Upexi(US:UPXI)2023-02-15 22:17Financial Data and Key Metrics Changes - For the fiscal second quarter ending December 31, 2022, the company reported record revenues of $27.1 million, an increase of 444% compared to $4.9 million for the same period the prior year, and a 134% increase sequentially from $11.6 million [5][11] - Gross profit for the quarter was $10.3 million, an increase of 141% compared to $4.3 million for the same period the prior year [11] - The company returned to positive EBITDA after the sale of Infusionz, with adjusted EBITDA for the second quarter at approximately $119,000, compared to an adjusted EBITDA loss of approximately $971,000 for the first quarter [14] Business Line Data and Key Metrics Changes - Revenue growth was driven by strong sales in brands such as E-Core, Tytan Tiles, Vitamedica, and Cygnet Online, as well as from the pet product business, LuckyTail [5][6] - The company divested select CBD operations, which represented approximately $20 million of the $44 million revenue generated in 2022, allowing a focus on high-growth, recession-resistant businesses [6][7] Market Data and Key Metrics Changes - The company operates in several business segments including health, wellness, pet, beauty, and educational toys, with sales channels including direct-to-consumer, Amazon Direct, and large retailers [8] - The Amazon liquidation business under Cygnet Online is expanding into electronics and other new categories, providing a well-rounded revenue stream [9] Company Strategy and Development Direction - The company aims to reach $100 million in revenue for 2023, driven by both organic growth and acquisitions completed during the 2022 fiscal year [15][17] - Management is focused on improving gross profit while reducing general administrative expenses as a percentage of sales, with a target EBITDA margin of 8% to 12% by the end of 2023 [17][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to meet projected revenue goals despite a challenging retail environment, noting that consumer demand has held up better than anticipated [20][16] - The company plans to continue evaluating potential acquisitions while pushing for organic growth across its brands [18][17] Other Important Information - The company had cash of $4.5 million and stockholders' equity attributed to Upexi stockholders of $36.9 million as of December 31, 2022 [15] - Management identified an additional $502 million in cost reductions for the third and fourth quarters of fiscal year 2023, which is expected to improve adjusted EBITDA by $1.5 million to $2 million [15] Q&A Session Summary Question: Insights on different brands' performance - Management noted reasonable growth across brands, with pricing power maintained, although average ticket prices have slightly decreased [20] Question: Clarification on $100 million revenue guidance - The guidance includes both organic growth and contributions from acquisitions, with no growth baked into the acquisitions themselves [21] Question: Drivers for improving EBITDA margins - Improvements are expected from operational efficiencies and potential price increases on products, alongside a focus on reducing general and administrative expenses [22][23] Question: Status of debt repayment - The company has paid off all debt related to the E-Core acquisition using proceeds from asset sales [24] Question: Revenue seasonality and growth expectations - Management indicated that the quarter was stronger than anticipated, with no significant seasonality expected in the coming year [28] Question: Expansion into wellness liquidation - The company plans to leverage its Amazon reseller capabilities to expand into wellness and other consumer packaged goods categories [30] Question: Gross margin impact from acquisitions - The decline in gross margin was primarily driven by the lower margins associated with the liquidation business, while branded products maintained higher margins [32] Question: Acquisition pipeline and valuation multiples - The acquisition pipeline remains strong, with normalized valuations around 3.5 to 5 times for businesses that align with the company's growth strategy [38] Question: Willingness to divest underperforming assets - Management is open to divesting assets that are not properly valued in the market, evaluating each business's overall value compared to market perception [41][42]