Upexi, Inc.

Good day, and welcome to the UPIXIE, Inc. 2024 Fiscal First Quarter Earnings Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Valter Pinto, Managing Director at KCSA Strategic Communications. Please go ahead.

Thank you, Operator. Hello and welcome, everyone, to the UPACC 2024 Fiscal First Quarter Financial Results Conference Call. I'm joined today by Alan Marshall, Chief Executive Officer, and Andrew Nordstrom, Chief Financial Officer. Before we begin, I'm going to remind everyone that statements made during today's conference call may be deemed forward-looking statements within the meaning of the safe harbor of the Private Security Litigation Reform Act of 1995. Actual results may differ materially due to a variety of risks, uncertainties, and other factors. For a detailed discussion of some of the ongoing risks and uncertainties in the company's business, I'll refer you to the press release issued today and filed with the SEC on Form 8K. as well as the company's reports filed periodically with the SEC. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, unless otherwise required by law. In addition, during the course of the call, we may refer to non-GAAP financial measures that are not prepared in accordance with accounting principles generally accepted in the United States, and they may be different from non-GAAP financial measures used by other companies. The reconciliation of non-GAAP financial measures of the most directly comparable GAAP financial measures are contained in our earnings release issued this evening, unless otherwise noted. I'd now like to turn the call over to UPEX's CEO, Alan Marshall.

Thank you, and welcome to our fiscal 2024 first quarter financial results conference call. As we have navigated through a dynamic economic landscape in 2023, it is crucial to recognize the robust undercurrents that position our company for a promising future. There are things we can control and those we cannot. Our share price, which as a larger shareholder I share frustration with, is a phenomenon not within our control given the broader market sentiments. What we can control is our operational core, which has never been stronger. We have successfully enhanced efficiencies across several business channels, which is a testament to our team's relentless pursuit of operational excellence and innovation. The ongoing streamlining of operations is projected to significantly bolster our margins, reflecting a healthier balance sheet in upcoming quarters. Moreover, growth in key sectors has been a bright spot, demonstrating the efficacy of our strategic pivots and the resonance of our offerings in high potential markets. Our revenue for fiscal Q1 of 2024 grew 140% year over year and 53.5% sequentially. During the quarter, we invested significantly in our brands, which impacted our EBITDA margins in the short term. However, this is an investment in the future sales growth and EBITDA, not in our view a negative. Our children's educational toy brand, Titan Tiles, is a great example of this return on investment. During the quarter, We invested significantly around the Disney Frozen launch and new product launches. Just one month into the launch of this product on Amazon, we are a run rate of over 115 units per day. We have moved our rank on Amazon from 20,000 to 4,000. On Friday, Titan Tiles had its largest day since launch, reaching number three in toy magnetic building sets. This is an incredible accomplishment in less than a month for any product launch on Amazon and very promising for the future Disney launches. Our pet products brand, Lumpy Tail, had launched its pet chews on Amazon and direct-to-consumer. This category is not only a value add to our current nail grinder, but the chews are an item we can push on a subscription basis, building a recurring revenue model for the brand. We spent approximately $250,000 of advertising on this launch and other product launch initiatives. Obviously, this did not convert to immediate revenue, but it is necessary to build a more diverse product line focused on subscription and recurring revenue opportunities for the future. On Vitamedica, earlier this year, we increased our ad spend to acquire and build Vitamedica subscription rates, subsequently decreasing the spend to try to increase profits, which we did in the short term. However, we realized that by doing so, we actually hurt our longer-term subscription growth and profits. We've concluded that a larger upfront ad spend will lead to overall higher lifetime values of the product and brand, and as a result, we started to implement this strategy in fiscal Q1. We expect growth to further accelerate for Vitamedica as we launch complementary products like acne treatments. We expect data from the acne study of this product sometime in January. I've invested a quarter of a million dollars on this study, and successful data will help to increase sales significantly in a very large, sticky, and recurring segment of the health and wellness industry. The overall growth of our brands will be critical to increasing overall margins as we launch more subscription-based product lines We anticipate this model will drive higher margin and profitability. Re-commerce revenue for fiscal Q1 was 76% of total revenue, an increase of 187% year-over-year. Signet Online, our high-volume re-commerce provider of branded OTC products, increased revenue sequentially by approximately $1.5 million, with gross profit margins increasing from 44% to 48%. This was accomplished by purchasing products in higher volumes at lower prices and implementing certain price controls. The business positives trends is expected to continue with increased contribution to profit margins in the coming quarter. During the quarter and into the current quarter, we consolidated Cygnus Warehouse into our 3PL warehousing, resulting in approximately a half a million dollars reduction in operating expense and increased efficiencies for the future. The business's positive trend should continue with increased contribution margin in the coming quarters. NETI, our e-commerce provider of overstocked and discontinued merchandise for hundreds of retailers, increased revenues sequentially during the quarter by approximately $6.3 million. Average gross profit, however, declined from 17% to 10%. This is primarily related to liquidation of excess inventory and inventory management. Given a slowing trend in consumer purchasing, we made the strategic decision to sell off excess inventories heading into an uncertain economic environment. Importantly, I wanted to highlight the cost-cutting measures we have implemented over the previous quarters that are now beginning to be reflected in our financial performance. For fiscal Q1, general and administrative expenses as a percentage of revenue decreased to 8.2% as compared to 19% for the same period in the prior year. Additionally, operating expenses as a percentage of revenue also decreased 29% as compared to 56.5% for the same period in the prior year. We remain committed to our previously announced guidance of generating $100 million in revenue for calendar 2023, and more importantly, to completing our cost cutting and increasing overall profitability. Lastly, before I turn the call over to Andy for details regarding our financials, I would like to take a moment to comment on our balance sheet and seller note due on October 31st. We have restructured this note and other debt, paying down a portion and extending the remainder. None of this debt will have a material impact on the future of our business. Our company stands at a pivotal inflection point for growth, underscored by a clear vision and steadfast commitment to our core values. These strategic advances are not mere coincidence, but the result of deliberate plan to future proof our business As stewards of this organization, we have collectively laid down a solid groundwork for sustained profitability and innovation. The trust placed in us by our shareholders and customers fuels our drive to excel, and I am confident that the initiatives we have set in motion will materialize into tangible success. Together, we are navigating towards a horizon rich with opportunity, and I am confident we will prove out the value of this model over the coming quarters to our stakeholders. I will now pass this call over to UPEXI CFO Andrew Nordstrom to discuss our financial results in more detail. Andrew.