UPEXI, INC. Q2 FY2023 earnings call

• Since joining as CEO in 2019, revenue grew from $7.4 million to $44 million in 2022, with $100 million expected in 2023 despite macroeconomic challenges.
• Fiscal second quarter ended Dec 31, 2022, saw record revenues of $27.1 million, up 444% y-o-y and 134% q-o-q, driven by strong year-end sales in multiple brands and the pet product business LuckyTail.
• Returned to positive EBITDA after selling Infusionz. Over the last nine months, the company completed important acquisitions and divested select CBD operations (approximately $20 million of 2022 revenue) to focus on high-growth, cash-flowing businesses.
• Acquisitions include Cygnet Online LLC (April 2022), LuckyTail (August 2022), and E-Core (November 2022), with Tytan Tiles being a top-selling toy at Sam's Club and Walmart.com, and new products launched.

For the fiscal second quarter ending December 31, 2022, Upexi generated record revenues of $27.1 million, a 444% increase from the prior year's $4.9 million and a 134% sequential increase from $11.6 million. Revenue growth was driven by strong sales in segments such as E-Core, Tytan Tiles, Vitamedica, Cygnet Online, and the pet product business LuckyTail. While specific revenue contribution percentages aren't provided, these segments were key drivers of the growth.

• Management estimates 2023 revenue to exceed $100 million.
• Anticipate sales and marketing expenses to return to normal levels, with $502 million in cost reductions planned for Q3 and Q4 2023, expecting adjusted EBITDA improvement of $1.5 million to $2 million.
• Expect EBITDA margin to increase steadily to 8% to 12% by the end of 2023.

• Macroeconomic factors that have challenged consumer companies in the market.
• Dependence on key brands and acquisitions performing as expected.
• Fluctuations in distribution costs and advertising expenses.

Q: Macro perspective on different brands?

A: Reasonable growth, pricing power, orders holding up better than feared. Most stuff is non-discretionary, and consumer seems to be holding up better than anticipated.

Q: $100M guidance: organic vs acquisitions?

A: Organic growth and acquisitions contribute. There is growth baked in across all brands, with acquisitions adding to the revenue.

Q: EBITDA margin improvement drivers?

A: OpEx adjustments, price increases, and G&A control. Sales and marketing expenses expected to return to normal, with cost reductions planned.

Q: Debt status?

A: Paid off E-Core debt with sale proceeds from the divestment of assets.

Q: Amazon liquidation business expansion?

A: Cygnet and E-Core are expanding into electronics, leveraging synergies between the businesses to drive higher margins.

Q: M&A pipeline?

A: Pipeline is good, focusing on 3.5 to 5 times multiples, focused on current acquisitions and squeezing margin from existing ones.

Q: Asset divestment?

A: Evaluate assets based on market valuation for shareholder return, as seen with the divestment of CBD operations.

Q: Interest expense and D&A?

A: Interest expense low, D&A about $1.2 million, with focus on intangible asset amortization.

Q: Marketing budget and cross-selling?

A: Fine-tuning advertising, testing to increase lifetime value of customers, with focus on fine-tuning spend to optimize customer acquisition.