Ispire Technology Inc. (NASDAQ:ISPR) Q4 2023 Earnings Call Transcript

Michael Wang: Ispire ONE was officially introduced to the market in early November. So far, I would just share a couple of data points to indicate where everything is. Part of our strategy with Ispire ONE has always been to provide value-added products and services to large brands and MSOs, because those are the organizations that would see the benefit of Ispire ONE more clearly in terms of operating efficiency gain and brand reputation. So that was part of our goal that we held in the back of our mind all the time. And the last two and a half months, three months, proved that our approach, our method, our strategy was spot on. As of November 2023, we only had two customers that I would consider multi-state operators. As of now, we are entertaining another six MSOs since we launched the Ispire ONE.

So we don’t have a major uptick in order volume for Ispire ONE products yet, because most of the customers, especially MSOs, are taking their time to evaluate the products and the operating procedures. And as we all know, larger MSOs tend to be more careful and conservative in their decision-making process. So that process we expect to take a while. But in the meanwhile, we are starting to get orders seen from medium-sized brands. So that’s my answer to your question.

Bo Pei: Got it, Michael. And then also I have a question on cash and cash equivalent. So I noticed the cash and cash equivalent declined again this quarter. So I mean, assuming we continue to burn cash at this rate, the company will probably run out of cash in a few quarters. And then you also mentioned we need to continue to invest in Malaysia factories. So what is the company’s plan to manage their cash level going forward?

Michael Wang: Okay, a couple of things. For us, you are spot on. Obviously the cash burn has been to fund the growth of the company. And on the other hand, we are mindful. As you pointed out, we are mindful of the available cash to continue the support of the Malaysian operation and so on and so forth. First of all, we had just over $9 million worth of cash freed out two weeks ago. That used to be part of our investment in a certificate to deposit account in Hong Kong and that CD matured two weeks ago. So that dollar amount, just over $9 million, is freed up now. So as of now, as per the report, we had just over $17 million in cash, adding the other $9.2 million to it. So we are now at $27 million in cash. But the key answer I want to share with you, Bo, is our team has been working diligently, especially under the leadership of our CFO, Dan, in addressing the account receivable side.

In the coming quarter, we should expect to have, I would say, much improved picture of account receivable. This is partially because the team has implemented a new deal review, credit review, what we call deal desk, within the sales function. So that certainly made it much, much easier for us to negotiate with the customers based on their credit worthiness to minimize any potential exposure in AR. So with that deal desk, we are also very diligent with the payment terms. So on that front, I think in the coming quarters, we should see improvement. But by-and-large, as Dan pointed out in his part of the remarks, working capital is about $25 million. It’s a drop of roughly $2.5 million from the previous quarter. So from that point of view, we are on one hand careful in managing our cash.

On the other hand, we feel just still give us enough runway. But on the other hand, Bo, I don’t know if you saw that we filed registration to raise additional capital. So that is also going on. So we are addressing both from cash management AR point of view, and from investor point of view, Bo.

Bo Pei: Got it, Michael. That was helpful as well. And that actually led to my next question. So we also noticed the accounts receivable continue to increase this quarter. And I understand you mentioned we’re going to go into the more stringent in terms of the customer credit worthiness. So can you share more color, how you are going to collect this accounts receivable, especially given its significant size, because our cash balance is over $20 million something. Our accounts receivable is over US $45 million. And then, if we are going to be more stringent in terms of customer credit worthiness, will that impact our revenue growth for the cannabis business going forward?

Michael Wang: Okay, I will provide high level answer. If it’s not deep enough, Dan can jump in to share more. You are right about the AR side. So you very well pointed out growing the revenue side and preserving cash certainly is a balancing act by itself. On one hand, we certainly strategically are more focused on medium to large accounts now than ever before. So that also helps with, I would say risk exposure. As we all know, with lack of, let’s just call banking services to the canvas industry, cash management for our brand new customers is also a big challenge. So generally cash cycle in this industry could be anywhere between six months to even up to eight months. So the smaller the brand the bigger challenge to face. As we in the last couple of years have grown in revenue and reputation, we are able to attain a much more desirable and more credit worthy larger brands.