Armlogi Reports Financial Results for the First Quarter Ended September 30, 2024

Rhea-AI Summary

Armlogi reported Q1 FY2024 financial results with total revenue increasing 3.0% to $42.5 million. The transportation services segment decreased 4.2% to $28.5 million, while warehousing services grew 23.8% to $14.0 million. However, costs of sales increased 28.0% to $46.1 million, leading to a negative gross margin of -8.5%. The company reported a net loss of $4.6 million compared to a net income of $2.8 million in the prior year. Key operational highlights include becoming a Temu authorized warehouse provider, partnering with Massimo Group, leasing a new 60,000 sq. ft. warehouse, expanding trucking operations, and implementing sustainable practices through the LCFS program.

Positive

• Total revenue increased by 3.0% to $42.5 million
• Warehousing services segment grew 23.8% to $14.0 million
• Strategic partnership with Temu marketplace for e-commerce fulfillment
• New 60,000 sq. ft. warehouse facility added in City of Industry, CA
• Port of Savannah warehouse achieving over 70% occupancy

Negative

• Net loss of $4.6 million compared to $2.8 million profit last year
• Gross margin declined from 12.7% to -8.5%
• Transportation services revenue decreased 4.2% to $28.5 million
• Costs of sales increased 28.0% due to higher UPS charges
• General and administrative expenses increased 92% to $3.7 million

Insights

Financial Analyst

The Q1 results reveal significant operational challenges, with a concerning shift from profitability to loss. The $42.5M revenue showed minimal growth of 3%, while costs ballooned by 28% to $46.1M. Most alarming is the swing from a 12.7% gross profit margin to a -8.5% loss, primarily due to UPS surcharges and volume decreases.

The transportation segment's 4.2% decline signals market share challenges, though warehousing grew 23.8% through acquisitions. The net loss of $4.6M compared to last year's $2.8M profit indicates severe margin pressure and operational inefficiencies. While strategic partnerships with Temu and Massimo Group show promise, the immediate financial performance raises concerns about cost control and pricing power.

WALNUT, Calif., Nov. 15, 2024 (GLOBE NEWSWIRE) -- Armlogi Holding Corp. (“Armlogi” or the “Company”) (Nasdaq: BTOC), a U.S.-based warehousing and logistics service provider that offers a comprehensive package of supply-chain solutions related to warehouse management and order fulfillment, today reported financial results for the first quarter ended September 30, 2024.

Financial Highlights:

• Total revenue increased by $1.2 million, or 3.0%, to $42.5 million during the three months ended September 30, 2024, compared to $41.2 million for the same period in 2023.
  
  • Our transportation services segment reported revenue of $28.5 million, a decrease of 4.2% from $29.7 million for the same period in 2023. The decrease was driven by decreases in customer order volume.
    
  • Our warehousing services segment generated $14.0 million, a 23.8% increase from $11.3 million for the same period in 2023. This growth was driven by the additional warehouses acquired in the last fiscal quarter. This segment comprises inventory management and storage offerings.
    
  • Revenue from other services decreased by $0.2 million, or 92%. This segment is primarily comprised of customs brokerage services.
    
• Costs of sales were $46.1 million during the three months ended September 30, 2024, an increase of $10.1 million or 28.0%, compared with $36.0 million for the same period in 2023. Our costs of sales mainly represented the costs incurred for the use of third-party direct freight service carriers, such as FedEx and UPS, warehouse rental expenses, costs of labor, and trucking expenses. . The increase was driven by two main factors. First, there was a rise in freight expenses due to higher UPS shipping charges. Second, lease expenses, employee salary and benefits, and temporary labor costs increased as we expanded our warehouse and operations team to support growth.
  
• Gross profit (loss) margin decreased from 12.7% for the for the three months ended September 30, 2023 to (8.5)% for the same period in 2024, primarily due to the increase of surcharge by UPSand the decreases in customer order volume.
  
• General and administrative expenses increased by $1.8 million to $3.7 million, a 92% increase from the $1.9 million reported for the same period in 2023. This rise in expenses was attributed to several key factors. Office expenses increased by $0.6 million or 106%, primarily due to a $0.5 million increase in insurance costs, which was associated with the rapid expansion of our warehouse operations and growth in our transportation services. Additionally, repairs and maintenance expenses increased by $0.2 million or 109%, linked directly to the expansion of our transportation services. Moreover, professional fees increased by $0.3 million or 485%, largely driven by an increase in audit fees.
  
• Net income (loss) for the three months ended September 30, 2024 was $(4.6) million, compared with the net income of $2.8 million for the same period in 2023, representing a decrease of $7.4 million.
  

Operational Highlights

• In June, we became an authorized warehouse provider for sellers on the Temu marketplace. Armlogi will offer Temu sellers streamlined access to its warehousing facilities and tailored logistics services to provide fast order fulfillment and improved inventory management through this collaboration. This collaboration with a major e-commerce platform is expected to expand our capabilities to serve more e-commerce sellers.
  
• In June, we announced a strategic partnership with Massimo Group (Nasdaq: MAMO) to provide streamlined warehousing and logistics services for the assembly and distribution of vehicles, aiming to meet the rising market demand across key U.S. regions. This collaboration has resulted in the integration of Massimo's quality control standards into Armlogi's distribution processes, improving service reliability. Armlogi now manages its deliveries independently across regions. Then in July, Armlogi announced the leasing of a new 60,000 sq. ft. warehouse in City of Industry, CA, to support its expanding trucking operations and its partnership with Massimo Group. The facility will provide additional storage and streamline distribution processes.
  
• In July, Armlogi announced the expansion of its trucking department, doubling its capacity and extending services to key clients, including Amazon. The Company has enhanced its logistics services and increased its customer base, particularly in the e-sports logistics industry. Investments in staffing, training, and equipment aim to meet rising demand and improve service quality.
  
• In August, Armlogi announced its participation in the Low Carbon Fuel Standard (LCFS) program, incorporating electric forklifts across its California warehouse operations to reduce greenhouse gas emissions. This initiative aligns with the company's sustainability goals and qualifies Armlogi for monthly energy rebates.
  
• In August, Armlogi’s warehouse at the Port of Savannah became fully operational and has quickly become the busiest among the Company's warehouses. Since June 2024, the facility has handled over 800 container shipments and maintains over 70% occupancy.
  

Management Commentary

Aidy Chou, Chairman and Chief Executive Officer of Armlogi, commented, “Our first quarter posed several challenges, primarily driven by increased costs and fluctuating customer demand. Despite these hurdles, we continue to invest in strategic growth initiatives and infrastructure enhancements that position us well for the long term. Our recent partnerships and expansion efforts are already showing promising results in streamlining operations and broadening our service capabilities. We are committed to navigating the current challenges, focusing on operational excellence and strategic growth.”

About Armlogi Holding Corp.
Armlogi Holding Corp., based in Walnut, CA, is a fast-growing U.S.-based warehousing and logistics service provider that offers a comprehensive package of supply-chain solutions relating to warehouse management and order fulfillment. The Company caters to cross-border e-commerce merchants looking to establish overseas warehouses in the U.S. market. With ten warehouses covering over three million square feet, the Company offers comprehensive one-stop warehousing and logistics services. The Company’s warehouses are equipped with facilities and technology for handling and storing large and bulky items. For more information, please visit www.armlogi.com.

Forward-Looking Statements
This press release contains forward-looking statements. In addition, from time to time, we or our representatives may make forward-looking statements orally or in writing. We base these forward-looking statements on our expectations and projections about future events, which we derive from the information currently available to us. Such forward-looking statements relate to future events or our future performance, including: our financial performance and projections; our growth in revenue and earnings; and our business prospects and opportunities. You can identify forward-looking statements by those that are not historical in nature, particularly those that use terminology such as “may,” “should,” “expects,” “anticipates,” “contemplates,” “estimates,” “intends,” “believes,” “plans,” “projected,” “predicts,” “potential,” or “hopes” or the negative of these or similar terms. In evaluating these forward-looking statements, you should consider various factors, including: our ability to change the direction of the Company; our ability to keep pace with new technology and changing market needs; and the competitive environment of our business. These and other factors may cause our actual results to differ materially from any forward-looking statement. Forward-looking statements are only predictions. We are not obligated to publicly update or revise any forward-looking statement, whether as a result of uncertainties and assumptions. The forward-looking events discussed in this press release and other statements made from time to time by us or our representatives, may not occur, and actual events and results may differ materially and are subject to risks, uncertainties, and assumptions about us.

Company Contact:
info@armlogi.com

Investor Relations Contact:
Matthew Abenante, IRC
President
Strategic Investor Relations, LLC
Tel: 347-947-2093
Email: matthew@strategic-ir.com

*** tables follow ***

ARMLOGI HOLDING CORP. CONDENSED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2024 AND JUNE 30, 2024 (US$, except share data, or otherwise noted)
	September 30, 2024				June 30, 2024
	US$				US$
	Unaudited				Audited
Assets
Current assets
Cash		2,924,176			7,888,711
Accounts receivable and other receivable, net		25,177,485			25,465,044
Other current assets		1,875,381			1,624,611
Prepaid expenses		812,691			1,129,435
Loan receivables		861,554			1,877,131
Total current assets		31,651,287			37,984,932
Non-current assets
Restricted cash – non-current		2,061,673			2,061,673
Long-term loan receivables		3,921,243			2,908,636
Property and equipment, net		11,785,272			11,010,407
Intangible assets, net		83,880			92,708
Right-of-use assets – operating leases		106,899,045			111,955,448
Right-of-use assets – finance leases		270,762			309,496
Other non-current assets		817,641			711,556
Total assets		157,490,803			167,034,856
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Current liabilities
Accounts payable and accrued liabilities		5,574,620			7,502,339
Contract liabilities		774,711			276,463
Income taxes payable		-			57,589
Due to related parties		350,209			350,209
Accrued payroll liabilities		779,680			405,250
Operating lease liabilities – current		26,272,945			24,216,446
Finance lease liabilities – current		155,625			155,625
Total current liabilities		33,907,790			32,963,921
Non-current liabilities
Operating lease liabilities – non-current		88,695,370			93,126,092
Finance lease liabilities – non-current		133,852			169,683
Deferred income tax liabilities		162,957			1,536,455
Total liabilities		122,899,969			127,796,151
Commitments and contingencies
Stockholders’ equity
Common stock, US$0.00001 par value, 100,000,000 shares authorized, 41,634,000 issued and outstanding as of September 30, 2024 and June 30, 2024, respectively		416			416
Additional paid-in capital		15,468,864			15,468,864
Retained earnings		19,121,554			23,769,425
Total stockholders’ equity		34,590,834			39,238,705
Total liabilities and stockholders’ equity		157,490,803			167,034,856

ARMLOGI HOLDING CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 (US$, except share data, or otherwise noted)
	For The Three Months Ended September 30, 2024				For The Three Months Ended September 30, 2023
	US$				US$
	Unaudited				Unaudited
Revenue		42,481,896			41,245,845
Costs of sales		46,088,686			36,019,413
Gross profit (loss)		(3,606,790	)		5,226,432
Operating costs and expenses:
General and administrative		3,668,825			1,908,156
Total operating costs and expenses		3,668,825			1,908,156
Income (loss) from operations		(7,275,615	)		3,318,276
Other (income) expenses:
Other income, net		(1,205,665	)		(542,215	)
Finance costs		9,008			13,387
Total other (income) expenses		(1,196,657	)		(528,828	)
Income (loss) before provision for income taxes		(6,078,958	)		3,847,104
Current income tax expense (recovery)		(57,589	)		649,305
Deferred income tax expense (recovery)		(1,373,498	)		443,023
Total income tax expenses (recovery)		(1,431,087	)		1,092,328
Net income (loss)		(4,647,871	)		2,754,776
Total comprehensive income (loss)		(4,647,871	)		2,754,776
Basic & diluted net earnings per share		(0.11	)		0.07
Weighted average number of shares of common stock-basic		41,634,000			40,000,000
Weighted average number of shares of common stock-diluted		41,714,000			40,000,000

ARMLOGI HOLDING CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 (UNAUDITED) (US$, except share data, or otherwise noted)
	For The Three Months Ended September 30, 2024				For The Three Months Ended September 30, 2023
	US$				US$
	Unaudited				Unaudited
Cash Flows from Operating Activities:
Net income (loss)		(4,647,871	)		2,754,776
Adjustments for items not affecting cash:
Depreciation of property and equipment and right-of-use financial assets		617,166			433,366
Amortization		8,829			8,829
Non-cash operating leases expense		2,682,178			423,085
Current estimated credit loss		126,936			(335,336	)
Accretion of finance lease liabilities		9,008			13,387
Deferred income taxes		(1,373,498	)		443,022
Interest income		(33,736	)		—
Changes in operating assets and liabilities
Accounts receivable and other receivables		160,623			569,051
Other current assets		(250,770	)		(51,242	)
Other non-current assets		(106,085	)		—
Prepaid expenses		316,745			(98,833	)
Accounts payable & accrued liabilities		(1,927,718	)		(2,130,478	)
Contract liabilities		498,249			(8,966	)
Income tax payable		(57,589	)		649,306
Accrued payroll liabilities		374,429			391,453
Net cash (used in) provided from operating activities		(3,603,104	)		3,061,420
Cash Flows from Investing Activities:
Purchase of property and equipment		(1,353,297	)		(1,145,104	)
Loan disbursement		(1,000,000	)		(1,019,559	)
Proceeds from loan repayments		1,036,705			—
Net cash used in investing activities		(1,316,592	)		(2,164,663	)
Cash Flows from Financing Activities:
Net proceeds received from (repaid to) related parties		—			491,978
Proceeds (lend to) from related parties		—			511,353
Repayments of finance lease liabilities		(44,839	)		(54,938	)
Deferred issuance costs for initial public offering		—			(104,049	)
Capital contributions from stockholders		—			95,000
Net cash provided by (used in) financing activities		(44,839	)		939,344
Net increase (decrease) in cash and restricted cash		(4,964,535	)		1,836,101
Cash and restricted cash, beginning of year		9,950,384			6,558,099
Cash and restricted cash, end of year		4,985,849			8,394,200

The following table provides a reconciliation of cash and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same amounts shown in the Consolidated Statements of Cash Flows:

Cash		2,924,176			6,682,527
Restricted cash – non-current		2,061,673			1,711,673
Total cash and restricted cash shown in the Consolidated Balance Sheet		4,985,849			8,394,200
Supplemental Disclosure of Cash Flows Information:
Non-cash Transactions:
Right-of-use assets acquired in exchange for operating lease liabilities		—			37,607,178

FAQ

What was Armlogi's (BTOC) revenue growth in Q1 2024?

Armlogi's total revenue increased by 3.0% to $42.5 million in Q1 2024 compared to $41.2 million in the same period of 2023.

How did Armlogi's (BTOC) warehousing segment perform in Q1 2024?

Armlogi's warehousing services segment generated $14.0 million in Q1 2024, representing a 23.8% increase from $11.3 million in the same period of 2023.

What caused Armlogi's (BTOC) net loss in Q1 2024?

The net loss was primarily due to increased costs of sales from higher UPS shipping charges, increased lease expenses, and higher labor costs, combined with decreased customer order volume.

What new partnerships did Armlogi (BTOC) announce in Q1 2024?

Armlogi announced partnerships with Temu marketplace as an authorized warehouse provider and with Massimo Group for vehicle assembly and distribution services.