Participants

Matthew Abenante; Investor Relations; Armlogi Holding Corp

Aidy Chou; Chairman of the Board, President, Chief Executive Officer; Armlogi Holding Corp

Sheng-Kai Hsu; Chief Financial Officer; Armlogi Holding Corp

Presentation

Operator

Tools, it's on hold. We appreciate your patience. Please stand by. Your program is about to begin. Thank you for standing by, and welcome to the Armlogi Holding Corp second quarter and first half of fiscal year 2025 earnings call. Please note that today's call is being recorded. I'll now turn the meeting over to Matthew Abenante, Investor Relations for Armlogi Holding Corp.

Matthew Abenante

Thank you, operator, and thanks to everyone for joining us today for Armlogi’ s earnings conference call to discuss the second quarter and first half of 2025 results. Please note that our earnings press release was issued yesterday, along with our quarterly report on Form 10-Q, which was also filed yesterday with the Securities and Exchange Commission. Both are available in the Investor Relations section of our website at ir.armlogi.com.
Joining us on the call today are Aidy Chou, Chairman and Chief Executive Officer of Armlogi; and Scott Hsu, Chief Financial Officer. The format of our call will consist of comments provided by management, followed by a question-and-answer session addressing the questions that were submitted by investors.
We thank everyone for submitting these questions. And before we get started, I'm going to review the Safe Harbor Statement. Please note that today's discussion will contain forward-looking statements. In addition, from time to time, we or our representatives may make forward-looking statements orally or in writing.
We base these forward-looking statements on our expectations and projections about future events, which we derived from the information currently available to us. Such forward-looking statements relate to future events or our future performance, including our financial performance and projections our growth in revenue and earnings and our business prospects and opportunities.
You can identify forward-looking statements by those that are not historical in nature, particularly those that use the terminology such as may, should, expect, anticipate, contemplates, estimates, intends, believes, plans, projected, predicts, potential or hope or the negative of these or similar terms.
In evaluating these forward-looking statements, you should consider various factors, including our ability to change the direction of the company, our ability to keep pace with new technology and changing market needs and the competitive environment of our business.
These and other factors may cause our actual results to differ materially from any forward-looking statements. Forward-looking statements are only predictions. We are not obligated to publicly update or revise any forward-looking statement, whether as a result of uncertainties or assumptions.
The forward-looking statements discussed on this call and other statements made from time to time by us or our representatives may not occur, and actual events and results may differ materially and are subject to risks, uncertainties and assumptions about us.
And with that, I would like to hand the call to our first speaker, Aidy Chou, Chairman and CEO of Armlogi. Good morning, Aidy.

Aidy Chou

Good morning, Matt, and thank you, everyone, for joining us today. I would like to discuss our second quarter and first half results for fiscal 2025 and outline our strategic progress. For Q2 FY2025, we generated revenue of $51.1 million, representing growth of 21.8% compared to the same periods last year, where our top line growth demonstrates strong market demand.
We faced margin pressure this quarter as we executed on our expansion strategy. We will grow from 9 to 12 warehouses, expanding our total space from $2 million to over $3.5 million will fit with new strategic locations in Savannah, Georgia, Ontario, California and most recently as a 500,000-square facility in the St. Louis major area. Looking ahead, we remain confident in our long-term strategy. Our expanded footprint now provide access to 70% of the US population with a two-day drive.
Our focus remains on optimizing this facility while maintaining our high service level. I will now turn it over to our new CFO, Scott Hsu, who will provide a detailed review of our financial performance.

Sheng-Kai Hsu

Thank you, Aidy. I will now take us through a comprehensive review of our financial results and operational metrics for both the second quarter and the first half of the fiscal year, 2025. Let me start by expanding our revenue performance, while we achieved a 21.8% top line growth, reaching $51.1 million in Q2.
The compensation of this growth reviews important trends across all business segments. Our Transportation services revenue grew 20.8% due to $36.1 million, driven by increased shipment volumes from our expanded warehouse network.
Our warehousing service revenue to even stronger growth increased 25.7% to $15 million, reflecting the successful addition of our new facilities. Our other services revenue, primarily custom blockage decreased to 6,243 as we focus on our core operations. However, the growth came with a significant cost pressures. Our total cost of sales increased by $16.3 million or 47.6% to $15.9 million in Q2. The increase was driven by two manufacturers.
First, there was a rise in freight expense due to higher UPS shipping trial. Second, this expands employee service and the benefit and the comparative cost increase as we expand our warehouse and operation teams to support growth.
This cost increase reflecting both our expansion activities and the industry-wide pressures resulting in our gross profit margin decreased to 0.9% in Q2 fiscal year 2025 from 18.3% in Q2 fiscal year 2024. General and administrative expenses decreased by $0.3 million or 9% from $2.9 million for the three months end December 31, 2023, to $2.6 million for the same period in 2024.
With the primary driver being a $1.2 million increased professional fees related to the investment financial advisory services. As a result, our net loss for the three months ended December 31, 2024, was $1.6 million compared with the net income of $3.3 million for the same period in 2023, representing a decrease of $5.4 million.
Looking at our first half performance, total revenue grew 12.5% to $93.6 million. However, the cost pressure I described earlier, the net loss of the six months end December 31, 2024, of $6.3 million compared with the net income of $6.5 million for the same period in 2023, representing a decrease by $12.8 million.
Turning to our balance sheet and the liquidity position as of December 31, 2024, ended June 30, 2024. We had cash and restricted cash of $7.4 million and $10 million, respectively, which primarily consists of the tax deposits in banks. Our cash flow analysis shows operating activities used a net tax of $9.2 million in the first half primarily due to our expansion-related expenses, Investing activities used $1 million mainly for the property and equipment purchases, while financing activities provided $7.4 million primarily from our standby equity purchase agreement.
We have taken a significant step to strengthen our financial flexibility. This includes the security of $15 million standby equity purchase agreement with a establishing up to $21 million in convertible promissory notes and competitive to $5 million chances of pretense.
Our working capital position remains solid with the total current assets of $42.9 million against current liability of $40.2 million, and our total stockholders' equity stands at $33.2 million. Particularly encouraging metric is our growing customer base, which has expanded from 105 at the end of June 2024 to 298 active customers as of December 31, 2024. The nearly three times growth in our customer base demonstrates for market demand for our service despite the near-term margin pressure.
Looking ahead, our financial strategy focused on four key areas. First, improving utilization rates at our new facility to drive better operating leverage.
Second, implementing automation and efficiency initiatives to manage operating costs; third, optimizing working [tattoo] the better inventory and the receivable management and fourth, maintaining adequate liquidity to support our continued growth initiatives.
With that the comprehensive financial overview, I will turn it back to Matt for questions.

Question and Answer Session

Matthew Abenante

Thank you, Scott. We will now move to the question-and-answer portion of the call. Thank you to everyone who has submitted questions. Our first question. Can you provide more color on the UPS cost increases? And what steps you're taking to mitigate the impact on margin?

Sheng-Kai Hsu

Yes. The UPS cost increase contributed significant to our $8.3 million rise in (technical difficulty) expenses this quarter. We are addressing this through the multiple initiatives. First, our recent integration with Armlogi shipping provides an alternative care options that we expect will help to diversify our shipping costs.
Second, we are leveraging our new port transportation management software to optimizing the routing and consolidated shipping where possible. Only, we are in ongoing discussions with multiple carriers to ensure competitive rates as we continue to grow our volume.

Thank you. Your warehousing footprint has grown significantly, but utilization seems mixed. What's your target utilization rate and timeline for reaching it across the new facility. While our Savanna facility has reached 70% utilization within six months, which we are pleased with. All of our newer facilities are still ramping up.
[Our take] utilization rate is 85% across the network. We expect most facilities to reach this level within 12 months to 18 months of the opening based on our historic experience. The St. Louis facility just came online. So that's where it takes on time. But Ontario is taking similarly to some of the ramp-ups occur.

Matthew Abenante

Now, given the cash burden this quarter and current market conditions, do you anticipate needing to draw down more of the SEPA facility in the near term?

We end the quarter with the $7.4 million in cash and the restricted cash, and we have only got $10 million of our $150 million SPF facility. While we believe all the current liquidity position is adequate for our near turning. Having the facility provides important flexibility as we continue to optimize our expanded operations. We will be strategic about any additional costs, balancing growth opportunity with delusion considerations.

Sheng-Kai Hsu

And our last question. Now you mentioned AI integration in your WMS. Can you quantify the expected efficiency gains and timeline for implementation?

Aidy Chou

Yes. The AI-enhanced WMS is currently being rolled out across our network with full implementation expected by fiscal year-end. Early results from our pilot facility show potential for the 15% to 20% improvement in efficiency and a 25% reduction in water working demand. However, we expect the full benefit to materialize over 6 to 12 months as the system learn from our operations and we optimize this implementation.

Matthew Abenante

Thank you, Scott, and thank you, Adi, for your comments. And thank you, everyone, for participating on today's call. We look forward to providing additional updates in the near future. In the meantime, we can be reached at info@armlogi.com or you could contact me at Matthew@strategic-ir.com.

Operator

Ladies and gentlemen, this concludes our conference for today. Thank you for your participation, and you may now disconnect.