Earnings call transcript Q2 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon, everyone and thank you for participating in today’s conference call to discuss iPower’s Financial Results for its Fiscal Second Quarter 2023 ended Decelerating 31, 2022.

Joining us today are iPower’s Chairman and CEO, Mr. Lawrence Tan; and the company’s CFO Mr. Kevin Vassily.

Mr. begin. may you Vassily,

Kevin Vassily

PM and website to everyone. on earnings our issued also Relations for approximately which operator available available release should the be meetipower.com. in press now website. This have our was Investor XX:XX at today access fiscal of earlier replay Time. good you, The By is our afternoon section everyone release, Eastern at Thank webcast second will quarter call

your we Following open will questions. our for call remarks, prepared the

certain Lawrence, webcast Before to reflected the listeners forward-looking introduce These statements. Act results like I cause I this risks and remind actual Reform unknown as under in differ that that forward-looking to and from would on of materially these could made statements conference statements XXXX. to Private Litigation certain are are forward-looking those comments Securities known call well subject and uncertainties, as considered assumptions

being are described are place and on also Do risks not forward-looking subject undue other in These the only any obligation forward-looking undertakes the as revise call, results to with company SEC. filings the which publicly statements, time-to-time forward-looking or release company’s no any revision required from by to statements the of to are reliance except of this as of any law, that uncertainties statements. date the

call iPower’s Chairman to over and would the Tan. I turn that, Lawrence Lawrence. now With to like CEO,

Lawrence Tan

quarters. sales a marketing We recent afternoon, we good generated Thank growth inventory into everyone. and quarter, revenue excess buildup to fiscal and you, as during Kevin, double-digit strategically leaned offload over our second

for categories, evolving continued portfolio. which feedback. most PET notable in-house continue demonstrates Throughout was the receive growth strong our within shelving, and the of were offerings. iPower’s our which to few consistent, portfolio diversify grow our the top-line we customer product The with A demand product products strong and quarter, by office and extensive non-hydroponics to product, led

it of and smaller our R&D. invest remains business a has the growth will from catalog portion important category product of as becoming we today, diversification continue to our our in and The appropriate is hydroponics investment stemmed Although evolves. market

will in invest new create the This trust, portfolio, expect for customers forward, the both and Moving growth development our innovative to partners. channel rolling new we out throughout our product offerings can value of customers we consist that we products of calendar ensure high will they industry receive XXXX. our to continue and to products leading continue

for chain made XXXX, partners. inventory and increased to both fast and the demand products. products Earlier for availability This ensured we of anticipation that headwinds decision in our stockpile moving residual our channel our in customers both strategic consistent in-house supply we of have

and a margins. impacted position we accumulated to space, pick As a result, had warehousing our short-term which inventory additional up heavy

and marketing in calendar year, begun out shift costs we a closed returning As prudently level begun leaned to into the supply we to stabilize levels to inventory, these higher COVID chain freight a to access chain, of we improved the environment with as sales carry supply and need longer no pre inventory. experience shipping offload and to

capital improve it. with extra This and the us warehousing cost associated and our to working decision space enabled eliminate higher the

the our to revenue drive line growth actions bottom our continued with these expect to in We coupled improvements ahead. quarters

the to company a website, happy items. month, our better portfolio process new the outside showcase transitional calendar to I’m hydroponics. report increasingly In that officially we marketing included this strategic revamping image product begun iPower scheme which XXXX, and other logo, the color diverse we our initiative related alongside core completed of last business

moving and guide new a our company’s elements these forward. design new brand Together, will position image instill help to

as we unify to a for and internationally. create services non-hydro more our and both addition, seamless our experience various In products customers will domestically it related scale

fiscal more our we costs our elevated half to Between expenses. and back efficiently improved shipping the continuous continue to tailwinds warehousing for freight are pre-COVID elimination supply short-term and expect XXXX, inventory the of demand profitability With from look growth to iPower and back and to chain to XXXX. product, expenses. we we the levels, while another allocate in operating environment benefiting As plan of strong purchases, these mindfully well capital deliver managing towards positioned strong period we

the our I our to more financial take Kevin. through will now to over you call detail, results Vassily, CFO, in Kevin turn

Kevin Vassily

our iPower. including as for period by revenue compared driven another demand million, and up hydroponics. for as was product strong Thanks, well to XX.X year-ago of solid Lawrence. office, to million portfolio, Fiscal shelving, XX.X period, XX% Total QX products, in-house the was growth in pet

well Gross increased The mix. decrease $X.X product in as million gross to X% quarter, in gross ago a compared $X margin profit XX.X% with XX.X% year the compared percentage ago category in year to and charges primarily in of freight quarter. as million fiscal was by the channel revenue the increased second driven as quarter margin

for expense same operating fiscal to $X.X QX for the fiscal million Total in $XX.X was million period XXXX. compared

primarily As of fulfillment that higher to inventory Lawrence in the increase costs expense and by bill operating we saw. marketing mentioned, related driven the was selling sale the

warehouse improved some We however, no longer to costs working have carry capital of inventory, thereafter, to inventory fiscal offload loads normalize still expect incremental along the have excess QX, expenses. to to as and we in operating higher with we

afore of fiscal by marketing attributed $X.XX to or costs. $X.XX for loss selling, decrease quarter the share compared and primarily in same the income mentioned to our period net million per share XXXX. iPower line per higher pull in X.X X.X fiscal second The bottom with million to fulfillment driven in the or Net was

quarter, reflecting million our cash in generated Looking burn $X.X to a working million cash $X period, to we have cash improvements from the of compared more year capital. flow, than operations the ago our we during made at the

cash, to sheet, XXXX, XXXX. equivalence million and million XX, Moving December four XX, X.X compared for cash June at the balance to on

compared XX million, stood total As million atXX.X as XXXX. XX, debt June to of December of XX, XXXX,

debt down of up portion capital decision The to freed working decrease to given significant a by inventory. related the pay was driven our

As XX, position XXXX. June X.X XX.X to net million was debt at result, a reduced million our to XX% compared

the normalization As of of as have and expenses operating levels to we exit Lawrence the well shipping warehousing excess times, lower year. as as to elimination fiscal earlier, freight costs, mentioned and supply chain, when return we inventory seen we reduce shipping significantly coupled pre-COVID the levels our with with costs, expect as our

and Looking range provide garden our plan as a continue ahead, focused products. of capital home working we improving to growth we our and profitability customers driving on diverse with position, quality improving high on

for and now questions. our conclude we will remarks we that, With prepared Operator. it open up

Operator

Instructions] comes from of line first question the ROTH. of Scott Fortune [Operator Thank Our you.

Your line is open.

Scott Fortune

more growth Thank for is on you it a little A on you of understand afternoon. in the on bit questions. the the you Good quarter-over-quarter this the come? front high where segments real growth? quarterly us kind can Can a or focus little down a here. non-high provide what I know drives growth is help seasonality top-line slowdown the and year-over-year color growth up basis, XX% growth quick top-line and or is

side on and across potential little follow-up color consumer side, your here additional And anywhere weakness then hydro the a bit a on and are hydro you the turn near you from and to are can sure. provide not is business board commercial that, the seeing weakness growth the standpoint? growth time on that ongoing as turn Sorry, A positively the far bit I’m from and say? to growth weakness the here side as more where tend little in per seeing for top-line hydro inflection you just

Kevin Vassily

Right.

any in you start and you Laurence I at jump can So point. can will

in I the think low the beginning we for in calendar us, have past was typical talked seasonal year leading a the years to quarter up season that the about of the March December XXXX. and the in little bit business the quarter pattern. the seasonality represented then

we year seasonality saw seemed to what think a defy I last bit.

bit has The quarter-to-quarter from of think how was December is, a revenues for confusing tracked quarter-over-quarter. it us. our standpoint I a quarter So little historically the of versus

context, in that So think that we saw surprising. what don’t December in I was

and were will in of home kind little have think our categories partners garden of was think, kind think broader we they seasonal for of I of don’t inventory what out to through so some that But ordering like ordering. and the I slowed channel finding say wholesale a work their of lot ways though a who people, standpoint, are kind pattern We a was of bit and of there saw I kind our from some the slowing ordinary.

can have From you think the standpoint Laurence, meaningfully of kind of chime consumer weakness, don’t in I weak. seen anything maybe here. we

deal of one be I out chains think But to higher inventory. tenors supply seems to is there levels way there. still demand reasonable of with consumer general finding the

anything if to else add Laurence, know I don’t have there. you

Lawrence Tan

mostly more They is need known like a like products Yes, stop are of buying and utility the I economy, even consumers people the are do don’t they think uh, down these valued, our it. needed slow where though products there - as hotline it. kind products

actually is beneficial consumers. it of value provide products mid-tier these as So, somewhat the kind for data best to they to

I see So there. that don’t slowdown

the As on for the think we now look but maintained at position, market data, need I online. more to we share side I hydroponics, get our hydroponics

yes. growing, is part growth the are contributed that other products, by So, slowly. so but Most of

Kevin Vassily

Well, really And about whether from see or asked commercial you to is a not. purchaser think online then or commercial. for Scott, our is I us think, not it orders I hard

in not of has think and really our impact. the environment business limping commercial now, small has that offline changed news is it I us Our demand don’t having that good business our a a any meaningful I for think part is become way, it such very small part mean, there of is still is along. a business I right it meaningful

Lawrence Tan

Yes, correct. that is correct. That is

Scott Fortune

for color follow-up a appreciate progress. is then of I progress And box the here. I partner slow potentially no it adding just know there. the in-depth big thanks on mentions there,

fiscal for looking are Can around updates any on it the the by moving partners box color the forward? of of opportunity? to of in you timing big end or Kind here. year do near-term potentially provide You that

Kevin Vassily

the the But But into to channels online made some sales that is We just stores. got there are we of some get first and platform. of there. some we into there we step progress to the make progress on the start product started

are things moving they take So time. just some

Scott Fortune

Got I queue. back the Thanks. will jump in okay, it,

Kevin Vassily

Thanks Scott.

Operator

of next Thank line your Michael of D.A. open. you. Davidson. is [Operator the Michael Baker Instructions] comes Our from line Baker question

Michael Baker

First supply profitable how and down much on to to gross getting and there, was of better How the close XXXX margins being income said of get I Yes, wanted think this that thanks. Lawrence, plan expect ask on to Okay, quarter, will Do all, profitable I few we you understand so you you which weren’t next that for seems was like quarters? about from net XXX be help fiscal but from XXXX much us line chain, in just then right? profitable, should points. the what is basis did it I maybe mix?

happened then the away? marketing And this million, that margins incremental much might few couple help quarters. words, quarters. are of aren’t occur was understand next the quarter going up like that How $X much the on partially in of of for other behind next going what this SG&A is how things look or us was that what the us in at they least to Thanks. because to So

Kevin Vassily

Right.

Let first. me in jump I think and of again. said, of we have few Lawrence those a will be fiscal profitable. that I XXXX take would don’t full-year you kind

Michael Baker

is in Sales maybe and growth I one. and in what but XXXX I XXXX, sales profits heard, heard profits

Kevin Vassily

way to think return characterize we XXXX. we is the profitability that fiscal in of better can that I maybe to that expect Well, kind

of there, we the us So by hope get end -. the the will trajectory

Michael Baker

So run the end profitable by XXXX, for rate of not year. profitability but of the

Kevin Vassily

giving guidance, full-year specific the extraordinarily I make would math the without think, mean, I Correct. hard.

Michael Baker

is why That I asked. is I That thought. what

Kevin Vassily

you Yes. did. I’m glad

was margin gross perspective, it a from a combination. So

the have SKUs, given I think, we have a of products, catalog excess got XX,XXX in X,XXX have in-house of we this we past, SKUs. that in talked about our

a across gross There are that of They in uniform product. in not is product. distribution margins every

at sell decline shipping big of influences any incremental costs. a XXX that products quarter was the what over point basis given so the And piece

in supply ramp So of through like only chains some a quarter. income is but product and ways the really availability statement the container of summer, because flowing inventory that we December still with over in felt panicked, pretty not Amazon, important what in this anticipation the purchased and dislocated

kind the push stuff That as we in the this one strategic was much took to to starting possible work that and initiatives door out quarter. of is through in fact, as of of

four to much, that cost, we new costs lower timeframe the carries and the than March are inventory much hold we container lower of to So are times June now last in were talking, year. freight that that five they

So, that ease to us, gross should is going for margins. which improve

Go sales ahead -. the marketing On of side.

Michael Baker

Well.

it I’m all a asking of whatever points XXX I basis was guess portion. the that you us Kevin, said can is, say, significant what of quantification help you or clear with just remarks. me Let was, from that, the you

described was will half? half asking just is most it forward. was we in any second Is quarter, going asking more you the supply how to supply So judgment can I’m better make look will half than so that about the it stuff or mixed our get chain then everything that - the I’m four it projection, and was and chain, from and like as much what Is

Kevin Vassily

Yes.

I think, and mixed. I the of say XX% in shipping container from that least Yes. came would it costs was other at XX the

Michael Baker

Okay. sounded is SG&A, from like push which behind marketing million now? incremental increase, the of how presumably most same on was what And question product, $X then you that to the much

Kevin Vassily

we get being marketing that primary fluctuate quarter-to-quarter we out But is But the hard demand incremental mix is least of - and to big from pretty cost - push it sales anyways came Yes. did programs higher all and with intentional partner impact I sales chunk would that, is say, the channel. was door. that where that forecast. increase channel on there promotion at that different our marketing our channel that some to almost and inventory XX% from of of

Michael Baker

you? Understood and of am inventory is the is a down I that correct that in behind that, saying coming lot now

Kevin Vassily

Lawrence, is front, to of have sense much it but do on you of a it. a we done amount better more have how need significant we maybe that

Lawrence Tan

accomplished we December, By - of we goal. our reduced XX%

on are way the there. we So

Michael Baker

through. So XX% you are

go. to some have still So

Lawrence Tan

Yes, -. we have still

Michael Baker

you working to assume going are that go that have you still that incremental million you are will away $X all still because some I’m through.

Lawrence Tan

The But plan pressure away, there. million is the as be we higher part total want $X won’t the lot not we though door. a did no as that play only through much We - remaining not we inventory now. the inventory, most to as now out we of go we longer our to promotions but did that it when all aggressive be cost pressure. - for facing are half the but of what we halfway will get But like a even inventory will of do not lower

run won’t aggressive So what as before. as we campaigns did we

Michael Baker

appreciate I color. clear. Very Thanks. the

Operator

That any call the you. Vassily Thank closing remarks. does the I over portion. would like to Kevin conclude for back Q&A turn to

Kevin Vassily

with want I forward spring. look everyone for this Thank little so joining today you bit us we a again to Okay. much. Thanks later you, thank Operator. and to speaking

Operator

you. and you Thank gentlemen, conference. this today’s Ladies does Thank conclude all participating.

day. You may now disconnect. Have a great

iPower (IPW) 14 Feb 232023 Q2 Earnings call transcript