Q3 2024 Worksport Ltd Earnings Call
Good afternoon, Robert Good afternoon, everyone coming through.
Loud and clear anyone in the chart can say that are you hearing me loud and clear.
Ooh.
Perfect.
Okay. Good afternoon, everyone welcome to work sports quarter, three 2024 earnings call I'm, Stephen Rossi, the founder and CEO of workspace and I'm joined here today by our CFO Michael Johnston.
We'd like to thank everyone for joining US works board as a growing brick by brick and today. We're pleased to share that we have experienced strong revenue growth. This quarter as a result, among other things the strategic investments and operational achievements, our financial and operational metrics signal promising.
Trajectory as we continue to scale, our brand released new products and expand into new markets.
We will be reviewing the financial results for the quarterly period ending September 32024. These results were issued today at four P M eastern and can be downloaded from the link provided in the chat at the end of todays call our prepared remarks and presentation deck will be available for download at www dot invest.
Store Dot works for Dot Com forward Slash earnings Dash call again, investor Dot Com.
Sorry, Investor Dot works for Dotcom forward Slash earnings Dash call.
During this call we will make forward looking statements, including statements regarding our financial outlook for the fourth quarter and full year 2025, our expectations regarding financial and business trends impacts from the macroeconomic environment and our market position opportunities go to market initiatives growth strategy and business.
Operations and product initiatives and the expected benefit of such initiatives.
These statements are only predictions that are based on our current beliefs expectations and assumptions because forward looking statements relate to the future they are subject to.
Inherent uncertainties risks.
And change in circumstances that are difficult to predict and many of which are outside of our control actual results or even or events may differ materially. Therefore, you should not rely on any of these forward looking statements. These forward looking statements are subject to risks and other factors that could affect our performance and financial results, which.
We will discuss in details in our which we do discuss in details in our filings with the SEC, including our annual <unk> annual report on Form 10-K, and quarterly reports on Form 10-Q, and other S. E. SEC filings. The forward looking statements made in this earnings call are made only as of today's date works for it assumes no.
Obligation to update any forward looking statements, we may make on today's webinar.
And with that let's begin.
Okay.
We will begin with a year to date overview of work sports foundational achievements in 2024, highlighting the significant milestones that have contributed to our strong growth trajectory. Following that we will delve into our Q3 financial highlights focusing on key performance metrics our surge in revenues in our strategic road map to profitability.
Increased revenues and sustained long term expansion.
We'll share our insights on the current macroeconomic environment, emphasizing how we're uniquely positioned to capitalize on emerging opportunities. Then we'll present detailed highlights of workspace robust business to consumer and business to business segments showcasing the strength driving our market growth next will discuss our upcoming pre.
<unk> launches and share an exclusive preview of what we believe will be groundbreaking innovation Jeremy synergy that are set to redefine industry standards will conclude with our ambitious visions for future growth, including insights into our initial revenue projections for Q4, and the 2025 fiscal year.
Three years ago, following our up listing on NASDAQ stock exchange, we embarked on our strategic journey to establish a solid foundation for works Board. This groundwork has not only enabled the significant growth we witnessed today, but also positions us strongly for future expansion.
This exciting growth only started 10 short months ago in January of this year, but we began early stage production ramp up of our E. L. Three heart boldly tonneau cover proudly made in America in our state of the Art 150000 square foot manufacturing facility, where I speak from here today in Western New York.
In May work sport was awarded a 2.8 million dollar innovation and growth granted by the state of New York Underscoring confidence in our vision and technological achievements.
In June 2024, we reported a notable 275% increase in revenue quarter over quarter from Q1 2024.
Our achievement.
And achievement, we are proud to have surpassed in Q3.
September marked a pivotal moment as our R&D facility.
R&D facility successfully tested our upcoming core portable energy system to charge, a Tesla model three and we launched the alpha release of our core and solus products signaling our progress towards entry into a sustainable energy market.
In Q3, we commenced sales to the U S government unlocking potential for significant new growth in the future. We also initiated a carefully designed $2 million strategic cost savings program, which is not expected to impact our revenue or revenue growth. It's aimed at enhancing operational efficiency as we gear up.
For profitability.
Furthermore, our IP portfolio continues to expand to protect our innovations and secure our future growth globally works for it has approximately 170 registered and pending patents and trademarks and its global IP portfolio.
Speaker Change: With that I'm pleased to hand over the discussion to Mike He will provide commentary on the Q3 2024 financial.
Mike: Our results.
Mike He: Thank you Steven and Hello, everyone, let's start with some exciting milestones achieved in Q3.
Mike He: First Barbara for its topline revenue of approximately $3 $1 million, 581% year over year increase from Q3 of 2023 458.
Mike He: This tremendous growth was driven by increased b to B and B to C C.
Mike He: Sales across our customer segments.
Mike He: Our exports growth momentum is further underscored by a 63% revenue increase from Q2 2020 for Q3 2024 building upon a notable 275% growth in Q2 2024 from Q1 2024, when production began scaling up this consistent upward trajectory highlights the effectiveness.
Our new sales initiatives and innovative products as well as a robust market opportunities ahead of us.
Mike He: Our rapid expansion of work sparse rubbing not only reinforces our strong market position, but also signals a promising outlook continued growth in our strategic push towards profitability.
Okay.
Mike He: So Q3 gross profit 247.
Mike He: 1000.
Mike He: We are not getting a strategic production slowdown in Q2 and early Q3.
Mike He: Which allowed the plant to optimize and trained workers ample where export sale to get ahead of production.
Mike He: Strategic aspect did lead to temporary margin erosion in this quarter. However.
Mike He: However, we project margins significantly crop recovered.
Mike He: Our sports product margins with a strong outlook potential with product margins in our <unk> segment expects to reach up to 51%.
Mike He: And b to be white label Margining margins targeting 25 important yourself.
Mike He: The growth of our <unk> White label segment is expected to increase revenues and further mitigate the impact of a lower margin private label.
Mike He: This shift positions us favorably for enhanced profitability and underscores our commitment to driving shareholder value through strategic product and market focus.
Mike He: Ultimately, we anticipate a significant improvement in gross margins in the near term.
Considering we began we only began early full scale production 10 short months ago, We're now perfecting our systems and beginning to appreciate economies.
Mike He: Economies of scale from volume and scale.
Mike He: With increased production rising sales and the introduction of upcoming high margin high demand product line.
Mike He: Our gross margins to be notably stronger by this time next year.
Speaker Change: Given our robust uptake of our white label and online sales channels, we are especially excited about the launch of our al <unk>, Tom will cover a set to debut in late Q4.
Speaker Change: This innovative product is projected to have a measurable positive impact on our 2025 financials will share more details on the al four later in the presentation.
Speaker Change: Okay.
Speaker Change: We're exploring inventory remains robust with a healthy balance of approximately $6 $1 million consistent with Q2 2024 levels and strategically allocated between finished and unfinished goods.
Speaker Change: Strong inventory position enables us to continue production seamlessly with no anticipated supply chain concerns.
Speaker Change: Our ability to meet rising customer.
Speaker Change: Customer demand without interruption.
Speaker Change: Our sales channels are now fully operational experiencing increased demand.
Speaker Change: It is exceeding the core protection levels are for export.
Speaker Change: Positive dynamic allows us to transition to an ordering strategy based on projected demand forecast, which will further optimize our cash flow enable us to meet market demand more efficiently.
Speaker Change: We believe we're exploring is well positioned to leverage the existing equipment facilities and inventory investment to meet current and anticipated sales growth for the manner of Q4 of 2024 and into Q1 2025.
Speaker Change: Accordingly, no significant equipment investments are expected in the near term, allowing us to capitalize on our assets and drive profitability.
Speaker Change: Now back to Steve Rossi with a note on Investor relations on our vision to profitability.
Steve Rossi: Thank you Mike.
Steve Rossi: Our director of sales stated our sales went per 1 million all of last year to $1 million a month.
And next year, our target's 1 million a week.
Steve Rossi: We're excited to realize that dream and beyond as we continue to drive towards profitability and sustained growth.
Thrilled to share insights on our path forward and the strategies fueling the post the progress.
Steve Rossi: We believe works for it will achieve cash flow positivity next year with revenues in 2025 projected to be multiples of our anticipated year ending 2024 figures several upcoming catalysts are poised to drive the significant growth the launch of our ale for tonneau cover in late Q4, the most demanded type of <unk>.
Steve Rossi: Cover and the market is highly anticipated with higher margins and strong market demand, we expect the <unk> to become the leading seller and to significantly bolster our revenues we have begun taking preorders and expect early sales in late Q4, and a ramp up in Q1 2025. Additionally, the market beta release of our signature.
Steve Rossi: Core and solus products, our portable energy system and solar truck bed cover is set to play a pivotal role in our growth through 2025 and beyond these innovative solutions position us.
Steve Rossi: At the forefront of the clean energy Revolution within the automotive accessory industry. Furthermore works for it is excited to announce that our subsidiary Tirrivee synergy is preparing to accept initial preorders for its state of the art high efficiency heat pump product line. This advancement positions us to expand our presence in the.
A growing energy markets, which we believe can contribute to our profitability over the coming years subject to market conditions and continued execution of our strategy.
Steve Rossi: By capitalizing on these upcoming catalysts, we are focused on accelerating our growth trajectory and strengthening our position within the industry.
Steve Rossi: Workspace solid foundation is firmly this firmly in place and our growth trajectory is accelerating as we remain unwavering in our focus on achieving profitability are current production assets are optimized to produce over 200 tunnel covers per day, a target we are on track to reach within the within the upcoming quarters.
Steve Rossi: If this production level is attained we anticipate improvements in margins and sufficient capacity to achieve positive cash flow.
Steve Rossi: We are proactively prepare to planning to exceed production beyond 200 covers a day as market demand grows, notably we anticipate that the additional investment.
Steve Rossi: And time necessary to achieve this increased capacity would be relatively low works, where it will provide a projected sales forecast at the end of this presentation and will continue to update investors each subsequent quarter.
Steve Rossi: Furthermore, the introduction of new product segments, including the core and soulless portable power grid system, and our subsidiary <unk> Energy's upcoming high efficiency heat pump positions us to expand our presence in the growing multibillion dollar clean energy market.
Steve Rossi: These innovative products have the potential to contribute to the profitability of <unk> as we continue to expand our market presence. Additionally, we will continue to build sales by adding new Skus every quarter, including new tunnel covers and anticipated variant models are the core enabling us to cater to a broader market and meet diverse customer needs.
Mike He: If I can by continuing to scale up production and expand our product lines. We believe we can drive significant revenue growth improve profitability and create value for shareholders back to might with back to Mike with commentary on workspace macro environment.
Thank you Steven from a macro perspective pickup trucks continued to be the top selling U S vehicles on the road.
Mike He: While the EV pickup truck market experienced delays and waning sales interests, we believe that with improved infrastructure technology EV adoption will extend the pick ups as well.
Mike He: <unk> solar cover Banca usable.
Mike He: Ice's vehicles, and future evs, allowing us to navigate without experiencing adverse effects these market share.
Mike He: Additionally, we've been sharing the U S government as potential push for increased tariffs on imports from China, particularly on batteries by 2020, we.
Mike He: We're positioning ourselves to leverage this change as a strategic advantage.
Mike He: Starting to explore next generation core boundaries using your technology in production.
For the first generation of the core of the company has partnered with an experienced manufacturing partner will look to provide an update on its production partner for the core system in the near future.
Mike He: The portable energy market is growing rapidly with further development expected.
Mike He: As mentioned earlier Chinese competitors, despite often perceived inferior products are achieving over $1 billion in annual sales for the recent year over year growth rate at month, 300%.
Mike He: Being first to market with our solar cover and believing that we offer a stronger portable battery system price.
Mike He: Aimed to capture both new market share in a portion of their existing market share.
Mike He: We do not anticipate any projected disruptions or risk due to the recent U S election.
Mike He: I'm confident in our growth trajectory.
Mike He: <unk> firmly on executing our strategy and delivering value to our shareholders.
Steve with insights on <unk> and PVC business segment.
Steve Rossi: Thank you Mike.
Speaker Change: We're exploring branded <unk> and B to C sales will be the future of the company. We're excited to share with you our latest TV commercial.
Speaker Change: Your truck deserves a tonneau cover that works as hard as you do where export hardest coverage will protect your cargo from the yellow vests, keeping your viewers safe and dry built up with America quality. Our covers are designed for any challenge with options for every job adventure or budget.
Speaker Change: Okay.
Speaker Change: Just worked toward to safeguard your journey and pushing the boundaries suite when your truck.
Speaker Change: Okay.
Speaker Change: Do more and go farther and so you can focus on the road ahead is it more toward dot com or your local dealer to get go freemium tonneau cover today.
Speaker Change: Anybody listening can take a look at those videos on our Youtube channels.
Speaker Change: As earlier indicated workspace business to consumer segment has experienced a significant surge in online sales jumping from $21000 in Q3 of 2023 to 159 million in Q3 2020 for this dramatic increase significant signifies a substantial shift with online sales.
Speaker Change: Now accounting for 51% of our total revenue for the quarter compared to just 5%. The prior year. This exponential growth is expected to drive up brand awareness and positively impact our business to business operations since initiating sales in March 2024, we're aiming to reach $1 million per month and business to consumer sales along.
Speaker Change: One before the end of Q4 currently we offer three products with over 100, Skus and we project an expansion of our product lineup to six or more products. In 2025. This expansion aligns with our strategy to broaden market reach and meet diverse customer needs further supporting our growth trajectory and enhancing shareholder.
Speaker Change: Their value.
Following recent sales to a prominent federal entity, where export strategic approach to government sales will be spearheaded by U S. Ambassador Ned Segal retired one of our directors. We believe his involvement will enhance our ability to secure new sales with more government entities. The white label business to business segment has shown early.
Speaker Change: Early signs of growth for export as well in the past four months workspace has achieved over 200% growth in dealer account sales of our branded products with over 17000 targeted dealers across North America. This notable growth underscores the vast potential of our dealer network expansion.
Speaker Change: We aimed to bridge the gap between direct to consumer sales and small owner operated dealers that are the fabric of local economies. We plan on supporting each dealer that supports work sport and made in America innovations, but developing a network of clever that's cleverly named workspace click and mortar which signifies workforce.
Speaker Change: In bridging the central gaps between online shopping with local dealer level support more on that to come early next year.
Speaker Change: Additionally, we have recently announced our ale for cover.
Speaker Change: The key customers and several top tier national Usb's distributors and are in discussions to preorder that our discussions to preorder the sale for tonneau cover. This further underscores strong market confidence in this highly anticipated product. Furthermore, where export recently announced its first ever <unk> order from a customer.
Speaker Change: Puerto Rico, marking a significant expansion to the expansion into new territories and demonstrating the increased in international demand for our innovative solutions. We believe an effective business to business network will be active and in place within the first half of 2025 workspace White label business to business segment will not only be a read.
Speaker Change: A new driver for next year, but it is also expected to have healthy margins and reoccurring sales.
The works for Ell for soulless and core products product lines are projected to be released in the near term Here's a quick recap for new investors about our products.
Speaker Change: The first to market solar solar tonneau cover the.
Speaker Change: The highly anticipated first to market works ports solar solar integrated fully cover represents a unique opportunity for workspace to enter the clean tech markets, starting with our rapidly expanding truck customer base. The patented solus covers designed to offer utility across a wide range of diverse applications.
Speaker Change: Next work sports core modular portable energy system, when paired with the soulless cover it creates some mobile nano grid. The core system can store up to 1700 watts hour what hours of energy and is fully modular, allowing for the addition of extra batteries, while the portable energy market.
Speaker Change: Is valued at $3 9 billion.
Speaker Change: Globally, and it's growing rapidly we're exporting core battery is expected to feature a unique never ending power hotspot capability. We believe this feature will enable the core system to penetrate markets far beyond just out of the pickup truck segment.
Speaker Change: The alpha release of the core and Solus was initiated in mid September. We are currently hard at work testing these units and real market conditions and are preparing for beta release in 2025 tremendously exciting.
Speaker Change: The <unk> for US is poised to become the crown jewel of works for traditional tonneau cover business. We are thrilled to be on the verge of its launch and believe this premium product will support our growth in the expanding truck bed cover market.
Speaker Change: With its innovative design and superior features we believe the <unk> four has the competitive edge to strengthen our position within the industry.
Speaker Change: Workspace initiated the alpha release of the core and Solus in mid September 2024 actively gathering real world feedback to refine our products last month, we implemented strategic enhancements to the solas cover projected to reduce consumer costs by up to $400 and expand compatibility there.
Speaker Change: Additionally, we are develop new product, we're developing new product variance with alternative specifications to broaden appeal across diverse customer demographics.
Speaker Change: We're excited to announce that the commercial launch of our core and solar system is anticipated for Q2 to Q3 of 2025.
Speaker Change: <unk> subsidiary <unk> energy has been developing behind the scenes and despite a control a controlled operational budget.
Speaker Change: Through grants and the effort of the last three years. They have made some fascinating development and we were thrilled to shed some light.
Speaker Change: On that today.
Speaker Change: First commercial sales quarter in Q3, <unk> achieved a significant milestone by securing its sales order for 17, EV charging stations from a leading global parking lot manufacturer. This accomplishment marks a promising advancement in <unk> business development as the global EDI infrastructure continues to expand rapidly.
Speaker Change: Outcome upcoming product line <unk> is preparing to launch its highly efficient heat pump product line known as <unk> with a global press release scheduled in the coming weeks, we believe that Eythor Lux technology has achieved breakthrough results that will position it as a disruptive force in the 100 billion.
Speaker Change: <unk> plus dollar heat pump market globally.
Speaker Change: To further strengthen our competitive edge initial trademark and patent assets have been filed with additional filings planned to enhance our intellectual property portfolio property portfolio further.
Speaker Change: The heat pump market is substantial and has been experiencing steady growth. We believe the <unk> product line has the potential to make significant impact in this sector. We are already hosted representatives from companies around the world at our R&D lab to meet with the <unk> team about this product. We are excited to share more detailed information about this in the coming.
Speaker Change: Weeks.
Speaker Change: We are thrilled to announce that we are on track to exceed our previously issued revenue guidance of $6 million to $8 million by the end of the year 2024.
Speaker Change: For the year end 2025 workspace believes that its current product line alone will represent $20 million in revenues.
Speaker Change: With the successful launch of an additional product line in late 2024% in 2025, we anticipate an additional revenue stream of up to 18 5 million.
Speaker Change: Dollars from those product lines.
Speaker Change: Taking varying circumstances into account, we project overall revenues to be between $25 million and $34 5 million in 2025 or.
Speaker Change: Our goal is to become cash flow positive in 2025 with a with a keen focus on earnings per share and EBITDA.
Speaker Change: We project sustained growth into 2026 and beyond as always work support will continue to update investors on forecasted guidance for current products and upcoming product launches.
Speaker Change: With that thank you so much for your attendance. We are very excited for the year ahead. If you haven't done so already please sign up for E mails and investors Dot works for Dot Com and follow us on all social media platforms or handle is at work sport LTV on Tictoc Instagram and so on all major media.
Speaker Change: That forms.
Speaker Change: Workspace is now opening the floor to questions and answers and we welcome live questions from the analysts attending the call followed by those from the general investors. Thank you.
Speaker Change: Good evening to everyone on your Zoom Web page you have an access for a question and answer if you do have any questions. Please submit your questions there.
Speaker Change: That we'd like to open the floor to analyst questions Tate Sullivan.
Speaker Change: Hand up.
Tate Sullivan: And thank you Steven Thanks for all the details and starting with the 2025 revenue guidance from current projects products, rather 20 million and then with additional projects going up to 25 to 34 and a half.
Speaker Change: Is most of that incremental more than likely al or what are some of the variables in terms of the revenue mix for the new products and 25%.
Speaker Change: So good question Tate, we think that the a L. Three as our foundational product will do $20 million next year is our forecast.
Speaker Change: The a L. Four will likely become a much larger revenue driver for us, but because it'll be a new product.
Speaker Change: And it'll take time to develop the processes and perfect our ability to get them out the door.
Speaker Change: And expand.
Speaker Change: And at certain point.
Speaker Change: To expand our production capabilities, we feel that a L. Three the <unk> for the new product will.
Speaker Change: We will be a smaller portion of revenues next year, However, as I indicated.
Speaker Change: Considerably are significantly larger portion of sales in subsequent periods.
And then the BD you have a gross profit margin slide in the presentation showing up meaningful margin gross profit margin growth by DTC up to 51 person. Our sense is that on pricing is that on as you absorb.
Speaker Change: The current operating level at your manufacturing facility, how do you achieve that growth.
Speaker Change: As to the economies of scale. So right now we pay all of the cost of a fully operational factory capable of most of those as I as we indicated in this in this presentation or this call.
Speaker Change: With no major or significant increases or expenditures and an increase in overhead or expenditures.
Speaker Change: We aim to achieve those those revenues. So what that means is we were already spending and therefore have all the infrastructure the human resources the management team in place.
Speaker Change: To achieve those targets without needing another factory, where millions of dollars of additional inventory or or or equipment.
Speaker Change: So it's through essentially the economies of scale and then continuing to perfect.
Speaker Change: Our process and be able to.
Speaker Change: Make a perfect product faster.
Speaker Change: I typically say metaphorically that the engine an engine of a car.
As least efficient when it first starts.
Speaker Change: So we're just naturally gaining efficiency and through the economies of scale we expect.
Speaker Change: That with no major.
Speaker Change: <unk>.
Speaker Change: That will be able to achieve achieve those revenue targets and an increase profitability because of the efficiencies and economies.
Speaker Change: And last one before I turn it over online sales greater than 50% of revenue.
Speaker Change: In the Q you detail all of the different portals that youre using is it evenly spread it a wrap up across Amazon your multiple your own site and the <unk>.
Other services are walnuts and was successful.
Speaker Change: We are exports.
Speaker Change: Almost exclusively focused.
Speaker Change: On on driving sales presently, but well let me answer this question properly so it's not misunderstood.
Speaker Change: For direct to consumer sales the majority if not I'll.
Speaker Change: I'd say the.
Speaker Change: Over 90% of those sales are on works for Dot com.
Speaker Change: We're trying to avoid using.
Speaker Change: Platforms, like ebay or Amazon, albeit very popular.
Speaker Change: Platforms typically have been also littered with.
Speaker Change: Inferior.
Speaker Change: Imported products and products that we really just don't want to share.
Speaker Change: Catalog space with so we court and drives consumers to our website, where we feel that we could really imply or bring.
Speaker Change: The value and the craftsmanship that we put.
Speaker Change: Into our product to love and care and the real spirit of made in America can beat that point can be driven.
Speaker Change: When we start to.
Trying to put sales on Amazon, we shared the space with with with <unk>.
Speaker Change: Imported products that those.
Speaker Change: These brands.
Speaker Change: Out there that make refrigerators and tunnel covers so that means that theres no particular craftsmanship of care.
Speaker Change: Lastly, I will say that although b to direct to consumer has been a big driver of sales recently.
Speaker Change: As I indicated we really want to work with the fabric of American business, which is local dealers. We will continue to build our dealer market. We will continue to treat those dealers that support us as members of our team and we will support the American economy and those dealers.
Speaker Change: By driving sales to dealers, so those that buy pickup trucks and wanted tonneau cover can get local service.
Speaker Change: And that really is a circular economy that we feel is going to be very strong for us in the future. So.
Speaker Change: Direct to consumer sales had been our proof of concept.
Speaker Change: And it's taken off.
Speaker Change: Now now now now we're finding considerable interest in the dealer level and we will continue to support.
Speaker Change: Sure.
Speaker Change: American small businesses of which are 17000 and growing that will support our product we're going to support them, we're going to stand behind our dealers.
Steven: Thank you Steven.
Welcome.
Turning the floor to Teekay Poe Frac from AGP now.
Steven: Yes.
Speaker Change: Hi, hopefully you can hear me okay.
Speaker Change: Yes.
Speaker Change: Okay great.
Speaker Change: You just go back to the forecast.
Speaker Change: Your guidance for 2025.
Speaker Change: First of all your previous guidance for 'twenty four were $68 million, He said youre going to beat that.
Speaker Change: What is the new guidance for revenue and 24.
Speaker Change: Good question, Paul I believe that.
One is on the call as well he might be able to have better answer on my behalf, but Ron do you want to take a you want to answer or should I answer sure. Thanks, Steve.
Speaker Change: Do you anticipate to beat the upper end of the $8 million range.
Speaker Change: With the data new data is still coming in as for expanding product lines, new models and and.
Speaker Change: New channels, we're not comfortable yet providing a exact number and.
Speaker Change: Tell investor to look forward to the updated numbers coming out in the Q1 call, but we do anticipate there to be a beat but not that significant so nothing nothing much higher than $8 million.
Speaker Change: So maybe eight to nine.
Speaker Change: And as far as.
Speaker Change: A target for 'twenty for perhaps.
Speaker Change: Potential for higher of course.
Speaker Change: Yes, I guess I just understand if youre going to if you know you're going to beat it when I put out new guidance, but and then especially in the context that you're putting out 25 guidance for revenue.
Speaker Change: You just highlight for 25, you talked about the different components sales <unk> and then may be potentially solace in core getting you to the upper end of that range can you talk about how your mix of <unk> versus B to C will change in 25, I know, Steve you just talked about.
How youre going to focus more on beta b to B and dealer networks, and that's going to be a bigger focus but is it likely to change did like 25% BDC in that 75% be the b to b is that sort of what's the rough mix for 25, I think that it's fair to say right now at least at <unk>.
Speaker Change: 51%.
Speaker Change: So we set a lot in our in the earnings call, but what was.
Speaker Change: What was.
Speaker Change: Softly said is that we are.
Speaker Change: Beginning to we're beginning to bet on works for and we're starting to phase out private label sales and to be clear on those for anyone listening what private label sales are as our product with somebody else's brand on it.
Speaker Change: So so right now 50% of our sales is online sales works for Dot Com sales and then a lot of the other 50% is workspace product with somebody else's.
Speaker Change: Some other brand.
Speaker Change: <unk> on it.
Speaker Change: So what we're going to be doing is we're going to be as a policy phasing out that type of business. We no longer were betting on works for it we want to build our brand and we believe brand equity is critical for the future value of workforce. So what I think at the very least will happen is we will swap the 50% private label business.
<unk> for at least 50% business to business works for branded business. So that every product that goes out the door proudly.
Speaker Change: Brandishes the works Port logo.
Speaker Change: However, because we want to support American small businesses.
Speaker Change: That could be 60% of our business. However, I think that once we start looking at 70 or 80% of our business being business the business Theres a theres a concentration risk that we just don't have the appetite for so keeping it as close to 50 50 as possible is our target.
Speaker Change: And making sure that every product that goes out our door proudly brandishes. The workspace logo is our key goal for next year.
Speaker Change: Yes.
Speaker Change: Great. That's helpful. And then if you look at your margin you talked about the branches for a period.
Speaker Change: B to C. And then also for eight a bigger private label then shifting over to your branded product.
Speaker Change: When do you think that margins will kick in to be able to do.
Speaker Change: Generate the ranges that you are talking about clearly March at Roche and hit in the third quarter.
Speaker Change: If you could maybe in the context to look and give us some idea of where fourth quarter margins look like that would be helpful to.
Speaker Change: The moving target, we're continuing to make improvements in the way, we manufacture things looking at integration of automation looking at.
Speaker Change: Mass manufacturing so.
Speaker Change: To give it a situational.
Speaker Change: Example, historically, we were using adhesives to bond certain parts of our covers together with.
Speaker Change: We've recently changed to use automation and <unk>.
Speaker Change: Automation system. That's adhesive lists are very clever cost saver and a time saver. However, we had to build it learn it and perfect it which was inefficient to begin with.
Speaker Change: As we launched a new product line will continue to do these types of upgrades these types of of improvements.
Speaker Change: So that we take short term pain with longer term gain involved.
Speaker Change: Would expect that the margins will continue to they will trend upwards.
Speaker Change: In Q4, and we will we'll probably re test where we were before at that 15 hopefully 20%.
Speaker Change: But I don't see significant improvement until we're just focusing on building the heck out of these things, which would be after Q1 of next year. So Q4, and Q1 are going to continue to be evolutionary quarters for us where we continue to invest in perfecting the product and I believe that Q1 and beyond.
Speaker Change: Next year will be will freeze the process and just work on improving it on a fish on making it more efficient therefore, no more line changes were no longer taking a glue station again back to the analogy.
Speaker Change: Removing a glue station and replacing it with a glue less station everything will be frozen and now all it is is getting it.
Speaker Change: Is six to seven minutes per ton will cover off the line, but our ultimate.
Speaker Change: Joel is sub five minutes.
And then may be improving through robotics, and artificial intelligence to sub four minutes.
Speaker Change: And the lights out processes that would be Q2 and beyond next year, and that's where I think that we could start getting that quote unquote elbow room of between 2030 40 upwards of 40% gross margins.
Stephen Rossi: Okay. That's that's helpful. Stephen Thank you.
Speaker Change: And then if you could just.
Speaker Change: Presentation, you alluded to.
It's fairly low capex over the next couple of quarters, and then as you look to get.
Speaker Change: Production capacity of 200 coverage per day, you might have to invest or spend a little money on equipment can you just quantify that amount of capital that you.
Speaker Change: <unk> put in to expand production sure. So when we built the factory or at least tool their factory with tool that.
Speaker Change: Anticipating expansion so a lot of the initial capital expenditure.
Speaker Change: We paid out in the early years.
Speaker Change: Where we were really spending.
Speaker Change: A lot of that infrastructure is already in place power space infrastructure, some foundational infrastructures as well.
Speaker Change: So we've already spent in advance of the expansion.
Speaker Change: The additional equipment is automated therefore requires.
Speaker Change: It could be a robotically process, if not requires one or two men operation and can be lights out.
Speaker Change: So it requires little human resource.
Speaker Change: And the equipment.
Speaker Change: <unk> Park would be no more than three to $3 5 million, which represents.
Speaker Change: Modest expenditure and that that equipment would be subject to vendor financing at no interest.
Speaker Change: So what that also means is we would have up to 24 months for example to pay for the for.
Speaker Change: For the systems.
Speaker Change: Without experiencing any any any cost of capital so really a win win in that we've already absorbed a significant amount of the expenses too.
Speaker Change: Layout and planning and then the equipment itself would be vendor financed.
Speaker Change: And installed while we almost could could use the profits while using the equipment to pay for it without.
Speaker Change: Without necessarily even having to use any of our own money very clever foresight by.
Speaker Change: By Us and our management team.
Speaker Change: Great. Thanks for taking my questions. Thanks for asking.
Thank you Bo Steve we have some questions from the investors in the audience a question from well well events investors ever get a discount on company products.
Speaker Change: We have to always maintain dealer level incentives, it's unfair for a dealer to to have to sell a product for example for X dollars and then us sell direct to people for less so to maintain.
Speaker Change: The best.
Speaker Change: The best integrity in the market, it's fair to say that our product is already.
Speaker Change: For example, our L. Three the closest competing product made in America right now is $1000.
Speaker Change: So it's already a discount.
Speaker Change: It's already a discounted product however.
Speaker Change: We encourage anyone interested in referring.
Speaker Change: <unk> or.
Speaker Change: We're purchasing a product we encourage.
Speaker Change: Those individuals' to call us don't email us don't text us don't online chat US 188, 550, 48789 call speak to our customer service and we'll make sure that we.
Speaker Change: We worked with them to make them happy whether it's.
Speaker Change: T shirt or had or some sort of incentive but the pricing is already.
Speaker Change: Good price.
And we feel that its only fair and equitable to maintain our manufacturer sorry, a minimum advertised price to the best of our abilities, we owe it to our our brick and mortars that support us.
Speaker Change: So what I can say is our brick and mortar our dealers.
Speaker Change: For example, we have dealers in Michigan or in states, all over and Thats growing rapidly our dealers may be able to offer a better price than we can.
That's also an option we may be able to refer those investors to a local dealer. So if an investor for example was in the great State of X y Z.
Speaker Change: We can refer them to a dealer who may be able to offer them.
Speaker Change: Better price and maybe even free installation of these types of perks.
Speaker Change: Thank you Steve will comment again, thank you I agree.
Speaker Change: There is another question from Kerry are what is your plan to have more analysts and institutional coverage and ownership of the company.
Speaker Change: Institutional ownership tends to be market cap, driven so as companies become higher market caps typically $100 million pluses were more institutions start to jump in at a market cap.
Speaker Change: We feel that.
Speaker Change: Where the revenue multiple of three to five X.
Speaker Change: Depending on market conditions and innovations in all of these types of things.
Speaker Change: We could we're spot on my target is a nine figure valuation for works for it.
Speaker Change: So that's one I think more institutions will start buying more export holding it although that those numbers are always going up more institutions hold us every every 90 days analyst coverage.
Tate Sullivan: We want to be a feather in the cap Tate.
Tate Sullivan: Has covered us since almost <unk> since our up listing and it's been a great partner of us.
Paul Who's on the call today, we hope to earn his coverage at some point from his great.
Tate Sullivan: Research Division.
Tate Sullivan: And other analysts we continue to build relationships with.
That's based on trust and transparency, so I think that high tide sale all ships.
Tate Sullivan: And as we continue to execute I think will become a great company and will be further covered by great analysts.
Speaker Change: Thanks, Steve a question from.
Speaker Change: <unk> B.
Speaker Change: You for allowing me part of this webinar it appears that the $1 minimum price per share is close to <unk>.
Speaker Change: It appears that the $1 minimum price per share to satisfy NASDAQ is going to be within reach do you guys feel like works Port will go through the tough times that appear to be behind you without doing a reverse split.
Speaker Change: So.
Speaker Change: Look I think that we love NASDAQ capital markets, having graduated from a.
Speaker Change: A smaller exchange, which is the OTC. However, we feel that the OTC is a market has come a long way as well.
Speaker Change: What I can say is we have no intentions of consolidating our stock or otherwise called the reverse split.
Speaker Change: We have a considerable amount of time to be able to cure those deficiencies, which we're starting to obviously look things are looking a lot better for us to be able to do that.
So all I can say is we have no intentions of consolidations to shareholders.
Speaker Change: And strategically as options on the table to remain on the NASDAQ We would have to consolidate if worse comes to worse on a year, we're still below a dollar.
But an option also is too.
Speaker Change: To list on another exchange it doesn't have that requirement and avoid the consolidation, which is an option I'm not making any promises or guarantees, but we're going to continue to just.
Speaker Change: Bust, our rear ends to build this business, which we've been showing execution shows up on the balance sheet shows up on the revenue side and next is margin improvement.
So we're going to continue to grind as hard as we can to build this business and I feel that all of the great things that us as executives.
Boundaries as well as early level investors like you guys. All listening today I think that there will be no other alternative but us just all being rewarded recalling that home depot, just a number of years ago and the nineties was $4 a share.
Speaker Change: So a lot of companies, where a low price and then they go up because they built so we're focused on building and I think that the rewards will come inevitably as a result of the hard work.
Steve Rossi: Thanks, Steve we have another question from Terry T regarding the margins, how we plan to improve.
Speaker Change: The question is a bit worthy so rather than read it out.
Speaker Change: The answer on how we plan to improve top merchants and how we see and project. The profit margins to increase is due to the foregoing of the margin erosion, so, especially in the slides we had margin erosion in Q2, and Q3 with low production and a fully functional factory, we believe that as Q4 and Q1.
Speaker Change: <unk> production is going to start ramping up.
Speaker Change: Furthermore.
Sales, that's also et cetera, accelerating quite quickly we believe that around 200 covers a day.
Speaker Change: We will be exceeding the production capacity needed to be cash flow positive.
Speaker Change: And we think that most of that benefit will come just from eating of the overhead.
Speaker Change: There will be further scale available to us as we scale. It to 300 400 500 covers a day.
Steve Rossi: And Steve One last question from Michael G. Can you speak to me more about the marketing of where export since the new commercial and other marketing efforts.
Speaker Change: Perhaps is it possible to see that commercial on TV.
Speaker Change: Sure. Yes. So we are I think let me let me open up my calendar.
Speaker Change: For all of those listening.
Speaker Change: I'm going to tell you right now.
Speaker Change: 10, 30, a M on truck you on motor trend TV truck use of television show on motor trend TV there'll be a segment on works for as part of our initial dip into TV.
Speaker Change: So anyone listening that has motor trend and TV access to motor trend TV in the U S. Watch truck you at 10 30, a M on November 24th and Youll see a segment on works for and its tunnel covers both a three and a first look at <unk>.
Speaker Change: We primarily market online where most shopping is initially done dealers 17000 dealers in America will be our agents, our sales reps with brick and mortar displays.
Speaker Change: Displays and knowledge of our product, so thats marketing and.
Speaker Change: And then we plan on continuing to market through social media avenues, which is part of what I already said, which is online as well as <unk>.
Speaker Change: As we discussed we have a TV segment.
Speaker Change: And we're going to be looking at prime time commercials, as well sponsorships of sporting events and these types of things.
Speaker Change: Sponsoring TV, the TV commercials, and sponsoring sporting events like football.
Speaker Change: Or NASCAR or these types of things are more of an effort in branding.
And branding drives brand recognition and doesn't always drive sales. So right now we're keenly focused on marketing initiatives that result in a sale versus acknowledgment of like Oh I've heard this brand. We don't want someone that doesn't have a pickup truck to noble work sport yet.
That second stage first stages marketing to people that want our product second stages brand awareness, which drives brand equity.
Speaker Change: Which is which is just drives value to more to the company incorporate corporate side.
Speaker Change: Thank you, Steve with that we'd like to end the question and answer period, if any investors do have further questions. They can email us at investors that were export dot com or give us a call Steve I'll pass it back to you for closing remarks.
Steve Rossi: Closing remarks are simple to all those listening.
Speaker Change: We're working our rear ends off we're building a real business, we went from $1 million in a year to a $1 million. A month next stop is a million dollars a week and then we're not stopping we're building a real business. This is a legacy company of made in America of engineered T of innovation.
Speaker Change: Integrity, we're going to innovate, we're going to integrate we're going to get our products.
Speaker Change: Into broader markets.
Speaker Change: Say often that Sony as a corporation's first product was a rice cooker. Our first product is a tonneau cover but it will not.
Speaker Change: Sony's wasn't it won't be our last product, we're going to continue to innovate in clean energy clean Tech.
Speaker Change: Heat pump technologies with <unk> energy and there's great things happening.
Speaker Change: So we've only just begun the best is yet to come stay tuned and just believe that the management is is working their <unk> off inclusive me and my team.
Speaker Change: Two to build this business and we're going to do amazing things.
Speaker Change: Thank you very much that defended this call have a great day, everyone. Thank you everyone.
Speaker Change: Goodbye.