KULR Technology Group Inc. Q1 2023 Earnings Call

Speaker 1: Welcome everybody to Cooler Technology Group first quarter 2023 earnings call set for today, Monday May 15th, 2023.

Speaker 1: With me on the call today is Michael Moe. He is the CEO of Cooler Technology Group, as well as Keith Cochran, President and COO, and Sean Cantor, Chief Financial Officer of Cooler Technology Group. Now as we have done on prior calls, we will have opening statements from management.

Speaker 1: followed by a Q&A section with some analysts that will be joining us later on the call. But before we begin this call, please allow me to read the following Safe Harbor statement regarding statements that are made on this call. This call does not constitute an offer to sell or a solicitation of offers to buy any securities available.

Speaker 1: information available to the company as of the date here of. Cooler's actual results 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 their Form 10-K filed with the Securities and Exchange Commission.

Speaker 1: as, anticipate, believe, could, estimate, expect, intend, may, should, and would or similar words.

Speaker 1: 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 management's best estimate of their future financial performance given…

Speaker 1: their current contracts, current backlog of opportunities, and conversations with new and existing customers about their products and services. Cooler assumes no obligation to update the information, including this call, whether as a result of new information,

Speaker 1: future events or otherwise. With that I would like to turn the call over to the CEO of Kuler Technology Group Michael Moe. Michael the call is yours.

Speaker 2: Thank you, Stort. Good afternoon. This is Michael Mell. Thank you everyone for joining us today.

Speaker 2: Kuro's mission is to build industry-leajing energy management platforms to accelerate the global transition to a sustainable electrification economy. Over the past two years, we've worked very hard to transform Kuro from a niche component supplier to NASA and Department of Defense.

Speaker 2: to a company with multiple platforms powering the electrification economy.

Speaker 2: Cooler is now Sonny Day Equal Stage Company. Our first quarter, 2023, revenue grew 778% over the same quarter in 2022 to reach approximately 1.8 million dollars.

Speaker 2: In 2023, we're focusing on revenue growth.

Speaker 2: We continue to broaden our customer base to include names beyond our initial space and military marquee clients. We're experiencing increasing customer demand across multiple vertical markets.

Speaker 2: and battery recycling is to reach 23 billion in 2030. We view our product in service platforms as mission critical across multiple sectors, giving that we sit at the intersection of sustainability, electrification, clean energy, and mobility. The increasing demand from consumer, commercial, industrial, and government markets, along with the growing regulatory requirements in these areas try further demand for tested and proven solutions.

Speaker 2: McKenzie estimates the global lithium-ion battery market to be approximately $400 billion by 2030. Kooner operates in the approximately 200 billion portion of the market, that include battery cells, battery packs, and recycling.

Speaker 2: Let him own battery safety is a critical bottleneck for the growth of this industry. We believe cooler provides a leading platform solution for this challenge.

Speaker 2: Energy storage is the largest market opportunity for cooler in 2023. We launched the cooler one platform at CES this past January . It's a modular, safe, intelligent and sustainable energy storage unit that can serve multiple applications like electric mobility and commercial energy storage.

Speaker 2: The Kuno One Design Solutions platform is our holistic methodology to solve very safety issues with panther technologies such as up there, where we're running with SHIELD.

Speaker 2: Safety case technology, an internal short circuit device, which cooler is the exclusive licensing partner for NASA.

Speaker 2: We're seeing significant customer demands for a cooler one design platform.

Speaker 2: We recently announced that we received a 1.13 million dollar contract from US Army to develop their next generation

Speaker 2: high energy battery pack utilizing our Kuno 1 Design Solutions platform.

Speaker 2: We're seeing customer engagement in electric vehicles, electric aviation, and energy storage, the fast charging infrastructure for the Cologne platform.

Speaker 2: Our customer engagement process starts with analysis and design. This is where our expert engineers evaluate the battery cells, understand its energy release, provide multi-physics modeling, which is a fancy way to say, using computer to simulate what happens in real life, and design the battery pack based on that analysis.

Speaker 2: This process can take anywhere between three months to a year historically, depending on the customer requirements.

Speaker 2: After analysis and design, we go to prototype and do a lot of testing. After testing in any necessary refinements, we help the customer go through the safety certification for the applications.

Speaker 2: Doing this process is after scratch so far, quarter-generates mostly service revenue.

Speaker 2: When the customer's product goes into volume production, cooler generates product sales revenue because the solutions are built into the customer's product model.

Speaker 2: When a customer's product, what a customer's production scales up in Bonnie, our revenue scales up with it as our solutions are building to the products that are specifically certified and designed.

Speaker 2: We anticipate that with increasing customer wins, our cooler one design solutions platform will be able to ensure the cycle time from design to manufacturer.

Speaker 2: Our goal is to be at one year or less. Like what we're doing with the US Army battery pack design, where we start the design in April of 2023 and get to manufacturing readiness by April 2024. We think we can get there accelerating both our customers' return on investment.

Speaker 2: in our product sales map. Next, Keith Kaplan, our President and Chief Operating Officer, will provide operational updates. Keith?

Speaker 1: Hello everyone, and thank you for attending our Q123 earnings call. I am pleased to report highlights from our operations.

Speaker 1: In Q1, her operations expanded to Webster in San Leon, Texas.

Speaker 1: Our Webster facility is the Center of Excellence for our Cullen-1 Battery Design Services. Our Webster facility is the Center of Excellence for our Cullen-1 Battery Design Services.

Speaker 1: This location will support internal and external battery back design, fractional thermal runaway, calorimetry, FTRC, which measures the total heat output of a cell and thermal runaway, and the fraction of the total heat that is released through a cell's casing.

Speaker 1: versus through its ejective material. This testing is crucial to understanding as Hill's thermal event properties. So proper protections are designed into a battery pack.

Speaker 1: And we also do bomb calorimetry, which measures the thermal and gas characteristics in a cell thermal runaway.

Speaker 1: The facility is conveniently located to our customers near Houston.

Speaker 1: is close to a major international airport. And being in the middle of the country allows for short trips from our US-based customers who want to visit our facility.

Speaker 1: Our Sanrio facility is established to execute destructive testing for internal and external lithium ion battery pack designs.

Speaker 1: Our testing facilities are modular and portable if needed.

Speaker 1: We will continue to expand our capacity as demand continues to increase. At present, we have significant backlog and expect further expansion of capacity in Q423. I am also excited to share, Kool-Aid has now deployed the only fully automated battery cell inspection and test system performing to NASA Work Instruction 37.

Speaker 1: This standard, which is the highest battery testing standard for NASA, is required for all man flight missions. The system went live in Q1 to deliver fully tested and traceable cells to NASA, Department of Defense, and EVA TOL, electrical, vertical takeoff and landing customers. Further, we have received and executed our first NASA Johnson Space Center order for this advanced testing. We believe this exacting standard may also be adopted for EVA TOLs acting as human taxis in the future.

Speaker 1: Again, we stand as the only fully automated inspection and testing option capable of meeting the standard. Cooler design the system as modular, such that we can be flexible with capacity and mix. The equipment can test both 1860 and 21700 cells.

Speaker 1: to adjust to mix and could easily be replicated as capacity demands increase.

Speaker 1: We have already done the hard work of establishing our manufacturing here in North America, limiting our future CAPEX requirements and providing us with capital planning flexibility.

Speaker 1: We should only have to invest in significant CAPEX as we hit capacity constraints on our testing and screening equipment due to increasing customer demand.

Speaker 1: Over the past two years, cooler focused on getting our brand and our capabilities recognized.

Speaker 1: We have successfully built significant brand recognition and are just in the early innings of monetizing that investment.

Speaker 1: Accordingly, we will reduce our spend in brand marketing and favor of targeted customer acquisition activities.

Speaker 1: As I mentioned, we are anticipating continuing to invest behind our customer demand. Lastly, the team continues to focus on operational excellence. As such, we recently conducted an external audit of our quality management system, QMS.

Speaker 1: In preparation for upcoming ISO 90001 annual audit.

Speaker 1: The results of the audit were outstanding with the auditors giving high-brace to our cooler team for elevating our Q&S system during a significant growth ramp for the company. There were zero non-conformances found during the audit.

Speaker 1: I highlight this as our focus on quality and delivery has been recognized by our customers as industry leading. Their recommendations to other companies have led to multiple recent wins or cooler.

Speaker 1: And that is the best marketing of all. The team and I are quite proud that our customers are singing our praises to their peers. As such, we have now expanded operations to accommodate that growth.

Speaker 1: I am pleased with the performance of all areas of operations in Q1, and feel we are very well prepared to deliver the rest of 23.

Speaker 1: Thank you. And now I will turn the call over to our CFO , Sean Cantor. Sean.

Speaker 1: And now I will turn the call over to our CFO , Sean Cantor. Sean, thank you, Tees.

Speaker 1: You can see the detailed financial results from our first quarter. I'll touch on some highlights. As Mike mentioned initially, first quarter, 2023 revenue was approximately $1.8 million, a 778% increase over the same quarter last year.

Speaker 1: Gross margin for the first quarter of 2023 was 37% versus 39% for the same quarter 2022.

Speaker 1: We ended the first quarter of 2023 with approximately $7.2 million in cash. Equipment plus equipment deposits was approximately $6.9 million versus approximately $2.7 million for the same quarter last year.

Speaker 1: Inventory plus inventory deposits.