UPEXI, INC. Q2 FY2024 earnings call

Key Points

• During the second half of 2023, the company focused on optimizing operations, investing in higher-margin brand products, and generating positive adjusted EBITDA. Gross profit margins increased to 38% from 31.8% in the prior fiscal first quarter.
• Brand product sales grew 16.7% sequentially, led by health and beauty categories. Subscription revenue in health and wellness grew approximately 5% month-over-month.
• The consolidation of manufacturing facilities is expected to be complete and fully operational by the end of April, expected to result in cost savings of $450,000 to $550,000 per quarter or $2 million annually in G&A expenses.

In the fiscal second quarter 2024, brand product sales increased 16.7% sequentially to $7.7 million, compared to the prior quarter's $6.6 million. Branded products sales as a percentage of total revenue this quarter was 35.1% versus 24% prior quarter. Revenue for the fiscal second quarter 2024 totaled $21.8 million, a decrease from $26.7 million in the same period of the previous year and $27.3 million in the fiscal first quarter 2024. The decrease in revenue was primarily due to lower re-commerce revenue through Amazon channels and wholesale.

Forward-Looking Statements

• The enhanced efficiencies across the business are expected to continue trending in future quarters.
• Management anticipates advertising expense will be reduced as a percentage of sales in the following quarters to increase overall profitability.
• The company remains confident in driving long-term growth, innovation, and value creation, aiming for higher EBITDA and cash flow positive results this year.

Risks

• Actual results may differ materially due to various risks, uncertainties, and other factors as discussed in the press release and SEC filings.
• Non-GAAP financial measures used may differ from those of other companies.
• Capital constraints could impact investments in brand products businesses.

Q: Talk about the re-commerce business, specifically softness in the quarter, pricing, and inventory.

A: Some of it was timing. The company was focused on margin profile, and capital constraints led to pushing for higher margin deals. There were opportunities but the focus was on reinvesting in higher-margin brand business.

Q: Discuss growth in brands, led by health and beauty, and split between e-commerce and brick-and-mortar.

A: Brands like VitaMedica saw growth, with Amazon sales up 30%-40% since reinvestment. The bulk of the business is expected to be direct-to-consumer with higher margins, but blending channels is ongoing, including Tytan Tiles evolving from brick-and-mortar to DTC with good margins