Executive Summary / Key Takeaways

• Armlogi Holding Corp. (NASDAQ:BTOC) is a rapidly expanding U.S.-based warehousing and logistics provider, specializing in one-stop supply-chain solutions for cross-border e-commerce merchants, particularly those selling bulky items from China into the U.S. market.
• Despite robust revenue growth of 14% to $190.40 million in fiscal year 2025, the company recorded a significant net loss of $15.30 million, a stark reversal from the $7.40 million net income in fiscal year 2024, primarily due to escalating operational costs.
• The company's gross profit margin plummeted from 10.80% in fiscal year 2024 to a gross loss margin of -1.60% in fiscal year 2025, driven by substantial increases in rental, freight, labor, and warehouse expenses.
• Strategic initiatives like the integration with TikTok Shop and the planned acquisition of Leopard Transnational Inc. aim to diversify the customer base and expand geographic footprint, offering potential avenues for future growth and improved operational leverage.
• Key risks include heavy reliance on PRC-based customers amidst U.S.-China trade tensions, intense competition from larger, more established logistics players, and the ongoing challenge of managing rising freight and labor costs.

The E-commerce Backbone Under Pressure

The global e-commerce boom has fundamentally reshaped consumer expectations, demanding faster, more reliable, and cost-effective logistics. This is particularly true for cross-border transactions, where merchants face intricate challenges in shipping goods across international borders, especially for bulky items prone to damage and delays during peak seasons. Armlogi Holding Corp. (BTOC) emerged to address this critical need, positioning itself as a fast-growing U.S.-based warehousing and logistics service provider offering comprehensive, one-stop supply-chain solutions. The company's core strategy revolves around establishing overseas warehouses in the U.S. to streamline delivery, reduce damage rates, and enhance the shopping experience for consumers.

Since its inception with the incorporation of Armstrong Logistic Inc. in April 2020, Armlogi has rapidly expanded its operational footprint. The company now operates ten warehouses across the U.S., spanning the West Coast, Midwest, and East Coast, with an aggregate gross floor area of approximately 3.91 million square feet. These facilities are specifically equipped with automated sorting systems, heavy-duty forklifts, pallets, and trays, making them particularly suitable for processing bulky items. This specialized infrastructure, combined with a commitment to ISO 9001 quality standards, has allowed Armlogi to achieve an impressive average of 99.64% inventory accuracy during the fiscal year ended June 30, 2025.

Armlogi's strategic evolution includes significant technological differentiation. The company developed its proprietary Armlogi Order Management System (OMS), built on the highly secure, reliable, and scalable Amazon Web Services (AWS) cloud computing infrastructure. This web-based platform is central to managing all incoming shipments, tracking their status, and providing real-time updates to customers. The OMS integrates with most e-commerce resource planning (ERP) systems used by its customers, facilitating seamless order processing from online platforms to warehouse fulfillment. This technological backbone enables Armlogi to reduce operating costs, increase efficiency, and minimize human error in complex logistics workflows. The company also holds software copyrights for its mobile applications, including Armlogi Trucking, Armlogi WMS, and Armlogi OMS, further solidifying its intellectual property in the logistics technology space.

Looking ahead, Armlogi plans to further invest in supply chain technologies, focusing on artificial intelligence, data analytics, and supply chain planning and optimization algorithms. These initiatives aim to develop smart systems for ocean freight tracking, automated sales forecasting, and real-time data analysis. The stated goals are to enhance the ability to provide smart supply chain solutions, offer valuable data insights to customers, and achieve tangible benefits such as improved inventory management, faster delivery times, reduced operational costs, increased supply chain transparency, and enhanced sustainability. For investors, this technological roadmap is critical, as it underpins Armlogi's competitive moat, drives operational efficiency, fosters customer stickiness, and is essential for its long-term growth strategy in a rapidly digitizing industry.

Competitive Landscape and Strategic Positioning

The U.S. warehousing and logistics industry is highly competitive and dynamic, with numerous players ranging from global giants to specialized regional providers. Armlogi primarily competes in a niche market, targeting cross-border e-commerce merchants, predominantly from the PRC, who seek to establish overseas warehouses in the U.S. This focus has allowed Armlogi to offer one-stop integrated supply chain solutions, differentiating itself through its quality services, 24/7 customer support, and the efficiency of its Armlogi OMS.

However, the competitive landscape includes formidable rivals such as United Parcel Service (UPS), FedEx Corporation (FDX), XPO Logistics (XPO), and C.H. Robinson Worldwide (CHRW). These larger competitors often possess longer operating histories, greater brand recognition, and significantly larger financial, technical, and marketing resources. For instance, while Armlogi's gross profit margin was -1.58% (TTM), UPS and FedEx reported gross profit margins of 19% and 22% respectively in their latest fiscal years, highlighting the scale and efficiency advantages of these incumbents. XPO Logistics and C.H. Robinson, with gross profit margins of 11% and 7% respectively, also demonstrate more robust profitability in their specialized segments.

Armlogi's strategic response to this competitive environment involves leveraging its agility and specialized network. Its focus on multi-modal services, including the recently launched international ocean freight, allows it to offer a comprehensive solution from overseas factory to end-consumer doorstep. This integrated approach can foster stronger customer loyalty through personalized services, potentially leading to recurring revenue and improved margins in its niche. The company's ability to consolidate small shipments also allows it to offer competitive transportation rates to its customers, despite relying on third-party carriers like FedEx and UPS.

Recent strategic moves underscore Armlogi's intent to strengthen its competitive position. On July 16, 2025, the company announced its integration as a warehouse provider for TikTok Shop merchants, allocating over 1.3 million square feet of operational capacity for TikTok-related fulfillment activities. This move diversifies its customer base and taps into the rapidly growing social commerce segment. Furthermore, on March 6, 2025, Armlogi entered a non-binding Letter of Intent to acquire Leopard Transnational Inc., a California-based logistics provider with approximately 360,000 square feet of U.S. warehouse space. This potential acquisition signals a clear strategy to expand its physical footprint and capabilities, enhancing its scale to better compete.

Financial Performance and Liquidity: A Growth Story with Profitability Challenges

Armlogi has demonstrated impressive top-line growth since its inception. Total revenue increased by 14% to $190.40 million for the fiscal year ended June 30, 2025, up from $167 million in fiscal year 2024. This growth was fueled by a 10.10% increase in transportation services revenue, driven by new warehouse locations and higher shipment volumes, and a 22.90% increase in warehousing services revenue, an integrated component of its one-stop solutions. The company's active customer base expanded significantly, from 105 in fiscal year 2024 to 505 in fiscal year 2025.

However, this rapid expansion has come at a substantial cost to profitability. The company reported a net loss of $15.30 million for the fiscal year ended June 30, 2025, a sharp decline from the net income of $7.40 million in the prior year. This dramatic shift is primarily attributable to a significant increase in the cost of services, which surged by 29.90% to $193.41 million in fiscal year 2025. The gross profit margin consequently inverted from a positive 10.80% in fiscal year 2024 to a gross loss margin of -1.60% in fiscal year 2025.

The primary drivers of this profitability erosion include:

• Rental Expenses: Increased by 25.90%, reflecting the acquisition of additional operating leases for new warehouses.
• Freight Expenses: Rose by 26.40%, largely due to changes in carrier economics. The gross profit margin on FedEx shipments declined from 23% in fiscal 2024 to a mere 7% in fiscal 2025, impacted by FedEx rate increases tied to tariffs and broader economic conditions. While management transitioned some volume to UPS, its current gross margin of 6% remains significantly below prior FedEx rates, continuing to pressure freight profitability.
• Labor Costs: Salary and benefits increased by 35.20%, and temporary labor expenses by 37.90%, driven by the need for incremental hiring for new warehouse facilities, particularly those fulfilling orders with lower profit margins.
• Warehouse Expenses: Grew by 66.40%, further contributing to the overall rise in operational costs.

General and administrative expenses also increased by 47.20% to $14.70 million in fiscal year 2025, due to higher truck insurance, general office expenses from business expansion, additional rented warehouses, and increased professional fees.

From a liquidity perspective, Armlogi's cash and cash equivalents and restricted cash increased to $13.60 million as of June 30, 2025, from $10 million in the prior year. Net cash provided by operating activities, however, decreased to $1.50 million in fiscal year 2025 from $3 million in fiscal year 2024, reflecting the net loss. The company believes its current cash and cash generated from operating and financing activities will be sufficient for at least the next 12 months.

This includes proceeds from convertible notes under a Standby Equity Purchase Agreement (SEPA) with YA II PN, Ltd., which provided up to $21 million, though a third tranche of $11 million was not disbursed due to unmet conditions. The company also has significant contractual obligations, including $171.10 million in operating lease payments and $5.82 million related to convertible notes as of June 30, 2025.

Outlook and Key Risks

Armlogi's outlook is characterized by continued strategic expansion and a focus on operational optimization to address current profitability challenges. The company plans to refine and optimize its international ocean freight services over the next two years, with an estimated cost of $3 million to $4 million. Furthermore, it is scheduled to expand its warehouse network by leasing additional space in California and Illinois by December 2024, with an estimated cost of $4 million to $5 million. These investments are crucial for scaling operations and enhancing service offerings.

Despite these growth initiatives, several significant risks could impact Armlogi's future performance. A primary concern is the company's heavy reliance on PRC-based customers, which accounted for approximately 84% of its revenue in fiscal year 2025 (down from 96% in fiscal year 2024). This concentration exposes Armlogi to substantial geopolitical risks, particularly the ongoing U.S.-China trade conflicts. The recent escalation of tariffs, with the Trump administration raising rates on Chinese imports to as high as 145% in early 2025 and China imposing retaliatory tariffs, creates significant uncertainty. While a temporary easing of tariffs was announced until November 10, 2025, tensions persist, potentially discouraging PRC e-commerce merchants from selling in the U.S. and adversely affecting demand for Armlogi's services.

Operational risks also loom large. Disruptions to international supply chain systems, such as port congestion or labor actions like the International Longshoremen’s Association strike in October 2024, can lead to increased transportation costs, shipment delays, and customer dissatisfaction. The company's dependence on third-party logistics providers like FedEx and UPS means it is vulnerable to their operational and pricing changes, as evidenced by the significant decline in FedEx gross profit margins. Furthermore, a material weakness in internal controls over financial reporting, identified as a lack of formal policies and procedures, presents a compliance risk that the company is actively working to remediate.

Conclusion

Armlogi Holding Corp. stands at a pivotal juncture. Its rapid expansion and specialized services in the U.S. cross-border e-commerce logistics market, particularly for bulky items, demonstrate a compelling growth trajectory. The company's proprietary Armlogi OMS and strategic investments in advanced supply chain technologies are foundational to its competitive differentiation and long-term potential. Recent integrations with platforms like TikTok Shop and planned acquisitions signal a proactive approach to diversifying its customer base and expanding its operational scale.

However, the significant profitability challenges highlighted by the fiscal year 2025 net loss and negative gross margin underscore the immediate need for effective cost management and operational efficiencies. The heavy reliance on PRC-based customers, coupled with persistent U.S.-China trade tensions and broader inflationary pressures, represents a substantial external risk. For investors, the core investment thesis hinges on Armlogi's ability to successfully execute its strategic initiatives, mitigate geopolitical and operational risks, and translate its technological leadership and growing market presence into sustainable profitability. The coming quarters will be crucial in demonstrating whether Armlogi can navigate these complexities and solidify its position as a profitable leader in its specialized logistics niche.