Q4 2022 Toughbuilt Industries Inc Earnings Call
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Speaker 2: Greetings and welcome to the TUF Build Industries 4th Quarter 2022 earnings call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.
Speaker 2: It is now my pleasure to introduce your host, Marjorie Galston. Please go ahead.
Speaker 3: Good morning and thank you all for joining us today to discuss Tuffield's fourth quarter and full year 2022 financial and operating results. Again, my name is Martin Galafian and I am the Chief Financial Officer of Tuffield. Joining me on today's call is Michael Ponoltzian.
Speaker 3: President and Chief Executive Officer of Tough Builds. Michael will begin today's discussion by providing operational and financial highlights from the fourth quarter and full year.
Speaker 3: I will then review our financial performance for the same period.
Speaker 3: Michael will conclude the discussion with our growth plans for the upcoming fiscal year and beyond. Michael will conclude the discussion with our growth plans for the upcoming fiscal year
Speaker 3: 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 the changes, risks, and uncertainties described in the press release and in our U.S. security filings.
Speaker 3: In addition, during the course of the call, we may refer to non-GAAP 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.
Speaker 3: Investors are encouraged to review Tuftel's current report on Form 8K furnished with the SEC for Tuftel's reasons for including those non-GAAP financial measures in its earnings release and presentation.
Speaker 3: The reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures are contained in our earnings press release issued earlier today, unless otherwise noted therein.
Speaker 3: I will now turn the call to Michael.
Speaker 4: Thank you, Martin, and thank you all for joining us today.
Speaker 4: 2022 was a very strong year for ToughBuild, culminating in record revenue of 94.9 million and an approximate 36% year-over-year increase compared to 2021.
Speaker 4: Fourth quarter revenue came in at a record $29.6 million, representing a 20% increase compared to the same quarter in the prior year period.
Speaker 4: Revenue growth in the fourth quarter as well as for the full year in 2022 was driven by a combination of growing business within existing retail partners, onboarding new retail customers, and the introduction of new lines and continued strong demand for our existing products.
Speaker 4: Our 2022 results are testament to the importance of establishing a platform of strong teams in product development, sales, and distribution.
Speaker 4: This is demonstrated by our numerous product launches, including our all-new cutting tools such as reload utility knife, measuring, hand saw line, striking tools, long hand-up tools and landscaping tools, screwdriver line, rotary laser levels, workbench.
Speaker 4: totaling approximately 200 plus SKUs. This year proved to be a milestone expansion period for Tough
Speaker 4: We are excited to currently be servicing over 17,300 large and mid-sized stores and online portals worldwide.
Speaker 4: To help combat logistics related costs during the year, we successfully negotiated improved shipping rates, lowering the cost by roughly 70%.
Speaker 4: We also worked with our large retail partners to implement direct import ordering as we have discussed on previous earning calls, where possible.
Speaker 4: We've seen this activity significantly decrease our logistics costs in part by shifting several supply chain steps from top-fill to our retail partners.
Speaker 4: As a result of our strong product introduction momentum and our growing brand recognition around the world, we expect to see retail and online revenues continue to grow year over year in 2023.
Speaker 4: I will turn
Speaker 4: The call back to Martin to cover our financial results in greater details Martin
Speaker 3: Thank you Michael. Revenues for the three months ended December 31, 2022 increased over 20% to approximately 29.6 million compared to 24.7 million in the STEM period last year.
Speaker 3: Revenues for the 12 months ended December 31, 2022, increased 36% to approximately $94.9 million compared to $70 million in the prior period. The increase in sales for both periods was primarily due to wide acceptance of our products, recurring sales orders for metal goods.
Speaker 3: and soft cuts from our existing and new customers.
Speaker 3: and the introduction of new soft and electronic good products to our customers.
Speaker 3: Cost of goods sold for the three months ended December 31, 2022 were approximately $23.6 million compared to $19.4 million for the same period in 2021. Cost of goods sold for the 12 months ended December 31, 2022 were approximately $73.1 million.
Speaker 3: compared to $50.9 million for the
Speaker 3: $3.9 million for the year goal period.
Speaker 3: Cost of goods sold increased in 2022 over 2021 primarily due to increase in cost of steel and plastic polyester needed to manufacture metal goods and soft goods.
Speaker 3: an increase in labor costs in China, high inflation rates, as well as increased prices in tariffs and shipping rates.
Speaker 3: Selling, general and administrative expenses for the three months ended December 31, 2022 were approximately $23.6 million compared to $19.4 million for the same period last year.
Speaker 3: Selling, general and administrative expenses for 12 months and December 31, 2022 were approximately $58.9 million compared to $51.4 million for the 12 months and December 31, 2021. As JNA expenses increased in 2020 to –
Speaker 3: over 2021 primarily due to hiring additional employees and engaging additional independent contractors and consultants to grow the company.
Speaker 3: We expect our SG&A expenses will start to increase at a lesser rate as our business matures and we will see substantial operating leverage.
Speaker 3: Research and development costs for the three months ended December 31, 2022 were approximately $4.6 million compared to $3.4 million in 2021.
Speaker 3: Research and development costs for the year ended December 31, 2022, were approximately $15.6 million compared to $6.9 million in 2021. This increase was prominently due to costs incurred in developing new tools and software applications to run on the mobile device related to the construction industry.
Speaker 3: In the full year of 2022, we had a net loss of $39.7 million compared to $37.5 million in a year-ago period. The net loss is mainly attributable to building our team to meet the demand for current product lines and new product lines in design, as well as significant increase in cost of goods sold prices as a result of the pandemic.
Speaker 3: noted previously. As of December 31, 2022, cash position was $2.6 million. Management anticipates that our capital resources will improve and our products will gain even wider market recognition and acceptance resulting in its increased product sales.
Speaker 3: On November 17, 2022, we completed a private placement with aggregate growth proceeds of $7.5 million before deducting placement agent fees and other offering expenses. I will now turn the call back to Michael for his final remarks. Michael.
Speaker 4: Thank you, Martin. I would like to reiterate the tremendous market opportunities that exist at Tough Build and the infrastructure we have in place to capitalize on those opportunities.
Speaker 4: To this end, in the fourth quarter, we entered into four major retailers in Germany, which accounts for 35% share of global hand tools market in 2022, and also successfully launched Tough Build products into a major retailer week, which has 230 locations across the United Kingdom.
Speaker 4: Moreover, Two Station UK with over 550 stores nationwide and Two Station France demonstrated consistent and impressive sales.
Speaker 4: Lastly, we reached a comprehensive distribution agreement with SODIMAC, the largest home improvement and construction supplier in South America.
Speaker 4: In this agreement, stores in Peru and Colombia initially began with 15 SKUs in store and growing.
Speaker 4: The agreement has subsequently been expanded to encompass other countries in the region and brought 23 SKUs to the SODIMAC Online Marketplace as well.
Speaker 4: As demand for our products increase around the world we continue to expand our capabilities to meet this growing demand.
Speaker 4: As we look ahead, our future revenue growth opportunities include continuing to expand with existing retail partners, adding new retail partners internationally, and introduction of new product lines.
Speaker 4: I firmly believe that we can be a disrupter in the home improvement industry and are well positioned for 2023.
Speaker 4: In closing, I'd like to thank our shareholders and our team for helping grow ToughBuild into a high quality brand that customers can rely on.
Speaker 4: Our team remains dedicated to our mission even through a global pandemic and difficult economic conditions.
Speaker 4: I am looking forward to the upcoming year and remain very confident in our ability to execute on our growth, cost-saving and profitability plans. With that, I would like to turn it over to our operator.
Speaker 2: This concludes today's teleconference. Please remain disconnected at this time and thank you for your participation.