iPower Inc. (NASDAQ:IPW), a leading online retailer and supplier of consumer goods, has delivered a standout performance in its fiscal third quarter of 2024, showcasing the company's resilience and growth potential. With double-digit revenue growth, record gross margins, and improved operating leverage, iPower has returned to profitability, positioning itself for continued success.

Financials

In the third quarter of fiscal 2024, iPower reported revenue of $23.3 million, a 15.24% increase compared to the same period in the prior year. This strong top-line growth was primarily driven by greater product sales to the company's largest channel partner, as well as the accelerating momentum in its super suite supply chain offerings, which now account for approximately 10% of total revenue.

Gross profit for the quarter surged 40.51% to $10.9 million, with the gross margin expanding by an impressive 850 basis points to a record 47%. This significant improvement in profitability was attributed to a combination of favorable product mix and enhanced pricing power through successful supplier negotiations.

Notably, iPower's operating expenses decreased by 2.66% to $9.3 million, reflecting the company's operational efficiency and cost optimization initiatives. As a result, the company reported net income attributable to iPower of $1.0 million, or $0.03 per share, a remarkable turnaround from the net loss of $1.5 million, or a loss of $0.05 per share, in the same quarter of the previous fiscal year.

For the nine months ended March 31, 2024, iPower's revenue reached $66.6 million, a 1.70% increase compared to the same period in the prior year. The company's annual revenue for the fiscal year 2023 stood at $88.9 million, with a net loss of $12.0 million and annual operating cash flow of $9.2 million, as well as annual free cash flow of $9.1 million.

The company's balance sheet also showed signs of improvement, with cash and cash equivalents of $2.7 million as of March 31, 2024, compared to $3.7 million as of June 30, 2023. Total debt decreased to $6.0 million, down from $11.8 million at the end of the previous fiscal year, resulting in a 59% reduction in net debt to $3.3 million.

Business Overview

iPower's Chief Executive Officer, Lawrence Tan, highlighted the company's strategic focus on diversifying its revenue streams, stating, "We have always placed a strong emphasis on diversifying revenue, demonstrated by the launch of our super suite business last fiscal year. We have also deepened our online presence with social e-commerce platforms like TikTok Shop, where we continue to see solid growth."

The company's super suite supply chain offerings have been a key driver of growth, providing valuable insights and enhancing iPower's internal capabilities. Tan noted, "The acceleration of revenue reflects the value we provide through our superior supply chain, performance, and merchandising expertise. We will continue to invest in this new business as we work through our robust pipeline of prospective partnerships, and believe this business will continue to take a greater share of revenue mix going forward."

In addition to the success of its super suite business, iPower has also been expanding its sales channels, including the recent launch on Tmall, a leading e-commerce platform in China. Tan stated, "In April, we expanded our sales channels by launching on Tmall and have seen promising early results in the kitchen and pet categories."

The company's focus on optimizing its operations has also contributed to its improved financial performance. Chief Financial Officer, Kevin Vassily, noted, "We continue to benefit from our internal initiatives to drive savings in our selling and performance operations. With a healthier supply chain environment, we are no longer required to hold high levels of inventory as we have returned to normalized lead times. We have also sold through most of our high-cost inventory, enabling us to eliminate short-term warehousing costs and improve margins."

Outlook

Looking ahead, iPower is well-positioned to close out fiscal 2024 on a strong footing. The company is benefiting from the robust demand from its largest channel partner, the accelerating growth in its super suite offerings, and the expansion into new e-commerce channels such as Tmall. While the company did not provide specific guidance, management expressed optimism about the company's future prospects.

The company's geographic footprint is primarily focused on the United States, with a growing presence in Canada and other foreign countries. In the nine months ended March 31, 2024, sales through Amazon to Canada and other foreign countries accounted for approximately 8.5% of the company's total sales, down from 12.8% in the same period of the prior year.

In terms of revenue breakdown, during the nine months ended March 31, 2024, sales of hydroponic products, including ventilation and grow light systems, accounted for approximately 21.7% of the company's total sales, while the remaining 78.3% consisted of general gardening, home goods, and other products and accessories. This represents a shift from the nine months ended March 31, 2023, when hydroponic products accounted for approximately 46% of total sales, and the remaining 54% consisted of general gardening, home goods, and other products and accessories.

Liquidity

iPower's liquidity position remains strong, with a current ratio of 1.25 and a quick ratio of 0.77 as of March 31, 2024. The company's cash conversion cycle stood at 57.04 days, indicating efficient working capital management. Additionally, iPower's return on assets and return on equity were -0.10 and -0.27, respectively, as of the end of the third quarter of fiscal 2024.

Conclusion

While the company faces some risks, such as the potential impact of global economic disruptions and regulatory changes in the industries it serves, iPower's diversified product portfolio, expanding sales channels, and focus on operational efficiency position it well for continued growth and success. With its impressive third-quarter performance and promising outlook, iPower has demonstrated its ability to navigate the challenges and capitalize on the opportunities in the dynamic consumer goods market.