Release Date: November 14, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• iPower Inc (NASDAQ:IPW) achieved year-over-year gross margin expansion and reduced operating expenses.
• The company expanded its Super Sweet supply chain platform by onboarding key partners, enhancing service capabilities.
• iPower Inc (NASDAQ:IPW) broadened its sales channels by launching on Aliexpress and strengthening presence on platforms like TikTok Shop and Timo.
• The company reduced inventory levels by approximately 18% compared to the previous quarter, improving cash flow generation.
• iPower Inc (NASDAQ:IPW) diversified its manufacturing base by partnering with a new manufacturer in Vietnam, reducing production and logistics expenses.

Negative Points

• Total revenue for the first fiscal quarter decreased to $19 million from $26.5 million in the previous year.
• The company reported a net loss of $2 million, or 6 cents per share, compared to a net loss of $1.3 million, or 4 cents per share, in the same period last year.
• Operating expenses included approximately $1.8 million in write-downs of certain inventory and credit loss reserves.
• Cash and cash equivalents decreased to $2.6 million as of September 30, 2024, from $7.4 million at the end of June 2024.
• There were delays in product availability due to transitioning to new suppliers, impacting the top line.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Signs with IPW.

Q: Can you provide details on the service income and service expenses mentioned in the earnings report? A: (CFO, Kevin Vasili) The service income and expenses are related to our Super Sweet platform, which includes both resale or wholesale agreements and fee-for-service business lines. The service fees are part of the fee-for-service business line, and due to their material impact on overall revenue, we disclosed them separately.

Q: There was a $1.8 million inventory write-down. Does this affect the income statement or is it just a balance sheet adjustment? A: (CFO, Kevin Vasili) The $1.8 million inventory write-down goes through the income statement. Of the approximately $2.7 million in operating loss, $1.8 million is related to these write-downs.

Q: Is the current revenue level of $19 million per quarter a baseline we should expect going forward? A: (CFO, Kevin Vasili) Yes, $19 million is close to a baseline. Last year's December quarter was unusually strong due to promotional activities to move inventory. We don't expect the same seasonal downtrend this year, and we believe the transition to new suppliers will no longer impact the top line.

Q: Among the new channels like Tiktok and Alibaba, which one should we focus on as a potential strong second channel? A: (CEO, Lawrence Tan) Tmall has the best potential among the new channels. It aligns well with our product portfolio and has strong marketing efforts. Aliexpress is still new, and while Tiktok's future was uncertain, it now seems more promising.

Q: How are you preparing for potential tariff increases, and what lessons have you learned from previous tariff introductions? A: (CEO, Lawrence Tan) We have been preparing for potential tariff increases by diversifying our supply chain and starting the Super Sweet platform. Some suppliers have plans to manufacture outside China. If tariffs increase, costs may be passed to consumers, but we are better prepared now than four years ago.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.