IPW - IPOWER INC: SHOOTING UP IN THE HYDROPONICS INDUSTRY
IPOWER INC: SHOOTING UP IN THE HYDROPONICS INDUSTRY
iPower Inc. (NASDAQ: IPW), a leading online retailer and supplier of consumer home and garden products, owns and operate the retail website www.zenhydro.com where they sell a wide array of stock keeping units (SKUs) and multiple best-selling products which enable customers to grow vegetables, fruits and flowers, and other plants, including cannabis. The Company has a diverse customer base that includes both commercial businesses and individuals.
The Company and its Products
iPower is one of the largest online hydroponic equipment suppliers in the United States, and is currently developing a suite of ecommerce services to enable companies and brands to penetrate global markets more effectively.
The Company leases approximately 220,000 square feet of floor space across four fulfillment centers just outside of Los Angeles, California and in Rancho Cucamonga, California, and has relationships with recognized commercial shipping enterprises.
In addition to iPower’s website, www.zenhydro.com, products are sold through third party e-commerce channels including Amazon, eBay and Walmart.com – approximately 90% of the Company’s sales revenue during the year ended June 30, 2022 were derived from sales on these platforms.
iPower Inc. (NASDAQ: IPW)
Market Cap: $21.40M; Current Share Price: $0.72
Data by YCharts
iPower offers essential supplies to the hydroponic, gardening and home goods industry, including nutrients, industry-leading hydroponic equipment, power-efficient lighting, and thousands of additional products for home users and professional growers. In addition to offering products from hundreds of third-party brands, the Company has established its own in-house branded products which are also made available for purchase through various sales channels.
In-house branded products, marketed under the iPower™ and Simple Deluxe™ brands, include grow-light systems, ventilation systems, activated carbon filters, nutrients, growing media, hydroponic water-resistant grow tents, trimming machines, pumps and many more hydroponic-related items, some of which have been designated as Amazon best seller product leaders, including products which have been designated “Amazon Choice Products” and “#1 Best Seller SKUs.”
The Company currently offers more than 4,000 products from our proprietary, in-house branded products to consumers.
Image Source: Company
Below, we discuss a few key elements that make the Company worth watching out for:
1. Multiple Growth Opportunities
As mentioned, the Company operates in the hydroponics industry which is an increasingly significant and fast-growing component of the expansive global commercial agriculture and consumer gardening sectors. According to the USDA and National Gardening Survey, the agriculture, food, and related industry sector produced more than $1 trillion worth of goods in the U.S. alone in 2017. According to Statista, the market for garden supplies and equipment surpassed $100 billion in 2020, and is expected to reach $130 billion by 2024.
According to ResearchandMarkets.com, the global industry for hydroponic systems is currently valued at approximately $12.1 billion and is projected to reach $25.1 billion by 2027. In addition, according to ResearchandMarkets.com, the global hydroponics crops market is estimated to be valued at approximately $37.7 billion in 2022 and is projected to reach $53.4 billion by 2028, recording a CAGR of 7.2%. The rapid growth of hydroponics-related crop output will subsequently drive growth in the wholesale hydroponics equipment and supplies industry.
Finally, Grandview Research has estimated that the size of the home goods market in the US was $740 billion in 2020 and should reach close to $1,040 billion by 2024, with a CAGR of 7.4%.
IPower is poised to benefit from all of these upcoming trends as it further penetrates online channels while enhancing the current product offering with additional SKUs and product features.
The Company has recently entered cannabis friendly markets such as Europe and expanding in Canada will accelerate growth and further diversify the customer base. It also continues to develop in-house product lines in categories where customers purchase with high frequency. In fact, they have now diversified product offerings to consumers outside traditional hydroponics.
Finally, over FY22, iPower completed a $25M secured revolving credit facility with JPMorgan Chase with an accordion feature to borrow an additional $25M – this means the Company has access to adequate funding to pursue acquisitions to quickly scale its in-house portfolio, should the opportunity arise.
2. Strong Financial Profile
For FY22, iPower demonstrated outstanding results, highlighted by a 47% increase in revenue to $79.4 million (compared to FY21), while gross profit increased 46% to $33.2 million. Net income also increased significantly to $1.5 million or $0.05 per share compared to a net loss of $0.8 million or $(0.04) per share.
Image Source: Company
More recently, for Q2 FY23, the Company reported a total revenue increase of 12% to $19.3 million compared to $17.1 million for the same period in FY22. The growth was attributed to strong demand for iPower’s in-house product portfolio, including shelving, office and pet products, as well as hydroponic equipment.
Gross profit in Q2 FY23 increased 5% to $8.0 million compared to $7.6 million for Q2 FY22.
Most recently, the company’s cash and cash equivalents were $4.0 million at December 31, 2022, compared to $1.8 million at June 30, 2022. The increase was primarily due to improved working capital.
Total debt as of December 31, 2022 was $12.2 million compared to $16.0 million as of June 30, 2022. As a result of the Company’s debt paydown and improved working capital, iPower’s net debt (total debt less cash) position was reduced 42% to $8.2 million compared to $14.2 million as of June 30, 2022.
3. Strong Online Presence
As mentioned, the Company sells products through its e-commerce platform, www.zenhydro.com. In addition to this website, they offer products to consumers through established e-commerce channels such as Amazon, eBay and Walmart.
Online shoppers have the ability to peruse various product departments, from nutrients to lighting to hydroponic and greenhouse equipment, providing consumers with an easy and quick method to find the exact products they need. In addition to these sections, their webstore frequently offers customers flash deals, best value recommendations and clearance sale items.
Image Source: Company
Consumers can shop online day and night and have their purchases shipped directly to the location of their choice, or simply elect to use our website as a resource. Google advertising, social media advertising and email list marketing, in addition to auto-ship functionality, are the primary mechanisms employed to drive traffic to www.zenhydro.com and the other portals through which products are available for sale, including Amazon.com, eBay and Walmart. iPower’s relationship with other 3rd party online marketplaces has led to increased exposure to customers.
At present, more than 50% of the Company’s total sales occur through Amazon.com. The Company’s marketplace relationship with Amazon as both a retailer and wholesaler provides key customer insights.
Image Source: Company
Thus, iPower seems to employ a strong marketing and distribution strategy where it not only makes good use of its own platform, but also those of big e-commerce retailers. The Company has a strong product base that seems to be popular amongst customers, as indicated by rapidly increasing sales. Given the projected industry growth, it appears that iPower will expand only further – especially since it has strong financial fundamentals required to support such growth.
Hence, iPower is a Company that seems to be well prepared to scale new heights.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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Reference:
https://ir.meetipower.com/static-files/f0e16e83-2e41-4140-bd90-de1ef2a5fa76
https://www.sec.gov/ix?doc=/Archives/edgar/data/1830072/000168316822006660/ipower_i10k-063022.htm
https://www.sec.gov/ix?doc=/Archives/edgar/data/1830072/000168316823000897/ipower_i10q-123122.htm