Upexi (UPXI) 14 Feb 232023 Q2 Earnings call transcript

Greetings and welcome to the Upexi, Inc. 2023 Fiscal Second Quarter Earnings Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions].

conference recorded. this reminder, a is being As

It host, KCSA Valter my pleasure Strategic to your to introduce Pinto, Thank is you. now Communications. Managing Director at

You begin. may

XXXX and Thank Good conference welcome fiscal second everyone call. you, quarter evening to operator. results financial Upexi

today Executive and I'm Chief by Andrew Marshall, Officer. Allan Norstrud, Chief joined Officer Financial

Litigation conference meaning begin, deemed Securities forward-looking be uncertainties I'm everyone Act of Before the may Safe Reform to we of that statements of other and and may within the XXXX, call remind going made the Harbor factors. to risks, during actual today's materially differ of statements a Private results variety due

SEC. press detailed the evening periodically and future release and of required discussion statements, obligation revise update on filed or the with of reports by filed uncertainties result company's new with company a a the company's the or intention unless ongoing disclaims otherwise X-K to or otherwise, the refer in I as as SEC as of well forward-looking risks the any any issued For law. business, The Form whether this events some to information, you

contained financial unless are reconciliation financial evening measures non-GAAP measures of our to issued not during accounting United financial measures The call, to this directly In from companies. financial most measures that course comparable may other accordance noted. And principles States. in we non-GAAP refer that GAAP by used earnings may the addition, otherwise generally the of accepted the this are prepared in with non-GAAP in different be released

Upexi's to over like call now to would CEO, Alan I the Marshall. turn

for revenue XXXX, many a expected quarter May of when $XX market macro to conference million substantial to the XXXX, years two consumer our companies We pandemic in results Upexi Since COVID company in and approximately grown with in experienced estimate reasons, XXXX. challenging in Thank you, an from in of of has a million as annual revenue struggled call. $XXX growth. million operating $X.X CEO XXXX, despite welcome fiscal growth find to joining XXXX second in the and economic

pet fiscal an of second XXX% we by of same XXXX XX, to as Tytan expectations XXX% million, as by strong predominantly the revenues $XX.X Growth Online, prior strong as Revenue of $XX.X generating LuckyTail. sales increase and million compared well recent our Cygnet many to sequentially. in E-Core, business, million quarter period ending most increase driven of Tiles, compared record as exceeded yearend product adjusted and for our brands, year, was our Vitamedica from For December sales the including an internal $X.X

productive fiscal very only generate this second the quarter, been were to last record able EBITDA nine after The revenues months to we have the did sale During return Infusionz. of not but company. positive for

cash flowing successfully on acquisition in during our us time, We we of recession period, represented approximately businesses. generated acquisitions. This which allowed select we high closed the several resistant, important that growth to million on million that revenue divested our XX has strategy focus During CBD decision XXXX. operations $XX

Amazon pet we lt.com. established sales In year-over-year vertical in which supplements our closing on products seller wellness through sales April digit and XX, verticals. a LLC, completed Amazon, beauty growth X, health, on August XXXX of XXXX, and the distribution has LuckyTail, double over entered OTC and SKUs, well strong secondary we Online branded experienced with Cygnet of X,XXX acquisition with direct-to-consumer the market both

national increased distributor at months XXXX XXXX. brand consumer Walmart.com Week Sam's a the is building its acquisition and seller a E-Core tiles one projected $XX announced toy products. the Technology selling has and along been Tytan blocks. On XXXX, Tiles November New million our New for Technology. X, the seller magnetic Cyber best the since million to of XX sales top toys a and in Tiles during in Tytan closing popular with England branded of Tytan and Club walmart.com $XXX And over on calendar XXXX, is The top transaction England maker subsidiaries, revenue on we and added trailing

Additionally, the line XXXX were the Walmart featured Toy product in Book.

assortment the announced on amazon.com and quarter we launch builder Subsequent have and a branded over fort to Tiles products new of for two end nationwide. its magnetic with [ph] Working products tiles a tiles additional store Walmart kit. with X,XXX locations milestones in kit significant princess full brand, Tiles Tytan on placement first of of Tytan developed the retailers, we our cubes, our shelves a DTC kit, including Donald

we sales and large XXXX now current to these channels, retailers Direct of educational and and focus category We Amazon in educational new protect four including future growth. for direct-to-consumer, wellness, as launch both the to remains segments The amazon.com. to During a we products health, plan acquisitions and continue us, in retailers. on key up big our operate pet, toy beauty, to organic build several with including toys, box our business

Amazon Cygnet -- beauty Online current The with liquidation nutraceuticals. sales operates under and Amazon wellness, business in health,

expanding business as electronics, into currently as this other well are new We categories.

center in sites Our wellness distribution United supplier retailers products, opportunity to rounded of of and merchandise, provides Deal non-discretionary and and the largest in business economic Day brand well brick revenue programs stream liquidation the mortar inline specializing is netessential.com a a excess consumer environments. [ph] inventories, the of gives pet business Amazon direct diverse us name premium premium health, in most A mix that and to States. and major and wholesale,

I our sales as Upexi, Thank million as on our this detail. you in financial $XXX partners. all build pass more we teams now as look over Upexi to We well discuss customers results will investors, intend call Norstrud and to XXXX. CFO, at in toward reaching our Andrew growth the substantial to to

presented. XX, discontinued manufacturing and have the Infusionz Allan. you, our the which with and presentation business month rules reclassified December the aggregation brand regarding also six LuckyTail, periods discontinued and certain Online, includes Thank ended our operations as operations, Tytan accordance Amazon of In distribution activities acquisitions the and product business, all product Tiles. for XXXX liabilities assets pet The been of our include month of three Cygnet operations E-Core

with gross operations are as discontinued reduced operations operation to Infusionz general the as improve has and of we elimination operations while the value we growth and certain implement sales reducing year ago. continue expenses will of coupled comparing believes a the to the of manufacturing of to current strategies. compared our more acquisitions operations, current These the future to indicative continue administrative profit consolidate the and from that significantly sales our Management operation

the compared revenue totaled $XXX,XXX for million, increase only $XX.X the $XX.X of the the as of million increase was December the XXX% year. period million XXX% million, totaled same $XX.X quarter the XXXX to prior compared ended in prior as compared for in Revenue same XX, the period an for the year. the the three to quarter of period an during same months the Cost for $X.X year. $X.X for prior profit to Gross of million

$XX.X compared as approximately prior in same the Operating in million, period increase the -- marketing year. to to increased million and prior year. $X.X or $X.X for by compared totaled expenses XXX% the million of same expense Sales the XX% period an

through increases sales capitalize lower increase on costs increased aggressive value sales the marketing an acquisitions, to the Beyond at just quarter management and opportunity estimated to an budgets the the to sales strategy. from for

companies acquisition most investment opportunity cutting this are customer saw While back the an to accelerate consumer yield as growth. we increase for and

in profitability. and of following overall which costs expenses Distribution of part costs discontinued primarily anticipate classification our million sale the in will prior the Infusionz $X.X increase increase reduced of was our compared same by the the The We as three offset period advertising in quarters, related be or to year. XXX% expenses acquisitions, the operations. will increased the distribution to these

provider in sales. In addition there and costs that be slight rates, of term increases were and to costs to the which has expected short decrease changes, management strategy transportation to distribution will start overall percentage party are these to a third

period $XXX,XXX administrative General expenses decreased compared same X%, and approximately to year. by last the or

implement had and sale acquisitions Infusionz has costs, of with G&A company the continue administrative management percentage to of and to the compared the has the general company December XX, and for strategies the same representing will improvement the period three XXXX, a compared year. on focused ended for As changed XX% controlling million of when prior $X.X months the decrease from to The the loss sales. to operations the $X.X net million loss

ended of and decreased approximately by the September of acquired used non-cash The management as for $XXX,XXX an XXXX, is significantly intangible an adjusted EBITDA quarter XX, December amortization approximately as Since loss Adjusted such first indicator assets company's net $XXX,XXX, for adjusted the quarter expenses to EBITDA XX, second ended was income. XXXX. the of compared reported the EBITDA important improvement. performance

of and stockholders XX, levels an sales of reductions to Upexi million had in improvement next XXXX quarter of to of $X Management return $XXX additional $XX.X an expenses the resulting expects to identified million the attributed The and to of million normal third million fiscal adjusted have XXXX. EBITDA fourth million company two cash year the quarters. marketing cost and stockholders over and $X.X equity as December $X.X in

outstanding. were year, growth Management additional align there acquisitions acquisitions to completed management's term that common both as stock to XXXX, the as long XXXX of increase shares in XXXX, well calendar XX, fiscal XX,XXX,XXX expects February today, during revenues of As strategies. organically, strategic continue with

revenue to excess For be XXXX continues calendar annual of in to estimate million. management $XXX

I'd this At for to comments. the call over closing turn to like time, back Allan

consolidation ending we continued our Infusionz our started the fiscal Tytan sale of XX, division businesses. During second quarter Tiles and E-Core and our of XXXX, transition December to

the company's revenue Tytan our Tiles E-Core growth quarter businesses. Amazon, highest with was driven quarter the in Our DTC, by highlighted and since inception,

Our a balanced our challenging overall growth environment long with for anticipated always generate for past, and efficiently profitability. operate than term execute. business focused growth retail In is in our on ability a to a the better very sales and testament we ability to spending have approach to

positive coming quarter margin transition quarters. the right this EBITDA direction was driving step an the and efficiencies in from the creating loss in first to increases of Our EBITDA

the throughout ample further have runway for We efficiencies calendar remainder the of year.

to prove made XXXX. towards XX% economic as will EBITDA downturn adjustments for economy meet anticipate well-positioned X% the the We of projected many throughout trend by our goal to margin end as EBITDA our The $XXX increase for Additionally, beneficial XXXX the of XXXX. normalizes. this us million steadily is be to calendar calendar of to we business revenue during

and Regarding the this. sale associated with assets Infusionz our gain of

they sell we and value could While the for of buy not our it to valuation business in is as businesses, not overall our sense return sale other makes business represented for total and assets the for and our our shareholders. mature, if especially consider is

is meeting well as $XXX XXXX as management In reported year XXXX revenue our million. is calendar largest projected confident closing, set for our

evaluate to continue confident in for acquisitions feel the possible growth into also XXXX we company. We strong across growth and continued push as organic

Now call questions. for let's the open Operator?

you. Thank

We be will question-and-answer our now conducting [Operator Instructions]. session.

Hutton. We from with first ahead. have the question of line Albanese Please a go EF Mike

you. thank nice acquisitions. assets with thanks guys question. positive the here. my Really and of and a quarter And Nice job couple EBITDA taking for nice driving, of CBD Yeah, sale adjusted

questions of couple a from Just me.

first, just I'd I across around of perspective, think some from more a brands. get some love to you're seeing kind your color different of what macro

reasonable question. This seeing is We're Allan Marshall. Thanks for the growth.

in pricing have past. far in so seeing high as We're go most of not We price ticket our it the brands. has as average power the

probably overall on that's that the we're I the guess seeing slight So reduction market.

is on a number the of couple be orders as our little the brands total order lower. same Our continue to number sales bit of per a

much again, stuff, over -- increases saw of as the to a see -- our we the much And didn't months. we're really six lot of yearend, most the had into So across seeing I of feared. across, as we not we due pretty everything non-discretionary think last kind

The we're us be anticipated. holding consumer pretty than So least comfortable. seems for up to better at

year, there what's and your Or just that? rate is the little driving guidance you. growth this? into Or organic a kind helped the acquisitions Thank me million Great. bit baked All $XXX understand given in? run of then is that for you've that right, mean, I piled

think and it's organic acquisition. growth I the

baked million. mean, there $XX is added, the I in million in acquisitions, brands. So but themselves. not. on of across did growth have don't guess, We $XX percentages We Probably the acquisitions we various business. baked sold growth with all our any worth I We

worked be way. if if that So it that -- we would the upside get out

Understood.

I if to $X of And great. Okay. terms year, XX% the year. is OpEx EBITDA wrong, margins All this right, X% the I by I guess, mean, from in this really? drivers bit. help if of right, a if understand decreased apologize from improvement OpEx kind kind got target improving guess of all throughout gross end to million. driving help mentioned or forecasting are as $XXX,XXX I that that's the what coming of I your understand, You think the standpoint? me was and -- I kind then all across Is a I well? that little think there's an what's G&A, expectations me just to EBITDA advertising or purely a really OpEx? of you're margin margins, And

Both.

So been cut a we -- put million, without to the we all. out of can last $X hurting we've able spent we the know about so the And then quarter we probably we That company at quarters. sales back probably the still next couple spend advertising it's a -- upping sales though positive. some over of should pulled customer, with forward even to our come per us

able were get more We normal the traffic ad on than to normalized. spend. be can that So

have cost would a though, $XX $XX. or acquisition. we even for certain to we $XX up that product, it we So normally spent moved We on

bit give were what on. we to time, over value. customer we're And able we betting away So the did sell a more thus which of that lifetime value little is

So we've more. we we yes, in there some think are push we those, made of see stuck few you we a sold G&A or seen then many then or in there's And not or fit call administrative several kind to are and when And -- get know whether figuring we price on products employees adjustments it, like you'd [ph] able they general I the the purgatory can increases were our decrease we and guess cuts. of to already side of this through there. room more expenses CBD We where still company in, still out quarter. have that all that

those can combined of that bottom of reach that number all yearend. by pretty least at end we things So make us confident that

It's all just one, helpful. Got my off that And your make it. then debt? sure, last paid very for just I Thank want to you context. you I guess

debt really -- assets. we We the E-Core the the the from yeah, And the from we -- off. had off paid that's all of all beginning, paid from payment proceeds the first what sale

really used to we that cash So that debt. pay off

Awesome. guys. All Thanks, it really That's great. Okay, me. right. for

Thank you.

from take Global ahead. with We you. Partners. next Gray Please line Aaron the Alliance Thank question go of

you inflection for Thank evening. and good and questions Hi, profitability. the quarter to nice

So the question just guidance. first me, to to and want kind of turn implied from revenue I back the

the a you with know, I be to seasonality decent terms hit $XX of in the holiday, was in curious, maybe So because the million. of just amount there quarter? wanted just toys, for

had for You two months. E-Core

it So $XXX alone fiscal on calendar. the for if you you looks assume a hit let full year quarter like almost that, for the a pro million XXXX, forma basis, could the

-- that that make in So acquired your target growth guidance of potentially But there? towards back some unless newly seasonality build hit go terms for of of legacy quarter Cygnet flat well to to the for some E-Core the of the of acquired there's expecting the does that business, ones some you're growth? know gave like to and you some want fiscal and look what Because year, majority for in newly terms Thanks. in to the I just on of, way you're and million it $XXX revenue.

Allan Again, Marshall.

think a I -- the more we there's little than quarter robust thought. was

Tiles drove a E-Core little significant of more than bit Tytan anticipated. drove than anticipated. So more the drove brands revenue revenue, Each

hit could But that discontinued think everyone. do by for my be don't think I would because the if we we XXX I don't operations, mean, I end. June great math of So by it

$XX to -- revenue So somewhere million, We million. think $XX $XX forward that probably I anticipated did pull really we're we million into quarter. some around

QX, think goes, see of you'll not seasonality. QX, it year. should So coming in up a but QX, don't I as year, think I it the QX, lot tear throughout the

That's Okay, great. helpful.

me. from question Second

just looking lot of kind You I'm just know of lot said more right mentioned kind is of how it's if of in a you business a discretionary, versus terms of into kind category. would liquidation the wellness, potentially of now, into expand. wellness Amazon a kind different electronics to wrong, liquidation, me shifting -- to want that of believe I but type correct differ

platform that and educational provide and you I mentioned, be does synergistic to Thanks. CPG So categories? know a toys also how might into expand you other talk about then that for otherwise.

Cygnet's parts focused of main Their they do focus the of liquidator. that sell have though And like two they products. kind reseller E-Core, much health, larger as liquidated kind categories of really because lot in liquidation wellness, wellness there's even business across And or an then to So nutraceuticals, on and that, do spread on third been Amazon larger has do always other quantities. SKUs. X,XXX a they party they

good margins margin overall on still smaller overall margins. those but orders, and a bigger So expense

On the lot a so. less side, G&A

intend will What is Amazon do past really -- to do of overstock. for it the to they business, the some the sold we E-Core liquidators in

asset just another And available So two drive that the larger for going if margins of small, have orders now small forward. those liquidating they part higher left. get, they businesses for should overall lots

helpful. question Okay, That's really me. great. then last And from Thanks.

touched of it there. on kind You

on a down there. Andrew. what And driven things the electronics business. due margin you if you some other liquidation gross in lower that Just could like was remarks, the in just to how of structurally business, just gross much margin prepared seems terms But your front, sequentially obviously equal help by maybe mentioned out

just driven So sequential how by versus the in business? margin decline much of the the gross was legacy Thanks. acquisition

that? got you Andrew,

it. significantly those The and everything the E-Core impacted. with to Cygnet, the part going Yeah, as margin impact, That's be of towards on mean, significant we we -- and with boxes to not move bigger but selling are as liquidation, the to most margins it's move absolutely. I done necessarily that's

own margin the That to sales different still what XX% are. product is don't that, are brand. what XX% product from gross cost when we the in that products branded Our to

most still exact but that actually not high actual get So margins. decline our from the breakdowns, I products that of part mean, the business our we're can I because is of maintaining from products the

there. helpful back Really jump queue. color great. I'll Okay, in the

question take ahead. Thank next go the you. from Please line ROTH We of Partners. Koranda the Capital with Matt

at Devlin It's [ph] the or store And how in how start far? lift to sales the to guess early. XXXX? I the guys. any the fits qualitatively Walmart Hey, progress way shelves tracking into first, it's for so with the just But to to from we I January. sales benefit hitting We Matt speak for Tytan quantify Wanted Matt. started Tiles. we expect second, are see just at on revenue know, outlook physical

the have or the yet. secure about want sales we sales more that we with launches same or don't something, walmart.com, we that supply be on new launches hopefully, It'd get Camping So to which normally Cyber bodes Week, those for anything future. And a distributor. time you every wherever great with public could think that kind that can the World strong well in of have did into We you that so have normally, else, into brand on category, contract chain. Walmart

that to yet. closer we'll public update on end the we'll we nothing the get but everyone when quarter quarter there that. see on of And So end at the kind out of the of

make and nice for Each is even Amazon to last the time to consumer in and say skew the grow up can like margin again. with reason business of if that would it question But gross more of incremental there, differences -- high the that the another number us, another direct gross over can add that -- to another so is business lever margin these like, our margin we Aaron be avenue. let's back margin on things have pull

the are category. about excited We

Got it?

just But then into. again. Maybe if I it. ask Don't step can know you Andrew need answer just if

valuation terms of further public Yeah. you to question for potential of current looking is quarter. the environment? what the pipeline But No, in We'll like the acquisition does get acquisition next look in M&A if the like? terms the there. big Maybe how an front. wait total for out call pipeline multiples speak last could just just our works. that companies? What revenue on nothing I changes just Anything out to update. pipeline, since in And

want potential. continue we're think and really that the the to makes and focused try valuations kind -- quarters now normalized give are on a to to that and get what comfortable five No We're acquisitions. of think sense to at can, squeeze on Right of where we're really times to to how multiple we sticking everybody we that margins on, business I really next X.X a at produce that we with look for business think us. couple the

to and and of Obviously, of is if may business was in area We're that wanted margin bring accretive squeeze how fiscally it very structure long conscious an in deal. an it the some consider we the grow, all sort we super acquisition difficult to takes. how

in of a out what But pipeline we're see much think see so or just is here. let take we so. for kind I us And don't appetizing next can the cruising I So of just us have to good. lot We said, a how get we really we but quarter of opportunities. something's bite like off the now, Unless got.

Yeah.

a Thanks, Okay. guys. Makes of sense. lot

Thanks.

[Operator you. Instructions]. Thank

have investor. line Lew Greichner go We Please of question from next the ahead. an

But Most answered your you about Hey, forget you wording. them. of if been market on be fantastic prepared great. you already. are had as something a remarks, properly exact have being you questions isn't that have Allan, From if bit it divest valuing feel approached, how assets, something a that? about if or willing could of that, mentioned you question. if actively one did going Or are that'd you're congrats I the my about I your quarter. pursuing? sort little talk guys Is Is to

shareholders, a was sense that of we're mean, lot overall get It the I high to And made think, to a it CBD us just even from hoping it, sense though lacked value growth for I it, for business. us. decently from margin on move for it made right. the

[ph] able leverage I business. able think our we're we're streamline balance sheet debt, the to strong, to is

perception -- the business we to overall each each the compared the market cap the markets value by something evaluate we consider, portfolio, where the So inside would value we is business that overall right. our of as think do

a programmatic that in it that CEO we tech it asset books. with patent is CFO than, talk way be have about than those advertising, more has, know In our we every different environment things most on could a Like valuable the and to Interactive and that we the And money at and opportunity shareholders. responsible, return look But Board internally. so a amount as for of the Offers.

at we So it's business. our not certainly it. would But look

Got you.

for Everything Thank That's else Okay. you. it me. is answered. I appreciate it.

Lew. Thanks,

We with Thank take from go line the you. question Please [ph]. Paulson next John of ahead. McCaulis

Hey, guys, nice quarter.

Let's quarter, for how feel have interest business? CBD expense of rid left D&A much after good. Andrew, the and do you the getting

expense the As interest are of -- at getting that had the talking X.XX Acorn? that incurred far because you of we we rid as about

No, just…

sorry. I'm Okay.

that which know interest costs, acquisition Do X% know or could? What number if you I was are The you X%? it?

Of the acquisitions?

you Yeah, -- for haven't yet. paid haven't fully the the interest you pay fully acquisitions that

for. And don't than paid only we -- $XX,XXX that's haven't the on England interest months. two any less we New we expense have But any fully quarter, In don't the it. was expense one related on to have because that have with it the LuckyTail, the interest acquisition, one, we the

amortization, much -- that Got what how it. And was number? depreciation and

going the Depreciation continue to as continue most going about $X.X is continue quarter it's we million. just the significant be because and intangible to to assets Amortization was to for acquire these grow. of to the thing entities amortization The

good. That's you. Thank

now the through of of last this budget customer look growth data, know, lot developing question marketing think a cross-sell have idea of giving after some that the clients kind you changed acquisition? about you're And like? information. how and organic you garnered your you've So What's to is, and go you

No, not. Marshall. Allan It's

on idea quarter what really spend really value current add did don't extra really think brands, advertising But organically. else? We great -- I growth, sell now. We high to can we our that lifetime our internally got acquisition and both additional right sense. set when our for said, assets, their chase want and can of perspective make last is a haven't we know really is with much a value? potential changed them customers We we that. increase here is too we've can of an really our lifetime I on And the someone Like we our current focus

more again, And sometimes Usually, get additional it's very to marginal data when for advertising, not a -- amount more money. get data it's makes competitive an always which you economical. in not larger opportunity don't it of it's increase, get a to

conscious customer us So again. really your the return fine fine do spend. for just and is -- little us. advertising, put what you're of over that track tuning out order probably acquisition we test that time this properly. and quarter, a to is it then then would just it on being marketing we look was customers well we'll how more that into It's constant next those tuning of spend, We for and the in. And when come at the a that If is works really

again. Congratulations Thanks.

Thanks, Tom.

Thank the Ladies the you. of and reached question-and-answer end we've session. gentlemen,

Over Marshall, to Now back floor to Alan comments. I'd the like CEO over turn to for you closing sir.

appreciate today. everyone and call joining the its all company I us want to just thanking support. Appreciate the employees, the questions, appreciate to the want close I for with

We will ends the look that call forward Thank call and for third to you. quarter the today.

Ladies you. gentlemen, and Thank concludes this teleconference. today's

You time. may participation. lines you for disconnect your Thank your at this