iPower Inc. Q3 FY2024 earnings call

• Achieved double-digit revenue growth, record gross margins, and improved operating leverage, returning to profitability.
• Super suite supply chain business contributes ~10% of total revenue and provides insights to enhance internal capabilities.
• Largest channel partner returned to normalized inventory position and purchasing cycle, leading to stronger order volumes.
• Invested in super suite business with a robust pipeline of prospective partnerships.
• Diversified revenue with launch of super suite and deepened online presence on social e-commerce platforms like TikTok Shop, and expanded to Tmall in April.
• Winding down legacy commercial hydroponics business, having reduced inventory by 25% as of March 31, 2024.
• Benefiting from internal initiatives to drive savings in selling and performance operations, and reduced short-term warehousing costs by selling through most high-cost inventory.

Total revenue for Fiscal Third Quarter 2024 was $23.3 million, an increase of 15% compared to the prior year quarter. Gross profit was $10.9 million, up 41%, with gross margin reaching a record 47% (an 850 basis point increase from the year-ago quarter). Operating expenses were $9.3 million, a decrease from $9.6 million in the prior year quarter. Net income attributable to iPower improved to $1 million or $0.03 per share, compared to a net loss of $1.5 million or $0.05 per share in the prior year quarter. Adjusted net income was $1.6 million or $0.05 per share, up from an adjusted net loss of $1.4 million or $0.05 per share. The super suite supply chain business accounts for approximately 10% of total revenue.

• No specific guidance provided, but mentioned order rates from the largest channel partner rebounded as expected, with optimism about growth from super suite and new e-commerce channels like Tmall.
• Acknowledged potential caution regarding bull whip effect from the largest channel partner but remained optimistic about future trends.
• Continued investment in super suite business and work on cost and operational improvements.

• Forward-looking statements subject to uncertainties, risks, and changes in circumstances outside of control.
• Potential impact of economic changes on consumer demand for products.
• Remaining inventory, particularly in the fan business, may carry higher freight costs that could impact gross margin if not managed properly.

Q: Congratulations on the strong quarter. How to look at the largest channel partner going forward and products driving growth?

A: The largest channel partner has returned to a steady, normal inventory mode. Products are resilient to economic change, and demand is expected to continue growing. Super suite will add more supply chain partners.

Q: On gross margin, what factors contribute?

A: Both favorable product mix (skewed towards higher-margin products) and improved pricing due to initiatives with contract manufacturing partners to reduce input costs.

Q: On sales channels, which are developing fastest besides Amazon and any physical channels?

A: Tmall is showing good early results. Other channels like TikTok Shop are growing steadily. No immediate plans for physical channels but Tmall is an important digital channel with promising early performance.