Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ispire Technology Third Quarter 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Philip Carlson from KCSA. Please go ahead.

Hello, everyone, and welcome to Ispire Technology's earnings conference call for the third quarter of fiscal 2025 ended March 31, 2025. At this time, I'd like to inform you that this conference call is being recorded and that all participants are in a listen-only mode. Following the Company's prepared remarks, we will be facilitating a question-and-answer session. Joining us today are Mr. Michael Wang, the Company's Co-CEO and Mr. Jim McCormick, the Company's CFO. To begin, Mr. Wang will recap the Company's key fiscal third quarter financial results and recent corporate highlights, after which Mr. McCormick will discuss the Company's fiscal third quarter financial results in more detail. Before we begin, I would like to remind you that, this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact in its announcement are forward-looking statements. Forward-looking statements are based on estimates and assumptions made by the Company in terms of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors that the Company believes are relevant. These forward-looking statements involve known and unknown risks and uncertainties, and many factors could cause the Company's actual results or performance to differ materially from those expressed or implied by the forward-looking statements. Further information regarding this and other risk factors are included in the Company's filings with the SEC. The Company undertakes no obligation to update forward-looking statements to reflect subsequent or current events or circumstances or to changes in its expectation except as may be required by law. I will now turn the call over to Mr. Wang. Mr. Wang, please go ahead.

Thank you, Phil, and thank you to all who have joined us today. I'm glad to be here today to review our fiscal third quarter 2025 results and the recent highlights. As our results over the third quarter demonstrated, we have continued to deliver on our promises across multiple fronts of our business. Our commitment to executing on our strategic roadmap is clear, as we strive towards becoming a leading manufacturer of precision dosing, basing technology for global nicotine companies. We've made significant progress throughout our fiscal third quarter. One of our main priorities has been on managing our account receivables more tightly. I'm pleased to announce that during the quarter, we were able to reduce our accounts receivable by approximately $7.3 million from the previous quarter to approximately $60.4 million. This includes a reduction in the underlying accounts receivable balance of approximately $2.6 million. Reversing the trend, we have seen with the increase in accounts receivable during previous quarters. This improvement was due to our team putting in place strict payment and collection policies, and further demonstrates our commitment to enhancing our financial stability. We expect to continue making more progress on reducing our account receivable in the coming quarters, as we focus on higher quality and the larger customers with improved payment terms. For the third quarter of fiscal 2025, we've reported revenues of approximately $26.2 million, compared to $30 million even for the same period in fiscal 2024. The pending increase in tariffs on Chinese made goods has impacted product pricing dynamics in the market. However, we expect to be less impacted, given that we also manufacture our products in Malaysia, which I'll talk to shortly. Moving forward, we are optimizing our pricing strategy by shifting more from landed pricing to FOB factory pricing, which will enhance…

Thank you, Michael. As a reminder, I will refer to the fiscal third quarter 2025 at the three months ended March 31, 2025. All comparisons are to the prior year ended March 31, 2024, unless otherwise stated. For the third quarter of fiscal 2025, total revenue decreased to $26.2 million, representing a change of 12.7% or $3.8 million compared to $30 million in the same period last year. Our revenue results were driven by the performance across our key geographical regions as follows. European revenues were approximately $13.2 million in Q3 fiscal 2025 represented a slight decline of $0.3 million or 2.9% compared to $13.6 million in the same period last year. Revenue from North America of approximately $8.8 million in Q3 fiscal 2025 represented a decline of $3.6 million or 28.9% compared to $12.4 million for the third quarter in fiscal 2024. This was largely driven by the new tariffs on China made products, the impact of our transition of some manufacturing activities from China to Malaysia and the effect of us on working only with larger and high-quality customers such as multistate operators. Asia Pacific revenues of approximately $3 million represented a decline of $0.8 million or 21.4% compared to $3.8 million in the third quarter of last fiscal year. This was primarily the result of reduced demand in South Korea ahead of anticipated changes in the regulatory environment. Revenues from Africa of $0.1 million were roughly flat compared to the revenue from the same period last year. For the nine-month period ending March 31, 2025, revenues decreased by 6.3% to $107.4 million compared to the same period in fiscal 2024. Once again, this is tied directly to the focus on higher quality customers in the cannabis space, ongoing revenue for higher levels of accounts receivable collection. For…

Thanks, Jim. In closing, I'm very pleased with the progress we made over the third fiscal quarter. As I stated previously, we achieved several significant milestones this quarter. Securing our interim mixing manufacturing license in Malaysia, restructuring our global operations to be more cost-effective, transitioning more of our manufacturing to Malaysia, filing of IKE Tech component PMTA with FDA on schedule, and reversing the increasing trend of our accounts receivable. In addition, our pricing strategy shift from landed to FOB factory pricing demonstrates our adaptability and commitment to long-term profitability regardless of the external market conditions. There are several unique and exciting opportunities that exist for Ispire going forward. In particular, receiving Malaysia's First federal nicotine manufacturing license, our age-gating technology's potential to revolutionize the electronic nicotine delivery systems, namely ENDS devices worldwide and our ongoing discussion with global nicotine providers. With our strategic focus on innovation, regulatory compliance and increased financial stability, we are well placed to capitalize on significant market opportunities, while also being a leader in responsible industry practices. Thank you again to our investors for their continued support and to everyone who joined us today for your time. We look forward to updating you further in the coming months. If you have any questions, please contact us through e-mail at ispirethechnology.com. This completes our prepared remarks, and we are now open to questions. Operator, please go ahead.

[Operator Instructions] Our first question will come from the line of Nick Anderson with ROTH Capital Partners. Please go ahead.

First one for me, just on the FDA and the focus on port shopping. Just help us understand what that could mean regarding the illicit vape supply in the U.S.? And I guess two questions off this. Do you expect a significant reduction in illicit product flow off this? And two, does this change the way you look at the growth opportunity in North America kind of near-term here?

Nick, thank you. So, with the approval of this technology, we strongly believe, we will convert a lot of consumers from currently using gray- or black-market vaping products to actually compliant and safer products so they can trust. Right now, of course, from different estimate, you get different dollar amount. But, by and large, the consensus is, the black market for vaping products, especially e-cigarettes, accounts for anywhere between 5x and 7x of the legal market, which last year reached over $10 billion. So that means in the U.S., black market is anywhere between $5 -- $50 billion to potentially even up to $70 billion in retail. So, those are products we really don't feel comfortable enough to use, we personally. So, by allowing so many consumers, especially adult consumers, we use them. So, of course, for us, there hasn't been a reliable solution to age-gate products for adult consumers to use and to prevent youth access to such products. But, finally, with such solution, we are very optimistic about how many percent of the consumers we can convert from black market to legal market. So, that's number one. Number two, I think in -- our products are FDA approved. We, of course, don't plan or cannot sell products in the U.S. So, in the near-term, in the U.S., there is probably very little revenue from such products. However, this technology could be used outside the United States. As we all know, most countries face the same challenge as we face here in the U.S. that's uncontrolled youth access to flavored e-cigarette. So, many governments are looking for solutions right now. In fact, we already spoke to a couple of governments in terms of regulation and tobacco control aspect. There are encouraging opportunities outside the U.S., where the deployment of such technology could happen much, much faster than within the U.S. So, in the near-term, I think the opportunities are more outside the U.S. when our own products are FDA approved, U.S. represents an enormous market for us. Nick, did I answer your question completely?

Yes, sounds perfect. Thank you. Second one for me, just wanted to follow up on the EU and the disposable vape bans taking place over the coming months here. Are there any countries in particular you're looking at and are excited about? And are there any supply constraints that need to be addressed before kind of expanding your product offering overseas?

As far as -- first of all, to address the EU market, as we all know, UK-led European market by banning disposables, EU would follow suit. So, obviously, the industry will switch to what we know as, number one, pod systems, where you only need to replace the pods that you use on your device. And the other opportunity would be for some consumers to actually switch to open systems or refillable systems. So, this is where Ispire's brand, Aspire is super strong. Largely, so far, our global nicotine or e-cig revenue comes from the European region. So, we strongly believe we'll benefit from the ban for disposable whether it's the UK or across the whole EU. Now, second question -- second part of the question is, whether or not we will have any restriction or bottleneck in terms of our supply chain manufacturing capabilities to support such initiative. We think we'll be in good shape supporting that endeavor and support the change in that regulation. As I stated previously, with our Phase 2 factory, our second factory in Malaysia, we'll be able to build out up to 80 production lines in total. Of course, we are, on one hand, very excited about this manufacturing license for nicotine products. On the other hand, we are also very mindful for financial discipline and strategic use of our cash. So, on that front, we are -- as we continue our conversation with our potential customers and to support our own demand, we are also looking at whether certain product lines are better supported by more automated production process. So, from output point of view, we feel very confident with 80 lines. I mean, fully automated. We could pump out somewhere between 700 million pod devices in a year's time. So, the capacity certainly will be able to support significant growth in demand, whether it's from our own products or to support other brands. Nick?

Thank you. And our next question will come from the line of Pablo Zuanic with Zuanic & Associates LLC. Please go ahead.

Thank you and good morning, everyone here in the U.S. Just my question more in terms of cannabis. Can you talk about customer reactions in the U.S. for your new hardware devices, your new innovation. How much inroads are you making there? And then related to that, of course, we don't know what's going to happen with tariffs. It's on and off every day pretty much. But what alternatives do customers have really? They need the vaping hardware, so we'll just have to pass it on to pricing to their customers, I suppose, but if you can discuss that.

Thank you, Pablo. The first part of your question, specific to the Sprout product we talked about, that's just one of the recent innovations. The other product we launched a quarter before is what we call Volt platform. That's a V-O-L-T, Volt platform. We shortened it for VLT. So essentially, with the Volt platform, we are providing a pod system that can become a new standard for the vaping industry. As you recall a long time ago and even to some degree today, the traditional battery plus S10 card configuration, it was very, very much standard for the industry. But over time, consumer space change and brands want more attractive looking devices. So, that's why two quarters ago, we launched the Volt platform. It offers alternative to traditional individually designed pod system and the traditional old battery stick approach, making the product easier to carry, compact and good to look. And we launched that on industry basis. By that, I mean, so all the brands could share the same battery part of the pod system. They don't have to spend all the money to reprocure, resell such battery part when a consumer already has a battery from another brand or a generic brand. So, we are trying to build a new essentially platform for the industry that was taking shape. Now with this new Sprout product, this is really performance focused and the more, let's call it, specifically designed for cannabis oil, especially with highly corrosive proteins. So, this is setting a brand-new safety standard for the industry. And similar to the Volt platform I shared earlier, we would like to make this a new standard for the industry as well. So, that's why we think our approach of trying to offer the industry a new platform, whether from performance…

That's very helpful. Very good color. If I may, just one quick follow-up. So, I know it's hard to know about your competitors, right? And there are several, especially in the cannabis, vaping hardware space, of course, also nicotine. But do you think that you have more flexibility, because we have Malaysian facility than others of your competitors or they have also been diversifying the supply chain or it's just hard to know?

I think even though -- first of all, even though the U.S. and China reached a 90-day agreement on tariff now. On one hand, we still don't know what the picture looks like after 90 days. So, even if we follow the current situation here, that is 30% tariff on Chinese mixed goods in the next 30 days, it's still significant tariff. And on the other hand, as you are very aware, many of the Chinese factories have added some overseas manufacturing capabilities. I know our key competitor is in Indonesia, and some other competitors are also in Indonesia. Indonesia products, according to President Trump's tariff chart, are expected to be 35% to 45%. And 35% for Indonesia, 45% for Vietnam, that's where a couple of our competitors are trying to set up factories. So, among those key locations for our competitors' factories, our Malaysian setup is still advantageous, because Malaysia, among all those countries I mentioned, enjoy the lowest tariff rate so far. We strongly believe, it will continue to have that edge over the other countries in Asia. Pablo?

Understood. Thank you very much. That's very helpful. Thank you. Good color.

And that will conclude our question-and-answer session. I will now turn the call back over to Michael Wang for closing remarks.

And thank you all again for joining us for the opportunity to share our progress with you. We look forward to reporting back more, as we continue to make progress. So, I hope to talk to you all again, during our next quarterly call. Thank you.

This concludes today's call. Thank you all for joining. You may now disconnect.