The market seemed unimpressed by iPower's (NASDAQ:IPW) recent Q3 2024 earnings call. Revenue up 15%, gross margins hit a record high, the company swung back to profitability - all solid, but nothing groundbreaking. Analysts were preoccupied with the anticipated rebound in orders from iPower's largest channel partner and the consistent growth of the SuperSuite supply chain business. However, hidden within the CFO's remarks is a sentence that could suggest a much bigger picture, one that seems to have gone unnoticed.

The sentence in question? **"Cash flow from operations was essentially neutral in fiscal Q3, largely driven by an increase in our direct import business with Amazon, which carries both higher operating margins but slightly longer payment terms."**

On the surface, this appears to be a straightforward explanation for a somewhat lackluster cash flow figure. But let's delve deeper. The key phrase here is "direct import business with Amazon." This implies a significant shift in iPower's relationship with the e-commerce giant. Instead of simply selling through Amazon's platform, iPower is now directly importing goods and likely leveraging Amazon's formidable logistics network.

Potential Impact of Direct Importing with Amazon

This subtle change could have enormous implications.

- **Deepening Partnership:** It signals a growing trust and stronger partnership between iPower and Amazon. Amazon is known for its strict selection criteria for its direct import program, favoring companies with a proven track record of quality, reliability, and scale. iPower's inclusion suggests they've met these demanding standards.

- **Enhanced Margins:** Direct importing allows iPower to bypass intermediaries, potentially leading to substantial cost savings and even higher gross margins. Although the CFO mentioned "slightly longer payment terms," the advantages of greater supply chain control and the potential for volume discounts likely outweigh this minor downside.

- **Global Reach:** This move could unlock massive growth for iPower. Direct importing with Amazon enables them to tap into a worldwide network of suppliers and reach a broader customer base. It opens up the possibility of selling iPower's products not just in the US, but potentially across the globe, leveraging Amazon's international reach.

Deciphering the Numbers

Let's examine the figures. The 15% revenue growth in Q3 was largely attributed to a resurgence in orders from iPower's largest channel partner. However, what if the direct import business with Amazon is already contributing a significant portion of that growth? Assuming that the channel partner's orders remained stable year-over-year, the remaining 15% growth could be entirely attributed to Amazon.

Moreover, the CFO highlighted that the direct import business carries "higher operating margins." This implies that the profitability contribution from Amazon could be even more substantial. Should this trend persist, iPower might be on the brink of a significant earnings acceleration.

Hypothetical Growth Scenario

Consider this: What if iPower's direct import business with Amazon is expanding at 50% or even 100% year-over-year? In that scenario, it wouldn't take long for this segment to become a primary driver of iPower's overall revenue and profitability. The market, fixated on the short-term fluctuations in channel partner orders, is completely overlooking this potential game-changer.

Naturally, this is just a hypothesis. We require more data to ascertain the true impact of the direct import business with Amazon. However, the clues are present, and they hint at a compelling story of potential explosive growth. Investors who are willing to connect the dots and look beyond the headlines could be handsomely rewarded.

"**Fun Fact:** iPower began as a supplier of hydroponic equipment, serving a niche market. Today, they have evolved into a diverse consumer products company, selling everything from gardening tools to home appliances, demonstrating their adaptability and evolution. This makes their quiet move into direct importing with Amazon even more intriguing, suggesting a bold vision for the future."