Ispire Technology Inc (ISPR) 2026 Q1 法說會逐字稿

Good morning and welcome to the Ispire Technology Inc earnings conference call for the first fiscal quarter 2026. Please note this event is being recorded.

I now have the call over to Phil Carlson from KCSA Strategic Communications. Please go ahead.

Hello everyone and welcome to Ispire Technology's earnings conference call for the first fiscal quarter 2026 ended September 30th, 2025.

At this time, I would like to inform you that this conference call is being recorded and that all participants are in a listen-only mode.

Following the company's prepared remarks, we will be holding a question-and-answer session. With us today are Mr. Michael Wang, the company's Co-Chief Executive Officer, and Mr. Jay Yu, the company's Chief Financial Officer. Mr. Wang will start by reviewing the company's key financial results and latest corporate highlights. Mr. Yu will then discuss the company's financial results for the first fiscal quarter 2026 in depth.

Before we begin, I would like to remind you that this conference call contains 4l statements within the meaning of the Private Securities Litigation Reform Act of 1,995.

All statements other than statements of historical fact in its announcement are forward-looking statements.

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

These forward-looking statements involve known and unknown risks and uncertainties, and many factors could cause the company's actual results or performance to differ materially from those expressed or implied by the forward-looking statements. Further information regarding this and other risk factors are included in the company's filings with the SEC.

The company undertakes no obligation to update forward-looking statements to reflect subsequent or current events or circumstances or to changes in its expectation except as may be required by law. I will now hand the call over to Mr. Wang. Mr. Wang, please go ahead.

Thank you, Phil, and welcome to everyone who has joined us today. I'm pleased to share our fiscal first quarter 2026 financial results and the latest corporate highlights.

Over the first fiscal quarter of 2026, we made strong progress in strengthening our financial foundation and the positioning the business for sustainable and profitable growth.

Over recent quarters, we have shifted our strategic focus to higher quality customers and the higher value nicotine sector.

This has in turn allowed us to strengthen our cash flow, greatly reduce our operating expenses, and lower our account receivable balance. Our revenue decline year over year for Q1 of fiscal 2026 was a result of our deliberate strategic move away from the cannabis industry. However, the results achieved in Q1 2026 in other key metrics demonstrate that these steps. Are having their intended impact.

We reduced total operating expenses substantially by approximately 39% year over year in Q1, from USD12.9 million in Q1 last year to USD7.8 million in Q1 this year. Net account receivable reduced from USD62.4 million in Q1 fiscal 2025 to USD44.5 million in Q1 of fiscal 2026. In addition, Net loss improved from USD5.6 million in fiscal Q1 2025 to USD3.3 million for Q1 fiscal 2026. This improvement was a direct result of our focus on aggressive cost controls. Disciplined expense management, and higher quality customers while bringing our non-GAAP. EBITDA to USD600,000 for the quarter ended September 30, 2025. We expect this trend to continue through fiscal 2026. We are also pleased to report solid progress on the operational side with our IT tech joint venture gaining significant attraction. This game-changing technology with a blockchain-based a verification. Requires frequent authentication at the point of use. Compared to the single verification used at point of purchase in older systems. We are working with regulators across Europe, Southeast Asia, and the Middle East to adopt aid gating technology in mandatory standards. Through this initiative, Ispire is again demonstrating its commitment to leading the industry with safety and compliance. Further We are in deep discussions with several large and medium-sized nicotine companies. Related to our proprietary and patented innovative Gsmash technology solutions. For next generation vaping products.

We are aiming to secure partnerships and or licensing agreements, which we aim to provide updates on in the coming month when possible. The buildout of our manufacturing facility in Malaysia is also progressing well. And we look forward to ramping up production in fiscal 2026. When the Malaysian facility upgrade is completed, And at full capacity. We will go from the 6 lines currently in operation to 80 lines.

As we have previously stated, This is a significant increase in capacity and will further position Ispire as a leading global manufacturer of precision dosing vaping products.

We will continue to update the investment community on our progress throughout 2026 as additional production lines become operational. To conclude, the measures we have taken to improve our financial footing. Have resulted in significant improvements to our cash flow, operating expenses, and accounts receivable. We remain focused on creating a sustainable and profitable business. And are positioned well for future growth with our groundbreaking technological innovations.

I will now turn the call over to Jay Yu, our Chief Financial Officer, to discuss our 1st quarter financial results in more detail.

Okay.

Thank you, Michael, and I thank you all for joining us.

On the call today as we recap, aspires a financial result for the first fiscal quarter of 2026.

As a reminder I will refer to the first fiscal quarter 2026 as the quarter ended on September 30, 2025.

On comparisons are to the prior first physical quarter ended in September 30, 2024.

Unless otherwise stated.

Total revenue for the first quarter of fiscal 2026 was USD3.4 million, reduction of USD9 million from USD9.3 million compared to the first quarter of fiscal 2025. This was due to a decline in product sales with the shifting of our business away from cannas customers, which we are confident will achieve long-term stable growth and profitability. During the first fiscal quarter of 2026, gross profit reduced to USD5.1 million from USD7.7 million. Supported prior. Gross margins were 70% for the first physical quarter 2026, declined from 19.5% in first physical quarter 2025. This was primarily due to changes in product mix with lower margin products being sold during the period. For the three month period to September 30, 2025, operating expenses worth USD7.8 million. Substantially from USD12.9 million for the same period last year. This decrease was largely due to the expense management measures we have discussed above. Net loss for First quarter of fiscal 2026 was USD3.3 million. Relative to USD5.6 million in first quarter of fiscal 2025. Turning now to the balance sheet. Aspire held cache of.

USD22.7 million at September 30, 2025 compared to USD24.4 million at June 30, 2025.

Net cash flow used by operating activities were. USD1.2 million for the three months. To September 30, 2025.

Compared to USD3.6 million provided by operating activities in the prior corresponding period. Net cash used in investing activities for the first fiscal quarter of 2026. USD540,000.

USD925, 200 used by investing activities in the same period last year. Net cash used by financing activities for the 3 months to September 30, 2025 was USD319,000 thousand. Compared to nothing used over the same period last year.

That concludes the discussion of our financial result for the first quarter of fiscal 2026.

I will now turn the call back to Michael for closing comment.

Nick.

Thanks, Jie.

To close, operationally, we are pleased with the progress we have made to enhance our financial stability. Our strategic focus on high-quality nicotine customers. And stringent cost and expense management. Has achieved solid improvements in our cash flow. Operating expenses and accounts receivable. Allowing us to improve our non-GAAP EBITDA to USD600,000 for the first fiscal quarter. We expect this trend of reduced costs, improved P&L, and strengthened the cash flow to continue through fiscal 2026. At the core of our business. We are a technology company. Our groundbreaking precision vaping technologies such as ITech and Gsmash garnering. Attention from the big tobacco players. As we continue to accelerate our overseas manufacturing footprint. We envision our ODM partnerships to contribute substantially to revenue growth in future quarters. We continue to lead the space in our focus on safety and compliance. We are building a profitable and sustainable platform for growth. And I'm proud of our achievements this quarter that bring us closer to that goal.

Thank you again for joining us today. Please email ir@ispiretechnology.com with any questions.

Yes, thank you. We will now begin the question-and-answer session. (Operator Instruction)

And the first question comes from Nick Anderson with Roth Capital Partners.

Yeah, good morning. Thanks for taking the questions and congrats on the quarter. First one for me, you mentioned the partnership and licensing opportunity. Some companies have partnered with Juul or entered in the licensing agreements to sell products here in the US, given Juul's patent library.

As some of these agreements expire, what's your sales pitch to potentially onboard these clients given your offering does not infringe on any of Juul's patents? Just your sense of that opportunity would be helpful.

Thank you.

Nick, thank you for the question. Yes, indeed. Everybody is aware about, the situation, related to the dual patents. And, our technology, specific to, the, not only the G mesh itself, but also to, overall product design. We have our own patents and, we certainly, are far away from, Juul's patents. So, we are confident, with that approach, as we talk to the, nicotine, potential nicotine partners. And, certainly, that is our angle, because, some of them are. Running on certain licensing agreement, or, royalty agreement with the Jewel, and some agreements are coming to the end of their, life cycle. We are, aiming to capture some, such costs. I hope I answered your question.Like.

Yes, no, I appreciate that color. Second from me on the Malaysian license, you received the interim earlier this year. Just wondering if you could update us on the timing of when you expect to receive the final license and just how that changes the discussions you're potentially having with these larger strategic partners.

Thank you.

Yeah, great question there. Yes, we received our interim license and that interim license is valid until October 2026. So, but.

Interim license, well, we can operate under the interim license, we are, in the process of getting this, let's call it permanent license. And we are making progress on that front. It's, just, we just need to meet certain, safety and the compliance requirement from the, Ministry of Trade and the Ministry of Health. We are, certainly making progress on that front, knocking down one, requirement, after another. So, I, I'm very confident, either before the end of this year or right around, the new year, we, should, receive the permanent license.

Great, I appreciate that. If if I could squeeze just one more in, you mentioned working with other countries to get this age-g age-gating technology off the ground. What are the chances that these regions move before the US does? And just what are you hearing from these other countries about potentially adopting the technology?

Thank you.

We, our feelings, and, based on the conversations we have had with those other countries is, those countries could, well, I would say ahead of the US in adopting such technology. And in those countries, there is a strong tendency of making a gating a mandate. For all e-cigarettes.

Sold in such countries, so, FDA certainly will take its steps in assessing the component PMPA that we submitted back in May. Even though that will move, in our opinion, faster than standard PMPA, those other countries we have been in conversations with, I feel strongly they could move much faster.

Their regulatory process and legislative processes are, very different from the US. However, on the, FDA side, I'm very optimistic about, what's going to happen. .

Just last week, there was a conference held in Washington DC.

Attended by many key leaders from FDA, specifically the Center of Tobacco Products, and we all know that agency plays the single most important role in PMTA.

Approval and at the conference, everybody was talking about age gating being the solution to solving the so-called flavor issue from the speech it sounded like. FDA is embracing the idea of, flavored e-cigarette, and the only, concern they have is, you access to such products. So age gating at point of use, is widely discussed, right now. So, I hope that builds some tailwind, for our technology, Nick.

Great, that's it for me. Congrats on the corner. I'll pass it on.

Thank you. And the next question comes from Helen Zuani with Zanic Associates.

Good morning. This is Helen on for Pablo. I have just two questions, more for the US market. First question, given the potential for new recreational cannabis market in the US, in Virginia, and in Pennsylvania, and for the Texas, to be a large medical market, would you reconsider your US strategy and come to focus more on the US cannabis again?

Helen, thank you for the question. As far as the US cannabis, business, I think we all know, as the industry, we have, waited and hoped for some, federal level, changes. And, right now, we really don't see any immediate, change to rescheduling, federal legalization, safe banking, what all those things. And the reason I mentioned all those things is because the industry is facing or has been facing cash flow challenges, whether we operate in California or New York, Michigan, Colorado, or I think, ultimately Texas, for example. So, I, we are certainly very invested in the cannabis industry here. But until we see signs of, financial, support to the industry, we really are concerned about overall, ability to be paid on a timely basis. So, to put it bluntly, that's our number one concern. So we will keep our eyes on the developments, on the cannabis side. Our first sign of a major change at the federal level, we will certainly double down and reinvest, in this space. Until then, we will continue to take a cautious approach. We only will deal with, as we, have, been saying, high-quality customers, meaning customers who could actually, pay on time. So, the, obviously, cash flow is very important to us. So, that's, the number one criteria for us. So we'll keep our eyes open. As, most states, legalize cannabis, and more importantly, as, federal level, changes takes place, we will, double down.

Helen.

Right.

Thank you so much. I totally understand. For our last question, I know this is hypothetical and, but if the Supreme Court were to reverse President Trump's terrorist policy, how would that make you change your supply chain strategy in relation to the US market?

Great question. If, that indeed is overturned, we will certainly, diversify our supply chain. However, one key thing we, are mindful of is the geopolitical, conflict, between the US and China, will not. Get any better anytime soon. So that's another key consideration of ours. In addition to the consideration for tariffs, indeed, we already have, contract factory, factories in China. We, now have our own factories, in Malaysia. If the tariff situation improves, we certainly will TRY to leverage, both, locations. Whichever advantage we can exploit, we will.

Helen.

Yeah, can I squeeze in one Just one last question.

Have not seen the full filing, but the press release discussed year on year changes, but there was also meaningful growth in sales and gross margin compared to the 1 queue with the 4Q. So the Q to Q, there is significant, meaningful, growth. I mean, can you discuss what drove that? Is it byproduct or by region?

Yeah, byproduct, it's really, the change in product makes, minimizing or, reducing, our reliance on the cannabis, business. So that's a key change. However, on the other hand, on the mixing side, we did have, of course, in the long past, our revenue came from all branded products, and over the course of the last few quarters, we onboarded ODM customers. I think that part of the revenue will only grow in the future quarters. So, nicotine, ODM customer, our partnerships, will be a key focus for us, going forward. But, no matter what, from our point of view, we will continue to focus on, quality revenue, and we will continue to focus on improving gross margin, and, more importantly, we will continue to focus on controlling our cost so that our profitability picture will change. As you heard from Jay.

We reduced our Net loss significantly and on a non-GAAP basis, we made over USD600,000 in profit for the quarter. That's unprecedented and we expect that trend to continue with improved cash flow, improved P&L. And of course, improved gross margin over time. Helen.

Thank you so much and congratulations for the quarter.

Thank you.

Thank you, and that concludes the question-and-answer session. I would like to return the call to Michael Wang for any closing comments.

Once again, I want to thank everybody for joining us today. As you heard, we have, made stripe, in several key areas. I just, look forward to, sharing more information with everybody as we have more development, a new development and a new update, especially looking forward to the next quarterly call.

Thank you all.

Thank you. The conference has now concluded.

Thank you for attending today's presentation. Let me now disconnect your lines.