Q3 2022 KULR Technology Group Inc Earnings Call

Place for the call and the call begins at 430 P. M. Eastern please hold on the line.

[music].

Welcome everyone to the cooler technology groups third quarter 2022 earnings call before I begin this call I would like to read the safe Harbor statement that covers this call. This call does not constitute an offer to sell or solicitation of offers to buy any securities.

Of any entity. This call may contain certain forward looking statements based on coolers current expectations forecasts and assumptions that involve risks and uncertainties.

Weird looking statements made on this call are based on information available to the company as of the date hereof coolers. Actual result may differ materially from those stated or implied in such forward looking statements due to risks and uncertainties associated with their business, which include the risk factors disclosed in there.

<unk> 10-K filed with the Securities and Exchange Commission on March 28, 2022.

Forward looking statements include statements regarding the company's expectations beliefs intentions or strategies regarding the future and can be identified by forward looking words, such as anticipate believe could estimate expect intend may should.

And wood or other similar words.

All forecasts are provided by management on this call are based on information available at this time and management expects that internal projections and expectations may change over time.

In addition, the forecasts are entirely on managements best estimate of cooler spot future financial performance.

Given their current contract current backlog of opportunities and conversations with new and existing customers about their products and services cooler assumes no obligation to update the information included on this call whether as a result of new information future events or otherwise I'm your host for this call.

Stuart Smith and with me on the call today are Michael No C. E O of cooler technology group, Keith Cochrane, President and CEO of cooler technology group and Simon Westbrook C. F O for cooler technology group later in the call the company will field questions from a panel.

All of analysts that are currently covering the company with that Michael I'd like to turn the call over to you.

Thank you Stuart this is Michael Moe.

I apologize for my voice today, I'm a bit under the weather.

I'm pleased to report that Q3 was an inflection point.

We reached record revenue of $1 three 9 billion.

We ended the quarter with $16 2 million.

Cash on the balance sheet.

We are well positioned to build a leading energy.

Management platform to accelerate the global transition to <unk>.

Favorable electrification economy.

As we have communicated to our shareholders as well to you.

We're making significant investments in our people and infrastructure.

Pierre and accelerate the growth.

We have doubled down manufacturing and automation infrastructure in North America, Inc.

Q3, with four points four 6 billion.

And your deposits compared to $2 1 million in Q3 of 2021.

We expect the trajectory of investments to moderate as we into our next call space to monetize all the investments we have made.

As we enter into the monetize.

Gross base of our business.

Gross margin profile will fluctuate in the range of 30% to 50% in the coming quarters.

And this is a function of us engage different customers with a wide range of products and services during the quarter.

Aerospace and Vod customer engagements will typically have higher <unk>.

Profile, whereas mass market commercialization products will drive more topline growth.

We expect gross margin to monetize.

To normalize in 2023.

As our customers in multiple market segments Interbody productions.

As we prepare for volume production of our customers for the remainder of 2022 and 2020 suite, we nearly tripled our inventory deposits in Q3, two 1.03 million compared to 390000, a year ago quarter.

691.

Q2 2022.

We expect inventory level by the end of Q4, two eight to increase from current levels.

The quarter sales and marketing team.

Expense is.

Customer engagement through direct sales and manufacturing reps.

Qunar has all but 300 customer engagements by the end of Q3 with some of the world's largest industrial and commercial companies as.

As we continue to expand our relationship with these major partners across the product portfolio.

Cross sell and upsell, our total solution package to these customers.

In September <unk> received approval from the department of transportation.

To increase the energy level in three special permits from $2, one kilowatt hour to one five.

Expanding usage.

<unk> products.

Quarter will utilize the permit upgrades to support our recently awarded project with one of the three largest outdoor writer less kicks.

In the world for the Steve Shipman storage lithium ion batteries.

Through our partnership with Bonnie So cooler has access to best in class lithium ion battery cells with high power and energy Bill.

Build battery modules with the highest safety rating.

As part of the strategic relationship.

Has access to over 700 megawatt hours of energy.

E battery capacity.

To further strengthen.

Our production of supply should localization initiatives within North America.

Securing multi cell.

Our supply.

Salaries of our ability to provide total solutions to high value customer applications with revenue potential that could exceed $350 million annually in five years.

We're very excited about the upcoming consumer electronics show CES in January 2023.

This is the largest electronics show in the world.

We plan to showcase three new products.

First is clarified.

As you know we recently completed.

The <unk> acquisition.

Quarter is expanding itself as a vertically integrated energy management company focused on sustainable energy solutions.

New product rollout is appended AI solution with learning algorithm.

Taser from sensors to reduce vibration for more energy efficiency.

We'll demo Boulevard with a new customer interface wireless sensors and run a new AI platform.

This new architecture will allow the robot to scale up from <unk> helicopter applications to mass market industrial motors and renewable energy applications such as wind.

We're also showcase cell chips in full operation on a new cloud computing platform with AI capabilities.

Well, we will unveil a new energy storage products.

Integrates all of these capabilities or terrestrial and space applications.

The highest safety rating and in depth monitoring capabilities.

Next keys Kauffman will show you more on the corner of IP acquisition and operational updates for the quarter Keith Please.

Thanks, Michael and thanks for those joining our call today, we appreciate you.

First off I'll share what I tell our team almost every day.

Great time to be a cooler.

Our team is highly energized as we head into the close of the year.

Phil the true sense of accomplishment coming from the team as we deliver into production multiple products. The team had been working on in the last two years.

One platform that we are particularly proud of is the deployment of our automated lithium ion 18, 650, and $21 700 battery cell testing capability, which meets the performance requirements of the very complex NASA work construction 37.

We will have the only fully automated test system capable of meeting where construction of 37 to deliver high volume testing of battery cells required for all manned missions by NASA and many other Dod branches.

The system will launch operation in December .

<unk> to begin shipping fully tested cells in January of 2023.

Another exciting platform recently acquired as cooler buyer as Michael had mentioned.

The incredible technology uses artificial intelligence with a self learning algorithm to provide precise calculations to balance any device that spends are rotates, thereby virtually eliminating vibrations.

<unk> was originally created to fix track imbalanced problems for military helicopters and we will continue to expand this service offering in the near future. However, I think many will ask how this relates to quarters mission of supporting renewable energy.

So let me explain that.

The reality is that vibration steel energy and performance by creating friction and impedance.

When your devices based on our battery technology, it's imperative that vibrations or eliminated to maximize battery life and increase performance.

<unk> recently balanced the motors and blades of our mission critical drone to demonstrate the benefits of the technology.

The results were a 23% increase in battery life.

And Olympia increase of 45%.

Hey Motors same blades, just cooler vibe optimized.

I would also like to share that in July .

<unk> completed ISO 9001 certification demonstrating our commitment to operating at the highest level of quality and performance by utilizing a certified quality management system.

The team did a tremendous job of preparation and delivered the certification with zero Nonconformance findings.

Lastly.

<unk> has been able to recruit and maintain high quality talent and support of our growth during a period of very tight labor markets and intent intense competition for that talent.

We are very thankful for the dedication of our team.

And as I said.

It's a great time to be a cooler and with that I'd like to turn it over to Simon Westbrook, where financial comments.

Thanks, Keith I'm going to provide some financial comments on the third quarter this year versus the third quarter last year.

Firstly from a revenue point of view, we reported revenue of $1 three $9 million in the current quarter compared to 601000 in the quarter ended September 32021. This was an increase of 132% as a result of increased shipments following the improvement in supply constraint issues last year.

Our selling general and admin expenses increased to $4 4 million in the third quarter of 2022 from $3 1 million in the corresponding quarter to prior year.

The 40% increase in SG&A expenses was due to additional marketing and advertising expenses consulting fees and non cash stock based compensation paid to employees and consultants and expansion and kicking out and you offered some production facilities.

R&D expenses increased 122% from 482000 in the third quarter of 2021 2.070 million in the third quarter of 2022.

A combination of head count and new and automated test and production equipment, continuing our investment and in house manufacturing and assembly facilities. There was begun in the last quarter of 2021.

Our loss from operations increased 56% from $3 1 million in the third quarter of 2000 $21 million to $5 million in the third quarter of 2022.

The $1 8 million increase in operating loss included increases in payroll travel advertising and marketing expenses professional fees related to the introduction of new accounting systems and research and development projects.

Our net loss increased by 80% from $3 1 million in the third quarter of 2021 to $5 6 million.

In the third quarter of 2022.

The net loss per share for the third quarter to 22 was five <unk> as compared to three for the comparable period last year.

Finally as related cost increased by $814000 largely due to a one time charge related to the $1 5 million financing and retirement of the remainder of the $5 million promissory note.

As a result, we now have no debt outstanding.

The EPS would have been a net loss of.

<unk> per share excluding this one time charge.

At September 30 of this year the company reported cash balance of $16 2 million.

Compared with $14 9 million at September 30 of last year.

This leaves us well positioned to expand operations support new business and consolidate our manufacturing operations in the U S to ensure greater control over logistics in the face of continuing worldwide uncertainties.

Now back to you.

Thank you Simon and that does conclude our opening statements by management, we're going to move on to the Q&A session. Once again, we're joined by several analysts who are currently covering the company, but one of them <unk> managing director Senior research analyst at Alliance Global partners.

<unk> is unable to connect with us at the moment. However, we did receive his questions in advance so he or she is the first question.

As the focus on higher energy density batteries increases do you expect to seek expanded permits for safe case.

Yes, I'll take that.

Yes.

As you know automotive is from industrial applications are making their batteries hi, Randy capacity.

So I mean, making them more modular.

So we're working on expanding the <unk> product line.

To accommodate higher energy capacity.

10 kilowatt hours.

Very good now moving on to a question regarding <unk> technologies, you recently announced the acquisition of Vibe check should we expect top line growth from this to show up in 2023.

Yes, it's Stuart I'll take that this.

As Keith Cochran absolutely.

We are in the final sign off of a long term agreement to support a large commercial aviation company with cooler and <unk> services.

You can look forward to that announcement once the documents are fully executed which should be sometime during this quarter. Additionally, we have many engagements underway to support funded projects and we're currently working to secure that business also during Q4.

Thank you Keith and the next question from Jake we've seen the drone industry start to mature and become more widely adopted and battery safety should be a primary focus here should we expect additional partnerships in this vertical over the near term.

Yes, I'll take that as well as Stuart and as I shared in my remarks, we're in the midst now of the full scale launch of cooler bags and the results have been nothing short of astounding to those that have witnessed the demos.

Accordingly, we are in conversations now defining service agreements with those potential customers. Additionally, we are in discussion to incorporate sell check Trs and provide battery pack design and architecture and the drone industry to dramatically increase the safety of <unk>.

Excellent now we're going to be joined by analysts were Litchfield Hills research that Theodore O'neill Theodore are you with us on the call yes.

Yes, I am thank you.

Go ahead with your question steel right you can hear me.

Yes, we can great can you give us an update on the planned rollout of your customers commercial drone production schedule or or or.

Or some sort of milestones over the next 12 months for that program.

Yes.

Neil.

We cant comment specifically on any specific customer strong production schedule.

But what we can say is that.

Energy storage product.

So it can be used for large commercial drums.

Fast charging high charge rates hydro charge rates.

With quarter by capabilities embedded into battery together with double check.

Kind of what Keith just talked about.

This will be integrated units.

And then we expect that to be the central power.

And the intelligence unit older vehicles.

Okay.

We expect to.

And will that in.

Yes, 2023, and see design wins.

In 2023 next 12 months.

So I understand you.

Your customer wants to protect what their plans are but is there is there any.

Possibly there'll be revenue out of this in the next 12 to 24 months can you even say that much.

Yes, there is.

Okay. Thanks very much.

Thank you alright.

Alright, Thank you Theodore and now we're going to move to an analyst from tablets brothers, we're joined by Howard Halpern Howard are you on the line.

Yes, I am I'm pinch hitting for John John is that.

The one asking the questions but he.

Helpful. Today.

He did leave me with Brian .

Brian question.

You've put a lot of work in this year, but.

Can you really flesh out what the key elements.

That you have put in place to drive.

Our significant revenue growth.

Next year and over the next five years to reach our goal of $350 million potentially in the next five years.

Yes, Howard Thanks for your question and I appreciate that.

I'll take this one Stuart.

Yes, there are four areas of products, we have a hard line of sight on that will drive our top line in early 2023 those.

Those areas are cooler SAP case.

Our Trs materials are automated lithium ion battery testing service and the use of our allocation of lithium ion cells from Aliso.

We are expecting further topline pickups from cooler buying as it ramps its customer base throughout the year.

We further have new product announcements coming here in Q1, which we're also very excited about.

I think that as the base platforms that we have in place today.

They are really foundational to the company and we will expect to see a pretty significant revenue growth in 2023.

Okay, Okay, Thanks, and keep up the great work guys.

Thanks, so much I appreciate it.

Well gentlemen that concludes our question and answer portion as well as our comments from management that wraps our call for the day I'm going to turn it over to our operator, now who will close out the call.

Thank you ladies and gentlemen, this does conclude today's conference call and webcast.

And you for your participation you may disconnect. Your lines at this time and have a wonderful day. Thank you once again.