, you know, with our product suite, you know, over the next quarter and so. So I think, you know, what we saw in this quarter was from a top line perspective, kind of that, you know, they probably, took on enough inventory and they worked through some of that while continuing to order. We're getting back to more normal kind of order patterns. And so I think we don't have, we don't have a ton of kind of additional color there. I think, you know, we're kind of probably narrowing the amplitude of the ups and downs a bit with them after the December quarter. Hopefully that's kind of what you were looking for. Yeah, I appreciate that.
Lawrence
Go ahead. Yeah, just to add on to it. I mean, we have compared to what happened during the COVID, which we have seen up and down in the M3 side. And I think the ordering patterns now is much more normalized. So we can safely say it's going back to the pre-COVID pattern where we'll see steady growth and steady inventory turnaround, which to us is very welcomed news. patterns of operating businesses. And we can continue to deepen the offering of our products, getting more market share and add on more supply chain partners. And all of this by driving mature existing channels like Amazon, Walmart, etc., etc., and adding new sales platforms like TikTok, Tmoo Shop, at the same time adding more supply chain partners. So we have more sales channels, better market shares on existing product categories, and adding new supply channels. And supporting these are our in-house proprietary ERP systems and our business BI platforms. So, that's the model of growth going forward that I envision.
Tmoo
Got it, and thanks for the detail. Now, a follow-up on the SuperSuite, you've done a really nice job of building out that robust supply chain offering of those SuperSuite services, which drives higher margins, but just Can you provide – I know you have three existing partners or customers there as part of the business, but can you just provide a little color on potential new customers' ads in the outlook into 2025 now that you have the foundation of that super suite in place, kind of what that pipeline is like and kind of expectations for that converting to new customers on that super suite for 2025 here? Okay. The –
Lawrence
We have got some pretty good partnerships from supply chain side onto our super suite. Going down, and we have got a few pretty significant, really great supply chain partners onboard over the last few months, including furniture, electronics in this category as well. These partners so far have been pretty big ones. Their revenues are pretty big. Going down, we also will start to expand partners into channel partner side, where we will work with different channel partners. to have their customers to become our customers. So we use our Super Suite capabilities to benefit their customers, which will accelerate the onboard process and the numbers of partners as the Super Suite become more and more mature. So in the next month or two, we'll start to launching more online platform side of products to enable and reduce the complexity of onboarding new partners and opening up the channels for our channel partners to help driving more customer to our way. So hopefully that answers your questions. Basically, we are working on the technologies to reduce complexity, thus prepare for... bigger number of partners potentially to come in and through our business development channels with our partners.
Tmoo
I appreciate the color there. And then one last little one for me. You mentioned you have now manufacturing in Vietnam, a partner there, and the savings you can see there moving forward, kind of what's percentage of the sourcing you think will come from Vietnam from that standpoint? And does that uphold and kind of keep the margin structure in place or there can continue to be more savings to pass through on a competitive pricing standpoint to drive volume there? How do you look at that gross margin side from all the OPEX savings and right sizing you've done here?
Lawrence
Right. It's a great start. It's an effort of us to diversify our supply chain outside China. It's just the beginning, but it will grow. Now, in terms of gross profit and margin, it's definitely saving our cost of goods sold. So we definitely see savings there. and I, I think that will become a generally more profit ability for us and as well as making our product more competitive.
spk03
Thank you.
Vasily
And we'll go ahead. Yeah. Scott, just to be clear too. I mean, you know, we don't really have product out in the market yet from the transition. You know, we, we push pretty hard to get that up and started, but, you know, you know, the manufacturing time takes time getting it over. So those benefits will accrue in future quarters. Uh, it's, uh, uh, it's not reflected yet in kind of our financials, uh, as we speak. So it will keep you posted on kind of how that rolls out. And I think the other thing that, uh, it's worth pointing out is while we are diversifying, uh, out of china and it'll never be completely out of china but it's a strategic kind of initiative on our part you know on an ongoing basis we continue to rationalize and and look for improvements within our existing supplier base in china as well as you bring on other suppliers uh we think that is one important for keeping us continually cost competitive and also keeping kind of our uh contract manufacturing partners, you know, kind of honest, you know, we've been good partners for, you know, almost all of them, you know, over the last, let's call it five years, you know, but we still have expectations that they need to deliver, you know, when we see areas for kind of efficiency and improvement. So, you know, our, our, our supplier base is an ongoing optimization effort and Vietnam and potentially other places in Southeast Asia over time is just the part of that ongoing strategy.
Lawrence
Yeah, just in addition to what Kevin's mentioned, it doesn't mean that we are not optimizing, we are ditching China. It's not like that. been optimizing our supply chain in China over the last few months as well, and we have seen significant costs down from there. So we'll see these savings showing up later on.
Tmoo
Thank you. I'll jump back in the queue.
spk03
Thank you. Our next question comes from Tiara Willout with
Operator
Water Tower Research, you may proceed.
Kevin
Thank you. Just following up maybe on the activities in Southeast Asia, in Vietnam, are those new different contract manufacturers or are those people you work with in China and they're just moving operations with you or at your request in Vietnam? I was curious about that.
Lawrence
That's new manufacture. That's new manufacture. Yeah. Though we have seen a lot of our suppliers in the process or already moved sort of their production lines outside China, including Vietnam, Mexico, and other countries, not all of them has reached the cost point where it's cheaper overall. Uh, so we're still waiting for some of them to, uh, speed up and make the new manufacturer, uh, more efficient. But to answer your question, this specific ones that we're talking about in the Vietnam, which is where we started as a new supply chain.
Kevin
Okay. And then maybe if you have some colors on, on how the specific, uh, categories we're doing, you know, you, you've had some movements, uh, uh some categories are becoming more important others are becoming less so i'm kind of wondering if you can give us a rough idea of where where that that site is it about the same as at the end of the march quarter or do you see areas kind of where the sales are growing and others where they might be slowing down or any color there right um we continues to focus on the heartlines
Lawrence
In terms of the sales composition of different categories, the few top-selling categories are home, pet, furniture, etc. The hydroponics line is no longer a significant part of the overall sales as compared to a few years ago. And the growth will come in the future, I believe, home furniture pads and electronics as well. So these are the categories that we think we will continuously see growth on. We have seen quite a few quantity partners on board over the last few months in these categories. We also are, like I mentioned earlier with Kevin, optimizing the existing supply chain network with better quantity of products and lower cost, and also expanding that network to different countries to make it more robust. So we'll continue to see the cost down from existing suppliers. We also will see more quantity partners coming on board through SuperSuite platforms. but mostly hot lungs.
Kevin
Okay, well, you covered a lot of ground with Scott. So, Kevin, did you have any other color to add?
Vasily
Yeah, I just wanted to kind of follow on Lawrence's comment about hydroponics. You know, it has become, you know, a much less meaningful portion of, you know, our overall sales. And I don't think it's any secret that kind of the demand environment more broadly for hydroponics has not been terribly good. I think when we look at our results, you know, relative to what we've seen in kind of others who are, you know, selling consumer-ish products in the marketplace, I think we are faring better, but it's still not a great demand environment for that. And so, I mean, I think the Luckily for us, we have restored the profitability of that business along with everything else that we've done in the last 18 months, but that is not an area that we expect a whole lot of growth for us going forward, partly because we've got other categories and other initiatives that make the most sense, but until that end market becomes a bit more robust um it's hard for us to see that the hydroponics piece be a bigger portion of kind of our overall revenues anytime soon so you know i think that color pretty consistent with i think what other people are seeing um i think you know there's a there's there's some underlying uh there's some underlying weakness in that end market that we've been lucky enough to overcome with some of our other product offerings.
Lawrence
Yeah, I mean, that market is still there. It's not going away. We're still leader on the online retail side, but our core strengths came from the technology and data and our platform we built, like our ERP systems internally we built and the business intelligence platform is reporting, as well as the super suite of products we build, which enable us to moving quality products from any categories to the consumers. So joining, that's the strength and that's where the growth will come from by become efficient merchandising and distribution and sellers online. providing all these great services to all of our partners and move the best value product to the consumers. That's where the foundation comes from. And I believe that's a business model where we focus on would expand in the future pretty quickly. Great. Thank you.
Operator
Thank you. I would now like to turn the call back over to Kevin Vasily for any closing remarks.
Vasily
Thank you, Josh. Thanks, everyone, for your questions and for dialing in. I look forward to speaking with you again shortly for our fiscal first quarter results and potentially at some investor conferences over the next several months. Thanks again, and we'll talk again soon. Bye.
Operator
Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.
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