Fitell Corporation (NASDAQ:FTEL) Q4 2023 Earnings Conference Call October 31, 2023 8:30 AM ET
Company Participants
Yiru Xu – Investor Relations
Yinying Sam Lu – Chief Executive Officer
Jamarson Kong – Chief Financial Officer
Operator
Good day, everyone and welcome to Fitell Corporation’s Fiscal Year of 2023 Financial Results Conference Call. [Operator Instructions] And at this time, I’d like to turn the floor over to Yiru Xu with Investor Relations. Ma’am, please go ahead.
Yiru Xu
Thank you, operator. Thank you all for joining us for Fitell fiscal year of 2023 financial results conference call. Fitell has issued a press release announcing the fiscal year of 2023 financial results yesterday afternoon. A copy of Fitell annual report on Form 20-F can be found on sec.gov.
Please note that this call is being recorded live and will be available for replay. I ask that you please take a moment to review our forward-looking statements. During the call, we will be making forward looking statements about company’s performance and business outlook. These statements are based on how we see things today and contain elements of uncertainty. For additional information concerning the factors that can cause actual results to differ materially from our forward-looking statements, please refer to our cautionary statement and risk factors stated in our annual report on Form 20-F.
Joining me today on the call are the CEO of a company, Ms. Yinying Sam Lu and CFO, Mr. Jamarson Kong. I will now turn the call over to our CEO Sam, please go ahead.
Yinying Sam Lu
Thank you, Yiru, and thank you, everyone, for joining us today. I will begin today’s call by providing an overview of our business performance during the fiscal year of 2023. We will then provide a detailed overview of our fiscal year 2023 financials, highlighting the financial performance of each product category.
Now, please turn to Slide 6, I’d like to briefly introduce our company for those who are new to our story. Fitell is an online retailer of quality gym and fitness equipment, we also provide other complementary fitness services. Our mission is to build an ecosystem with a whole fitness and wellness experience powered by technology. In 2021, we’ve launched the following three new business verticals: first, smart connected equipment, which includes interactive bikes and workout mirrors; second, AI-powered interactive platform, it’s an online training content to interact with trainers, follow members and track workout progress. Third, our boutique fitness clubs licensing, we target at health-conscious customers with high-disposable incomes.
Now, please turn to Slide 7. I would like to briefly discuss our fitness brands. Muscle Motion, which is a supplier of home gym and commercial strength training equipment, emphasize on weights, bar, power racks and etcetera. Rapid Motion, it covers products that are similar to Muscle Motion but with a strong focus on commercial items. FleetX, it focuses on cardio equipments, such as rowing machines, exercise bikes and treadmills.
In May 2021, we have initiated our smart connected equipment that includes interactive bikes, treadmills and workout mirrors with built-in touchscreen and training content platform. Expect to launch in March 2024. We have launched out licensing business with mYSTEPS Training Clinic in late 2021. We have helped mYSTEPS opening six fitness centers in Eastern China as of April 25, 2022. Going forward, we are seeking opportunities to expand our licensing partnership footprint in the Asia-Pacific regions.
We are also developing an AI-powered interactive platform called 1FinalRound. It is a customized solution which comes with pre-installed with our interactive fitness equipment. Visual and trackable workout progress. Customized one-on-one remote coaching, and online and offline users participate in the training either on their own schedule or via livestreaming to interact with other subscribed members.
And this slide we will be going through the stores strategy as you can see, which is that we have – we’re going to increase fitness equipments product marketing, develop of private label cardio equipment, development of gym direct mobile applications, expansion of licensing business, development of smart contracts equipments and digital fitness programs. And the last but not least, this opportunity to explore other revenue streams.
Thanks for your time. Now, I will pass on to our CFO, Jamarson return to financial highlights.
Jamarson Kong
Thank you, Yinying. Hi, I’m Jamarson Kong, the CFO of Fitell. I will review the fiscal year of 2023 financials with you and I will be available for the Q&A session if you have any questions afterwards.
Before I review the number, let me remind you that all figures I discuss are for this reporting period, which is the fiscal year and June 30, 2023, unless I stated otherwise. Anyway additionally, any year-over-year comparison is to the same period last, which is June 30 of 2022.
Now, let’s go over our 2023 financial results. I will begin with an overview of our consolidated results first. In the fiscal year of 2023, Fitell generated approximately $4.8 million in revenue. Our gross profit is about $2.2 million with a net loss of approximately $1.6 million. Our gross profit margin is fairly consistent with last year’s, which is about 45.3%. I will deep dive into each category and segment in the next slide.
In this slide, I will dive deeper into the financial performance of each of our product categories. Our revenue consists of three product categories, which includes merchandise revenue, sales of consumable products and revenue from licensing customers. Merchandise revenue represents the sales of our gym and fitness equipment products. Consumable products are various lifestyle products. Last but not least, licensing business include licensing and management consultant income and agency fee for distributing other miscellaneous items.
Merchandise revenue was about $4 million for the fiscal year ended June 30, 2023. It accounts for approximately 84% of our total revenue. The decrease was mainly attributable to the decrease in sales order, which was due to the decrease in disposal income of Australian households in general caused by the inflation and increasing interest rate in the Australian market. In addition, there is also a slight decrease in the average revenue per order by 3%.
Consumable products include, but not limited to, coffee and other nutritional supplement products. The sales of consumable products were about $223,000 in fiscal year 2023, which accounted for about 4.7% of the total revenue. And the sales of consumable products increased about 11.6% compared to the same period last year. The increase was mainly due to our efforts in diversifying our revenue streams to mitigate the other negative impacts.
Our licensing business generated approximately $540,000, and it accounts for approximately 11.2% of our total revenue. The decrease was mainly due to the temporary suspension of our overseas expansion plan due to the inflation and rising interest rates in global markets.
Our growth in both number of customers and orders from FY 2022 to FY 2023 was affected by inflation and also the raising of interest rate in Australia. We have received about 15,000 orders and acquired approximately 23,000 customers in 2023, a decrease of 42.6% and 41.1% respectively, compared to the same period of 2022. The average order value per sales order have slightly decreased by 3% in FY 2023 compared to the same period last year. By the end of fiscal year 2023, we have 172,000 members approximately, compared to only 167,000 members at the end of FY 2022.
Despite it was a challenging year with declining revenues for us, especially in the merchandise sales and licensing business segment, our management team remains dedicated to working tirelessly to promote our products and retain our loyal customers. And instead of being disheartened by the downfall of the global economic market, we have to doubled down our efforts to promote business growth. We are committed to innovative strategies, market research, and we will continue to expand our licensing business service again in the Asian market when we identify the beneficial opportunity. We believe that the company will slowly make it run [ph] – show resilience and with rewards of growth and success in the near future.
Next, I would like to go over some of the key subsequent events after our fiscal year 2023. On August 8, 2023, we have successfully listed on Nasdaq and raised our net proceeds of approximately $13.6 million for the issuance of 3 million shares of common stock. And also on October 23, the Board has promoted Sam Yinying Lu, the General Manager of GD Wellness, to the CEO of Fitell, the parent company and also the listed.
With that, I will now turn the call back to our Investor Relations, Yiru. Thank you.
Yiru Xu
Thank you, Jamarson. We will now begin the question-and-answer session. Operator, please.
Question-and-Answer Session
Operator
[Operator Instructions] And we do have a question from Stephanie Wang from System One [ph]. Please go ahead with your question.
Unidentified Analyst
Hello. Good morning, I see that there was a significant decline in the revenue for the company. And if you could please elaborate more on the significant decline and also has the company took in any strategy and/or plans to implement to reverse like declining trends? Thank you.
Jamarson Kong
Okay. Thanks for that question. As I have already mentioned, when I go through the slide one of the main reason why we are facing the decline in revenue in the past fiscal year was mainly due to the inflation and also the sharp increase in the interest rates in Australia. In fact, not only in Australia, it’s also applicable to the whole global markets. So, all of a sudden, most of our potential customers, the disposable income has dropped significantly. So, this is one of the reason – one of the main reasons why our net revenues has been dropped by around 40% as compared to the previous fiscal year. Going forward, we are going to undertake a few strategies. For sample, with the new capital we raised from the IPO, we are also paying to expand our business within, both within Australia and also to the global market, within Australia, because right now we are more focusing in the initial realm of states. But with the new capital we have generated with the raise from the IPO, hopefully we can also improve our logistics and also our warehouse management also in other states to provide better support to other states. So, hopefully, we can also see some organic growth from this area. And on top of that, we are also planning to apply our business model on to other countries including, but not limited to Asian country and also maybe to the United States as well. But all of these are in a really pivotal stage. But we are – our passion, we have diversified pipeline we also have management and business experience in the other direction. So, hopefully we can apply this model on those traditions as well. Sam Lu, to see whether you have anything – whether you would like to add? Thank you.
Yinying Sam Lu
Thanks Jamarson. I think you pretty much covered most of them. Apart from that extra 3PL in different regions like Brisbane and Melbourne, we also actually plan to have our 3PL in USA market as well. We have already started the process and having connections to get to know the pricing and the reach in USA. So, now we are actually just about to decide which part we are going to do the market test, either LA or actually San Francisco, because those two are the ones actually quite economical and actually closer to the Sea, so [indiscernible] shipping purpose and also, our business close to China overseas supplier manufacturer. And on the other hand, I understand there will be a concern about the decreasing revenue. However, we have a certain set – we have done efforts to boost the market. And also there are so many changes happening internally of operation to push the sales. For instance, just for the October, which is enough, but not officially, but October just passed, we have already had the 24% increase in revenue compared to 2022. Yes, the results should be finalized, obviously, later on stage, but just want to share some news with you guys. So hence, I strongly believe the last quarter of the 2023, we have really see the positive results at all strategies in place, so moving forward and I think we will…
Unidentified Analyst
Okay. Alright. Thank you so much for the details thorough the answer. I guess my next question, and my last question would be that, like, how do you manage to – how do you plan to manage the cash flow in the future? Do you have plan to reinvesting, paying dividends, or does the company have any plans for pursuing any acquisition in the future?
Jamarson Kong
In the short run, I think we will focus on reinvesting internal generated fund onto our business, because we believe that we are still in the growing space, despite the economic downturn in the last 12 months. So, most likely, we will focus more on we will invest in ourselves going forward. And another alternative that Sam mentioned is now we will also leverage some of our cash. So, that’s why initially, I don’t think we will issue any dividends, but we are sure want to know, we will show that in the form of capital acquisition. And we are also – going forward, we are also in the middle terms, we are also constantly evaluating different M&A opportunities. If there is suitable targets arise, we will also make a move and try to increase our shareholders revenue. But at this moment, we haven’t identified any simple M&A target yet. But we will keep looking. Thank you.
Unidentified Analyst
Okay. Understood. Thank you so much and that’s all the questions I have.
Operator
[Operator Instructions] And ladies and gentlemen, that concludes our question-and-answer session. I would like to turn the floor back over to Yiru for any closing remarks.
Yiru Xu
On behalf of Fitell, we want to thank you for your interest and participation in this call. If you would like to speak with us further, please contact Investor Relations. The contact information is listed at the end of the press release. Operator, you may conclude the call.
Operator
Ladies and gentlemen, the conference has now concluded. We thank you for joining today’s presentation. You may now disconnect your lines.
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