Q4 2023 KULR Technology Group Inc Earnings Call
Operator: You are in the right place for the KULR Technology Group full year 2023 earnings call set for today, Friday, April 12, 2024. The call begins at 4.30 p.m. Eastern. Please hold on the line.
You are in the right place for the cooler technology group full year 2023 earnings call step for the day Friday April 12, 2024. The call begins at 430 P. M. Eastern please hold on the line.
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Stuart Smith: Welcome, everyone, to the full year 2023 earnings call for KULR Technology Group Incorporated, a company traded on the New York Stock Exchange, the NYSE, under the ticker symbol KULR. I will be joined on the call today by the CEO of the company, that's Michael Mo, and the Chief Financial Officer of the company, Shawn Canter. The call will proceed as follows.
Welcome everyone to the full year 'twenty twenty-three earnings call for cooler technology group incorporated the companies traded on the New York Stock exchange the NYSE under the ticker symbol K U L or I will be joined on the call today by the CEO of the company, that's Michael Moe and the.
Chief Financial Officer of the company Sean cancer. The call will proceed as follows we will get opening statements from both members of the management team. After those opening statements have concluded we will welcome onto the call. Various analysts will also be asking their questions directly to the company at the conclusion.
Stuart Smith: We will get opening statements from both members of the management team. After those opening statements have concluded, we will welcome onto the call various analysts who will also be asking their questions directly to the company. At the conclusion of the Q&A portion of this call, we will then wrap up the call. With that said, before the call can begin, please listen to the following statement. This call does not constitute an offer to sell or a solicitation of offers to buy any securities of any entity.
<unk> of the Q&A portion of this call. We will then wrap up the call with that before the call can begin please listen to the following statements. 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.
Stuart Smith: This call may contain certain forward-looking statements based on KULR's expectations, forecasts, and assumptions that involve risks and uncertainties. Forward-looking statements made on this call are based on the information available to management as of the date hereof. The company'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 risk factors disclosed in their Form 10-K with the Securities Exchange Commission on March 28, 2023. Forward-looking statements include statements regarding their 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 would, or similar words.
Expectations forecasts and assumptions that involve risks and uncertainties forward looking statements made on this call are based on the information available to management as of the date hereof. The company's actual results may differ materially from those stated or implied in such forward looking statements due to risk.
And uncertainties associated with their business, which include risk factors disclosed in their Form 10-K with the Securities Exchange Commission on March 28th 20 twenty-three forward looking statements include statements regarding their expectations beliefs intentions or strategies regarding the few.
And can buy be identified by forward looking words, such as anticipate believe could estimate expect intend may should and would or similar words. All forecasts are provided by management on this call are based on information available at this.
Michael Mo: All forecasts 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 based on management's best estimate of their future financial performance given their current contract. Current backlog of opportunities and conversations with new and existing customers about their products and services. The company assumes no obligation to update the information included in this call, whether as a result of new information, future events, or otherwise. With that, I will now turn the call over to the CEO of the company, Michael Mo. Michael, the call is yours.
And management expects that internal projections and expectations may change over time. In addition, the forecasts are entirely on managements best estimate of their future financial performance given their current contracts current backlog of opportunities and conversations with new and existing customers about.
Their products and services the company assumes no obligation to update the information included on this call whether as a result of new information future events or otherwise with that I will now turn the call over to the CEO of the company Michael Moe Michael the call is yours.
Michael Mo: Thank you, Stuart. Thank you, everybody, for joining us today. 2023 was the most challenging, yet pivotal year for KULR. For most of 2023, we were working on paying down approximately $8 million of prepaid advanced convertible notes that we owe to YA. This outstanding debt really limited KULR's ability to access capital in a market that had already been the most difficult for small-cap companies in recent history.
Michael Mo: Thank you Stuart Thank you everybody for joining us today.
Michael Mo: 2023, what's the most challenging yet pivotal year for Qunar.
For most of the 20th 20 Street, we're working on paying down approximately $8 million.
Michael Mo: Prepay convertible note that we owe to Wyatt.
This outstanding debt really limited kudos ability to excess capital in a market that had already been the most difficult for small cap companies in recent history.
Michael Mo: The difficulties in accessing capital really limited our ability to grow our business as we had to reduce our workforce by 15% and work with our customers and partners closely to manage our operations. During 2023, we completed two equity financings for a total of approximately $3.5 million. We experienced significant shareholder value erosion during that process, and we're not interested in doing that again.
Michael Mo: The difficulties in accessing capital drilling limited our ability to grow our business as we have to reduce our workforce by 15%.
Michael Mo: Worked with our customers and partners closely to manage our operations.
Michael Mo: During 2023, we completed two equity financings for a total of approximately $3 5 million.
Michael Mo: We experienced significant shareholder value erosion during that process.
Michael Mo: Interest in doing that again.
Michael Mo: I'm happy to report that we have retired the entire prepaid advance convertible note on March 27th of this year. Despite these challenges, 2023 was a transformational year for KULR as we achieved record revenue growth and built a solid foundation to grow in 2024 and beyond. In 2023, total revenue increased 146% year over year to reach a record $9.8 million. The total number of customers increased from 36 to 53, and product sale revenue increased 161%. And the number of product sales customers grew from 33 to 39, engineering services revenue increased 117%, and the total number of engineering service customers grew from 14 to 17. In addition to the tremendous growth in our business, we have built an industry-leading technology platform for battery safety and thermal management and a world-class engineering team to execute our plan.
Michael Mo: I'm happy to report that we have retired the entire prepay them as comfortable notes on March 27 of this year.
Michael Mo: Despite these challenges 2023, what's the price formation all year for quarter as we achieved record revenue growth has built a solid foundation to grow in 2024 and beyond.
Michael Mo: 2023, total revenue increased 146% year over year to reach a record $98 million.
Michael Mo: Total number of customers increased from 36 to 53.
Michael Mo: Cross sell revenue increased 161% a number of product sales customers grew from 33 to 39.
<unk> engineering services revenue increased 117%.
Michael Mo: Total number of engineering service customers grew from 14 to 17.
Michael Mo: In addition to the tremendous growth in our business, we have built an industry, leading technology platform for batteries safety and thermal management.
Michael Mo: And our World class engineering team to execute our plan.
Michael Mo: I would like to share with you more about our KULR One platform and how it's serving some of the leading companies in the world. Generally speaking, every combination of battery application, storage, and operational environments, and driving requirements and standards are different. Further, there's variability in chemistry based on use and also on chemistry improvements over time. There will always be something new to address.
Michael Mo: I would like to share with you more about our cooler one platform and how it is serving some of the leading companies in the world.
Generally speaking every combination of battery application storage and operational environments and driving requirements and standards are different.
Michael Mo: There is variability in chemistry based on the use and also all the chemistry improvements overtime.
There will always be something new to address.
Michael Mo: Therefore, there's no one-size-fits-all solution, which necessitates taking a holistic approach to ensure the technical provider's ability to effectively and competitively support lithium ion battery development. It all starts with accessing high-quality battery cells from top-tier OEMs. Then we provide cell-level testing categorization.
Michael Mo: Therefore, there is no one size fit all solution, which necessitates taking a holistic approach to ensure that technical provider's ability to effectively and competitively support lithium ion battery developed.
Michael Mo: It all starts with exiting high quality battery cells from top tier Oems.
Michael Mo: And we provide sell level testing categorization.
Michael Mo: That's from the electrical level to the mechanical level, and also to the destructive test level for thermal runaway energy release. With the data from the cell level categorization testing, we can build computer models of the battery pack for simulation analysis, which gives us confidence in the battery pack's performance before it's ever built. Then we build a prototype battery pack for pack level and system level testing that range from electrical performance, thermal performance, and also safety rating. We've also got our own radiation-tolerant battery management system, BMS, the Intelligent Battery Monitoring System, to get more data when the battery is in a field of use. Last but not least is our SafeCase technology that keeps storage and transportation of batteries safe throughout their lifecycle of use.
Michael Mo: That's from electrical level to mechanical level and also to destructive test level for thermal runaway energy release.
Michael Mo: With the data from T cell level characterization testing, we can feel computer models of the battery pack for simulation analysis, which give us confidence or the battery test performance before it's ever built.
Michael Mo: That would go the prototype battery pack.
For PEC level system level testing that range from electrical performance thermal performance and also safety ratings.
Michael Mo: We've also got our old radiation tolerant battery management system, Pms intelligent battery monitoring system to get more data when the battery is a few of us.
Michael Mo: But not least is our safe case technology that keeps storage and transportation of batteries safe.
Lifecycle of usage too.
Michael Mo: To address this need for a holistic approach, KULR spent the last few years building a team and has developed a portfolio of products and services that can address all the affirmations. Some of KULR's key products include ISC, which is Internal Short Circuit Trigger Cells, for which KULR has an exclusive license from NASA and DOE. We have served over 100 customers over the years with this technology. Our patented Thermal Runaway Shield (TRS) product is used to prevent thermal runaway provocation.
Michael Mo: To address this need for holistic approach quota spend the last few years building a team.
Michael Mo: <unk> a portfolio of products and services that can address all of the aforementioned points.
Michael Mo: Some of the coolers key products include.
Michael Mo: IFC, which is internal short circuit trigger cells, which cooler has an exclusive license from NASA.
Michael Mo: We have served over 100 customers over the years with this technology.
Michael Mo: Our patented thermal runaway shield Trs product is used to prevent thermal runaway propagation.
Michael Mo: Our recent announcement of an over $1 million order from H55 shows how this technology is helping the pioneer and global leader in electric aviation to meet European Union Aviation Safety Agency battery safety requirements. For safety testing, KULR has onboarded a diverse array of tools used to categorize battery cell performance. Among them is the FTRC technology, which won NASA Inventions of the Year Award in 2023.
Michael Mo: Our recent announcements on over $1 million order from age 55 demonstrate how this technology is helping the pioneer and global leader Electric aviation to meet European Union Aviation Safety Agency battery safety requirements.
Michael Mo: For safety testing quota has upward a diverse array of tools used to categorize.
Michael Mo: Battery cell performance.
Michael Mo: Among them is the FTR see technology, which one NASA English of the year Award in 2023.
Michael Mo: We have performed FTRC testing for the world's largest automotive OEMs, leading private space exploration companies, and top eVTOL customers. We expect battery safety testing to be a multi-million-dollar business for us and an anchor of our product offering. KULR has invested heavily in quality and electrical testing capabilities and has fully automated NASA Work Instruction 37, which screens cells and is part of the cell qualification process for human space exploration. We have the only fully automated cell screening line in the industry to meet NASA Work Instruction 37 requirements.
Michael Mo: We have performed FERC testing for the world's largest automotive Oems, leading private space exploration companies and pop you Vito customers.
Michael Mo: We expect that battery safety testing to be a multimillion dollar business for us and an acre of our product offering.
Qunar has invested heavily in quality electrical testing capabilities. It has fully automated NASA working structure 37.
Michael Mo: Which screen cells and as part of the cell qualification process for human space exploration.
Michael Mo: We have the only 40 automated self screening in the industry to meet NASA work construction 37 requirements.
Michael Mo: In addition to NASA, we have served several other private space exploration companies that require these battery cells to be the standard to be part of the Artemis mission going to. KULR is an industry leader in safe storage and transportation with a safe case and safe sleep products that are the workforce of our Safe-X product. Collectively, these products, services, and solutions are referred to as KULR One Design Solutions, or K1DS. And they allow KULR to jump in with any customer, anytime, anywhere, through their battery development cycle. KULR leverages all components of the KULR design solutions to design house battery systems and also provide ground-up custom solutions for our customer base. Regarding in-house batteries, KULR focuses on using cell level categorization data to drive the designs of reference architectures that can be rapidly adopted to meet customers' needs. Key examples include the quote-unquote space, which is for space applications, Quota One Guardian, which is for military applications, and also Quota One Max, for modular energy storage applications.
Michael Mo: In addition to NASA, we have served several other private space exploration companies that required these battery cells to meet the standard to be part of the Artemis mission going to them.
Michael Mo: Quarter is an industry leader in safe storage and transportation with a safe case, and say sleep products that are the workforce or feedbacks.
Michael Mo: Collectively these products services and solutions are referred to as cooler designing solutions, Okay. One DFS.
Michael Mo: Qunar to jump in with any customer anytime anywhere do their battery development cycles.
Michael Mo: Cooler leverages all components of the corner design solutions to design House battery systems, and also provide ground up custom solutions for our customer base.
Michael Mo: Regarding in house batteries quota focus on using cell level characterization data to drive the designs of reference architectures that can be rapidly adopted to meet customers' needs.
Michael Mo: Key examples include a kilowatt space.
Michael Mo: Which is for the space application quota, one guardian, which is for military application and also a quarter when Max for modular energy storage applications.
Michael Mo: What sets KULR One battery design apart from the competition is not only the superior thermal performance and safety aspects of it, but it's the flexibility of the architecture that allows it to be quickly customized and still meet regulatory requirements across a wide spectrum of applications. Our end-to-end and one-stop shop solution is what customers are looking for. The Kuala Lumpur Space Architecture is focused on providing high-performance and energy-dense solutions that are designed with intent to satisfy NASA JSC 20793 requirements, which is the gold standard for safe batteries in space exploration.
Michael Mo: This quarter, one battery to set us apart from the competition is not only the superior thermal performance and safety aspect of it.
Michael Mo: The flexibility of the architecture.
Michael Mo: Allows us to be quickly customized is still meet regulatory requirements across a wide spectrum of applications.
Michael Mo: Our end to end at one stop shop solution is what the customers are looking for the Chordoma space architecture is focused on providing high performance and energy dense solutions are designed with the intent to satisfy NASA GSC to 0793 requirements, which is a gold standard for safe batteries, Inc.
Michael Mo: Basic exploration.
Michael Mo: The combination of the Kuala Lumpur space architecture with KULR's offerings available to our customers through Kuala Lumpur Design Solutions is the driving force for some of our key customer engagements, including NanoRack, which is part of Voyager Space, among many others. KULR is able to provide rapid time to market for fully qualified battery systems. Something that has been expressed as a much-needed capability by the customer base. While others may take three to four years to build such systems, the KULR Engineering team will take 18 months or less to deliver them to our customers. As the space economy is expected to reach over $1.8 trillion by 2035, we believe that the lithium-ion battery will play an important role as the primary energy source.
Michael Mo: The combination of the quota was based architecture with quarters offerings available to our customer two kilowatt because our solutions is the driving force for some of our key customer engagements, including nano rack, which is part of Voyager space.
Michael Mo: Many others.
Michael Mo: Quarters April to provide rapid time to market to 40 quantify battery systems.
Michael Mo: Something that has been expressed as a much needed capability by the customer base.
Michael Mo: While others May take three to four years to build such systems the quarter engineering team will take 18 months or less to deliver to our customers.
That's a space economy is expect to reach over one eight trillion by 2035.
Michael Mo: We played a lithium ion battery will be the important role as the primary energy source, we expect cooler space platform to capture meaningful market share in the coming years.
Michael Mo: We expect KULR One's space platform to capture meaningful market share in the coming years. The Kuno-1 Guardian architecture, like with the Kuno-1 Space, focuses on safety and performance. The primary differentiator here is to focus on military standards rather than NASA TSC standards.
Michael Mo: The corner with Guardian architecture.
Michael Mo: Like with the quota was space focus on safety and performance.
Michael Mo: I'm Mary differentiator here is to focus on military standards, rather than a NASA PSC.
Michael Mo: Under the KULR One Guardian umbrella, KULR is working on the next generation standard format 2590 battery to achieve energy levels never seen before in this form factor. Our development engagement with RVDEVCON is a perfect example of a quote-unquote guardian engagement. We started this project in Q2 2023 to deliver the next generation aviation battery for the Army with the latest silicon anode technology. The Army has increased the total contract value to over 1.8 million.
Under the cooler one guardian umbrella kudos working on the next generation scanner format 2590 battery dot cheap energy levels never seen before in this form factor.
Michael Mo: Our development engagement with army difficult is a perfect example of equivalent guarding engagement.
We started this project in Q2 of 2023, two delivered a next generation aviation battery for the army with the latest silicon anode technology.
Michael Mo: Army here says increase of total contract value to over $1 8 million.
Michael Mo: And we're scheduled to deliver our prototype battery in August of this year. This battery will be a game changer for the Army in terms of safety and energy capacity. A hyper between quarter one guardian and quarter one max is our UPS program with the Army as well. Under a multi-year contract, KULR has delivered a KULR-1 battery pack specifically for the Army's effort to modernize future command posts. This specialized pack combines high-performance 21700 power cells with state-of-the-art thermal management technology to enhance propagation resistance while minimizing size and weight overhead.
Michael Mo: Scheduled to deliver a prototype battery in August of this year.
Michael Mo: This battery will be a game changer for the army in terms of safety and energy capacity.
Michael Mo: A hybrid between quarter, one guardians equivalent Max is our <unk> program with the army as well.
Michael Mo: Under a multi year contract quarter has delivered a quarter one battery pack specifically on this effort to modernize future command posts.
Michael Mo: This specialized Pak combined high performance 21, 700 power ourselves with a state of art thermal management technology to enhance propagation resistance wide minimized size and weight overhead.
Michael Mo: This customization has resulted in an impressive 80% improvement in UPS runtime, providing a strategic edge in tactical command operations. The safe case design has been improved over the last year with the adoption of a robust thermal liner in the strap and buckles. KULR has demonstrated the performance of the recent design with live demonstrations with the San Diego Fire Department and Hazmat officials across the country and with the publication of test results to the public for a 2.5 kilowatt hour battery pack in full propagation with nearly 100 cells that propagated in an hour time frame. KULR also maintains a transparent offering of a testing result to step forward in 2023 by offering the entire testing and qualification data set to the U.S. Department of Transportation. The KULR team recognizes that no two batteries in thermal runaway events are the same.
Michael Mo: This customization has resulted in impressive 80% improvement.
Yes, rod pump, providing strategic edge tactical commenced operations.
Michael Mo: The third case design has been improved over the last year with adoption of robust more liner and a strap and buckle.
Michael Mo: Qunar has demonstrated the performance of our recent design win life demonstration with the San Diego Park apartment and hospital officials across the country.
Michael Mo: With the publication of his result to the public for a $2 five kilowatt hour battery pack and full propagation with nearly 100 cells that propagated in an hour timeframe.
Michael Mo: Kona also maintains a transparent offering of caisson result, and step forward in 2023, offering a tire testing and qualification datasets to the U S Department of transportation.
Michael Mo: The Colo team recognizes that no two batteries is thermal runaway events are the same and therefore, it's important to continue testing they showed a test results and lessons learned.
Michael Mo: Therefore, it's important to continue testing to ensure the test results and lessons learned. Customers are coming to KULR because the SafeCase has the highest energy capacity in the industry. Its Panda technology is the most effective in the industry and has been used on international space stations since 2019, and it's reusable, which makes it much more sustainable and cost-effective compared to our competitions. In addition to the battery recycling applications, we're finding new applications for safe case use for energy storage in battery and EV production.
Michael Mo: Customers are coming into a quarter because lets save case has the highest energy capacity in the industry.
Michael Mo: And the technology is the most effective in the industry and has been used on the international space station since 2019.
Michael Mo: And it's a reusable, which makes it much more sustainable and cost effective compared to our competition.
Michael Mo: In addition to the battery recycling applications, we're finding new applications for safe case used for energy storage and battery EV production.
Michael Mo: We're working with a leading US automaker focused on mitigating thermal runaway risk in EV battery modules during vehicle production. This project underscores KULR's commitment to safety and innovation in the rapidly growing electrical vehicle market. SafeCase is also being adopted by a leading e-veto customer for the production month, which showcased the versatility and efficacy of SafeCase, ensuring safe handling and transportation of batteries across sophisticated production facilities.
Michael Mo: We're working with a leading U S automaker focus on mitigating some will run a risk.
Michael Mo: Battery module doing vehicle production.
Michael Mo: This project underscores <unk> commitment to safety and innovation in the rapidly growing electrical vehicle market.
Michael Mo: Safe cases also being adopted by a leading <unk> customer for their production months with Schulke compressor facility and efficacy of <unk>.
Michael Mo: Save case, ensuring safe handling and transportation of battery across sophisticated production facilities.
Shawn Canter: We believe that KULR One Platform and SafeKey's product line are going to be the main growth driver for KULR going forward, to more efficiently facilitate our growth with established KULR Texas in our new facility in Webster, Texas, in February of this year. This facility is conveniently located 2.1 miles from NASA Johnson Space Center and is surrounded by a large number of KULR's existing and target customers. This 17,000 square foot facility is home to our battery R&D team, our battery testing service, and our battery pilot production. It's going to be our center of excellence to show all the capabilities of the KULR One design solutions. Next, Shawn Canter will provide financial updates.
Michael Mo: We believe that cooler one platform is safe keeps product line are going to be the main growth driver for quarter going forward.
Michael Mo: To more efficiently facilitate our growth with established cooler Texas.
Facility in Webster, Texas in February of this year.
Michael Mo: This facility is convenient located 2.1 miles from NASA Johnson space Center and are surrounded by large number of cooling listing and target customers.
This 17000 square foot facility is home to our battery R&D team, our battery testing service and our battery pilot production.
Michael Mo: It's going to be our standard of excellence to show all the capabilities of the cooler one design solutions.
Speaker Change: Next chunk catcher will provide financial updates.
Speaker Change: Sure.
Shawn Canter: Thanks, Mike. You can see the financial results for our full year 2023 in our 10K, which is now online. I'll touch on some highlights.
Chunk Catcher: Thanks, Mike.
Chunk Catcher: You can see the financial results from our full year 2023, and our 10-K, which is now online.
Stuart Smith: 2023 was another record revenue year for KULR. KULR extended its growth trend, growing revenue at about 100% compound annual growth rate for the last two years. Additionally, KULR extended its trailing 12-month revenue growth record once again. KULR generated revenue of approximately $9.8 million versus $4 million in 2022, an increase of 146%. Product revenue increased 161%, and service revenue was up 117% year over year. Gross margin for 2023 was 37% versus 59% in 2022. This reflects the increase in product sales and a larger portion of the revenue mix that management anticipates will scale revenue going forward. Revenue-generating customers in 2023 numbered 53 versus 36 in 2022, a 47% increase. Revenue per customer in 2023 was approximately $185,000 versus approximately $111,000 in 2022, a 67% increase. KULR consumed less cash from operating and investing activities in 2023 than in 2022. Net cash used in operating activities decreased 31% year over year. Net cash used in operating and investing activities decreased 41% year-over-year.
Chunk Catcher: I'll touch on some highlights.
Chunk Catcher: 2023 was another record revenue year for cooler cool.
Chunk Catcher: Cooler extended its growth trend growing revenue at about 100% compound annual growth rate for the last two years. Additionally.
Chunk Catcher: Additionally, cooler extended its trailing 12 month revenue growth record once again.
Chunk Catcher: Cooler generated revenue of approximately $9 8 million versus $4 million in 2022, an increase of 146%.
Chunk Catcher: Product revenue increased 161% and service revenue was up 117% year over year.
Chunk Catcher: Gross margin for 2023 was 37% versus 59% in 2022.
Chunk Catcher: This reflects the increase in product sales and larger portion of revenue mix that management anticipates will scale revenue going forward.
Chunk Catcher: Revenue generating customers in 2023 number 53 versus 36 in 2022% to 47% increase.
Revenue per customer in 2023 was approximately $185000 versus approximately 111000 in 2022% to 67% increase.
Cooler consumed less cash from operating and investing activities in 2023, and then in 2022.
Chunk Catcher: Net cash used in operating activities decreased 31% year over year.
Chunk Catcher: Net cash used in operating and investing activities decreased 41% year over year.
Stuart Smith: With that, back to you, Stuart. All right. Thank you, Shawn. And now we will begin the Q&A portion of this earnings call. First, we have a call or questions from Jake Sekelsky. He is the Managing Director and Senior Research Analyst at Alliance Global Partners. And I'm going to be asking questions for him this time because he was not able to make it today.
Chunk Catcher: With that back to you Stuart.
Chunk Catcher: Yeah.
Alright, Thank you Sean and now we will begin the Q&A portion of this earnings call first we have a call or a question from Jake the koski as the managing director and senior research Analyst at Alliance Global partners and I'm going to be asking these questions for him. This time, he was not able to make.
Shawn Canter: So the first question is, what inventory management strategies are you looking at as safe case sales ramp on the back of the EVA toll contract announcement? Thanks, Stuart. It's Shawn.
Speaker Change: Today, So the first question.
<unk> is what inventory management strategies are you looking at as safe case sales ramp on the back of the EBIT toll contract announcements.
Speaker Change: Thanks, Stuart, it's Sean I'll take that one.
Shawn Canter: I'll take that one. Our contract manufacturing partners hold buffer raw materials inventories and have the capacity to support our demand on short notice. We'll hold minimal finished goods inventory to support small orders and have our supply chain ready to quickly fill large orders as they come in. I think this will put us in a good position to support customers while maintaining our focus on improving our cash flow. Thanks. Okay, very good. This next question is a two part question. Do the recent awarded permits from the Department of Transportation for the safe transportation of EOL and DDR batteries have a specific timeframe that they are active for? Also, can you touch on some areas the new permit opens the door to? story Yeah, I think that this is Michael Mo. With the SafeCase special permit, they're good for three years.
Speaker Change: Our contract manufacturing partners.
Speaker Change: Buffer raw materials inventory and have capacity to support our demand on short notice.
Sean: We'll hold minimal finished goods inventory to support small orders and how our supply chain ready to quickly fill large orders as they come on.
Sean: I think this will put us in a good position for supporting customers, while maintaining our focus on.
Sean: Improving our cash flow.
Sean: Thanks.
Speaker Change: Very good and this next question is a two part question do the recent award permits from the Department of transportation for the Safe transportation of E O L and D. D. Our batteries have a specific time frame that they are active four also can you touch on some areas the new Permian opens the door to.
So yes, I think that this is Michael.
Speaker Change: Other safe K special permit for three years.
Michael Mo: And the new permit really gives our OEM customers and also logistic partners more flexibility on how many smartphones, tablets, laptops, and power tools they can fit into each SafeCase and SafeSleep is really for business purposes. So we're working with top logistics shipping companies and e-commerce logistics companies to use these solutions for our OEM customers. It turns out that these logistics partners themselves have a lot of batteries for internal use, storage, and shipment.
Michael: And the new permit really gives our OEM customers and also logistic partners more flexibility on how many smartphones tablets laptops and power tools that can fit into each save case and thanks Leif.
Speaker Change: It's really for business purposes.
Speaker Change: We're working with publishers to shipping companies E Commerce logistic companies to.
UC solutions for the OEM.
Customers. It turns out that these logistic partners themselves had lot of batteries for internal use storage and shipment. So as we explore more with finding new applications.
Michael Mo: So as we explore more, we're finding new applications. Kind of like what we talked about in the prepared remarks, how we work with automotive OEMs, and e-veto customers. The more we get into their operation, the more applications we find.
Speaker Change: Like what we talked about in the prepared remarks, how we work with automotive Oems you Vito customers the more we get into their operation the more applications, we find and now we're taking these application requirements and refine our solutions. So they can serve this entire industry entered new markets with the case in <unk>.
Michael Mo: And now we're taking these application requirements and refining our solutions so they can serve these entire industries, these entire new markets with the SafeCase and SafeX technology. So we're super excited about these new application opportunities and that we expect them to be good revenue drivers going forward for us. Thank you, Michael. All right, now, we're going to be joined by Theodore O'Neill. He is the Principal of Equity Research at Litchfield Hills Research. Theodore, you now have the call.
Speaker Change: Technology solar.
Speaker Change: We're super excited about these new application opportunities and we expect them to be accrued revenue drivers going forward for us.
Speaker Change: Thank you Michael Alright, now we're going to be joined by Theodore O'neill is the principle of equity research at Litchfield Hills Research Theodore you now have the call. Please proceed with your questions.
Theodore O'Neill: Please proceed with your questions. Thank you very much and congratulations on a solid quarter. I have two questions for you.
Theodore O'Neill: Thanks, very much and congratulations on a solid quarter.
Theodore O'Neill: Okay.
Theodore O'Neill: Thank you Steve.
Theodore O'Neill: I have two questions for you My first question is.
Theodore O'Neill: My first question is... In the last three months, KULR has announced projects or contracts with leading global space innovators NanoRacks, a leading automaker, the Army, Lockheed, and H55, and you received special permits from the DOT. Can you prioritize for us, if possible, the timeline for these to turn into recurring revenue and how big those markets might be? Yeah, so thank you, Theo.
Theodore O'Neill: The last three months coolers announced projects or contracts with.
Speaker Change: A leading global space innovator and interacts leading automaker the army Lockheed at age 55, and you receive special permits from the D. O T can you prioritize for us if possible the timeline for these to turn into recurring revenue and how big those markets might be.
Speaker Change: Yes sure.
Michael Mo: We actually talked quite a bit about these customers in my prepared remarks and like how they kind of tie into our customer or our product roadmap. We're really excited about these engagements. As you can see, they're in different markets. They're not correlated markets, and so that's really our diversification strategy on a customer base to reduce our risk. The service contract, so to answer your question, we always start with service contract revenue. As you can see, our service contract revenue grew 117% year over year.
Speaker Change: We actually talked quite a bit about these customers.
My prepared remarks in the cloud.
Speaker Change: Into our customer or our product roadmap and really excited about these engagements.
As you can see they are in different markets. They are not correlated markets.
Speaker Change: So thats really our diversification strategy on our customer base and reduce our risk.
Speaker Change: The service contract so to answer your question. So we always start with service contract revenue.
Speaker Change: As you can see our service contract revenue start grew 170% year over year.
Michael Mo: That's really an indication of what can lead to future product revenue growth for us. The H55 engagement, for example, we started the contract services revenue about three years ago, and now you can see the ramp up in volume for over a million dollars worth of orders. The Army DEFCON contract, we started 18 months ago, and now we're delivering the prototype battery. And the NanoRacks, the prototype battery is delivered within nine months.
Speaker Change: That's really indication of what can lead to future product revenue growth for us.
Speaker Change: The <unk> 55.
Speaker Change: Engagement for example, we start the contract services revenue about three years ago now you can see the ramp up in volume.
Speaker Change: For over a million.
Speaker Change: Dollars' worth of order the army desktop contract.
18 months ago, and now we are delivering to the prototype battery and the net of Rex.
Speaker Change: <unk>.
Speaker Change: Prototype battery is deliver within nine months.
Michael Mo: So, as you can see, we're shortening the design cycle for our customers. We're getting them faster time to market so they can win. And we expect that trend to continue. And each customer, frankly, has different life cycles and product ramp sets, you know, product ramp cycles. But the faster time to market that we enable for them is why they choose KULR.
Speaker Change: As you can see we're shortly.
Speaker Change: The design cycle for our customers.
Speaker Change: We're getting them faster time to market. So they can win.
Speaker Change: We expect that trend to continue and each customer frankly has different.
Speaker Change: Life cycles.
Speaker Change:
Speaker Change: Grand theft.
Speaker Change: Prop product ramp cycles, but the faster time to market that we need to put them.
Speaker Change: He is widely truth cooler.
Michael Mo: Okay, that's helpful. My other question is that you've opened an online marketplace. Which customers is this aimed at? And who would be buying online versus going directly to you and trying to negotiate?
Speaker Change: Okay. That's helpful.
Speaker Change: My other question is that you've opened an online marketplace, which customers as this aimed at and it wouldn't be buying online versus going directly to you and try to negotiate sorry.
Michael Mo: Yeah. Yeah, well, thanks for keeping it real up to date, because I think our online store just opened up a couple of days ago. It did, yeah. It is for both.
Speaker Change: Kind of contract yes.
Speaker Change: Yeah, well, thanks for keeping a real up to date, because I think all of our cost structure has opened up a couple of days ago.
Speaker Change: Yes. It is for both beef yeah. Thank you. It is for both for <unk> and <unk> customers, we're getting a lot of inquiries from Bart departments Hazmat teams are dangerous goods teams companies as well as consumers directly.
Michael Mo: Thank you. It is for both B2B and B2C customers. We're getting a lot of interest from fire departments, hazmat teams, dangerous goods teams, companies, as well as consumers directly inquiring about the safe case. So we established the online store. We believe it's a good way to directly interface with our customers and can serve them in a scalable way.
Speaker Change: Hearing about the safety.
Speaker Change: We established.
Speaker Change: The online store, we believe it is.
Speaker Change: Good way to directly interface with our customers and can serve them in a scalable way.
Michael Mo: And in addition, we're also working with online and offline distributors who are focused on hazmat safety, and the dangerous goods industry. So stay tuned for more business partnership announcements in the future on additional distribution channels for us. Okay, thanks very much.
Speaker Change: And in addition, we also working with online and offline distributors.
Speaker Change: Our focus on safety.
Safety dangerous goods industry, so stay tuned for more business partnership announcements in the future.
Speaker Change: Additional distribution channels for us.
Speaker Change: Thanks very much.
Michael Frederick Legg: Thank you, too. All right, thank you, Theo. And now we'll be joined by Michael Legge, Sr. He is the Managing Director of Benchmark in Emerging Growth Research.
Speaker Change: Thank you Tim.
Speaker Change: Alright, Thank you and now we will be joined by Michael laid senior he is the managing director at benchmark in emerging growth research Michael The call is now yours. Please provide us with your questions.
Michael Frederick Legg: Michael, the call is now yours. Please provide us with your questions. Thanks. Michael, Shawn, great job getting the debt off the balance sheet. I know that had to be a large part of your focus at the end of 23 and the beginning of 24.
Thanks, Michael Sean Great job getting him he got off the balance sheet I know there is a large part of your focus at the end of 'twenty three 'twenty four.
Michael Mo: I want to try to understand how much of that focus, now that you have that off the balance sheet, you can put back to strategic growth, getting more out the door, and obviously, the revenues in the fourth quarter were down sequentially from the previous quarter, to get products out the door. I don't want to get into the revenue run now and how you see that going forward. Yeah. Yeah, Michael. Thank you. Yeah, I'll take that.
Michael: Want to try to understand how much of that focus now that you have that off the balance sheet, you can put back to strategic growth getting more out the door.
Michael: Obviously, the revenues in the fourth quarter were down sequentially.
Michael: From the previous quarter was any of that impacted by the cash.
Michael: Balance sheet and your ability to get product out the door.
Speaker Change: I don't want to get into the revenue run rate, where we're at now and how you see that going forward. So let's just start there. Please.
Speaker Change: Yes, Michael Thank you.
Michael: Yes, I'll take that.
Michael Mo: So, no, I mean, the outstanding debt that we had throughout 2023, also the first part of 2024, which we just got, you know, completely paid off and retired, was very, very costly for the management to solve. In my prepared remark, I talked about how that really choked off access to capital, and that really, you know, forced us to work very closely with our customers and partners on our operations and cash flow. I would say that that had an impact on our performance leading to the second part of 2023. And we had to, you know, cut our workforce. We had to put certain programs on hold to focus on the right programs to serve. You know, I mean, every customer is a good customer, but some customers are a little bit more urgent. So we have to prioritize, if you will. So, yeah, no, it had a real impact on not just management time, you know, timeframe, the resources, the mindshare, but also operations.
Michael: So no it does.
Michael: The outstanding debt that we had throughout 2023 also a first part of 'twenty 'twenty four which we just got.
Michael: Completely paid off and retired.
Michael: Very very consuming.
Michael: For the management.
Michael:
Michael: To solve that in my prepared remarks, I talked about how that really choked up access to capital.
Michael: That really.
Michael: Forced us to work very closely with our customers and partners on our operations and cash flow.
Michael: Lets say thats.
Michael: That had impact.
Michael: <unk>.
Michael: Performance.
To the second part of 2023.
And though we had to.
Michael: Cut workforce.
Michael: We had to put certain programs on hold.
Michael: To focus on the right programs to serve.
Michael: I mean every customer is a good customer, but some customers.
Michael: But the more urgent so we have to prioritize if you will so.
Michael: So yes, no ahead has had a real impact on.
Michael: Not just the management time timeframe.
Michael: The resources.
Michael: The mind share, but also operations.
Michael Mo: But we're certainly glad that that's out of the way, and Sean and I and the entire team can really focus on the business. I'm super proud of the team for executing on the technology side, on the infrastructure side, and on the operations side and getting, you know, huge growth in customer engagements, huge growth in revenue per customer. And I think we're just setting up the stage for very strong future growth. And when you look at all these new contracts you're bringing on, what type of visibility do you have into those for when, you know, deliveries will be, and how much lead time on that do you usually have? I would say that the engineering service contracts are hopefully getting shorter and shorter. You know, like I said, the NanoRacks delivery was, you know, nine months. So some of these engineering service contracts still, I'd say conservatively, nine to 18 months for design, qualification, testing, prototype, so forth.
Michael: But we're certainly glad that the.
Michael: <unk>.
Michael: And Sean and I and the entire team can really focus on the business.
Speaker Change: Super proud of the team.
Speaker Change: Executing on the technology side on the infrastructure side operation side and getting.
Speaker Change: Yes.
Speaker Change: Huge growth in customer engagements.
Speaker Change: Growth in revenue per customer.
Speaker Change: And I think we're just setting up the stage for a very strong future growth.
Speaker Change: Great.
Speaker Change: When you look at all of these new contracts are bringing on what type of visibility do you have into those who are when deliveries will be and how much lead time on that to usually have.
Speaker Change: No.
Speaker Change: I will say that the ink.
Engineering service contracts or.
Speaker Change: Hopefully getting shorter and shorter.
Speaker Change: Like I said, the nano Rx delivery was nine months.
Speaker Change: So some of these engineering service contracts still I'll say conservatively nine to 18 months design qualification testing prototypes, so forth and then you get to.
Michael Mo: And then you get to, you know, starting to ramp. And so you're looking at, you know, 2024, getting the 2023 customers to ramp, and then you get 2024 customers, or end of 2023 customers, start going into pilot productions in 2024, 2025. And yeah, I think that's probably a 12 to 18 months rev story, Michael.
Speaker Change: Turning to ramp.
Speaker Change: And so youre looking at.
Speaker Change: 2020 for getting the 2023 customers to ramp and then you get 2024 customers or end of 2023 customers start going to pilot production.
Speaker Change: <unk>.
Speaker Change: 425 and.
Speaker Change: Yes.
Speaker Change: I think that's probably.
Speaker Change: 12 to 18 months Rep story Michael.
Michael Mo: Okay, great. Congratulations, and it's nice to see all the progress and look forward to 24. Great. Thank you so much. All right. Well, with that, that was our last set of questions from Michael. And we want to thank Michael, Theodore, and Jake for providing their questions to us here today. That now concludes our call. So I will turn the call back over to our operator, Tom, to end the call. Thank you, Stuart. This does conclude today's conference call. You may disconnect at this time and have a wonderful day. Thank you for your participation.
Michael: Okay, great Congrats on a nice to see all the progress.
Speaker Change: Look forward to 'twenty four.
Speaker Change: Yes.
Speaker Change: Great. Thank you so much.
Speaker Change: All right well with that that was our last set of questions from Michael and we want to thank Michael Theodore and Jake for providing their questions to us here today that now concludes our call. So I will turn the call back over to our operator Toms to end the call. Thank.
Toms: Thank you Stuart This does conclude today's conference call. You may disconnect at this time and have a wonderful day. Thank you for your participation.
Toms: Yeah.