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2QFY24 Preview: Looking for Updates on Key Initiatives

iPower is expected to report its 2QFY24 results in mid-February. Investors will continue to focus on the company’s progress on key initiatives. While continuing to grow its key Amazon relationship, iPower is also expanding its distribution channels. We look for an update on the growth of its TikTok Shop business as well as developments with physical retailers. Recall iPower recently hired a salesperson specifically focused on these relationships and we hope to gain some insight here. iPower rolled out its Business Services offering in 2023 with two partners and we are looking for an update on this effort. The company’s strong start on the TikTok Shop could be an additional key selling point, along with the company’s deep Amazon relationship, in attracting new service partners. We look forward to the announcement of further Business Services partners. As a reminder, hydroponic sales now represent less than 25% of total sales, continuing the trend of strong growth in other product categories. This should continue as the Business Services and TikTok Shop channels continue to grow and distinguish IPW as more aligned with home goods online sales and online sales servicing companies. The last three quarters have shown steady progress on various financial metrics, including inventory levels, leverage, and gross margins. While quarter-to-quarter fluctuations cannot be excluded, the company’s business initiatives should continue to yield steady improvements and point the business toward regaining profitability levels it achieved prior to the 2022 supply disruption. Inventory and debt levels have reached a satisfactory stage, and we will look for clues as to further potential gross margin improvements that could be driven by channel expansion, further growth in Business Services, and possibly supply chain optimization.