iPower Inc. Q1 FY2025 earnings call

• Maintained solid momentum in the third quarter, refined cost structure leading to gross margin expansion and operating expense reduction.
• Made progress in expanding SuperSuite supply chain platform, onboarding key partners, and broadening sales reach by launching on AliExpress and strengthening presence on platforms like TikTok Shop and Temu.
• Launched SuperSuite supplier online platform to optimize supplier interactions and workflow.
• Benefited from optimizing initiatives from last fiscal year, including gross margin expansion, lower operating expenses, and normalized supply chain lead times.
• Reduced inventory levels by approximately 18% as of September 30, 2024, and diversified manufacturing base with a new partner in Vietnam, completing the first purchase order shipment from the new manufacturer.

Total revenue in the first fiscal quarter was $19 million compared to $26.5 million. Gross profit in the fiscal first quarter of 2025 was $8.5 million, compared to $11.8 million in the same quarter of fiscal 2024. Gross margin increased 30 basis points to 44.7% compared to 44.4% in the year ago period. Total operating expenses for fiscal Q1 improved 14% to $11.2 million as compared to $13 million for the same period in fiscal 2024. Net loss attributable to iPower in the first quarter was $2 million or $0.06 per share compared to net loss attributable to iPower of $1.3 million or $0.04 per share in the same period of fiscal 2024. SuperSuite accounts for about 10% of overall sales.

• Believe actions combined with continued growth of SuperSuite business and optimized cost structure will enable delivery of goals for fiscal 2025.
• Revenue of $19 million is close to a baseline, with no expected same seasonal downtrend as last year's extraordinary seasonality, and expect top-line growth to resume.
• Confident in gross margins maintaining in the mid - to high - 40s range, with container costs currently behaving nicely but noting SuperSuite's potential impact on gross margin if it takes off.

• Forward - looking statements subject to inherent uncertainties, risks, and changes in circumstances difficult to predict, outside of control.
• Risks described in SEC filings, including those related to economy and future conditions.
• Potential impact of upcoming tariff increases, with possibility of passing cost to consumers if no alternative manufacturing countries are available.

Q: Can you give us some information as to what service income and service expenses are related to?

A: Sure. We've got two components of the business as part of SuperSuite. One is resale or wholesale agreements on the sales side with partners and the other are fee for service related business lines. The service fees are part of that fee for service business line.

Q: Does the $1.8 million inventory write down go through the income statement?

A: Yes. That goes through the income statement. Of the roughly 2.7% in operating loss, 1.8 of it was related to the write downs.

Q: Are we at a baseline of $19 million a quarter going forward or how should we think of it?

A: I think it's a good question. I think that's probably close to being a baseline. Last year's December quarter was extraordinarily seasonal relative to historical patterns, and we're not seeing that type of activity so far. Also, last year was impacted by active promotional work to move inventory and we've been negotiating with supply chain for more efficient manufacturing partners with some delays in getting product over the summer which had a dampening effect on the top - line, but we're through that transition and expect top - line growth to resume.

Q: Any of the three new promising channels (Temu, TikTok and Alibaba affiliate) we should pay attention to?

A: I think about the three, Temu has the best potential. The platform fits more of our product portfolio, and the marketing efforts they are putting together behind are probably the best and the strongest amount three of them so far. AliExpress is pretty new, we're still working with our team. TikTok's fate wasn't clear with the new administration but Temu still fits our product portfolio better.

Q: How are you looking at the situation of potentially upcoming tariff increases?

A: We have been preparing for this for the last few years. In the worst case, our suppliers and manufacturers have some plans to manufacture alternatively outside China. For those part of the product categories where no other countries could produce as effectively, we have no choices but pass the cost to the consumers. But as long as we do our parts efficiently, effectively, and quick, and maintain a low inventory, and be flexible, we can adapt. It's a whole market activity, and as long as we do our parts well, we'll be okay.

Q: Is the mid - to high - 40s gross margin range reasonable going forward?

A: Yes, what you're seeing in that uplift is a function of the work we did over the last year and a half years with our supply chain, and the Vietnam move will help that. The move was made with the intent on bringing unit cost down. Container costs are currently behaving nicely. The one thing that could swing that is container costs, but the work we can control has set a higher bar, so we feel good about where gross margins are and feel like that's a decent place for modeling