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Fortune Valley Treasures, Inc. (FVTI)·Q3 2021 Earnings Summary

Executive Summary

  • Q3 2021 delivered strong sequential execution: revenue rose to $2.005M from $1.825M in Q2, with operating income of $608k, net income of $450k, and EPS of $0.03 . Year-over-year, revenue increased 607% on the restated base as Fu Gu Online launched and water/oil products scaled .
  • Mix shift and digital commerce were key drivers: management cites the WeChat Fu Gu Online launch (April 2021) and expansion in water/oil as primary growth catalysts .
  • Balance sheet and liquidity: working capital improved to $2.78M; however, operating cash flow remained negative YTD and cash was $150k at quarter-end, underscoring execution and financing discipline needs .
  • Controls and transparency: the company disclosed internal control weaknesses but established an audit committee in October 2021; it restated Q3 2020 figures due to omission of an acquisition, with no impact to FY2020 audited results .
  • Guidance/estimates: FVTI did not issue formal guidance; S&P Global Wall Street consensus estimates were unavailable for FVTI (no CIQ mapping). This limits “beat/miss” framing and may reduce near‑term estimate-driven catalysts.

What Went Well and What Went Wrong

What Went Well

  • Revenue inflected across quarters driven by online channel activation: “Revenue… increased… [as] the Company started generating online sales from WeChat Application named Fu Gu Online in April 2021.”
  • Gross profit expansion with product mix: “The increase of gross profit was due to the addition of the revenue from our water and oil business, where gross profit was higher.”
  • Working capital strengthened: working capital rose to $2.78M vs $2.36M in Q2 and $2.44M in Q1, giving runway for operations and growth initiatives .

What Went Wrong

  • Internal control weaknesses: management concluded disclosure controls were “not effective” (related party, business combination accounting); audit committee remediation only began late in 2021 .
  • Restatement disclosure: Q3 2020 was restated due to an unrecorded acquisition, materially changing comparative figures (e.g., revenue $283,560 and net loss $(77,140))—a credibility overhang despite no impact to FY2020 audited results .
  • Cash conversion and supplier prepayments: cash from operations was negative YTD (−$712k) with sizeable prepayments/deposits to vendors ($2.35M/$1.88M), increasing working capital intensity and execution risk if demand softens .

Financial Results

MetricQ1 2021Q2 2021Q3 2021
Revenue ($USD)$1,644,160 $1,825,344 $2,005,390
Cost of Revenues ($USD)$729,743 $797,524 $875,418
Gross Profit ($USD)$914,417 $1,027,820 $1,129,972
Operating Income ($USD)$405,286 $558,510 $608,080
Net Income ($USD)$335,574 $456,881 $449,863
EPS (Basic & Diluted) ($USD)$0.00 $0.00 $0.03

Year-over-year reference (Q3 2020 restated):

  • Revenue $283,560; Gross Profit $38,056; Net Loss $(77,140) . Management highlights a 607% YoY revenue increase in Q3 2021 versus restated Q3 2020 .

Segment/Product Mix (Revenue)

ProductQ1 2021Q2 2021Q3 2021
Wine ($USD)$779,220 $617,568 $639,635
Water ($USD)$700,495 $1,027,651 $1,099,586
Oil ($USD)$135,997 $81,120 $14
Others ($USD)$28,448 $99,005 $266,155
Total ($USD)$1,644,160 $1,825,344 $2,005,390

KPIs and Balance Sheet Indicators

KPIQ1 2021Q2 2021Q3 2021
Working Capital ($USD)$2,437,539 $2,360,398 $2,778,546
Accounts Receivable ($USD)$1,181,889 $1,189,597 $2,003,170
Prepayments ($USD)$2,106,839 $2,577,034 $2,345,959
Customer Advances ($USD)$795,293 $695,695 $538,829
Cash And Equivalents ($USD)$964,335 $420,400 $150,189

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Company GuidanceFY/Q3 2021None providedNone providedMaintained (no formal guidance)

Earnings Call Themes & Trends

Note: No earnings call transcript was located for Q3 2021 or earlier in 2021 for FVTI [ListDocuments returned none for earnings-call-transcript].

TopicPrevious Mentions (Q1/Q2)Current Period (Q3)Trend
Digital commerce/technologyFu Gu Online launch noted as revenue driver (Q1: added water/oil; Q2: online sales via WeChat from Apr 2021) Continued reliance on Fu Gu Online; mix shifting to products with higher gross profit Sustained contribution from online channel
Product performance/mixWater/oil added driving higher gross profit in H1 Water remains the largest contributor; “Others” category grew materially in Q3 Water-led growth; broader SKU expansion
Supply chain/working capitalSignificant prepayments/deposits to vendors; negative operating cash flow in H1 Prepayments/deposits remain elevated; operating cash flow negative YTD Persistent working capital intensity
Regulatory/taxPRC small-scale enterprise tax preference (effective rates 5–10%) applied to subsidiaries Continued PRC tax preference; total tax expense $156k for Q3 Stable regulatory/tax backdrop
Controls/governanceControls not effective; audit committee formed in April 2021 Controls still not effective; audit committee formed Oct 2021; restatement disclosed Remediation underway; transparency improving

Management Commentary

  • “Revenue… increased… [as] the Company started generating online sales from WeChat Application named Fu Gu Online in April 2021.”
  • “The increase of gross profit was due to the addition of the revenue from our water and oil business, where gross profit was higher.”
  • Going concern: “Based on the Company’s effort in improving its operations and the significant working capital increase as of September 30, 2021, the management believes that the substantial doubt has been alleviated.”

Q&A Highlights

No earnings call/Q&A transcript found for Q3 2021; no call-based guidance clarifications or tone changes available [ListDocuments returned none for earnings-call-transcript].

Estimates Context

  • Wall Street consensus (S&P Global) for FVTI Q3 2021 EPS and revenue was unavailable (no CIQ mapping for FVTI). Consequently, beat/miss analysis to consensus could not be performed. Investors should rely on actuals and trajectory until coverage expands.

Key Takeaways for Investors

  • Execution is improving: sequential revenue and operating income growth across Q1→Q2→Q3, with online channel activation and water/oil mix underpinning gross profit expansion .
  • Balance sheet is stronger but cash conversion remains a risk: working capital increased to $2.78M, yet YTD operating cash flow is negative and cash is $150k; monitor supplier prepayments and collections closely .
  • Governance remediation is in progress: audit committee formation and transparent restatement disclosures are positives, but internal controls remain not effective—expect continued process improvements through 2022 .
  • Channel/portfolio strategy is working: Fu Gu Online and water/oil product lines are driving growth; sustainment of the “Others” category in Q3 indicates broadening demand .
  • Limited external catalysts near-term: absence of formal guidance and unavailable consensus estimates constrain beat/miss narratives; focus on operational KPIs (AR movement, customer advances, inventory turns) and channel traction .
  • Watch related party exposures: ongoing borrowings and transactions with related parties support operations but elevate governance/financing risks—track reduction in related-party balances over time .
  • Medium-term thesis: if digital channel growth persists and controls are remediated, FVTI can translate revenue scale into consistent free cash flow; the pace of working capital normalization will be a key determinant .