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Co-Chief Executive Officer — Michael Wang
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Michael Wang, co-chief executive officer of Ispire Technology Inc. Michael, you may begin.
Michael Wang: Thank you, operator, and thank you all for joining us. This quarter marked a turning point for Ispire Technology Inc. Our business has stabilized, our operating model is sharper and more disciplined, and we ended the quarter with $18 million in cash, up $468,000 sequentially. This sequential cash growth is one of the clearest signs of progress in the quarter. It demonstrates improving financial control and a more focused operating posture, and it reinforces our confidence in becoming cash-flow positive in the second half of calendar year 2026. The transition we set out to make is behind us.
Now we are executing against a phased growth roadmap with multiple catalysts, each tied to billion-dollar markets where we have clear competitive advantages. The first and most immediate of these is Malaysia. Our Malaysia manufacturing platform is live today, and we believe this is one of the most strategically important developments in the company's history. In addition, Malaysia provides us with an estimated 25% tariff advantage over China, giving us both economic and strategic leverage as we pursue opportunities in the $73 billion global vape market. This is both a manufacturing milestone and a structural advantage that we believe can support margin improvement, customer acquisition, and long-term market relevance.
Second, plans are underway to launch our vapor ODM initiative in July. This initiative will initially serve small and midsized brands, with larger brand opportunities targeted for 2027. We see this as another practical commercialization pathway that can convert our manufacturing, design, and regulatory capabilities into higher-value customer relationships. Beyond these near-term drivers, we continue to build long-duration optionality through differentiated technology. [inaudible] We believe our edge gating platform has the potential to help unlock the approximately $50 billion to $70 billion U.S. flavored vape market, a market that remains effectively inaccessible today under the current framework. In parallel, our Gmesh glass technology is drawing interest in a $24 billion-plus legal global market, including licensing discussions with major tobacco participants.
These are proprietary assets that could materially expand our strategic and financial opportunities beginning in 2027 and beyond. The accomplishments we achieved during the fiscal third quarter are clear. We strengthened liquidity, improved operating discipline, and advanced a roadmap with multiple high-value catalysts. We believe that combination gives Ispire Technology Inc. a stronger foundation for both profitability and long-term shareholder value creation as we move forward. I will now turn the call over to Jie Yu for a more detailed review of our financial results.
Jie Yu: Thank you, Michael. For the fiscal third quarter ended 03/31/2026, Ispire Technology Inc. reported revenue of $18.7 million compared with $26.2 million in 2025 and $20.3 million in the prior quarter. The modest sequential decline primarily reflected seasonal factory downtime associated with Chinese New Year, and represents the most resilient second-to-third quarter performance pattern in our history. Gross profit for the quarter was $2 million, and gross margin was 10.7%. Importantly, gross profit was impacted by approximately $2.2 million of one-time product returns from a legacy cannabis customer with whom we have been doing business. We view those returns as part of final cleanup associated with our strategic repositioning, not representative of the normalized earnings profile of the go-forward business.
In that sense, we view this quarter as one in which reported margin absorbed a legacy headwind while the underlying business mix continues to move in an improved direction. On the cost side, we continued to make meaningful progress. Total operating expenses, excluding credit loss, were $5.9 million, down 36% year over year from $9.3 million and down 3.7% sequentially from $6.1 million in December. This performance reflects the impact of sustained cost discipline and a more focused operating structure. It also reinforces our belief that profitability is increasingly a matter of near-term execution and scale. Credit loss in the quarter was $5.6 million, down roughly $500,000 year over year.
This improvement is another indication that the financial cleanup tied to legacy activity is moving in the right direction, and we are committed to continued discipline around receivables and working capital management. Net loss for the quarter was $9.5 million compared with $10.9 million in the year-ago period and $6.6 million in the prior quarter. While the quarter still reflects transition-related pressure, the broader trend is encouraging. We have materially reduced our cost base while positioning the company for higher-quality value streams and better operating leverage over time. We ended the quarter with $18 million in cash, an increase of approximately $468,000 sequentially. This sequential cash growth is a meaningful achievement in the context of an ongoing repositioning.
It strengthens our balance sheet, supports our near-term growth investments, and underpins our confidence in reaching cash-flow-positive performance in the second half of calendar year 2026. From a financial perspective, the foundation for improved profitability has been built. The company is leaner, more disciplined, and better aligned with high-value growth markets. I will now turn the call back to Michael Wang.
Michael Wang: Thank you. This quarter marks the beginning of a new phase for Ispire Technology Inc. The transition in our business reflects reduced exposure to low-quality revenue and is now about converting that reset into a stronger earnings model, a stronger cash profile, and a stronger strategic position in global nicotine and compliance technology markets. Our priorities are clear. First, we are focused on profitability and on a path to becoming cash-flow positive in the second half of calendar year 2026. We intend to build on the momentum we have established this quarter through operating discipline, working capital management, and the ramp of new revenue catalysts. Second, we are focused on winning from a position of strategic advantage.
Our licensed manufacturing presence in Malaysia gives us a highly differentiated foothold in a critical geography, with regulatory exclusivity and tariff advantages that we believe can translate into both commercial and financial benefits over time. Malaysia is a platform for expansion. And finally, we are building a company with multiple avenues for value creation: near-term scaled commercialization through vapor ODM, and longer-term upside through edge gating and Gmesh. Together, these initiatives create a diversified roadmap that we believe is unusual in our industry and compelling from an investor perspective. Thank you for your time and continued support. Operator, please open the line for questions.
Operator: Thank you. We will now begin the question-and-answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If your question has been addressed and you would like to withdraw it, please press star, then 2. We will now pause momentarily to assemble our roster. And today's first question comes from Nick Anderson with ROTH Capital Partners. Please proceed.
Nick Anderson: Good morning. Thanks for taking the questions, and congrats on the quarter. First for me, just on the vape news and the recent flavored approval, there was discussion around the digital lease software, which maybe was a reason the FDA viewed that application favorably. I guess two questions off that. Do you believe proximity-based restrictions will be the path the FDA takes? And if so, do you have the capability to incorporate that tech into your solution if you do not have it already? Thank you.
Michael Wang: Nick, thank you. On the first part of the question—actually, I will go straight to the second part. Yes, we do have that built into our solution, and from day one that was the key differentiation between our technology and other solutions out there. More importantly, our platform is now moving out of the old app model and more into a platform model. This again reinforces continuous authentication capabilities and, because it is a platform, we allow brands to customize and set their own performance parameters. We also want to make sure brands, in dealing with different regulations across the world, can set parameters differently country by country depending on regulations.
So the simple answer is yes: we have continuous authentication capability, and it is in our solution. The advantage is that many solutions out there, especially those developed years ago, tend to either have the device remain on after initial age verification—which is highly undesirable from a regulatory point of view—or they have periodic re-authentication, which creates gaps where potential misuse of the device could happen. That is why, from day one, our solution was continuous authentication, and that proves to be very important to regulators not only with the FDA but outside the U.S. as well. Nick, I hope I answered your question.
Nick Anderson: That is perfect and very encouraging. Second for me, just on partnerships: this PMTA announcement also validated gating positioning and getting flavors to market. I know this is maybe too early, but what have you seen with discussions with potential partners in terms of potentially accelerating off of this approval? What has changed in the last few days in terms of the clients you are talking to?
Michael Wang: You are right. In the last 48 to 72 hours, the ground was moving, so that is really encouraging to us. President Trump's pressure on the FDA obviously went a long way for the industry, and you needed an approval of the 4 additional SKUs for GLASS to send a strong signal to the industry. I think all the key players in the industry are familiar with the pros and cons of different solutions. Collectively, there is a shared consensus that our solution is the most advanced versus other technologies. With the news over the last couple of days, we have certainly accelerated existing conversations with brands.
In a couple of situations, we have even moved one step further, discussing using our technology in some of the existing PMTAs through a so-called supplemental PMTA to accelerate the approval of their flavored products. It is clear the industry recognizes that the floodgate is opening, and that edge gating is the only way to get a flavor approval. Lastly, with everybody understanding our solution is far ahead of competition, we are absolutely getting more engagement. I will put it this way: yesterday I worked 17 hours, much longer than my typical day of 12 hours. That says a lot about the effort we are putting into those conversations.
Nick Anderson: That is great to hear. If I could squeeze just one more in on the state-by-state structures: with regulators becoming more constructive around vapes, how do you anticipate states will respond? Several markets still have banned flavors; some have banned foreign imports. How do you see the state landscape changing as potentially more flavors come to market in the legal market? Thank you.
Michael Wang: I think from a flavor ban point of view, those 5 or 6 states are literally aligned with the FDA's flavor ban, so they are just reinforcing these bans accordingly. From that point of view, there is consistency. I certainly hope that with the FDA feeling comfortable with age-gating technology and starting to approve flavors, those states would align as well and support approved flavors. The general flavor ban in place right now is really trying to minimize the impact of the black market selling devices to underage users, and that was the real goal by those states. From that point of view, there is perfect alignment with the FDA.
I hope states will follow the FDA's lead in supporting approved flavors. Regarding other state-by-state situations, Texas, for example, is driving toward banning China-made vaping devices. That absolutely supports our strategy of producing our product in Malaysia, so I think that is a plus for us. Some other state-by-state restrictions may involve banning disposables. We all know disposables are not an environmentally friendly approach to vaping, so I think the industry is moving further into pod systems versus disposables. California, as we know, banned online sales to further protect consumers. I do not think that is going to change; that is the right policy because online sales are hard to regulate and verify.
Ultimately, the solution to protect underage people and to protect adult consumers from using risky, dangerous products is the FDA approving flavored devices with edge gating built in. I am happy for the industry knowing two devices were approved, and this is a new beginning for the industry. I am happy for consumers, and certainly this is a major win for regulators as well. Instead of doing nothing for flavored products, finally this is the right thing to do—using technology to solve the problem. Nick, that is my answer.
Nick Anderson: Great. That is it for me. Congrats, and I will pass it on.
Operator: This concludes the question-and-answer session. I would now like to turn the conference back over to Michael Wang for any closing remarks.
Michael Wang: Thank you, operator. Obviously, this quarter is a low quarter in terms of revenue for us, but it is not a surprise. Q3 has always been a low quarter due to the Chinese New Year shutdown of factories. Generally, from Q2 to Q3, we saw over a 30% drop in business. This time, it is only an 8% drop, which, as Jie indicated, is the lowest drop in our history. I believe, from both top-line and bottom-line points of view, Q3 was the low point. We feel very strongly, as Jie stated, our foundation is set solidly.
We have a lot of work to do to prove to investors that we are over the hump and are now on an upward trajectory. I look forward to sharing more performance and developments with investors in the coming month. Certainly, we are here to show what we can accomplish this current quarter and in September. I hope there will be a trend to [inaudible] some of the investors’ trust and confidence, and we will never look back again. Thanks again to everybody on today's call. This concludes it. Thank you.
Operator: The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.
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Ispire (ISPR) Q3 2026 Earnings Transcript was originally published by The Motley Fool