Greetings, welcome to the UPEXI Inc. 2023 fiscal Q2 earnings results conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce to you your host, Valter Pinto, Managing Director at KCSA Strategic Communications. Thank you. You may begin. Thank you, operator. Good evening, welcome everyone to the Upexi 2023 fiscal Q2 financial results conference call. I'm joined today by Allan Marshall, Chief Executive Officer, and Andrew Norstrud, Chief Financial Officer. Before we begin, I'm gonna remind everyone that statements made during today's conference call may be deemed forward-looking statements within the meaning of the safe harbor of the Private Securities Litigation Reform Act of 1995, actual results may differ materially due to a variety of risks, uncertainties, and other factors. For a detailed discussion of some of the ongoing risks and uncertainties in the company's business, I refer you to the press release issued this evening and filed with the SEC on Form 8-K, as well as the company's reports filed periodically with the SEC. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, unless otherwise required by law. In addition, during the course of this call, we may refer to non-GAAP financial measures that are not prepared in accordance with accounting principles generally accepted in the United States and that may be different from non-GAAP financial measures used by other companies. The reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures are contained in our earnings release issued this evening, unless otherwise noted. I would now like to turn the call over to UPEXI CEO, Allan Marshall. Thank you. Welcome to our 2023 fiscal Q2 operating results conference call. Since joining Upexi as CEO in May of 2019, the company has grown from approximately $7.4 million in annual revenue to $44 million in 2022, with an estimated $100 million in revenue expected in 2023. We experienced substantial growth despite two years of COVID pandemic and a challenging 2022, where for many macroeconomic reasons, consumer companies and the market struggled to find growth. For our most recent fiscal Q2 ending December 31st, 2022, we exceeded internal expectations by generating record revenues of $27.1 million, an increase of 444% as compared to $4.9 Million for the same adjusted period the prior year, and an increase of 134% as compared to $11.6 million sequentially. Revenue growth was predominantly driven by strong year-end sales in many of our brands, including eCore, Tytan Tiles, VitaMedica, and Signet Online, as well as strong sales from our pet product business, LuckyTail. During this fiscal Q2, not only did we generate record revenues, but we're able to return to positive EBITDA after the sale of Infusions. The last 9 months have been very productive for the company. During that period, we successfully closed on several important acquisitions. We divested our select CBD operations during that time, which represented approximately 20 of the $44 million in revenue we generated in 2022. This decision has allowed us to focus our acquisition strategy on high growth, recession-resistant, cash flowing businesses. April 1st, 2022, we completed our acquisition of Signet Online LLC, a well-established secondary market seller on Amazon with over 1,200 SKUs of branded OTC products and supplements in health, wellness, and beauty verticals. August 22nd, 2022, we entered the pet vertical with the closing of LuckyTail, which has experienced double-digit year-over-year sales growth through both its strong Amazon distribution and direct-to-consumer sales on lt.com. November 2nd, 2022, we announced the closing of eCore acquisition along with its subsidiaries, Tytan Products and New England Technology. The transaction added over $40 million in trailing twelve-month sales and increased our projected calendar 2023 revenue to $100 million. Tytan Tiles is a toy brand and maker of popular magnetic tiles and building blocks, and New England Technology is a national distributor for brand and consumer products. Tytan has been one of the top-selling toys in Sam's Club since 2018, a bestseller on Walmart.com, and a top seller on Walmart.com during Cyber Week in 2022. The product line were featured in the 2022 Walmart toy book. Subsequent to the quarter end, we announced two additional significant milestones for our Tytan brand. With the approval to launch its first branded DTC storefront on Amazon.com and placement of Tytan Tiles products on Walmart shelves in over 2,000 locations nationwide. Working with our retailers, we have developed a full assortment of new Tytan Tiles products, including magnetic cubes, a fort builder kit, a dino tiles kit, and a princess tiles kit. During 2023, we plan to launch up to four of these new products into current retailers and on Amazon.com. The educational toy category remains a key focus for us, both for potential future acquisitions and as we continue to build our organic growth. We now operate in several business segments, including health, wellness, pet, beauty, educational toys, with sales channels including direct-to-consumer, Amazon Direct and large and big box retailers. The Amazon liquidation business operates under Signet Online with current sales in health, wellness, beauty and nutraceuticals. We are currently expanding this business into electronics as well as other new categories. Our netcentral.com business specializes in name brand distribution of in-line merchandise, excess inventories, premium and premium center programs. It is a major supplier to the largest deal of the day sites and brick and mortar retailers in the United States. A diverse business mix of non-discretionary health, wellness type products and liquidation and wholesale, Direct-to-Consumer and Amazon gives us a well-rounded revenue stream that provides opportunity in most economic environments. We intend to build on this substantial growth as we look toward reaching $100 million sales in 2023. Thank you to all our teams at UPEXI as well as our investors, customers and partners. I will now pass the call over to UPEXI CFO, Andrew Norstrud, to discuss our financial results in more detail. Thank you, Allan. In accordance with the rules regarding the presentation of discontinued operations, the assets, liabilities and activities of Infusions and certain manufacturing operations have been reclassified as discontinued operations for all periods presented. The 3-month and 6-month ended December 31, 2022 include the acquisitions of Signet Online, our Amazon aggregation business, LuckyTail, our pet product brand, and eCore, our product distribution business, which also includes Tytan Tiles. These acquisitions, coupled with the elimination of discontinued operations from the sales of Infusions and certain manufacturing operations, has significantly reduced the value of comparing our current operation to the operation a year ago. Management believes that the current operations are more indicative of the future, and we will continue to improve gross profit while reducing general and administrative expenses as compared to sales as we continue to consolidate operations and implement our growth strategies. Revenue for the three months ended December 31, 2022 totaled $27.1 million, an increase of 444% as compared to the $4.9 million for the same period in the prior year. Cost of revenue during the quarter totaled $16.8 million, compared to only $700,000 for the same period in the prior year. Gross profit for the quarter was $10.3 million, an increase of 141% as compared to the $4.3 million for the same period of the prior year. Operating expenses totaled $12.5 million, an increase of 83% as compared to $6.8 million for the same period in the prior year. Sales and marketing expense increased by approximately nine or $1.9 million or 100% compared to the same period in the prior year. Beyond just the increases from the acquisitions, management increased the sales and marketing budget for the quarter to capitalize on an opportunity to increase sales at lower costs to estimated value through an aggressive sales strategy. While most companies were cutting back, we saw this as an opportunity to increase the investment yield for customer acquisition and accelerate consumer growth. We anticipate our advertising expenses will be reduced in the following quarters, which will increase our overall profitability. Distribution costs increased $2.7 million or 335% compared to the same period in the prior year. The increase in distribution costs was primarily related to the three acquisitions, offset by the sale of Infusions and the classification of these expenses as part of discontinued operations. In addition to these changes, there were slight increases in transportation costs and third-party provider rates, which are expected to be short-term and management has a strategy that will start to decrease the overall% of distribution costs to sales. General and administrative expenses decreased by approximately $100,000 or 3% compared to the same period last year. As the company has changed with the acquisitions and the sale of Infusions, management has focused on controlling the general and administrative costs and will continue to implement strategies to decrease the% of G&A when compared to sales. The company had net loss from operations of $2.1 million for the three months ended December 31st, 2022, representing a 16% improvement compared to the $2.5 million loss for the same period the prior year. Adjusted EBITDA is used by management as an important indicator of the company's performance and improvement, since non-cash expenses such as amortization of acquired intangible assets significantly decrease the reported net income. The Adjusted EBITDA for the Q2 ended December 31st, 2022 was approximately $119,000, compared to an Adjusted EBITDA loss of approximately $971,000 for the Q1 ended September 30th, 2022. Management expects the sales and marketing expenditures to return to normal levels and have identified an additional $500,000-$1 million of cost reductions in the third and Q4 of fiscal year 2023, resulting in an Adjusted EBITDA improvement of $1.5 million-$2 million over the next two quarters. The company had cash of $4.5 million and stockholders' equity attributed to UPEXI stockholders of $36.9 million as of December 31, 2022. As of today, February 14, 2023, there were 17,960,748 shares of common stock outstanding. Management expects revenues to continue to increase in calendar 2023, both organically, acquisitions completed during the 2022 fiscal year, as well as additional strategic acquisitions that align with management's long-term growth strategies. For calendar 2023, management continues to estimate annual revenue to be in excess of $100 million. At this time, I'd like to turn the call back over to Allan for closing comments. During our fiscal Q2 ending December 31st, 2022, we continued to transition the sale of our Infusions division and started our consolidation of eCore and Tytan Tiles businesses. Our quarter was highlighted with the highest revenue quarter since the company inception, driven by growth in our DTC, Amazon, Tytan Tile, and eCore businesses. Our ability to generate better overall sales than anticipated in a very challenging retail environment is a testament to our ability to efficiently operate our business and execute. In the past, we have always focused on growth with a balanced approach for spending for long-term growth and profitability. Our transition this quarter from an EBITDA loss to EBITDA positive was the first step in the right direction of creating efficiencies and driving margin increases in the coming quarters. We have ample runway for further efficiencies throughout the remainder of the calendar year. Additionally, many of the adjustments made during this economic downturn will prove to be beneficial for us as the economy normalizes. The business is well-positioned to meet our projected revenue goal of $100 million for calendar 2023. We anticipate our EBITDA margin to increase steadily throughout calendar 2023 as we trend towards 8%-12% EBITDA by the end of 2023. Regarding the sale of our Infusions assets and gain associated with this, while it is not our business to buy and sell businesses, we could consider the sale of other assets as they mature, especially if the value is not represented in our overall valuation and makes sense for total return for our business and for our shareholders. In closing, management is confident 2023 is set for our largest revenue year reported, as well as calendar 2023 meeting our projected $100 million. We also feel confident in continued strong growth into 2024 as we continue to evaluate possible acquisitions and push for organic growth across the company. I'd like to open the call for questions. Operator? Thank you. We will now be conducting our question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we pull for questions. We have a first question from the line of Mike Albanese with EF Hutton. Please go ahead. Yeah, thank you, and thanks guys for taking my question. Really nice quarter here. You know, nice job driving, adjusted, you know, positive EBITDA and, you know, with the sale of CBD assets and a couple nice acquisitions. Just a couple questions from me. I think first, just kinda from a macro perspective, I'd love to get some more color around what you're seeing across some of your different brands. All right. This is Allan Marshall. Thanks for the question. We're seeing reasonable growth. We have pricing power so far in most of our brands. We're not seeing the average ticket price go as high as it has in the past. I guess that's probably the slight reduction that we're seeing in the overall market. Our number of orders on a couple of our brands continue to be the same, yet the total sales number per order is a little bit lower. Most of our stuff, again, you know, due to the kind of, I guess, non-discretionary of a lot of the items we're not seeing as much as we had feared. Into year-end, we saw increases across, I think, pretty much across everything over the last six months. We're pretty comfortable. Consumers seems to be holding up in a for us at least better than anticipated. Great. Thank you. All right. Then your $100 million, you know, guidance for the year, I mean, is there organic growth baked into this, or is that just kind of run rate given the acquisitions that you've piled in or help me understand a little bit what's driving that. I think it's organic growth and the acquisition. We, you know, we sold $20 million worth of business. We did for $44 million. We added, you know, various, I mean, I guess percentages with the acquisitions. There is growth baked in for across all our brands. Probably not, we don't have any growth baked in on the acquisitions themselves. That would be the upside if we could, you know, if it worked out that way. Understood. Okay. All right, great. Kind of help me understand, I guess, the drivers in terms of, you know, improving EBITDA margins throughout the year, right? I think 8%-12% kinda target by the end of the year. I mean, is this all coming from OpEx really? You mentioned, and I, and I apologize if I get this wrong, I think $500-$1 million. Is that just purely advertising? Was that across all OpEx? You know, G&A decreased a little bit. I guess help me understand what your expectations are from OpEx standpoint, and if that's really what's driving the EBITDA margins or if there's, you're kinda forecasting an improvement to gross margin as well. Both. In the last quarter, we spent about $1 million we know we can cut out without hurting the sales of the company at all. Mm-hmm. Then we probably pulled forward some sales with upping our advertising spend per customer, even though it's still a positive, that should come back to us over the next couple of quarters. That can be normalized. We are able to get more traffic than normal on the ad spend, so we spent it, even though, you know, if we normally would on a certain product, we have $40, you know, cost for acquisition. Mm-hmm. We moved that up to 50 or 60. We did give away a little bit of the lifetime value unless we're able to sell that customer more value over time, which is what we're betting on. Right. We see all of those, and then we were able to get price increases on several of our products, and we think we can push through a few more. Then, you know, G&A, like general administration expenses, there's some more room to decrease there. We've already made adjustments in this quarter. Still kind of, you know, when we sold that, the CBD side, we still have employees that are stuck in, I guess you'd call it, you know, purgatory or figuring out where they fit in the company or whether or not they're just. Sure. Permanent cuts. I think all of those things combined make us, you know, pretty confident that we can at least reach the bottom end of that number by year-end. Got it. Thank you for that context. It's very helpful. I guess just my last one, I just wanna make sure, do you paid off all your debt? Yeah, we. From my- Yeah, we paid all the debt from eCore off. That's really with all the proceeds from the beginning, the first payment from the sale of the assets. We really used that cash to pay off that debt. Nice. Okay, great. Awesome. All right. That's really it for me. Thanks, guys. Thank you. Thank you. We take next question from the line of Aaron Grey with Alliance Global Partners. Please go ahead. Hi, good evening. Thank you for the questions and a nice quarter and inflection to profitability. First question for me, I just wanna kinda turn back to the revenue and the implied guidance. Just wanna be curious in terms of, you know, was there a decent amount of seasonality, you know, in the quarter? I know just for the holiday, maybe with the toys, 'cause you hit $27 million. You only had eCore for two months. If you assume a full quarter for that on a pro forma basis, it looks like you could almost hit the $100 for the fiscal year 2023, you know, let alone the calendar. I know you gave some guidance towards, you know, flat for some of the newly acquired and growth for, you know, some of the legacy business and the newly acquired ones with Signet and eCore looking up to make the majority of the revenue. Just wanna go back to in terms of, you know, what you're expecting in terms of that growth, because it does look like you're well on your way to potentially being able to hit the $100 million target for fiscal year, unless there's some seasonality in that quarter there. Thanks. Again, Allan Marshall. The quarter was a little more robust than we thought. Tytan Tile's got, you know, grew significant revenue. eCore drove more revenue than anticipated. Each of the brands drove a little bit more than anticipated. I don't think, you know, my math because of the discontinued operations, I don't think we could hit $100 million by June end. I mean, if we do, that'd be great for everyone. I think what we're really, you know, we did pull some revenue probably forward into that quarter. We anticipated somewhere around $20 million, you know, $21 million-$23 million. I think throughout the year, it should tier up as it goes, Q1, Q2, Q3, Q4, but not a lot of seasonality I don't think you'll see in the coming year. Great. That's helpful. Second question for me. You mentioned in terms of Amazon liquidation business, right now a lot of it electronics, looking to expand. I believe you said potentially into wellness, correct me if I'm wrong, but just wanted to know is kind of the wellness kinda liquidation, how would that kinda differ versus, you know, electronics, a lot more discretionary, just kinda shifting into a different type of, you know, category? Just talk about how synergistic that might be, and then does that also provide the platform for you to expand into other CPG categories? I know you mentioned, you know, educational toys and otherwise. Thanks. There's two parts of that. Like Signet's really focused on as an Amazon reseller liquidator, and they do sell a lot of third-party and liquidated products. Their main focus has always been kind of that health, wellness nutraceuticals, even though they spread across other categories 'cause they do have 1,200 SKUs. On the eCore, they do, you know, much larger kind of liquidation business in larger quantities, so bigger orders. Smaller overall margins, but still a good margin, and their overall expense on those margins, you know, on the G&A side is a lot less. What we do intend to do is the eCore business, it will really. In the past, they've sold to Amazon liquidators for some of the overstock. Now they just have another asset available for liquidating, part of the larger orders if they get, you know, small lots left. That should overall drive, higher margins for those two businesses going forward. Okay, great. Thanks. That's really helpful. Then last question for me, you kind of touched on it there. Just on the gross margin front, you know, obviously down sequentially there, and you mentioned some other things in your prepared remarks, Andrew, but just if you could maybe help out in terms of how much of that was driven by, you know, eCore, which seems like a structurally lower gross margin business, just due to the, you know, electronics liquidation business. How much of the sequential decline in gross margin was just driven by the acquisition versus the legacy business? Thanks. Andrew, can you grab that one? Yeah. Yeah, absolutely. The margin, I mean, it's significantly impact. As we move towards the not necessarily liquidation, but as we move to selling to the bigger boxes and everything that's done on with NET or with eCore and with Signet, those margins are gonna be impacted. That's the most significant part of it. Our branded products are still in that, you know, 70%-80% gross margin from what the product costs to what the product sales are. That is different when we don't own that brand. I mean, I can get the exact breakdowns, but most of that decline is from actually that part of the business, not from our actual products, because our products, we're still maintaining the high margins. Okay, great. Really helpful color. Now I'll jump back in the queue. Thank you. We take next question from the line of Matt Koranda with ROTH Capital Partners. Please go ahead. Hey, guys. It's Mike Zayburn on for Matt. Wanted to start with the progress at Tytan Tiles. I know it's early, and we just started hitting shelves in January, I guess first, how are we tracking so far? Second, any way to quantify the benefit or just qualitatively speak to how the sales lift we expect to see from physical store sales at Walmart fits into the revenue outlook for 2023? We don't have anything public about those sales yet. We did have strong sales in that brand on Walmart.com, which normally, you know, on Cyber Week, that normally bodes well for the future. With more launches into that category, you know, hopefully we can secure the new launches into the same supply chain. It would be great to think that every time you launch something, you could get that kind of contract with Walmart or Camping World or wherever else we have it distributed. We'll see on that. Don't have anything public out there yet, we'll, you know, kind of update everyone, you know, when we get closer to the end of the quarter or at the end of the quarter on that. But it is nice to have another, we'll say, like another lever to pull for us and another avenue. Each of these things make incremental differences in the business. Even on the last question with Aaron, like the reason our margin is so, you know, that gross margin can grow over time if we add more of the high margin businesses, Direct-to-Consumer and Amazon, that would skew that gross margin number back up again. We are excited about the category. Got it. Makes a lot of sense. Not sure if that answered it, but if it didn't, just ask again, maybe Andrew can just step in too. Yeah. No, that works. I get it. Nothing, nothing public out there. We'll wait for an update. Next question on the M&A front, maybe if you could just speak to the acquisition pipeline, just how big is the pipeline in terms of companies? What does total potential acquisition revenue for the pipeline look like? Further, just what are valuation multiples looking like in the current environment? Anything to call out in terms of changes since last quarter? No, valuations continue to, I guess, normalize on acquisitions. Right now we're really comfortable with where we're at, and we're really focused on, you know, I think the next couple of quarters, we really want to try to squeeze this business and produce the kind of margins that we think we can, to give everybody, you know, a look at how, you know, what we think is the potential. We're sticking to that 3.5-5x multiple on a business that makes sense for us. Obviously, if the business was, you know, super accretive in an area that we wanted to grow, we may consider some sort of structured deal. You know, we're very fiscally conscious of, you know, how difficult it is to bring in an acquisition and squeeze all the margin and how long it takes. The pipeline's good. We see we have a lot of opportunities, but like I said, we're kind of just cruising here and let us see how much we can get out of what we got. Unless something's just, you know, so appetizing for us to take a bite of now, but I really doubt that'll happen here in the next quarter or so. Yep. Okay. Makes a lot of sense. Thanks, guys. Thanks. Thank you. Again, if you wish to ask a question, please press star one on your touchtone phone now. We have next question from the line of Luc Richner, an investor. Please go ahead. Hey, Allan, congrats on a fantastic quarter. Most of my questions have been answered already. I did have one question, from your prepared remarks. I forget your exact wording, but you had mentioned something about being willing to divest assets if you feel as if the market isn't properly valuing them. Is that something you guys are actively pursuing or how are you going about that? Is it sort of, you know, if you're approached or, you know, if you could talk a little bit about that'd be great. I mean, I think, you know, CBD for us made sense to move on from it, even though it was, you know, a decently high margin business, it just lacked a lot of growth for us and the value that we're hoping to get from it just made sense for the overall shareholders, right. I think our balance sheet got stronger. This thing, we're able to pay off a little debt. We're able to streamline the business. We do evaluate the value that we think each business. The overall value of each business inside their portfolio as compared to, you know, our market cap or the overall perception by the market. It's something we would consider, right. We have a tech asset in that Interactive Offers, you know, in a different environment and programmatic advertising with the patent it has. It could be way more valuable than we, you know, than it is on our books. You know, we talk about those things internally and as a, you know, as a responsible, you know, CEO and CFO and board, we look at every opportunity to return the most amount of money for the shareholders. It's not our business, but we certainly would look at it. Gotcha. Okay. Thank you. That's it for me. Everything else was answered. I appreciate it. Thanks, Luke. Thank you. We take next question from the line of John McAuliffe with Paulson. Please go ahead. Hey, guys. Nice quarter. Must feel good. Andrew, interest expense for the quarter and, how much of DTC do you have left after getting rid of the CBD business? Are you talking about the interest expense that we had of $1.7 million that we, that we incurred because of getting rid of Acorn? No. Oh, okay. I'm sorry. The acquisition interest costs, which I know are 3% or 4%. What was that number, if you could? Do you know it? Of the acquisitions? Yeah, the interest you pay in the acquisitions that you haven't fully paid for yet. In the quarter, it was less than $35,000 that we haven't fully paid for. That's because the one acquisition, On the LuckyTail, we don't have any interest expense on it. With the New England one, we only had the interest expense related to two months. Got it. Depreciation and amortization, what was that number? Depreciation and amortization for the quarter was about $1.2 million. The most significant thing is gonna continue to be the amortization of the intangible assets, because. All right. Continue to acquire these entities, it's just going to continue to grow. Thank you. That's good. Last question is, you know, I think of this some now you're developing kind of a, you're developing a lot of data, giving your customer information. What's the marketing budget look like? Have you changed your idea about how to cross-sell and go after the clients that you've garnered through organic growth and acquisition? It's Allan Marshall. No, we haven't really changed our perspective on that. We really don't wanna chase, you know, too much additional spend on advertising right now. Like I said, our focus really here is, you know, we've got a really, you know, I think a really great set of assets with high potential for growth both internally and organically. We can add an acquisition which makes sense. When we did spend extra last quarter, our idea is we know what the lifetime value of our current customers is on our current brands. Can we sell them someone else? Can we increase that lifetime value? Again, it's not, it's not, it's not. You don't always get an opportunity to get more data for a marginal additional amount of money. Usually to get more data when it's very competitive in advertising, it's a larger increase, which sometimes make it not economical. Really just it was a test for us and then we'll track those customers that come in. We look at when the next time the order is and what the return is on that spend. If that works out really well for us over this quarter, then we probably would put, you know, put a little more into it again. It's fine-tuning. Advertising, marketing, customer acquisition is just constant fine-tuning of your spend and your being, you know, conscious of how to do that properly. Thanks. Congratulations again. Thanks, John. Thank you. Ladies and gentlemen, we've reached the end of the question and answer session. I'd like to turn the floor back over to Allan Marshall, CEO, for closing comments. Over to you, sir. I just want to close the call with thanking everyone for joining us today. Appreciate the questions. Appreciate the company and all its employees. Appreciate the support. We look forward to the Q3 call. That ends the call for today. Thank you. Thank you. Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.