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Ispire Technology Inc. (ISPR)·Q2 2025 Earnings Summary

Executive Summary

  • Revenue was essentially flat year-over-year at $41.83M (+0.3%), while gross margin expanded 350 bps to 18.5% on mix, but operating expenses rose 48%, widening net loss to ($8.00)M and EPS to ($0.14) .
  • International execution was a standout: nicotine revenue was ~$31M with strong Europe growth and an Africa launch (BRKFST) now in 500+ locations and targeting >2,000 within six months .
  • Strategic milestones: Malaysia import/export licenses (manufacturer license pending; plan to scale to 70 production lines), $10M buyback authorization, and FDA engagement with IKE Tech on a component PMTA targeted for April 2025 submission .
  • Near-term watch items: higher opex and U.S. cannabis hardware softness (North America -45% YoY) offset mix-driven margin gains; management signaled Q3 cash flow breakeven timing likely slips due to one-time cost actions, but sees structural annualized opex savings of ~$8M from shifting roles to Malaysia .

What Went Well and What Went Wrong

What Went Well

  • Margin expansion and quality of revenue improved: gross margin rose to 18.5% (from 15.0%) driven by mix and “higher-quality accounts” and international growth .
  • International traction: Europe revenue strength and Africa BRKFST launch (>500 stores; path to >2,000 in six months) underpin nicotine revenue momentum (~$31M in Q2) .
  • Strategic platform progress: “successful pre-PMTA meeting… FDA indicated they would accept our component PMTA submission and consider our priority review,” with an April 2025 submission plan; Malaysia regulatory progress with import/export licenses and manufacturer license pending to scale “over 70 production lines” .

What Went Wrong

  • Operating cost pressure: total opex +48% YoY to $15.1M (Malaysia investment, product development, scaling activities) widened operating loss and net loss .
  • North America softness: revenue declined ~$9.0M YoY (-45.3%), primarily from lower U.S. cannabis hardware sales as the company tightened customer quality and terms .
  • Cash flow timing: management now expects Q3 cash flow breakeven to slip due to one-time costs from relocating roles/functions to Malaysia and Hong Kong, despite positive operating cash flow in Q2 .

Financial Results

Quarterly sequential comparison

MetricQ1 FY2025Q2 FY2025
Revenue ($USD Millions)$39.34 $41.83
Gross Profit ($USD Millions)$7.67 $7.72
Gross Margin (%)19.5% 18.5%
Total Operating Expenses ($USD Millions)$12.90 $15.08
Operating Income (Loss) ($USD Millions)($5.22) ($7.36)
Net Income (Loss) ($USD Millions)($5.60) ($8.00)
EPS (Basic & Diluted) ($)($0.10) ($0.14)
Cash & Equivalents (period-end, $USD Millions)$37.76 $34.37
Working Capital (period-end, $USD Millions)$12.1 $6.1

Year-over-year comparison (Q2)

MetricQ2 FY2024Q2 FY2025
Revenue ($USD Millions)$41.69 $41.83
Gross Profit ($USD Millions)$6.25 $7.72
Gross Margin (%)15.0% 18.5%
Total Operating Expenses ($USD Millions)$10.17 $15.08
Operating Income (Loss) ($USD Millions)($3.92) ($7.36)
Net Income (Loss) ($USD Millions)($3.99) ($8.00)
EPS (Basic & Diluted) ($)($0.07) ($0.14)

Geographic mix and key KPIs (Q2 FY2025)

KPIQ2 FY2025YoY/Context
Europe Revenue (approx., $USD Millions)~$24.0+$8.3M YoY (+53.2%)
North America Revenue (approx., $USD Millions)~$10.9-$9.0M YoY (-45.3%)
Asia Pacific Revenue (approx., $USD Millions)~$3.6-$2.4M YoY (-39.6%)
Rest of World Revenue (approx., $USD Millions)~$2.7+$2.6M YoY (Africa launch)
Nicotine Revenue (approx., $USD Millions)~$31.0“continuing to perform in line with expectations”
BRKFST Africa Retail Locations500+Plan to reach >2,000 in 6 months
Malaysia Production Lines (planned)70Pending manufacturer license

Notes: Management presented region figures as approximations on the call .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance/UpdateChange
Operating Cash Flow BreakevenQ3 FY2025 (March qtr)Targeted breakeven in March quarter (prior commentary) Likely pushed out due to one-time costs from role shifts; still progressing toward cash flow improvement Delayed
Component PMTA (IKE Tech)Calendar 2025Pre-PMTA meeting scheduled; pursuing age-gating tech (Nov 2024) FDA indicated it would accept component PMTA; submission targeted for April 2025 Clarified timeline
Pod System PMTAs (Ispire)Calendar 2025On track to submit in 2025 Plan to file PMTAs for flavored pod products using age-gating system; 6–10 offerings potential Expanded detail
Operating Expense ActionsRun-rateN/ARelocating functions to Malaysia/HK; anticipated ~$8M annual opex reduction New initiative
Capital Returns (Buyback)Next 24 monthsN/AUp to $10M share repurchase authorization Introduced

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2, Q-1)Current Period (Q2 FY2025)Trend
Age-gating / PMTAQ-1: FDA meeting scheduled Nov 13, 2024; pursuing age-gating PMTA; pod PMTA planned 2025 FDA indicated acceptance and priority review consideration; IKE Tech component PMTA targeted April 2025; Ispire to file pod PMTAs incl. flavored Accelerating regulatory path
Manufacturing (Malaysia)Q-1: Malaysia facility aiding margins and global scale Import/export nicotine licenses obtained; manufacturer license pending; plan to scale to 70 lines; cost shift to Malaysia Scaling and de-risking supply chain
Regional MixQ-1: Europe +11% YoY; North America -46%; APAC down Europe +53% YoY; North America -45%; APAC -39.6%; Africa contributing International up, NA cannabis still soft
Product & Brand ExpansionQ-1: Launched high-capacity I-80 filling machine; ANDS master distributor for MENA & duty free BRKFST Africa launch (500+ locations; expanding to >2,000) Building global footprint
Regulatory/Macro (Tariffs, UK)Q-1: —UK disposable ban creates shift to open/refillable systems; tariff risk mitigated by Malaysia manufacturing Policy tailwinds + mitigation

Management Commentary

  • “Gross margin for Q2 increased to 18.5%, up from 15%... driven by our focus on... better quality of revenue, changes in product mix as well as contribution sales from our expansion overseas.” – Michael Wang, Co-CEO .
  • “Our BRKFST brand… established a presence in over 500 retail locations across South Africa and Nigeria… we plan to reach more than 2,000 stores in the next 6 months.” – Michael Wang .
  • “We’ve successfully obtained both nicotine import license and export license [in Malaysia]… [and] prepare to… scale… over 70 plus production lines.” – Michael Wang .
  • “FDA… indicated they would accept our component PMTA submission and consider our request for priority review… IKE Tech is on track to submit… in April 2025.” – Michael Wang .
  • “The authorization… of up to a $10 million stock repurchase program underscores our confidence… [and] we… moved certain daily roles… to our Malaysian operations… to reduce operating expenses by an anticipated $8 million annually.” – Jim McCormick, CFO .

Q&A Highlights

  • Cannabis pipeline and I-80: Management pivoted to MSO/SSO customers; three large accounts in place and more expected; I-80 high-capacity filling machine supports large accounts and pipeline visibility .
  • Europe outlook and UK regulation: Anticipated UK disposable ban shifts demand to open/refillable systems; Ispire positioned with refillable pod devices and open systems .
  • Cash flow and buyback: Positive operating cash flow in Q2; buyback spans 24 months and will be opportunistic; breakeven likely delayed due to one-time costs from role relocations .
  • Tariffs/macro: Potential U.S. tariff increases on China-made products expected; Malaysia production mitigates risk; tighter border enforcement could squeeze illicit products, benefiting compliant operators .
  • Modular PMTA opportunity: Component PMTA could enable licensing age-gating across many brands; management framed sizable potential in converting illicit market demand to regulated channels over time .

Estimates Context

  • Wall Street consensus (S&P Global) for Q2 FY2025 EPS, revenue, and EBITDA was unavailable at the time of analysis due to data access limits; as a result, we could not quantify beats/misses versus consensus. We will update estimate comparisons once S&P Global data is accessible.

Key Takeaways for Investors

  • Mix-driven margin expansion is real, but higher opex tied to global scaling and product development widened losses; the announced ~$8M annualized opex savings from shifting roles to Malaysia is the bridge back to breakeven if revenue holds .
  • International nicotine growth and Africa BRKFST rollout provide near-term top-line support; NA cannabis remains soft as the portfolio is “upgraded” to larger, higher-quality customers .
  • Regulatory catalysts: IKE Tech component PMTA submission in April 2025 and Ispire’s pod PMTAs, plus UK’s disposable ban pivoting share to open/refillable systems where Ispire is positioned .
  • Supply chain de-risking: Malaysia licensing progress and capacity plan (70 lines) mitigate tariff/geopolitical risks and should support margin structure and lead times .
  • Capital allocation: $10M buyback authorization signals confidence and provides downside support amid operational transition .
  • Watch list for next quarter: opex run-rate progress, operating cash flow trajectory post one-time costs, NA cannabis customer conversions, and early traction from BRKFST expansion .
  • Medium term: Success of component PMTA/age-gating could unlock a licensing revenue stream and accelerate U.S. re-entry on compliant, regulated products, potentially reshaping growth and margin mix .