Thank you for standing by and welcome to the iPower Q4 2021 Earnings Conference Call. [Operator Instructions] As a reminder, today’s conference call maybe recorded. I would now like to turn the conference over to your host Mr. Kevin Vassily, Chief Financial Officer. Sir, you may begin.

Yes, thanks, Valarie. Good afternoon, everyone. By now everyone should have access to our fiscal fourth quarter and full year 2021 earnings press release, which was issued earlier today at approximately 4:05 PM Eastern Time. The release is available in the Investor Relations section of iPower's website at www.meetipower.com. This call will also be available for webcast replay on the company's website. Following management remarks, we will open the call for your questions. Before I introduce our CEO, Lawrence Tan, I would like to remind listeners that certain comments made on this conference call and webcast are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain known and unknown risks and uncertainties as well as the functions that could cause actual results to differ materially from those reflected in these forward-looking statements. These forward-looking statements are also subject to other risks and uncertainties that are described from time to time in the company's filings with the SEC. Do not place undue reliance on any of these forward-looking statements which are being made only at the day of this call except as required by law, the company undertakes no obligation to revise or publicly release the results of any revision to any forward-looking statements. Today’s conference call will also include certain non-GAAP financial measures, including non-GAAP net income and EPS, a supplemental measures of performance of iPower's business, all non-GAAP measures have been reconciled to the most directly comparable GAAP measures in accordance with SEC rules. You will find reconciliation charts and other important information in the earnings press release and Form 8-K furnished by iPower to the SEC today. With that, I would like to turn the call over to iPower's Chairman and CEO, Lawrence Tan.

Thank you, Kevin, and good afternoon everyone. Fiscal year 2021 was a very good year for iPower highlighted by a strong revenue growth of more than 35% and gross margin expansion due to a growing mix of in-house product sale. The growing demand for our in-house products, which made up around 70% of the sales in fiscal year 2021 compared to 55% in fiscal year 2020. That is a testament to our superior product research, design and merchandising expertise. We were able to grow our proprietary product revenue over 70% plus in fiscal year 2021. The design and build products, where the data tell us we have real market share opportunity. In fiscal year 2021 we clearly have the right products with the right features to address the needs of our target customers. During our fiscal fourth quarter, we utilized the growth capital raised from our IPO to make significant investments and lay the groundwork for continued growth in the coming years. This included increasing advertisements on new products launched in the second half of the fiscal year 2021, the expansion of our fulfillment infrastructure, and multiple new programs with our co-engineering and supply chain logistic partners. I am particularly happy with our proprietary product catalogue. In fiscal year 2021, we continued to introduce new proprietary SKUs into the market. Most notably, roughly two thirds of those SKU launch in the last 6 months of this year. So we are still in the early stages of capturing the full potential. Although I'm incredibly pleased with our progress as a company, we are still in the early days of capitalizing our unique model in the hydroponics industry. And I want to give the credit to our fantastic iPower staff, whose hard work and dedication allowed us to perform at a level we did this past year. We look forward to another year of strong execution ahead. I will turn the call back to our CFO, Kevin, take your -- take us through our financial results.

Thank you, Lawrence. So diving into the financials, overall we were pleased with our fiscal fourth quarter financial performance. Total revenue was in line with our expectations and slightly up from a year ago period at $14.7 million. Recall that our fiscal fourth quarter of 2020 benefited from heightened e-commerce demand due to the COVID-19 stay-at-home mandate. So it was a very, very challenging comp for us. For the full year fiscal 2021, revenues grew 35.4% year-over-year, which is at the high-end of our historical organic growth range of 25% to 35%. As we've stated in the past, we continue to emphasize selling more of our in-house brands. During the quarter, in-house products accounted for approximately 71% of sales compared to 65% in the prior year quarter. For the full year, in-house products made up approximately 70% of total sales versus 55% in the prior fiscal year, and sales of in-house products were up nearly 80% over fiscal 2020. From a channel perspective, roughly 90% of our sales were through our e-commerce and third-party partners, with the remainder being our offline wholesale business. Amazon remains far and away our largest and most important channel partner. Gross margin for the quarter was essentially flat at 44.4% compared to 44.7% in the year ago period. Our focus on selling more in-house brands benefited margins during the quarter. As we've stated in the past, gross margins for our in-house products on average are around 20 to 25 percent points higher -- percentage points higher, excuse me, than the third-party products that we carry. Our margins can still fluctuate based on a number of factors including sales mix, channel program mix, product input costs and freight costs. For the full fiscal year, gross margin was 42.2%. That was up from 37.9% the prior year.…

[Operator Instructions] Our first question comes from Mike Baker of D.A. Davidson. The line is open.

Okay. Hi. Thanks, guys. A number of questions here we could ask. Let's start with this ones. Can you talk about the -- your in-stock levels, your inventory is obviously up, but it's been hard for a lot of companies, even big companies to get products in from Asia. Did that impact your quarter at all? In other words, were there areas that you would have liked even more inventory. And so that's the June quarter. Has it impacted the September quarter at all as well? You're about 95% through this quarter, so you should have some [technical difficulty]? Thanks.

Right. Lawrence, maybe you should take a shot at kind of how we're dealing with kind of supply right now?

Sure. Let me repeat the question because it was a little bit broken up. The question was that the [technical difficulty] logistics and supply chain, does it had an impact on our quarter four last 2021 and the September quarter that we currently ending. Is it right?

Okay. Yes, you’re breaking up a little bit, Mike. I think that’s right, Lawrence. I think that’s the question.

Okay, great. Okay. So, for June quarter its -- one of the interruption we saw is that our Amazon partner, they had to pull back or as far as I remember, probably is that they had a very little direct import purchase orders in April, May, June month compared to other times of the year and also historically. We believe it's due to their logistic problem. But then we saw recovering in the July, August, September quarter. So I believe the problem has been resolved by them. So we did see interruptions in Q4 of 2021. But I believe that problem has been resolved, either resolved or mostly recovered. So the -- in terms of our own logistics supply -- supply chain and logistics, we had like I mentioned before that we have an extensive manufacturer network in Southeast Asia, mostly in China. Those manufacturer has been working with us for years. We have really good relationship, and we have a pretty good planning. So we tends to help -- work with our partners to further extend our cooperation into -- deeper into their supply chain to mitigate and forecast the inventory need and mitigate the risk of interruptions. So we did all that work. We don't see our supply chain has any capacity issue to supply the products. We have been able to secure enough transportation power to get the products for ourselves. The -- but it does have -- we also -- we are facing the difficulties of longer than before or longer than usual transportation time as well as higher transportation costs from overseas.

Thank you. Our next question comes from Scott Fortune of ROTH Capital. Your line is open.

Thanks for taking the questions. Real quick, can you provide a channel mix kind of post-COVID and seasonality around the do it yourself hobbyists and tough comp coming up here in third quarter? And number -- we see a number of hydroponic competitors have seen the growth here in the commercial side in third quarter. A little color on your commercial business, if you can provide kind of what you're seeing on both those segments of the channel mix here?

Right. So yes, let me take that real quick. So from a mix perspective, we didn't see much change from our last quarter, or the mix that we had kind of coming into the IPO. The commercial side of our business is still roughly 10%. And when I say commercial that's offline wholesale. The rest of it is e-commerce, a combination of our website, which still remains very small and kind of future opportunity for us. The largest channel partner remains Amazon, they are kind of running at about the same kind of percentage of sales as we saw kind of earlier in the year and kind of what we've published in and around the IPO. So there wasn't really much change in mix. Some of the things that did change, and I think Lawrence referenced this in his answer to the question that Mike Baker asked is that within our third-party channel relationships, there are a number of different programs for each of them. And so the program mix definitely changed a bit. I think Lawrence referenced as it pertains to like our largest partner. There was a lot more drop ship from our inventory that took place in the fourth quarter, than is normal. And we're seeing a normalization back to kind of our more traditional mix. And in fact it might be pushing a little bit more in the other direction where we're doing a lot more direct import. But from a seasonality standpoint, we didn't -- and again, I think we're still in early days of trying to figure out if there is a new seasonality to the business, but we didn't notice anything in this quarter and we haven't noticed anything kind of for the current quarter, which is our first fiscal quarter of FY 2022 that suggests anything, or any kind of pattern that's meaningful. I think our biggest potential growth propeller is our ability to have products. And as you look at our balance sheet, we added a lot of inventory since the end of our fiscal Q3. So it was a pretty meaningful move and a pretty big move up from last year. So we feel pretty good about where we are going into the next fiscal year. Did I get all your questions, Scott?

Yes. I appreciate the color there.

Oh, you asked -- sorry, you asked about commercial business.

Yes.

Lawrence, you might want to answer that one. I think you're a little closer from a -- kind of sales standpoint.

So what's the question for commercial business? I was going to chip in a few segments on the parts that you just referenced on.

So, yes, what actually -- why don’t you answer the -- those first and then we can come back to the commercial, the wholesale business.

Right. So we like -- we were like 85% plus to the retail business. So that hasn't seen very much roughly a retail B2C health care. So the challenges we were facing today, generally that the commercial business, I believe, they are softening a bit. Everybody, like two of the things I want to pointed out is why don't we sell mostly our in-house products that consists of 70% more -- more than 70% of our total sales. So we have a much, much better control of our own supply chain versus some of our competitors on the market. I won't name them for now, but we -- like they sell mostly three [indiscernible] parts. So by saying that, we have a much, much better control on supply chain, especially during a period of time where everybody is facing external challenges. And since we had successfully executed the IPO in May, we had more resources to work with our partners to strengthen our supply chain even further. And we -- like we mentioned, we secured a new warehouse space in [indiscernible] County, that's 100,000 square feet compared to 70,000 total we have now. That's more than doubling what we have because we realized early in the years that the -- in order to be able to execute in such a tough environment as of today, spacing, efficiency and logistics and supply chain, these are very important essentials. That's why we could still, we can -- and based on our whole internal data, data for capability, we can quickly react to what our if there is problem from anywhere, like Q4 when Amazon stopped importing, we had enough parts in the United States to like mostly compensate for where they left off. So we have been prepared, and we are pretty strong at doing all these kinds of work. So these two, like, the very strong execution operations with data backed decision making and in-house products, that’s majority of our sales, I think these two help a lot for us to navigate through this tough environment. Now in terms of commercial business, they are softening. We all get signals and data that in industry that we are [indiscernible] that's asking particularly because there was a lot of hypes going on the industry for the second half of 2020 calendar year and first half of 2021. People are getting to more like a kind of normal, but with more space going opening up I think there's still a lot of opportunities from there.

I appreciate. That’s great color. That's kind of obviously we're hearing in the space on the commercial side are softening there. But you're online and you definitely offset that with the strengths. And just a follow-up question kind of you mentioned in-house products made up about 72% of sales in 2021. Due to a 100 new SKUs coming on board here in the second half, you had a ramp up in advertising in the second half. How can we view kind of continuing expect in-house products to continue to increase? Can we look at it as maybe 100 basis points a quarter continuing to increase? Or do you have to continue that ramp up in SKUs in advertising to keep it at that level? How can we look at that cadence going forward?

So are you ask -- you're asking mix not margin, right?

Yes, mix of 72% of the in-house products. And I know you guys have targeted getting up to higher than that, but how should we look at that [indiscernible].

Yes, I mean -- right. So every quarter as its own kind of puts in takes, our goal is definitely to continue to drive that number up. I think, we're comfortable as we go out over the next several years wanting to get that to an 80% to 85% range. So, I don't know if it necessarily makes sense to think about it inching up quarter to quarter-to-quarter to quarter. We tend to think of our business in terms of full year, but there's no doubt that we will be introducing a host of new proprietary SKUs over the course of the year I referenced. We have our own in-house nutrients brand that will be -- that we hope will be launched and -- well it's launched. I should say that we will start to generate revenue by the end of this calendar year. And so, the direction should be up. Is it a 100 basis points a quarter? Hard to know. We're also at the mercy of our customers, including our largest channel partner. One thing I would say, though, too is one opportunity that we have that could really help is, is in that commercial business, our wholesale business sits offline. We still largely sell third-party products there. And so the penetration of our products into that part of the market still represents an opportunity to keep driving that percentage up.

Okay. That’s great.

I have a couple things here. Yes. So, we all know that in-house products are very, very important for any of the retailers or brand owners or distributors. But at the same time, I want to point it out, even though these have higher gross margins, the 3P products, they contribute, they are very important parts of our business. Will never like we don't see them and we see that they are our friends. So they help us getting better customer experiences. So we want to carry more and more 3P parts. So we're going to see is that you will see our in-house product growth with new SKU and you will see the 3P products grow as well. So both of these parts will grow. So whether it becomes 80%, 85% or stay at 75%, it really depends on what makes sense. We already had a very, very dominated positions where like we continues to add great products, including nutrients, and we're going to do more. We continues to invest into that front line. But I want to -- what I want to pointed out is that, it doesn't necessarily means that 85% is better than 80%, right? In May, because we have partnered with a grade 3P, like for example, fertilizer line, right, and then it become a huge selling category for us that we didn't puncture before, it may happen. I just gave an example, it doesn't mean that we -- I'm just giving an example saying that, okay, these products are our friends, they are not our [technical difficulty]. So we got to invest into both and for in-house products, most of the new SKU we introduced, we're going to be provide better value to customers. So we're going to be increasing on the SKU and introducing new SKU through innovation and through advanced in technology, through better customer [indiscernible]. So that's how I look at it. And I think like Kevin mentioned, when commercial business opens up, it doesn't mean that we will just sit there and look at it, and we're going to take an opportunity. So [indiscernible] there may be chances that our 3P products start to have a boost. So, in terms of the percentage, I never really set a goal myself to achieve certain as like in-house sales products, but I think we're already at a pretty good position and we will -- my best estimation is continue going up. I don't know where it will end up, but it's going to be going up from here and that's my best guess.

Got it. Thank you for detailed answers. I will jump back in the queue.

Thank you. [Operator Instructions] Our next question comes from Mike Baker of Davidson. Your line is open.

In this time I’m on a landline, so it should sound better. So I’ve a couple questions and obviously I got cut off last time. So I'll jump them all together here. One, you mentioned, Kevin that some of the costs incurred this quarter won't be -- we shouldn't consider ongoing or more sort of one-time, if that's the right term in nature. Could you sort of quantify that a little bit. Secondly, can you talk about the 25% plus growth you expected this fiscal year. Should we assume that, that will be more back end loaded just given the comparisons and, again, I don't know if you're comfortable talking about this, but September quarter, it's September 27 any additional color and how we should think about growth for this quarter? And then lastly, that nutrient business, can you remind us how big that is for you and what percent of that do you think could become private label? Thank you.

Okay, let's start with -- let me start with the last one first since that's fresh on my mind. So, Lawrence, correct me if I'm wrong, but I think nutrients is around 20% -- 15% to 20% of our total sales and that is all right now, third-party products that we sell. We don't have revenues generated from in-house. So, the opportunity for us is quite large both from a kind of revenue standpoint. But more importantly from a kind of margin standpoint, the nutrient business is very gross margin rich business. And it's a natural place for us to play given the other products that we have. Do I have that mix, right? Is it around 15% to 20%, Lawrence?

You're right. You're right.

Okay. Okay. As it pertains to the cost, let me just give a -- just a little bit of a little bit of color. So one of the biggest quarter-to-quarter and quarter-over-quarter changes was some of the fees that we pay. We call the merchant account fees to our channel partners. In this quarter, they were significantly higher and this was really a function of program mix. I don't want to get into too much detail, but Lawrence referenced, what's -- what clearly was supply chain distress that our biggest partner was having in the period April to June.

That's our [multiple speakers].

Yes, they -- yes, they tend to -- they have a mix of business they do with us that includes direct import from our partners in overseas as well, as shipping from our inventory, our warehouse here in the U.S. We could speculate as to why it happened, but they were and needed to ship almost exclusively from our inventory in our warehouses. So that's us drop shipping on their behalf. And the programs that we're kind of supporting that were some of the higher merchant account fee programs. So, that was probably the highest mix of that type of business we've had. It just so happened that it generated higher than normal fees. We think that is not going to -- going forward that mix, where we have no direct import, and all drop ship from our locations won't continue. And as such, those fees will come down. So that's one. Two, on the advertising side, we essentially because we were waiting for the IPO to happen, had held off on advertising for a lot of the new products that got introduced in the first half of the year, largely because we were capital constrained. And once the IPO was complete, we went and ramp that fairly quickly. Now, that, again, was meant to play some catch up. I think we had anticipated in earlier in the year kind of IPO completion. And then lastly, we had some catch up spending to do with our, we call them co-engineering partners to get our product development back up to speed. So some of that will come down as well. But we were long overdue to getting that in the queue with them. So again, the biggest part was the merchant account fee that was driven by program mix. And I think that is back to a more normal environment this quarter. And then, I think you had some -- you have one question about the outlook and kind of the cadence of revenue for the year. Is that right, Mike?

Yes, exactly.

Yes. So I want to kind of avoid specific quarter-to-quarter color or commentary. But I think -- maybe the best way to answer it is, yes, we do have the benefit of seeing kind of much of the first 3 months of this fiscal year, which gave us more than enough comfort to say that our floor for growth should be 25% for this year. How it exactly plays out, I think I'd rather refrain from speculating. But we're in good -- let's just put it this way, we're in good shape as we kind of close out this quarter, and we have some puts and takes on -- way that we work with our channel partners to kind of close that actual number, but it helps we have inventory, it helps that we're able to get product and have it available when people want it. So we feel good about where we are.

Okay. Thanks, Kevin. That's helpful. I appreciate it.

Sure.

Thank you. I'm showing no further questions at the time. So I'd like to turn the call back over to management for any closing remarks.

Great. Well, I want to thank everyone for joining us today. And we look forward to talking to you about our fiscal Q1 and the rest of the year on our next call. Thank you.

Thank you. Ladies and gentlemen, this does conclude today’s conference. Thank you all for participating. You may all disconnect. Have a great day.