Ispire Technology (ISPR) 21 Feb 242024 Q2 Earnings call transcript

Hello, everyone, and welcome to today's conference call to discuss Ispire's financial results for its fiscal second quarter 2024 ended December 31, 2023. At this time, I would like to inform you that this conference is being recorded. [Operator Instructions] Joining us today are Mr. Michael Wang, the company's Co-CEO; and Mr. Daniel J. CFO. company's the Machock,

will Mr. on company's Machock Wang highlights, financial company's and then will brief Mr. the you key results. First, review the

that other forward-looking are begin, conference Litigation of its Reform we I announcement XXXX. like forward-looking of Securities remind Before All historical of statements in would the Private call statements within statements you contains Act the than meaning statements. to this fact

experience as in and on based and made terms estimates trends, of company conditions, believes developments, its that perception Forward-looking expected statements are company current its by assumptions relevant. historical other of future the the are and as factors well

or to These or except no are could materially by be implied forward-looking law. those unknown and cause statements to expressed the statements. company from many the factors in regarding this required Further as the forward-looking included company's or risk involve subsequent factors undertakes events filings differ with and and The its update actual by expectation, known to other forward-looking changes risks SEC. in or and current the statements or obligation information results may company's reflect to circumstances uncertainties, performance

Mr. I turn call would Wang. ahead. the now go Mr. over like please to Wang, to

Thank this you you, operator, all and us morning. thank for joining

quarter same million, increase The compared to This $XX.X year. million of increase an last same X-month by to milestones. many accomplish period XXX% period year. were over last Overall quarter, XX.X% cannabis pleased $XX.X we sales saw key operational reached the hardware to X-month business the also and revenue

the after in and sectors glove in quarter cannabis best-in-class and demand has for delivering increase that have recognition. technology rapid sales showcased led increase quarter. increased the of demand This brand white we strategy products in customer has by service Our hardware dosing seeing our in been these increase been to precision

Boy. star, and Lbs Dogg's with global The marks in second such partnerships is Snoop the first BRKFST-branded our high-tech products distribution the wafer our strengthened agreement Afrobeats our highlight brand It Nigerian presence. global Dogg manufacturing Another and being of Burna collaboration our X-year collaboration. deal. of portfolio recent launch celebrity/brand exclusive

in will Africa U.K. Middle We the and year. the this summer, this East year, in products the and in later in Europe QX launch in BRKFST

Additionally, our to X Malaysian We and profitability. and we of achieve facility, were able ISO believe sign gross operational certifications such ultimately efficiency, GMP instrumental a best facility to our to prove our Attaining at certifications year. on practices opened enhancing plant. will our leading for that in is commitment February margin this for new which and manufacturing this improved

facility We a meaningful our start this from next as seeing expect early on performance impact as to financial quarter.

the the This party believe operations our drive operational the we contrast at enhance performance to a operation. forward-thinking represents that previous financial sustained our goal aims on Malaysian arrangement to achieve we products to company. opportunity involving manufactured our more of Based provides factories, our can Our and with for factories, third-party streamline growth approach initiative, supply Malaysian chain. on related XX% experience our than that margin gross in

the market, growth presence in FDA market tandem pursuing order domestic is innovative begun within to applications, our internationally, In world. to the Receiving the our strategic premarket into U.S. nicotine with U.S., distribute whole product tobacco with PMTA, sell recognition we U.S. market. $XX our growing brand E-cig give lines, in product and approval the will opportunity multiple the diversify products market E-cig leverage nicotine our build that the PMTA billion have in and largest our Ispire the

in the on coming months. further announce details to We development plan this

loyalty results, The build we witnessed innovations. our and as premier a we the tangible dosing itself leading, are innovative, technology have quarter, as upon to company. customer garnered long-lasting of ongoing visibility have precision our the Our value with reflecting and associated reception solidifies to recognition brand Each innovations. dedication continues our Ispire reflective and positive customer-focused

Also point-for-use Ispire's technologies formed to venture joint e-cigarette subsequent of platform Berify, power redesign we pioneering the educating joint submission control. and incorporate of a age-verification This multi-patented hardware as consumer such and that is cannabis will both technology blockchain hardware leverage that age-verification expertise user to venture secure and that as user-friendly. a solution as devices, to next-generation introduce and leveraging for announced with cutting-edge we product applications the end, an engagement, innovative recently PMTA vapor e-cigarette well technology quarter with authentication, access Berify's identification, and

dynamic E-cigarettes, technology. with blockchain user the The for direct-to-consumer offering, range creating added and platform identity real-time security all deters control, exclusive the and end-to-end access engagement, on that counterfeiting. of foundation biometric reliability of authentication, an features, as such built

technology it We potential future about leading are dosing very joint to excited as and company. grow the the holds the precision our aim footprint as venture we

are the year and committed trajectory we of Looking fiscal steady focused of the ahead remainder XXXX, growth. to to

strategic will portfolio our eventually partnership and worldwide. and to position Our us celebrity the nicotine billion $XX partnerships market strengthen U.S. innovation enter

and Our more our transition capabilities to of as expand own will production manufacturing the Malaysian our profitability gross margin operation. we

and over With results. our will turn will comment call that, CFO, on our Dan I Machock, the to review who financial

for to on Michael, the everyone being and you, Thank call. thanks

financial XXXX, December as quarterly XXXX. deeper our months ended quarter quarter XX, a on second XXXX the some the year's summarize financials. months stated. will comments otherwise to December fiscal the second my I will the All results, to comparisons key XXXX. In are XX, unless for X refer fiscal on ended into dive X results Let's I take the prior

$XX.X quarter fiscal the to million of same for products including XX% to tobacco mentioned, for million XXX% increasing fiscal the cannabis XXXX, growth total Overall, all-time previous quarter high million. U.S. by quarter we vaping million the XXXX hardware remarkable Sales sales second increased of achieved second year-over-year. $XX.X XXXX versus our fiscal were of an $XX.X $XX.X revenue in the As second by Michael the period vaping year. for for fiscal

margin For Gross fiscal the XX, the million, December in second XX.X% XX.X% previous tobacco increase of revenue the We second $XX.X period in XXXX a to slight same million in was same quarter XXXX, The to in or period from $X.X XX.X% for the for compared increased to period profit XX.X% previous year. a the fiscal period representing downtick products XX% to compared gross ended same fiscal vaping margin as rose the last compared experienced fiscal XX.X% to last the same XXXX for year. period year. X-month the the the to year. quarter for of gross

period by increased the was products million X-month for as this Tobacco or the ended for vaping previous the in quarter profit compared XX.X% During year. year-over-year. to X-month $XX.X the period gross XX.X% the fiscal XX.X% ending quarter, to same period

We our XXXX. improve fiscal poised throughout we are as ramp margins up to products model of sales new the

ASU was The $XX.X adopting due effective in an operating to by X-month to July second expenses XXXX year. XX% XXXX. was to increased of fiscal accounts CECL, period increase increased for period to million the which $X.X total This for accounting the million for increase new for million. previous expenses quarter us in policy, $XX.X XXXX-XX receivable. due a The to reserving XXX% X, compared the by Operating expenses the same was primarily

approach that a operating expenses, due This a manufacturing expenses working being increase our Malaysia to It to is relating for marketing plant receivable maintaining collectible, our but trade to public incurred in belief our and accounts professional company. increased all we also was are fees customers reserve. have capital conservative in shows, taken and expenses

year. $X.X our million net second the quarter of for result million X-month was increase path. financial the investments $X.X to indicative period ending loss and our the foregoing, our XXXX. of same as $X.X the loss period a this for our million increased operational for fiscal second million fiscal the XXXX, December As compared was as quarter Net efficiencies to the This quarter in $X.X for compared in strategic is growth XX, XXXX previous

Turning to balance the liquidity. and sheet

we from $X.X X-month As activities believe will financing the used was $X.X our investing respectively. to compared and provided December cash last million cash activities operating net XX, XX working XXXX, last period the by in same million $XX.X by $X.X our provided months. million sufficient for was to next $XX.X operations used the current and compared our million the period Net $XX.X in in to of Net and ended operating for cash be year. million the period used compared to million XX, needs activities of working of $X.X capital financing XXXX, for $X.X year. XXXX, for Net had activities generated same flow capital was million same million, XX, cash cash year. December We activities that meet period the last for June cash

Michael? results financial XXXX over quarter second now fiscal it Michael. I our back to turn concludes This review. will

Thanks, Dan.

I our to questions, on Before like we above-mentioned to open financial our long-term would goals. to the expand key relate call strategies how

upon to hardware with we $XX year the growth. strategic As year, performance forward between for to strong rate fiscal that's fiscal innovation another expect and XXX% for XXXX, represents million. last cannabis that move in we over current XXXX, vaping believe build growth revenue their generate sustained year projected fiscal $XX the XXX% On the continued to fiscal us position investments and front, revenue That we million year. our

rate million fiscal year million, to XX% of to tobacco for XX%. at hand, the growth the revenue On projected the for other vaping a products $XX is $XXX representing XXXX

With of year pace the E-cigarette XXXX. Innovation partnerships core expect in distribution to the e-cigarette launch remains pick our we our revenue with the XXXX and up brands, and of global philosophy. celebrities our at calendar

forefront to and to to offerings. to our stay will our and resources enhance reach, and at solve consumer of continue the points, needs pain customer channel We the to market's expand expectations,

and our customers value and our determined We commitment ahead. in deliver to are products the determined sustained quarters superior shareholders to in alike,

Operator, any Please us ir@ispiretechnology.com. meanwhile, now completes at are please if open questions. have our to the ahead. remarks, through we In this and you go questions, e-mail contact prepared

the [Operator line Securities. Our from question US of Instructions] Tiger comes Bo Pei first with

have a I couple.

about tobacco question the So first revenue. is

fiscal And fiscal declined which million, the least per achieve is will sequentially. Can million to given $XX the So tobacco $XXX discuss guidance then the have tobacco generate X quarter. tobacco midpoint, you revenue year-to-date revenue company quarters to revenue at last the drivers? in the year

colors in confident you this are you a also I have follow-up. growth? share can some And why achieving So implied

use the we naturally, Yes, retailers, Bo, because will distributors X quarter there. and side, to Okay. tobacco you. Good here to products from be distribute fluctuation there, thank other. there question to

by quarter recall, increased tobacco for period last was same you good revenue. a real quarter It almost XX% over As year. last

unfortunately, quarter of a from dip. saw this or the by bit we period last same X% It a this year. recent quarter, So dropped

average, significant growth. would a will see very I are if However, say, we still confident, you we numbers, quarterly

to hit you per our guidance. quarter So Second X $XX straight about order question, the million asked in delivering in for quarters confidence

can All are that reasons, tobacco We have That's couple large, where open been products sold Europe. main primary for open is though. of segment for very systems. and confident a be revenue the is. our in Europe systems by achieved market open systems,

the especially European Union the disposable both you and devices heard, considering is the the a in As similar U.K. -- U.K. market EU-wide disposables. that of strongly probably banning -- effect, of both ban actually towards E-cigarette, markets. the banning France and took ban really disposable also, of already announced reacted And

factor. in I in So is see the open systems this we sales been gain quarters, to future increase selling key we change through strong, That In all say, our factors there. have will momentum X E-cig would that the indicate marketing that expect actually and regulation.

Second factor a is that more, revenue E-cigarette have we say, so really for far. celebrity/brand business don't

some see from between fiscal now and that year. front will contribution We

factors X those combined So that confidence. give us

to So you. back

remember improving That declined start I gross my from bit little is, question quarter. And quarter, quarter, was cannabis cannabis margin in last then management the but margin helpful. actually the the September to expected the the gross December a second

then your And next So the the you can believe we XX do achieve still diverge months. results cannabis within XX% gross what business from actual caused to for previous the margin outlook?

XX drove X cannabis margin Year period would I X few Chinese Well, is that holidays, Yes, before days all last over change. that the key factories the first after indeed, part for did before there week Chinese shut same year. gross a as, Number New the New question, decrease their typically of plants, Year, Year. were why Chinese to your really down lasts New and factors categorize typically tend that

orders. factories during to, say, or commit So shutdown, let's additional that really before shutdown couldn't couldn't and more that capacity commit to even

quarter, December same the in challenge. So experienced the we obviously

them on time, that one we in During the -- demand to on the challenge time. we being and from shipping hand, had we had product other market; factories increased completing had hand,

shipping example, and higher several Shipping incurred tremendously expenses, U.S. for So increased China others cost. between cost including, has really the

#X gross over affected I to margin. that probably combined the say several margin in drove with down that's contributor factors So That X gross margin other decrease by, points. think, would somewhat. gross I our

part second how XX% operation with the confident start So should is gross of margin to getting after are your its we Malaysian question production.

So months' time, communicated our it's we Bo. of goal say, all, to to if China not party transition hardware in Malaysia. our in factories most, from issue, Previously, a capacity really XX vaping was, cannabis production related

So that our is still goal.

However, need operation. we capital available getting I That's speed the to into to The Phase of build-out for the there, our commitment. there make get fund on depends X would really to expansion some, working investment still Malaysia. Malaysian say, our in the

obviously, past Every cost if can on in versus of in goal goal internal would improvement more in that, China XX% is to again, that the achieve to gross significant based analysis, on With operations is operation still margin. all and Malaysian a piece over see Malaysia yield of or once product hardware gross of So our majority the our us knowledge factories. of production production vaping cannabis products. even in take based our margin

So questions. your that's my long to answer

it. is question then Got Ispire ONE. about third helpful. my That's it. Got And

Has So far the original share updates can your ONE? any you intake Ispire on expectation? order met so

to November. officially Ispire introduced ONE the early in market was

those more would our organizations and reputation. services points I always are ONE with terms efficiency products far just benefit Part operating brands would of MSOs, to couple So been in data the of is. where -- the and everything Ispire ONE clearly Ispire because see of to and large a that value-added share has provide to indicate gain strategy of brand

was was mind our or our our months in that that the So part our back time. the had strategy the of And last approach we all of that prove goal spot-on. X.X method,

multi-state would of had consider I X we November only operators. XXXX, As customers that

entertaining As now, of are we ONE. MSOs since we X another launched Ispire

for products and have yet, especially operating Ispire customers, in time uptick major of volumes because other don't So their the a taking the are we most evaluate ONE products MSOs, the to procedures.

as in decision-making And and conservative all process. be to MSOs larger tend the careful know, we more

expect starting medium-size meanwhile, that to in from are But to orders So while. take the a we get process brands. we in

So to answer that's question. my your

Got and I it, have a Michael. equivalents. question And cash then on cash also,

again So this quarter. I noticed equivalents the cash cash declined and

in company out run in mentioned burn this So also rate, cash And to to assuming a then we I quarters. to few mean, we continue need you at Malaysia, the continue probably will of cash invest our factories.

the company's forward? manage level to So what plan is the cash going

things. of couple A Okay.

For forth. operation out, the cash has of the of Malaysian on available on us spot-on. the of continue -- the you mindful we are to are -- to you hand, other we support are burn fund the and mindful the company. as pointed and the been so And so cash Obviously, growth

certificate freed of in up account that a deposit First Kong. of CD be all, matured investment worth $X to ago. That used we part of had cash Hong million ago. weeks And X X our just over weeks in

amount, million, now. is up $X just over So that freed dollar

now, we as the $XX $X.X had So of million report, cash. to per over just Adding in the million as it. other

now are in at we $XX So million cash.

picture This review, a improved partially want But implemented in accounts call, review, of much the share under sales leadership say, coming is our credit Bo, In working key team the answer deal has because our the receivable would function. the CFO, quarter, with team we of within I have, deal has we is the Dan, diligently, I to to side. expect especially you, addressing should accounts desk, what been receivable. the new

any based negotiate potential made with customers credit much us the to certainly exposure. the that worthiness to it on for much, easier minimize So

with the deal we diligent So are payment very also terms. with desk, that

in that previous So the quarter. capital improvement. the roughly on should drop of is Dan out in we million coming by I front, see pointed quarters, large, as from the think remarks, million But about $XX of and at part a $X.X working his

of hand, point that are, careful managing So cash. on from our view, in one we

other additional registration us filed hand, we still On hand, this on though, if saw raise runway. feel that to But know don't you gives we the I capital. enough other the

So that on. going is also

of cash So AR we point of addressing point from from and it view Bo? are both investor management view.

And was well. helpful That actually as led Michael. it, last to question. that Got my

noticed So this understand accounts increase credit to going And receivable be we're you continued to also more terms I stringent we of customer quarter. mentioned in worthiness.

revenue but So how cash accounts our can you receivable, is collect you its stringent million, our size, significant is $XX And cannabis over credit forward? especially that more to color are for $XX-something to customer given because over share going worthiness, receivable this terms the accounts more our balance million. of we going impact business growth if then going are be will in

I enough, Okay. will not it's provide to Dan a If more. Bo, can jump high-level answer. share deep in

are about side. You AR the right

very balancing side On you as than on more are one cash certainly and medium-to-large certainly act focused growing pointed before. So ever itself. well accounts revenue now preserving a out, is hand, strategically by we

that helps So would say, exposure. I with, risk also

all let's services customers know, for to a with industry, branded challenge. the also our we lack is call, big management of, As banking just cash cannabis

So up generally, months. in months cash even anywhere X to industry to cycle this between be could X

bigger smaller brand, face. challenge the So they the the

last couple attain to As more and reputation, much are we, more of brands. in and we desirable have in larger creditworthy able revenue years, grown the

that's decision process. why desk in So the a great deal from that view, point of deal serves our

and of less. through is feel, through type going customers the get We risk to working less AR are and we desk the deal with,

also MSOs favorable payment have a terms. However, demand more the other bit hand on larger the to scale

managing or the carefully. are plan. payment contracts include typical deals both we The So aspects

also hear get is certain There even there. there some they terms, will -- plan. in don't basically, payment threshold minimum payment payment terms, they them, to is certain So addition to need for of if

finance in factors organization, certainly collection. I sales that together the and help happen cash So all and managing us managing think, will those

with For we more due feel, payment than plans. a those accounts worked lot them, the and past ever, also payment plans we accounts, of their out complete will

So I anything? Bo, did miss

No. expenses just expenses. level increase? increased over the should And last think forward quarters? operating Yes, I on XX% the we operating last question. answers question some think then, going next then how And on few quarter. my operating is that I about color share expenses the noticed you like from my Can

answers Yes. Dan the I will probably before can Dan out, answer question but that best, question. your point

one pointed for new As out, is Dan in reserved OpEx AR. element the

So Dan, jump largest there? and in question think contributor. can answer that's the I Bo's you probably

Sure, Michael.

We on we in are invest or haven't we that really future commented loss, but to future the OpEx about net to initiatives on the continue call. excited spoke

Specifically, will with our in drive initiatives, continue at revenue feel Malaysia, pace OpEx our overall continue the general that tobacco we'll and growth. States, we to United invest just in the to

think our past I that quarters, we and similar far see so trend. with proven few we've should

that We we continue gross we'll Hopefully, answers expands, will as focus see in and monitor expand OpEx cash on something flow at some that question. to that's breakeven margin point future. as your the

was Thank questions. were all helpful. so that And you my much. Yes, that

There teleconference. today's that, with further And this time. concludes [Operator questions Instructions] at this no are

may your lines disconnect You at this time.