ISPR - NASDAQ

Hello, everyone, and welcome to today's conference call to discuss Ispire's Financial Results for the Fiscal Year 2024 Ended June 30, 2024. 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. We will be facilitating a question-and-answer session following the prepared remarks from the company. Joining us today are Mr. Michael Wang, the company's Co-CEO; and Mr. Jim McCormick, the company's CFO. First, Mr. Wang will brief you on the company's key highlights, and then Mr. McCormick will review the company's financial results. 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 the statements of historical facts 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 would now like to turn the call over to Mr. Michael Wang. Mr. Wang. Please go ahead.

Thank you, operator, and thank you all for joining us this morning. Fiscal year 2024 was a foundational year for Ispire. As we achieved strong results, with record-breaking revenue and sustainable margin expansion. We reported record revenue of $151.9 million, a 31.4% year-over-year growth, all of which was organic growth. This organic growth was primarily driven by an increase in sales in the United States, Europe and South Africa. This increase in revenue was accompanied by notable margin expansion. And we reported a gross margin of 19.6% an increase from 18.0% in the previous fiscal year, mainly driven by product mix and the sales leverage as well as the beginning effects of our Malaysian operations. Throughout the year, we also made significant advancements across the company that have positioned us for future margin expansion, improved profitability and increase the revenue generation. Those highlights, which I will go into in more detail shortly, include One, our Malaysian operation as we aim to drive down internal product costs; two, our investment in the point of use technology joint venture. Three, our intentional focus on cannabis multi-state operators for MSOs; and four, increased partnership in the global nicotine space. We have also adjusted our approach to credit management as we aim to improve our customer portfolio by making it more reliable as we limit our exposure to extended outstanding balances. As we head into the fiscal year 2025, we remain optimistic about our future growth and the momentum and believe we are well-positioned to capture further growth and margin upside with the new cannabis and nicotine projects, a stronger customer portfolio and continued expense discipline. Throughout the last fiscal year, we secured several significant strategic partnerships to expand our market presence and distribution channels. Most recently, with Acreage Holdings, Dank Pack, a confidential leading-edge e-cig brand and Hidden Hills Club all in 2024. In April, we secured a long-term agreement with Acreage Holdings, a multistate operator in the cannabis industry. Ispire will supply acreage with the company's Ispire vapor products and feeding machines as Acreage aims to streamline its vape production and enhance reliability across its retail facilities in the United States. Furthermore, we also secured an exclusive distribution agreement with the Dank Pack, South Africa's leading cannabis hardware supplier in May. This partnership marks Ispire's entry into the rapidly growing South Africa market or South African cannabis market. Under the deal, we will supply Dank Pack with a range of vapor products and accessories, including the Ispire ONE line and various Ispire signature products. This collaboration aligns with Ispire's global expansion strategy and the commitment to deliver high-quality vaping solutions. This partnership has the potential to revolutionize the South African cannabis market and elevate the industry standards. We also entered into an original design manufacturing relationship, commonly called ODM. Through our Ispire Science and Technology Limited subsidiary, this is with a leading global e-cig brand in June. Ispire will receive monthly purchase orders of 3 million units per month which are expected to be consistent over the next 12 months and add additional $100 million in revenue to our top line. In August, our subsidiary Ispire North America LLC, entered into a 30-year global licensing agreement with Hidden Hills Club marking our expansion into the global nicotine product market. Under this agreement, Ispire will manufacture distribute and commercialize Hidden Hill's branded nicotine product worldwide, starting with launches in the UAE and South Africa followed by the UK and the EU. This collaboration builds on our earlier partnership in the cannabis and hemp vaping sector and leverages Ispire's expertise in vaping technology and the global distribution network while capitalizing on Hidden Hill's strong brand reputation and presence. This strategic move positions us to capture a larger share of the rapidly growing e-vapor and cannabis baking markets worldwide. We continue to make significant progress in our joint venture with Berify and Chemular to create a next-generation point-of-use age verification technology for e-cigarettes that will prevent underaged access and improve user experience. This is a first of its kind of vape hardware innovation as we understand the safety and security that is needed for the industry and we are excited to share that we have received the fastest ever meeting request acceptance from the FDA with our first meeting scheduled for early November. We recently submitted our first PMTA application in 4 years for a disposable and product with 4 flavors: this is an important milestone for Ispire, as these signals are reentry into the U.S. end market. We intend to amend or resubmit this application in the coming months. Once we have finalized the gating technology solution with our joint venture Itech that is a joint venture with Berify and Chemular. Our team continues to focus on submitting additional PMTA applications for Pod-based end systems, which will include a gating technology in the coming month. We are doing this to ensure that our best-in-class e-cigarette technology can access additional nicotine markets and customers, such as US$80 billion -- U.S. nicotine market, ultimately driving worldwide demand for our technology and creating long-term value. Another key highlight during this fiscal year is the successful closing of our $12.3 million public offering in March. We are very encouraged by our achievement as our team was able to overcome a very volatile macro environment to successfully complete this transaction creating additional growth opportunities for Ispire. Gross proceeds from the offering founded as a previously mentioned joint venture with Berify and Chemular as well as helped establish and streamline operations in our Malaysian manufacturing facility. Since this opening in February 2024, our Malaysian facility continues to trend in alignment with our operational initiatives to achieve higher gross margins. From our state-of-the-art facility, we continue to ship products, generate revenue and see a tremendous impact on our gross margins. I can't stress the But this facility will be a significant advantage for Ispire going forward as we aim to capitalize on the international nicotine market and its considerable market size while streamlining our business and further driving down our product costs. Additionally, we strengthened our leadership team with the key appointments, including Jim McCormick as our Chief Financial Officer; John Patterson as our Senior Vice President of International Nicotine, and Dennis Lider as our Senior Vice President for Cannabis Product Sales. These strategic moves have positioned Ispire further for continued success and value creation for our shareholders as we move forward. Fiscal year 2024 was both a foundational year and a transformative year for Ispire, marked by record-breaking revenue from our organic growth across all markets and significant margin expansion. Our focus on innovation and market leadership drove the successful implementation of key strategic initiatives in nicotine and cannabis. We continue to forge new partnerships and strengthen existing relationships, further expanding our reach globally. By introducing our leading-edge technology to new markets in the U.S. and globally, we have exceeded our growth expectations. This year's achievements have truly raised the bar for our product opportunities. We are proud of our progress and remain committed to driving innovation and capitalizing on our expanding market potential. Looking ahead, we are well positioned to build on this momentum and continue our trajectory of growth and market leadership. With that, I will turn the call over to our CFO, Jim McCormick, who will review and comment on our financial results. Jim?

Thank you, Michael. I would like to take this opportunity to summarize our key financial results for the fiscal year 2024. In my comments, I will refer to the fiscal year 2024 as the year ended on June 30, 2024. All comparisons are to the prior year ended June 30, 2023, unless otherwise stated. As Michael mentioned, we achieved significant organic growth for the fiscal year 2024. Overall, our total revenue for the fiscal year increased to $151.9 million or by 31.4% compared to the same period last year. This was driven by the following performance across our key regions. European revenues of $65.3 million in fiscal year 2024 increased by $6.5 million or 11% over the previous fiscal year. This was primarily as a result of increased sales of open vaping systems in the region. In North America, fiscal year 2024 revenues of $63.1 million represented an increase of $21.5 million or 55% over fiscal year 2023. The year-over-year growth was driven by the expansion of our cannabis vaping hardware sales to existing customers as well as the expansion of our overall customer sales base for these products, primarily in the U.S. Asia Pacific revenues were $17.6 million, an increase of $2.7 million over fiscal year 2023. For the rest of the world, revenues were $6 million, an increase of $5.7 million year-over-year, primarily on increased vaping sales in South Africa related to our licensing arrangement with international singer-songwriter Burna Boy and the BrkFsT brand. During the 12-month period ended June 30, 2024, Ispire's gross profit increased to $29.8 million or by 43.3% year-over-year. At the same time, our gross margin grew to 19.6% in fiscal year 2024 compared to 18% in fiscal year 2023. Gross profit and gross margin improvement can be attributed to our overall revenue increase as well as an improved product mix, greater purchasing cost resulting from higher sales volume and the initial benefit of lower product costs being sourced from our Malaysian production facility. Total operating expenses for the fiscal year ended June 30, 2024, were $43.7 million as compared to $25.3 million for fiscal year 2023. This increase was primarily due to expenses required to support the expanded international business footprint. These expenses were reflected in higher payroll and contract wages, Sales and marketing expenses professional fees as well as increased stock-based compensation. As a result of these activities, our fiscal year 2024 net loss for the 12-month period ending June 30, 2024, was $14.8 million, as compared to a loss of $6 million in fiscal year 2023. Turning to the balance sheet and liquidity. As of the end of our fiscal year, that being June 30, 2024, and June 30, 2023, with cash balances of $35.1 million at the end of fiscal year 2024 compared to $40.1 million at the end of fiscal year 2023. For those same periods, we have working capital balances of $16.6 million and $29 million, respectively. Net cash used in operating activities was $18.3 million for the 12-month period ended June 30, 2024, compared to $8.5 million in fiscal year 2023. Net cash provided by investing activities was $3 million compared to $10.2 million used in investing activities in fiscal year 2020. In fiscal year 2024, net cash provided by financing activities was $10.1 million compared to $15.6 million used in financing activities in fiscal year 2023. With that, this concludes the review of Ispire's fiscal year 2024 financial results. I will now turn the call back over to Michael.

Thanks, Jim. Before we open the call to questions, I would like to expand on how our key strategies relate to our long-term financial thoughts. As we move forward into fiscal year 2025, we believe our strategic investments and the continued innovation position us for sustained future profitable growth. I would like to reiterate that our focus at Ispire remains on innovation. We strive to be a leader in the industry using our technology to help Berify what best-in-class products are and set a new standard for excellence. We are evaluating potential partnerships, growth opportunities and ways to streamline our supply chain so that they align with our overall mission on a consistent basis. We look forward to sharing future updates and progress as they develop. If you have any questions, please contact us through our e-mail at [email protected]. Otherwise operator, this completes our prepared remarks, and we are now open to questions. Please go ahead.

[Operator Instructions] Our first question comes from the line of Scott Fortune with ROTH Capital Partners.

First of all, I want to focus on margins and the recent improvement in the gross margins over the last 2 quarters here, once you brought on the in-house manufacturing in Malaysia, basically, can you unpack the gross margins by the categories in the fourth quarter tobacco versus cannabis? And how should we look at the cadence in fiscal year '25 as you ramp up more lines currently in Malaysia here? And just a little more color on gross margins and trajectory for each category. How much of the improvement -- you mentioned a little bit is around from savings in Malaysia, product mix and renegotiating those sources in China, just kind of impact gross margins a little bit, that would be great.

Okay. Scott, thank you for the question. As far as the gross margin by category, overall, I will just take the most recent quarter, Q4, as referenced. Cannabis and e-cig side are both -- we're both seeing increased gross margin. And in fact, for that quarter, both sectors saw over 20% gross margin. And the cannabis side saw higher in fact, over 25%. So for both e-cig and the cannabis Q4 was really a record quarter in gross margin. They're now looking ahead into this new fiscal year. Will the trend hold up? We strongly believe so. On 1 hand, gross margin for both segments will continue to expand. On the other hand, we strongly believe towards the end of this fiscal year, gross margin for both sectors will actually get real close. We, of course, are aiming high 20% for both -- on both sides. Scott, I don't -- does that answer your question?

Yes. No, it's helpful. Just remind us kind of the savings you're getting in Malaysia from that standpoint as you move more in-house products coming from Malaysia?

Yes. For Malaysia, there is a slight, I would say, we pivoting in terms of priority previously, we wanted to utilize Malaysia primarily for cannabis hardware production. However, things changed quite a bit in the last 4 months, especially after the June World Vape Expo in Dubai, we received the tremendous requests and demand from brands and distributors for us to produce e-cigarettes for worldwide markets from Malaysia. This is partially because worldwide, a lot of the players realize that there is going to be a geopolitical risk associated with factories in China. And given such high demand we internally have decided we are shifting Malaysia priority more in the direction for high-quality premium e-cigarette products. So Scott, I think that's one part of my answer to your question. But certainly, from a gross margin point of view, the goal is the same, to continue to hand more production to Malaysia, so that we can benefit from the higher gross margin, whether it's e-cigarette or cannabis hardware. Scott?

Thank you for the update. You have those great details there. Next question, can you provide kind of an update on the global vape sales as the tobacco sales, it looks like it ramped up 18% year-over-year. But the expansion of your brands, you have your own brands, you have third-party brands that you've added on distribution and adding on Hidden Hills here. But just kind of get a sense for the tobacco opportunity as you move into Africa, continue to expand into Europe and the Middle East from that standpoint. And additionally, are you currently producing that 3 million units with your new ODM partner, just kind of the ramp-up of that ODM partnership would be great.

I'll answer your second question first. On the ODM deal, we are in the month of July and August, we were increasing production capacity especially when this relationship was formed in June, we didn't have enough, let's just say, production tooling or molds, number of sets more available to immediately produce 3 million units -- but in the first 2 months of the new fiscal year, we rapidly increased that. So starting with the month of September, we have the 3 million a month capacity finally. So it will go forward that way. In fact, based on the demand towards the end of this calendar year, we may even need to further increase production capacity. So we are already standing where we are today, we are already where we upgrade our promise to the customers. We certainly are hoping that the products will be received well by consumers so that we could further increase beyond 3 million units a month rather quickly. So that's on that front. As far as the global nicotine overlook and strategy. On one hand, as we launched our global nicotine initiative, we started with the Burna Boy BrkFst brand. And their brand, certainly, just strategically, we decided to launch it in South Africa first followed by North African countries or markets and the Middle East. And then early next year, we'll expand into Europe and we are on track there. Of course, like any launch of a new brand in any market the initial momentum building phase is critical. So we select South Africa as a launching market for this product. So far, the reception has been tremendously positive. Just in South Africa alone, we expect demand for BrkFst branded products to ramp up from initial that's just estimate at about 1 million units a month to toward the end of this fiscal year, 2 million units sum up. So as we continue with the build-out in South Africa, we already established a signed supply agreement, a distribution agreement in the Middle East, Egypt and several North African countries. So that is proven to be very successful. We are mindful, Scott, to what brand is the best suited in what market. That's why Hidden Hills Club comes to the picture and complete -- in a way, completes our global roadmap very nicely. Hidden Hills is absolutely well received in the Middle East, in Europe and more importantly, in Latin America. So with that, it really gives us a very complementary brand in combination with BrkFst to give us just a global footprint. This global footprint is important to us also because as we know, tobacco, let's just say whether it's BAT or Imperial and so on or PMI, their attention often is not focused on some markets that we are attacking right now. So we do feel we have a strong advantage in this exercise where we can become one of the top players in those markets, taking advantage of the lack of focus from the big tobacco competitors. Scott, did I answer your question?

Yes. That's great. And then, one quick one, one last one, here around the balance sheet and priorities as you have meaning improved your gross margins as you mentioned that was your execution from last year, but can you provide your time line now to reach breakeven and generate cash flow or next quarters here from that standpoint? And then also address your accounts receivable, accounts payable and activities towards improving that side of the business, too.

Okay. I will briefly touch on the profitability and breakeven part. And then I will turn to Jim to talk about our AR matters. Yes. As far as the breakeven target, we are aiming, especially now with heavy investment into the again technology and the PMTA applications. As we all know, PMTA applications are expensive exercises and more importantly, investment into our global lighting initiatives. Our breakeven target is now moved to fiscal third quarter. So we are aiming to break even by the end of March 2025. However, just -- another data point I want to share with you is on a non-GAAP basis, I do want to share this piece of data because it's indicative for where we are and where we are headed. On a non-GAAP basis, even though for the quarter, for the June quarter, we reported about $3.4 million in net loss -- but on a non-GAAP basis, we are actually -- we were making $1.3 million in profit. The key factors there are really, as Jim mentioned earlier, stock option-based compensation expenses actually was significant. And some other like patent-related expenses or amortization and some other noncash provisions contributed to that. So this is important partially because from operating activities, we are actually on good track, solid track toward profitability. So the $1.3 million non-GAAP target truly gave us the confidence that we can get to GAAP-based profitability by the March quarter, 2035. So Jim, can you answer the AR related to questions from Scott.

Sure. So Scott, we look at the balance sheet and managing the balance sheet is obviously a very high priority of mine and Michael is in the whole company. We saw a significant increase in accounts receivable to $59.7 million from $24.5 million last year. Now that was largely the result of our expansion into the U.S. cannabis market and getting new customers on board and getting them into our ecosystem, if you will. Now that comes at a price because I think most people on this call will know the challenges faced by the U.S. cannabis industry with the banking issues, high levels of taxation, et cetera, et cetera. So it's a very cash-strapped industry at the moment and we see that reflected in our accounts receivable. So getting that market share came in a bit of a price in terms of collecting on those accounts not as quickly as we'd like in all cases, but our customers are doing their best, and we're staying on top with them to get that accounts receivable down. I will say, going forward, and I think it's in the release that we talk about refocusing our efforts in the U.S. cannabis market. With that increased scale comes the opportunity to service larger customers, the MSOs at the level that they need to be serviced, and we're confident we can do that. So we are looking at improving the overall quality of our receivable base going forward, so as to get that cash flow coming in quicker to the company. In terms of accounts payable, the increase there is in the related party line item. And that's really one hand-in-hand with what I just said about getting the expansion into the U.S. market. So we have favorable terms with our related party factory, and that will carry forward and be taken down as we collect on that AR going forward. Is that good for you, Scott?

By the way, Scott, I'll add 1 more element to our AR, I guess, in going forward. In addition to what Jim said about our focus on the larger customers, MSOs and so on, on the cannabis side. That's another reason we are more determined than ever to push forward with full force on the global nicotine side because payment terms on the nicotine side is just far more favorable for us. And it will certainly help with overall AR as a percentage of the total sales.

Our next question comes from the line of Bo Pei with US Tiger Securities.

Can management give us some sort of outlook or even guidance for fiscal year 2025, especially for the revenue growth for both cannabis and e-cigarette?

Bo, thank you for the question. This is the first time I will not be able to give you an answer on that topic. We decided given so many projects and opportunities that we are pursuing this fiscal year will be really hard to predict. It could grow a rate cut a swing from 30%, to 50%, to 100%, it's really hard to tell right now. We don't want to share any numbers because we -- honestly, we don't even know if it's going to swing the way to 100% or stay at 30%, 50% level for apologies for that.

Yes. Yes, that's totally understandable. Thanks for the clarification. But can you also maybe just briefly talk about the baggage opportunity you see, the revenue opportunities see in 2025 will that come from cannabis or e-cigarette or in terms of geographic distribution, where will the incremental demand coming from?

Yes. That I certainly can add some color, too. First of all, on the cannabis side, as Jim mentioned, I think we all are aware of the challenges facing the cannabis industry not only because of a -- but also because for the sometimes oversupply and the price war among the brands and retailers. So it's not the most desirable macro environment for anyone. Good for us is that we have a global nicotine strategy that we are executing. So we are probably going to see much higher growth on e-cigarette side from international markets in this fiscal year. I think as I mentioned, ODM alone is going to contribute significant revenue and that alone will likely double or past e-cigarette revenue by itself. On top of that, we have other branded business like BrkFst and Hidden Hills, and we will soon launch our other brand worldwide. So back to the simple answer to your question, a vast majority of our growth will come from global nicotine. And of course, we are hoping in the fiscal year 2026, meaning by this time next year, we are hoping to see -- start seeing some effect for our PMTA applications in the U.S. market. As we are -- when that comes, it will be absolutely monumental because with a point-of-use aging technology, we will be able to finally offer a variety of flavors to consumers and yet still protect miners from getting their hands on e-cigarette which is, of course, FDAs and consumers and the primarily concerned right now. So we are confident with our age-gating technology we will finally be able to supply a variety of flavor. I think that will really position Ispire well in the future years.

[Operator Instructions] Our next question comes from the line of Pablo

Mr. Wang, can you give more color in terms of the gating technology. For example, how unique is this -- would you be the first to market with this product roughly by when do you expect to have it in the market? If you can answer that first.

Yes. Pablo, thank you. Right now, out of the market, there are several proposed solutions to age gating -- but I will say that we do have a unique advantage with our solution for a variety of reasons. Number one, it's a blockchain-based technology. So that is not hackable, meaning, as you know, young people, teenagers if you have any software solution that they will figure out a way to hack it and break it. But because this is a blockchain-based solution it's very unique in that you cannot break -- even if you break it, you can only break 1 device. You cannot mask break it because each device has its own unique token. So that's a strong advantage. I think that's important to the parents important to the FDA as well. The other key advantage that we have over everybody else is we are working with already existing technology out there as our backbone solution, which is very different from our other solutions. Other solutions are all so-called web-based. It's a rather simple web-based you verify your age. However, it's hard to use, hard to manage. So it creates high friction for consumers and their experience. With our solution is very easy to use, it's app based, very easy to use. We work with trusted back-end technology partners like clear. This is an airport security system clear and with another platform like ID Me and so on and so forth. So bottom line is a frictionless process once your age is verified. So based on that, we feel very confident about this solution. And we presented the solution at a few conferences. And that's why, as I stated earlier, we received the answer from the FDA for a meeting within 3 weeks of requesting for this meeting, which is for anyone who knows how long it usually takes for FDA to respond to quest for meeting. This is unheard of. So we strongly believe this will be well received we are going to work with the FDA closely to move this technology forward. If everything goes well, to answer your second half referral question, we are hoping by the end of next calendar year. 2025 will be at a point for close to launching products in the U.S.

That's great. And then just following up on the --

Michael, can I add just 1 thing, Pablo, Jim McCormick here. I'd just add that this is a global product, while it's going through the FDA process. This product also has application around the world, especially Europe, where obviously, the used access is as much of an issue as it is here, and it has application not just in the e-cigarette but also in the cannabis hardware. So I just thought I'd add that.

Great point, Jim. Pablo. I didn't mention that. Jim is totally right. In fact, this technology we presented to some European regulators. They are absolutely excited about it. So from that point of view, it's highly likely we would use this technology in our products for the European market much sooner than for the U.S. market Jim, thank you.

And then just following up on the PMTA, you mentioned 4 flavors. Can you roughly talk about the time line there? I know it's hard to predict with the FDA. Are we talking most of our disposables? And if it gets approved, roughly what could be the sales contribution from those 4 flavors in the U.S. market for the PMTA.

Yes. Pablo, that's a great question -- as we all know, for typical consumer sell smokers, they would rather that e-cigarette having flavors or let's say, food flavors, mango flavor, for example, right? The reason today, the FDA approved products generally only contain tobacco flavor or in some cases, menthol flavor is because FDA is worried if you offer a flavor. And without age gating technology, kids and minors will get their hands on their devices. So that's their primary concern. And that's why the flavor is approved so far only tobacco and menthol. However, consumer demand for food flavored e-cigarette is absolutely out of this world. As you know, in the U.S. market, still a vast majority of the e-cigarette sold are not PMTA approved or essentially are illegal. Yes. So that's why it's important to have a technology that will enable flavored devices. This way, you can check the black market players out, right? So I don't want to put a number to it. By all measure, U.S. total, including black market, total e-cigarette retail sales is $80 billion a year. So if you break down that number to, let's say, wholesale revenue from brands to distributors is roughly $30 billion. So that is TAM available to us. You can just imagine if we are the first with age-gating technology that offer food flavored is to read how much potential there is. Certainly, it will be in the billions.

Right, right. And 1 very last one, and it's a bit of a broad question, but -- for example, you attended the next-generation nicotine delivery in June. What's new in general in terms of nicotine delivery? And I know it's a very broad question, but sometimes you look at vapes and it's about all-in-ones or it's about larger format -- but when you think about nicotine delivery, what's -- what are the big things that are coming down the pike if we're going to ask -- that's it.

Yes. In addition to age gating technology, that's important for consumer protection. Of course, the product safety is another key concern. That's why we are working on a new technology that will provide safer devices getting away from the traditional, let's say, ceramic based vaporizer technology. So we haven't publicly announced our technology yet, but it's a very safe technology, no heavy metal, no ceramic is a very clean technology that will offer to this market. So I think between age-gating and clean technology, that's what the market is looking for in the years to come.

Michael, can I add to that, please?

Yes.

Pablo, one of the other dramatic changes we've seen in nicotine delivery is the emergence of the pouch sector, which

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Wang for any final comments.

I just want to thank you all for joining us today. And I look forward to the next call, which is only about a month and half away for our first quarter 2025. Thanks again.