Q2 2021 Toughbuilt Industries Inc Earnings Call

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Greetings and welcome to the tough belt industries second quarter 2021 earnings Conference call. At this time, all participants are in a listen only mode.

No one should require operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to introduce your host Martin Goldstein Chief Financial Officer. Thank you you may begin.

Good morning, and thank you all for joining us on our quarterly call to discuss <unk> second quarter 2021 financial and operating results.

My name is Mark and golf in and I am the Chief financial officer of tough field.

Joining me on today's call is Michael <unk>, President and Chief Executive Officer of Duffield, Michael.

Michael we'll open our call with an overview of Tokyo's journey from inception to where we are today as well as provide operational and financial highlights from the second quarter.

I will then review our financial performance for the quarter.

Michael will conclude the discussion with our vision for the future.

Before turning the call over to Michael I would like to remind you that any forward looking statements made by management are covered under the U S. Private Securities Litigation Reform Act of 1995 and are subject to changes risks and uncertainties described in the press release and in our U S. Six.

<unk> filings.

In addition, during the course of the call. We may refer to non-GAAP final financial measures that are not prepared in accordance with accounting principles generally accepted in the United States.

And that may be different from non-GAAP financial measures used by other companies.

Investors are encouraged to review <unk> current report on form 8-K furnished with the SEC for tough builds reasons for including those non-GAAP financial measures in its earnings release and presentation.

A reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures are contained in our earnings press release issued earlier today.

Otherwise noted there and I'd now like to turn the call over to Michael Michael.

Thank you Martin and thank you all for joining us on our conference call to discuss the operational and financial results before I discuss the quarter I will provide a brief review of our history and where we are today.

We launched tough built in 2012 as a group of industrial designers and engineers that had identified and innovation and quality GAAP in the home improvement industry wildly.

Wilder advancements with the technology and design was being embraced by many other industries throughout the world professional builders remain stuck using tools with the same functionality that have existed for decades.

Gold then we should remains intact today was to usher in the next generation of advanced innovation and quality first home improvement supplies.

<unk> product line and one SKU at a time.

As part of our long term goal, we began building our brand tough built introducing products that put innovation quality durability and functionality above all else.

As a result of these efforts we have experienced incredible demand for our products and strong brand loyalty.

Currently it's all field products are sold in over 13000 stores globally with shelf placement and leading retailers in the U S, Canada and across Europe in.

In terms of revenue, we have gone from $1 million in 2013 to over 39 million by 2020.

We are seeing a growing portion of our revenue driven by e-commerce demand indicators from record Amazon sales in the first half of 2021.

Considering the tremendous growth we've experienced across our product lines, we've continued to expand and strengthen our company to support R&D sourcing manufacturing and to support the continued evolution of our pipeline of innovative products.

For context in the beginning of 2020, our worldwide head count was approximately 30 and as of June 32021, our head count totaled 121 strong.

These 2012, we have made significant progress in building <unk> business platform for the long term and lasting brand that end users can rely on.

Against that backdrop allow me to review, our operational and financial highlights for the quarter.

In the second quarter of 2021, we generated revenues of approximately $15.9 million, a 132% year over year increase compared to $6.8 million in the second quarter of 2020.

The increase in revenue was driven by demand from leading retailers across all our product lines.

During the second quarter alone, we expanded our footprint, adding just under 900, new storefronts, increasing our total store count to 13000.

In addition, we continue to introduce new skus within our existing product lines with fantastic feedback from our retail partners and customers alike.

Shortly after the second quarter ended we introduced a new product line one of three product lines, we expect to introduce in 2021.

Between one scraper utility knife is a highly versatile tool for all professionals and represents a significant innovation in the billion dollar utility knife market.

Already we've received extremely positive feedback from our marketing efforts with accelerating orders from retailers and customers.

We believe this globally patented line will be a significant contributor to tough built for years to come.

In the second quarter, we increased our market penetration in Europe by adding several new large customers.

As a result, we increase the international revenue from $2.5 million in the second quarter of 2020 to $4.3 million in the second quarter of 2021.

Additionally, we expanded our capabilities by hiring additional employees and consultants to support our engineering marketing and operational efforts.

I will now turn the call back to Martin to cover our financial results in greater detail Martin.

Thank you Michael revenue for the three months ended June 32021, or approximately $15.9 million compared to $6.8 million in the same period last year representing.

Representing a year over year increase of 132%. This significant increase was primarily the result of wide acceptance of our products in the tool industry by new customers combined with follow on sell orders of metal goods and soft goods from our existing customers.

Cost of goods sold for the three months ended June 32021, or approximately $12.5 million.

<unk> to $4.5 million for the same period in 2020.

Cost of goods sold increased in 2021 over 2020 by approximately $8 million, primarily due to industry wide supply chain disruptions, which have led to a historically high shipping costs as well as increased material costs and higher labor costs.

Cost of goods sold as a percentage of revenues in 2021 was 70, 885% as compared to cost of goods sold as a percentage of revenue in 2020 of 65, 2%.

Selling general and administrative expenses for three months ended June 32021, or approximately $9.2 million compared to a $4.1 million for the same period last year.

SG&A expenses increased in 2021 or 2020 by approximately $5.1 million, primarily due to the hiring of additional employees and engaging independent contractors and consultants to grow our existing business and advance our expansion efforts we X.

SG&A expense growth to decelerate as business matures and we develop economies of scale.

Research and development costs for the three months ended June 32021, or approximately $1.4 million compared to 42202020, we expect to maintain similar levels of R&D costs as the company continues to develop new tools.

And the second quarter of 2021, we had a net loss attributable to common stockholder.

Approximately seven 4 million or a loss of <unk> <unk> per diluted share.

Due to a net loss of approximately $2.5 million or a loss of 11 cents per diluted share in the second quarter of 2020.

As of June 32021.

The company's diluted weighted average common shares outstanding totaled $81.6 million.

On July 14th 2021, we completed a registered direct offering for net.

Approximately $36.3 million.

The funds from the registered direct offering are to be used for working capital purposes, including inventory builds or product launches marketing and operations.

As of June 32021, <unk> cash position was $20.2 million.

Based on the company's current cash balance coupled with anticipated cash flow from operating activities.

No plans to raise additional capital for the remainder of 2021.

The company continues to control as cash expenses as a percentage of expected revenue on an annual basis, and thus may use as cash balances in the short term to invest in revenue growth.

I will now turn the call back to Michael for his final remarks, Michael.

Thank you Martin as we look at the second half of 2021 and beyond our goal is to deliver next generation technology enabled equipment in gear for professional and DIY builders.

To reiterate we expect to launch two additional product lines by the end of 2021 with a pipeline of over 20 lines of products to be released over the course of next several years. These.

These products will incorporate technology that saves builders time and money throughout each step of a project.

While maintaining the quality first focus of topical products.

To support the success of our product launches, we will continue to strengthen the foundation of our business with a robust manufacturing and distribution network, our best in class marketing team and the industry's best designers.

I want to give a special thanks to our employees, who have relentlessly executed through the global pandemic without whom we could not have made it. This far. Thank you all for your hard work and dedication even in the hardest Stoke times.

I want to thank all of tough build shareholders for supporting US along this journey and I can't wait to show you all the exciting developments that we have in store.

Operator, if you would please conclude our call.

Ladies and gentlemen, this does conclude today's teleconference and webcast. We thank you for your participation and you may disconnect. Your lines at this time.

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