Q4 2024 Worksport Ltd Earnings Call
Yeah.
[music].
Yeah.
[music].
24 performance discuss key operational milestones and share an updated outlook for 2025.
Fiscal year 2024 was a transformative year for works for we achieved significant revenue growth expanded our product lineup.
Strengthening our financial Foundation.
We will be reviewing the financial results for the quarterly period, ending December 31, 2024, and full year 2004 <unk>.
These results were filed today at $7 45, a M eastern.
Our Form 10-K and can be downloaded from the link provided in the channel.
At the end of todays call our prepared remarks and presentation deck will be available for download at www Dot investors Dot work sport dotcom forward Slash reports.
I'll also share the link in the chat to where you can download those reports and everything available.
Our remarks will follow a slide presentation.
After our prepared remarks, we will open the line for questions. So on that let's begin.
First with Safe Harbor statements. During this call we make we make will make forward looking statements, including statements regarding our financial outlook for the full year 25, our expectations regarding findings regarding financial and business trends impacts from the macroeconomic environment and market position opportunities go to market initiatives growth strategy.
And business aspirations and product initiatives any 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 future.
The future theyre subject to inherent uncertainties risks and changes in circumstances that are difficult to predict and many of which are outside of our control actual results 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.
<unk> and actual results, which we discussed in details in our filings with the SEC included in our annual report on our Form 10-K, and quarterly reports on Form 10-Q, and other SEC filings.
The forward looking statements made in this earnings call today are made only as of today's date works forward assumes no obligation to provide update on any forward looking statements. We may make on today's webinar.
We will begin by highlighting work sports achievements from fiscal year 2020 for celebrating the milestone that propelled the impressive growth trajectory followed that will dive into our strong financial performance emphasizing our accessional exceptional revenue growth significant improvements in profitability metrics and clear strategic roadmap for <unk>.
<unk> expansion and profitability will then explore our operational successes showing our growing presence in both consumer direct and reseller markets as well as our success in betting on ourselves shifting towards higher margin work sports only branded product sales.
We'll also preview our highly anticipated upcoming product launches, including innovations from Caribees energy, which we believe has the potential to reshape the industry and its standards and open up new market opportunities for us to wrap up we will share our vision and strategic plans for fiscal year 2025, providing fresh guidance and outlining key.
Goals for another year of dynamic growth ahead.
Yes.
2024 was a breakout year for works for it we delivered full year net sales of $8 4 million up 455% from 153 million in 2023. This tremendous growth was driven by successful ramp up of our American made hard folding.
Tonneau cover products and expansion of both of our business to consumer and business to business sales channels, we effectively bolstered our direct to consumer presence online sales surged, 58% of total revenue 24 compared to just 7% the year. Prior at the same time, we on boarded new distributors and private label partner.
Ships that contributed to our top line results importantly, this revenue growth growth was achieved while laying the groundwork for improved profitability, we strategically shifted towards higher margin work sport branded products and began phasing out lower margin offerings, especially in the latter part of the year as a result gross profit from the year improve.
And we saw a strong uptick in margins by year end.
Michael: Which Michael will detail shortly.
Speaker Change: Overall fiscal year 'twenty four results underscore that our investments in U S manufacturing and product development are translating into accelerating sales.
Michael: In a stronger market position.
Michael: In the fourth quarter of 2024, we continue to build on our success with our highest quarterly revenue to date Q4 net sales were approximately $293 million a sharp increase from 839000 in Q4 the year before.
Michael: This nearly 250% year over year Q4 growth reflects robust demand for both of our both our E Commerce platform and our distribution partners. During the holiday season. Our Q4 performance also meant that we exceeded all of our full year 'twenty for revenue guidance, which was previously set to be.
Michael: Between $6 million to $8 million, we came in above the high end of that range.
Michael: In addition to strong top line results. We achieved notable gross margin expansion in Q4 in fact December 2024 gross margin percentage is nearly three times that of Q3 higher than 20% gross margin of profit.
Michael: And that is improving for.
Michael: For the whole quarter gross margins improved by 30% compared to Q3, thanks to our shift towards higher value work for branded products and a better absorption of products our production overhead as volumes increased economies of scale as we call. It. This is a clear indication that our strategic pivot to prioritize margin by focusing on our own product lines and reducing lower margin.
Michael: Private label sales is paying off.
Michael: Summary, summing up Q4.
Speaker Change: We ended the year with excellent sales momentum and a trajectory of improving profitability metrics now Michael Johnson, our CFO will walk you through the financial details of both the quarter and the full year.
Michael Johnson: Thank you, Steve Let's review, our financial performance in more detail starting with the income statement for fiscal 2024 net sales were $4 eight.
Michael Johnson: 848 million up 455% and 153 million in 2023.
Michael Johnson: Growth was broad based driven by increased sales of private label partners surge in online consumer sales and the onboarding of new dealers and distributors during the year Q.
Michael Johnson: Q4, 2024, and net sales contributed approximately $293 million of that total.
Michael Johnson: Which resulted in revenue of approximately $6 million for the second half of the fiscal year.
Michael Johnson: This figure represents 71% of work sports annual revenue and demonstrates how our revenue acceleration intensified in the back half of the year.
Michael Johnson: Notably another interesting shift that occurred in the back half of 'twenty 'twenty four rapid increase in GOR export branded E Commerce sales and the decrease of lower margin private label sales.
Michael Johnson: Okay.
Michael Johnson: Cost of sales for fiscal 2024 was $7 five 8 million up from $1. Two 9 million in 2023, largely corresponding to the higher sales volume.
Michael Johnson: Representing 80 miles of sudden lot sales in 2020 versus 84% in 2023.
Michael Johnson: Increase in cost of sales as a percentage of revenue was mainly due to strategic discounting initiatives in our direct to consumer channel as well as higher overhead allocation early production rates with volumes were lower.
Michael Johnson: For the full year 2024.
Michael Johnson: Most profit reached approximately.
Michael Johnson: 910.
Michael Johnson: Gross margin of about 11%.
Michael Johnson: However, as demonstrated by December strong performance.
Michael Johnson: Margins exceeding 20% and we've already begun benefiting from economies of scale.
Michael Johnson: Premium product launches the continued production ramp up and expanding sales initiatives. We expect fiscal 2025 gross margins to align more closely with those achieved in December 2020 for supporting our growth strategy.
Michael Johnson: Our fiscal 2020 for operating loss of $16 $1 6 million compared to $14 nine 3 million in 2023, the higher loss reflects the increased operating expenses tied to scaling our business and product development.
Michael Johnson: However, on a per share basis, our loss improved significantly year over year from.
Michael Johnson: From $8 44 songs from 2023 to $5 84, and 2024, 31% improvement.
Michael Johnson: Satisfied reporting a loss we emphasized that these investments are necessary to position where export for robust growth and future profitability.
Michael Johnson: We expect net operating loss further decreased significantly and move towards net income in the near future as our revenue continues to scale and as the cost reductions we implemented in late 2024 take effect.
Michael Johnson: With the strong margins seen in December 2024.
Michael Johnson: Tolerating branded sales and recently announced expanded dealership network, we are well positioned to target breakeven and profitability in the near term.
Later in this call will outline key initiatives and projections driving our continued success in the coming year.
Yeah.
Michael Johnson: Turning to the balance sheet, our financial position at year end 2024 reflects capital raises and asset growth are encouraging year, which has strengthened our foundation.
Michael Johnson: Cash and liquidity as of December 31, 2024, we had $4 eight 8 million in cash and cash equivalents on hand.
Michael Johnson: Does that $3 $3 7 million at the end of 2023 bolstered by financing activities during the year, including equity issuance and warrant exercises and cash inflows from higher sale we.
Michael Johnson: We also maintained 892000 and availability on our revolving credit line for additional liquidity if needed.
Michael Johnson: And believe our cash position and credit availability provides a solid runway to support our growth plans.
Michael Johnson: Also in March 2025, we completed the warrant inducement transaction or the key warrant holder.
Michael Johnson: <unk> and net proceeds of $6 $3 million.
Michael Johnson: Working capital was $7 3 million at the end of 2020 for substantial improvement from $196 million at the end of 2023.
Michael Johnson: The increase in working capital is largely due to the cash increases as a result of the equity capital, we raised and higher inventory balance in support of sales this increase.
Michael Johnson: Working capital gives us flexibility to manage our operations and obligations.
Michael Johnson: Current ratio on overall liquidity has improved accordingly, leaving some going concern pressures that existed a year ago.
Michael Johnson: We had inventories of $5 $109 million on December 31, 2024, representing roughly 50% of our current assets. We intentionally built up inventory during the year, particularly with raw materials and finished Tal covered units to ensuring we can promptly fulfill customer demand orders as demand grows.
Michael Johnson: This inventory includes components for a L series powers and legacy products that we deem it appropriately balanced.
Michael Johnson: Process in place to monitor for any slow moving or obsolete stock.
Michael Johnson: <unk> production purchasing accordingly.
Michael Johnson: Notably our inventory at the end of Q3 was about $6. One guy. So we did utilize some inventory in Q4 build a surge in sales which contributed to the revenue increase.
Michael Johnson: We view our inventory level of the healthy support for our 2025 sales target.
Michael Johnson: Meeting substantial further investment in working capital.
Michael Johnson: We also have unit inventory levels sufficient to combat short term tariff related baxalta while.
Michael Johnson: While the long term impacts will be evaluated later this year.
Michael Johnson: We have a relatively clean balance sheet with long term debt largely related to the refinancing refinancing the building mortgage.
Michael Johnson: Primary liabilities or accounts payable and accrued expenses associated with our operations.
Michael Johnson: March 2000, 2025 subsequent to the 2024 year and took a proactive step to strengthen our capital structure by enacting a one for 10 reverse stock split.
Michael Johnson: This corporate action effective March 18th 2025 reduced our number of outstanding common shares and increase our stock price. Accordingly reverse split was intended to help maintain compliance with NASDAQ listing requirements and make our stock more on track to a broader base of investors. It's important to note that this does not affect our total equity or are you on a per share ownership percentage of any.
Michael Johnson: Purely a structural change to the share count.
Michael Johnson: Overall, our year end balance sheet reflects coming that is investing in growth, but also shoring up liquidity, we have the assets needed mainly cash inventory to drive our next phase of expansion lean liability profile now.
Stephen: Now back to Stephen for some key insights on the business operations.
Stephen: Thank you Mike Thank you very much.
Stephen: Beyond the financial numbers 2024 was Europe significant operational and strategic <unk>.
Stephen: Progress for <unk> I'd like to highlight just some of those key milestones we achieved that we're setting that are setting the stage for our future.
Stephen: In Q4 last year, we began making inroads into government and fleet sectors on October three 2024, we announced an expansion of sales to U S. Federal government agencies, we secured initial orders.
Stephen: Our government sales.
Stephen: From a government agency, making works worth entry, making works for its entry into the sector.
Stephen: While revenue from the government sales was modest in 2020 for this development strategic is strategically important that validates the appeal of our made in America tonneau cover for government use and positions us to pursue larger fleet opportunities in 2025, we are actively pursuing. Furthermore, we've already we're also actively speaking with general fleet based cut.
Stephen: In 2025, especially for the upcoming Solus and core products a lot of exciting developments there to come.
Stephen: A cornerstone achievement in Q4 of last year was the commencement of production of our newest premium tonneau cover the works for a L. Fourth we announced on October 23rd 2024 that we would begin the ale for production as of December 15th that year 2024, and I am pleased to report that the <unk> is now selling in the market under full <unk>.
Stephen: <unk> production the al four is our top of the line hard folding tunnel cover offering full truck that access in our refined designs, we had a successful preorder campaign.
Stephen: For the L. Four indicating strong market interest in anticipation of volume production, we increased our production workforce by over 30% during Q4 of last year hiring additional assembly technicians and machine operators are west Seneca facility.
Stephen: Thanks to these efforts we hit our manufacturing readiness target and began building initial ale four units by mid December.
Stephen: While revenue from the Eagle Ford not contribute materially to Q4 of last year since shipments only began after year end, we started shipping <unk> orders in early February of this year.
Stephen: And listed the al four for sale in our E Commerce platform in late February the Alpha launch is significant for works for it as it expands our product lineup at the high end and early feedback from customers has been positive on the quality and functionality of this cover an overall success.
Stephen: This cover will be a very big part of our story in 2025.
Stephen: Product pipeline extension, introducing the <unk> III in parallel with the <unk>, we have been developing another heart will then cover variant called the HD three on January 7th of this year, we announced plans to launch the works for <unk> three in spring of this year. The HD three is a heavy duty.
Stephen: Business to business oriented tonneau cover that builds on our L. Three design, but with enhanced materials and an additional watch mechanism for greater durability. This key.
Stephen: Strategy with the <unk> threes to cater to commercial fleet customers for example business out fittings.
Stephen: Work truck fleets with.
Stephen: With a product that can withstand rigorous use we plan to offer the <unk> three at wholesale pricing exclusively to our business to business clients, which.
Stephen: Which include dealers outfitters and fleet operators by doing so we protect <unk> partners' margins and encourage them to push volume. The <unk> III is expected to begin production and sales in the coming months, adding another revenue stream in this year of 2025, more importantly, rounding out a full and robust line of quality.
Stephen: Durable tunnel covers made right here in the USA.
Stephen: Innovation is at the core of work sports mission.
Stephen: Last year, we made substantial progress not just in our traditional tonneau cover products, but also in our clean energy accessories, which are poised to unlock new markets for us.
Start with solar the solar tonneau cover.
Stephen: Redesigned for cost efficiency.
Stephen: Our highly anticipated solar solar tunnel solar integrated tonneau cover advance through critical development milestones in 2024 on October 31st last year, we announced a strategic redesign of the colas.
Stephen: Ill cover which will save us several hundred dollars and cost per unit and increase its compatibility with a wider range of portable power systems. Our goal is to officially launch solus in mid 2025 around Q2 Q3 of this year.
Stephen: Core mobile power system.
Stephen: Progress towards launch alongside Solus, our portable core battery system, which can integrate with the solas cover or operate independently.
Stephen: Significant progress last year, the core underwent alpha testing.
Stephen: As we refined our battery management software and safety systems, our first generation core scheduled for release in mid 2025. Additionally, we partnered with cooler technology group a leader in battery safety internal thermal management to enhance cores battery pack design. This collaborate collaboration announced in February of this year centers on advanced thermal runaway.
Stephen: Protection AI integrated battery management, our ongoing research and development efforts with strategic partners like cooler aimed to enhance the performance statics and cost efficiency of future generations are core products.
Stephen: Very exciting Tirrivee synergy Eythor Lux heat pump breakthrough beyond our vehicle focused products, our subsidiary Tirrivee synergy achieved remarkable R&D breakthroughs in 2024 that have implications for the broader clean tech markets on February 11th of this year, we announced that <unk> has developed a cold.
Stephen: Heat pump system named <unk> with two major innovations first elimination of deep roster cycles. The Asa Lux heat pump can operate without the need for traditional deep rostrate cycles deeper off cycles are common drawback and heat pumps were the system periodically stops heating to melt ice buildup in the unit itself.
Stephen: Eliminating this requirement means continuous efficient heating even in freezing and extremely cold conditions.
Stephen: Altra low temperature temperature operation the system can function in ambient temperatures as low as negative 57 degrees Fahrenheit bar below the operation operating range of typical commercial heat pumps. This is a groundbreaking capability, making it easier looks potentially viable and extreme arctic environments or applications that were previously impossible.
Stephen: Both can be serviced by heat pumps.
Stephen: These advances collectively branded zero Frost trademark technology <unk>.
Stephen: We've attracted significant global commercial interests.
Stephen: We believe tirrivee synergies innovations hold the potential to revolutionize heat heating solutions across multiple sectors residential commercial HVAC to electrical electric vehicle applications, especially in cold climates.
Stephen: Those still at the prototype stage, we're actively exploring opportunities to monetize the intellectual property through strategic partnerships possible licensing agreements and manufacturing collaborations.
Stephen: Among our recent announcement hundreds of companies, including several multibillion dollar corporations have expressed interest in zero Prost underscoring a strong market demand we firmly believe that the value of this transformative technology is not yet reflected in works for its current stock valuation.
Stephen: A little bit about intellectual property.
Stephen: In tandem with our product innovation, we have always been very active in protecting our inventions as of the end of last year worked sports patent portfolio expanded by 25% year over year, we now hold numerous utility and design patents across the U S and international jurisdictions, covering our tonneau cover technologies solar technologies and energy storage solutions.
Stephen: As well as the ether Luxe products works for holds a robust and growing global portfolio of over 170 approved registered and pending patents and trademarks.
Stephen: In January of this year, we joined the lot network, a global consortium aimed at safeguarding in innovation against patent trolls.
Stephen: This move helps us helps us protect intellectual property and gives us access to a broad community of tech companies committed to cross licensing for defensive purposes for our investors our growing patent portfolio and participation in organizations like lock network underscore that works for it is building significant proprietary technologies and taking steps to secure them. This.
Stephen: Intangible asset base is an important part of our company's value.
Stephen: Let's speak a little bit about market expansion strengthening sales channels.
Stephen: We dramatically expanded our sales and distribution networks through 2025, and we added new dealers and wholesalers across the U S and Canada and deepened our relationships with major online marketplaces as noted online retailers, including our own E Commerce site and platforms like Amazon Walmart and ebay accounted for 58% of our sales in 2024 up from.
Stephen: Just 7% the year before in 2023. This is a testament to our effective digital marketing and fulfillment fulfillment capabilities. We're also in active discussions with multiple large distributors and a network of nationwide dealers in the U S to carry our products, we expect to share more information on these discussions throughout the year, notably the company's dealer.
Stephen: Network has expanded by 30% in just the first two months of this year alone following an ongoing production ramp up driven by strong early feedback and demand for the <unk> for premium tonneau cover. This dealer network expansion is expected to continue through 2025 and beyond and contribute to significant revenue increases.
Speaker Change: Pass it back to Mike Johnson, our CFO with our fiscal year 2025 outlook and guidance.
Speaker Change: Thanks, Steve.
Speaker Change: As we look ahead, we're very optimistic about where exports trajectory in 2025, we expect to carry forward the momentum from Q4 2024 into sustained growth.
Speaker Change: Performance.
Speaker Change: Sure outlook and guidance for the year.
Speaker Change: Our revenue growth, we're forecasting another year of significant revenue expansion in 2025, driven by both our core tonneau cover business and new product introductions based on our current disappear.
Speaker Change: We're targeting full year 2025 revenues in the range of 20 to $34 5 million.
Speaker Change: Hitting the midpoint of that range would represent roughly a tripling of our 2020 for running this guidance is supported by our current order pipeline.
Speaker Change: Dissipated uptake of the <unk> III covers and expect the market lots of solid leasing core in the second half of the year.
Speaker Change: We have a line of sight on continued strength in our <unk> E Commerce channel and growing contributions from <unk>, including distributors private labels and fleet customers.
Speaker Change: Of course as a growth company our guidance range is broad and there's execution work ahead to achieve these numbers, but we want to provide the market with our baseline expectations given the opportunities we see.
Speaker Change: But also margin improvement cash flow positivity as our next major goalposts, we're encouraged by the margin improvement seen in the latter part of Q4 2024, and we expect gross margin to continue to increase in 2025 as a product mix shift further towards higher margin items and as we benefit from economies of scale.
Speaker Change: By phasing out our lower margin private label offerings and focusing on our own branded products.
Speaker Change: We anticipate gross margin will step up each quarter.
Speaker Change: Currently for credit forecast gross margin, reaching a 25% to 30% range or higher by late 2025.
Speaker Change: Various especially added in consideration, but sold leasing core which are expected carry healthy margins come online.
Speaker Change: While we continue to invest in R&D and sales and support growth.
Speaker Change: We expect a more moderate increase in operating expenses relative to revenue growth in 2025, which should drive improved EBITDA results.
Speaker Change: Our overarching financial objective for 2025 significantly closer to cash flow breakeven and ultimately to achieve cash flow positivity by late 2025 early 2020.
Speaker Change: The revenue growth and margin gains I, just described we believe where export can reach cash flow breakeven.
Speaker Change: This is an ambitious goal, but one we are committed to achieving it will likely require hitting the higher end of our revenue guidance and maintaining cost discipline.
Speaker Change: And to manage operating expenses carefully balancing growth investments with efficiency.
Speaker Change: Sure outperform on sales and margins, we would pull ahead of timing of reaching breakeven importantly, even as we strive for profitability.
Speaker Change: Maintaining sufficient cash resilience and access to capital to fund our growth initiatives.
Speaker Change: Pursuing growth at the expense of liquidity.
Speaker Change: With respect to capital expenditures, we anticipate capital expenditure needs in 2025 remain relatively low.
Speaker Change: Of our required production equipment. The tunnel coverage is already in place when Boston, some additional tooling for production ramp up and possibly automation enhancements to improve throughput, but these are not expected to be material.
Speaker Change: The launch of solar from core may require some bathroom introduction settlement, but again, we expect to manage it within our operating cash flow as the year progresses.
Speaker Change: We do not foresee, adding new facilities or major machinery purchases in 2025, our existing infrastructure can handle the increased volume.
Speaker Change: In summary, our 2025 outlook is one of robust growth with improving financial performance and set clear targets aggressively growth expand margins and achieve a sustainable financial model by year as well.
Speaker Change: We will report our progress each quarter and we are confident in our direction.
Speaker Change: Rob off the Steve with concluding remarks.
Rob: Thank you Mike.
Speaker Change: To achieve the financial targets Michael outlined we are focused on our strategic plans for 2025 centered on product execution market expansion and operational excellence I want to reiterate.
Speaker Change: Far and work toward has come in the past year and where we're headed.
Speaker Change: Last year was a record year for us by every measure record revenue expanded production and multiple new products in the pipeline, we transformed from a pre revenue developmental company into a growing manufacturing and product company with over $8 million in sales and our presence on major major channels.
Speaker Change: We also made critical investments in innovation that set us apart from the competition, while improving our balance sheet and liquidity.
Speaker Change: We are as we move through 2025, we are laser focused on execution delivering our products to more customers launching on launching our new offerings successfully and moving the company towards profitability.
Speaker Change: Goals, we've laid out on revenue margins and cash flow.
Speaker Change: Largely but our team firmly believes them to be achievable.
Speaker Change: And we are motivated and are prepared to achieve them.
Speaker Change: We believe that the combination of our made in America tunnel covers an upcoming coming clean energy solutions.
Speaker Change: Created new unique value proposition there is a significant market opportunity at the Nexus of automotive accessories in renewable energy and works for it is positioned to be a leader in this space.
Speaker Change: I'm equally excited about the future of our subsidiary <unk> energy the Acer Lux product line holds tremendous potential and I firmly believe it will deliver significant value to <unk> shareholders.
Speaker Change: I want to thank our entire workspace team.
Speaker Change: For their hard work and dedication in last year and in this year. So far we will accomplish what we've accomplished was truly a team effort from engineering to production to sales to back office support.
Speaker Change: Okay.
Speaker Change: I also want to thank our board and our shareholders for their continued support and trust as a shareholder myself I am excited about what the value what the future holds for workspace, we enter 2025 with confidence our strong product lineup and a growing brand reputation.
Speaker Change: To our investors and analysts listening. Thank you for your time here today and for your interest in <unk>, we are committed to transparent communications and delivering on our promises we look forward to updating you on our progress in the quarters ahead, as we work to create sustainable long term value.
Speaker Change: I would like to thank everyone for attending this concludes our prepared remarks and operator. Please open the line for questions.
Speaker Change: Thank you Tate Sullivan I see you have your hand up you May go ahead.
Tate Sullivan: Thank you Steven Thanks for the comments and can you first on online sales.
Tate Sullivan: Based on my account about 82% of revenue.
Tate Sullivan: In the fourth quarter.
Speaker Change: And then a lot from third party I mean with your margin guidance for second half of 'twenty five are nearing the end of the year is it are you implying that most of those sales will come from your own platform or platform, such as ebay Amazon Walmart et cetera. Please.
Speaker Change: Our our hope our push is that work sport will see 50 50, 50% sales.
Speaker Change: Product through its online.
Speaker Change: Platform.
Speaker Change: And then 50% of its sales are close to where it is right now.
Speaker Change: Of sales through dealer and business to business.
Speaker Change: Units per.
Speaker Change: <unk>.
Speaker Change: I am personally not a massive fan of marketplaces, theyre expensive and there were inferior products typically survive and thrive.
Speaker Change: Amazon and some of ebay.
Speaker Change: So we're going to keenly focus on driving revenue and sales and traffic to our website. So we can re target these customers and build relationships with them and then we're going to keenly focus on marketing spend to drive attention and demand through our dealers. So in essence visit our site bite on our site or buy it through a dealer and.
Speaker Change: It is further bolstered by offering dealer only an online exclusive products. So we're going to offer different products on our website as dealers. So that we keep things competitive within the two different markets.
Speaker Change: If you can can you give us an overview of the online buyers through your platform or are they buying multiple covers are they rob <unk> or are they spread across the country can you give any sort of general overview.
Speaker Change: To the best of my abilities Theres, a stronger concentration in the in the South Southern Midwest like States of Texas, and Florida, and along the Eastern corridor.
Speaker Change: California is also a very strong state geographically speaking are customers or individual buyers.
Speaker Change: Retail consumers DIY by it and install it themselves and then we have oftentimes, we see like businesses purchasing online like fleets landscaping companies.
Speaker Change: You name it the gamut of businesses will buy multiple to outfit their fleet soft covers hard covers on our website and then we're seeing a lot of referrals.
Speaker Change: Family and friends are showing the products, saying I got this encouraging people to buy trucks and by cover so it seems to be a great ecosystem, but it's mostly individual retail consumers.
Speaker Change: Spread amongst the coastal USA, and then a little bit of concentration in the Midwest.
Speaker Change: Thank you one more for me.
Speaker Change: With the solar cover are you planning on the redesign are you planning to launch it with the core in the middle of 'twenty fiber or to be determined so we're going to offer three.
Speaker Change: Three different paths path one is solar cover alone.
Speaker Change: So that you can kind of be Y O D bring your own device like your own battery generator.
Speaker Change: Then we think that the most popular product offering will be the middle which will be the bundle.
Speaker Change: Internally, we call it the go kit or the go bundle, which will be the solar tonneau cover our mounting hardware, which is proprietary and very excited.
Speaker Change: And our core battery systems, you turn your truck into a micro grid.
Speaker Change: And then Alternatively also a very large addressable market is core only the core only as we always say no truck necessary. So the core could be for anybody anywhere it doesn't matter. If they have a driver's license age is not important it just for anyone that's needs power on the Gulf.
Speaker Change: Those three.
Speaker Change: <unk> offerings will be available, but we're going to focus on.
Speaker Change: On the larger power units as opposed to being a small power unit like the power like the charge your cell phone. The core is not really meant for that the core is meant to power the job site. The campsite the house natural disasters first responders.
Speaker Change: Power for bigger events.
Speaker Change: Thank you.
Speaker Change: Welcome.
Speaker Change: Thank you Scott.
Speaker Change: Scott Buck I see you had your hand up do you still have the question.
Speaker Change: Yes, guys. Thanks for the time.
Speaker Change: Steven.
Speaker Change: How should we think about the difference in the high end versus the low end of the guided revenue range of 25 to.
Speaker Change: To meet that high ended the distribution is it something in the macro what what needs to go right I guess to be 30 plus of revenue that you're good.
Speaker Change: Good question. So we believe that our trajectory on the low end is tonneau cover alone, which is building us to about 20% to 30% of what we feel is.
Speaker Change: Is.
Speaker Change: Is a good first.
Speaker Change: Our goal for <unk>. So let me say differently, we think that we can build the business to about $100 million tonneau cover sales alone.
Speaker Change: <unk>, having to reach deeper into the markets like Oems and these types of things. So we think that we can grow tonneau cover only sales.
Speaker Change: <unk> III <unk> three are soft cover lineups, we feel that that product those product lines alone could carry us to that $20 million Mark roughly right.
Speaker Change: Delta between 20 and 30.
Speaker Change: 35, roughly is going to be the uptake of our solus and core products.
Speaker Change: And there's with geopolitical issues right now, there's just a lot of moving parts around semiconductors batteries and solar panels, new energy products and these all these products ultimately come from like wafers for solar batteries for ourselves for our packs. They ultimately come from Asia regions.
Speaker Change: So it's just going to be if things are going to slow if inflation is going to hit if theres going to be tariffs or stop stop ships. These types of things.
Speaker Change: But for all intents and purposes, we don't see major roadblocks and we're pretty good at problem solving so to answer the question. The low end as tunnel covers only the top end is a is a a strong start to our battery systems and solar launch.
Speaker Change: And that's why we're pretty optimistic we think both are reasonable.
Speaker Change: Great that's helpful and with the new product launches should we expect an uptick in sales and marketing expense around those.
Speaker Change: Yes, we have the person actually to two when you're staring at the screen the person to my right to left where the most is that's our Chris Menard, our chief marketing CMO and he's he's involved in marketing and we're really really keen on growing.
Speaker Change: Paid advertising.
Speaker Change: And then and then user generated content and all the different things. So we're going to ramp up significantly, but we have to ramp slowly because otherwise our consumer acquisition cost goes very high for a few months and it doesn't look so good on the balance sheet.
Speaker Change: So we are we're pretty good at being able to feather for lack of a better word.
Speaker Change: <unk> growing our marketplace and according consumers and we find out as we grow our marketing and we shift from trying to sell a product branding our product. That's one it's a tide floats. Many other ships, where we start getting more inbound interest from businesses and government entities from Oems et cetera et cetera.
Speaker Change: Great. That's helpful and now the expectation for breakeven by year end 'twenty five as great strategically moving forward, how should we think about the company balancing improving profitability versus reinvesting in the business and driving top line. So we're going to so as products become.
Speaker Change: Legacy with L. Three becomes stable and steadfast in the in the market.
Speaker Change: I will hand, it off to our group of Engineers Division of our group of engineers in Missouri, where it'll be in the Ci program. The continual improvement program, which basically means we're going to make it better smarter faster and ultimately hopefully less expensive now that doesn't continue improvement tends to mean try to reduce.
Speaker Change: Material make the aluminum thinner make the plastic later, that's not where we're going to do we're actually going to find ways to make it more robust, but use clever engineering to be able to save costs and of course through economies of scale. So we're going to improve we're going to improve.
Speaker Change: Margins and profits through engineering brainpower as opposed to lightening of shaving material, which makes it an inferior product, which is what our competitors have been doing recently.
Steve: Okay, and then last question for me Steve.
Speaker Change: Right.
Speaker Change: The increase in demand in 'twenty, four and what you're expecting 25, just remind us where you stand on the manufacturing capacity level and at what production level do you actually need to put some additional capex investments into the business.
Speaker Change: Thats a good question. So right now we have two lines capable of producing.
Speaker Change: We've been able to do more with what we have than we thought.
Speaker Change: So it's difficult there's a lot of core correlated or peripheral assumptions I have to make but in broad strokes.
Speaker Change: One of our production lines is capable of making 100 covers per shift we now have two production lines and the opportunity for three shifts.
Speaker Change: Which would represent all of what we believed we would be able to get from our entire 160000 square foot facility in New York.
Speaker Change: With six or nine lines.
Speaker Change: So in essence, we're far more efficient than we thought we would be and that's again because of we have the brightest minds in engineering.
Speaker Change: So we don't think that we're going to have to invest we initially thought that we would have to invest millions of dollars in expanding the building.
Speaker Change: But with vendor managed inventory.
Speaker Change: And our efficiencies we feel that all we may have to do is invest in more machinery, which is easily finance or lease or et cetera, as opposed to cash outlay. So we think that.
Speaker Change: Dramatically reduce.
Speaker Change: Our our capex on expansion, so basically the building expansion would've been tens of millions, but now we're talking hundreds of thousands and in some new machinery to get there.
Speaker Change: Great well I appreciate the added color guys and congrats on the progress. Thank you Scott. Thank you Scott, we say hand up from Poe front as well.
Speaker Change: Yes, hi, good morning can you just frame for us the range on the revenue forecast or guidance.
Speaker Change: I think historically, you said that to hit $20 million.
Speaker Change: To do $20 million just from the tone on covers alone.
Speaker Change: So could you just.
Speaker Change: With that.
Speaker Change: Starting point can you frame, how you get to $34 5 million. What is included in that in other words, how much of the incremental revenue add potentially would come from solas in core and is there anything from the tariff fees.
Speaker Change: And your revenue potential guidance.
Speaker Change: Yes, good question Paul.
Speaker Change: On it a little bit but to make it a little bit clearer.
Speaker Change: The $20 million the low end of our forecast is from our standard product offerings tunnel covers only which would basically be on the trajectory that we're already on with the growth in ups absorption through dealers and online expansion. The al four has a higher dollar figure per sale.
Speaker Change: As well as a higher margin or profit per sale.
Speaker Change: So we believe that the low end of the spectrum encompasses exclusively selling only tunnel covers assuming everything else goes wrong for the solas and the core.
Speaker Change: With the solas and the core being in like.
Speaker Change: In the later stages of development.
Speaker Change: Testing in these types of things we've anticipated.
Speaker Change: About 5000 units of Solas in core sold at about an average price of $3000 per kit to encompass the other $15 million in sales so a very modest.
Speaker Change: Number in terms of 5000 units.
Speaker Change: If we were to think about.
Speaker Change: Six months, if we were to launch it in the second half of the year that would only be 833 units a month.
Speaker Change: Or like 27 units, a day or kits, which is which is relatively modest.
Speaker Change: And the core again being roughly a 500 dollar price tag.
Speaker Change: Could could sell in multiple so we think that we're going to sell more core units to consumers that don't have drivers licenses at all or don't driver.
Speaker Change: The larger demographic globally.
Speaker Change: So we think that for every solus will sell we'll sell a multiple of the core units because it's for a broader consumer market.
Speaker Change: And Steve could you just add.
Speaker Change: Go ahead Paul.
Speaker Change: Just to clarify it.
Speaker Change: If the base revenue for <unk> versus 'twenty.
Speaker Change: And that's the low end of the guidance what are the total coverage and the upper end of the guidance of $34 $5 million is it $25 million and then the incremental 10 would come from Solas in core and I think.
Speaker Change: Sort of if you.
Speaker Change: I would confirm that Theres no expected revenues from.
Speaker Change: The tariff fees.
Speaker Change: That said 26 event at the earliest.
Speaker Change: I'll, let <unk> speak after I'm done and once that can be fraud, meda had some remarks, there but potent to answer your question.
Speaker Change: We're not forecasting any sales of territories ether luxe products, not because we don't intend them, but because we are being highly conservative with our product is still in research and development. So so to that extent.
Speaker Change: We are moving ahead, and we think that theres going to be some very expedient milestones and catalysts there on that on that line, but we don't want to we don't want to reach too far into the future where theres. So many things that have to go right.
Speaker Change: With that business. So let me let me let me summarize that in a statement, we believe <unk> will show up on the balance sheet.
Speaker Change: As a source of revenue, but we don't want to forecast that this early on in the year. So, it's a moving target and and we'd rather over deliver than than over promise.
Speaker Change: Secondarily with the balance of tunnel covers and.
Speaker Change: And in corn, and soulless I think that it's and I'll, let Ron speak, but I think it's easy to just assume the $20 million range would be tunnel covers only around 2021 1922, something like that and then all of the Delta would be.
Speaker Change: The difference between the 20 and $35 million top end forecast would be mostly solus and core sales with core <unk>.
Speaker Change: Leading but I'll turn it to Ron to add a little bit more color in correction if I'm if he sees things differently.
Speaker Change: That's fairly spot on Steve, especially with the eighth largest commentary while we do think.
Speaker Change: We can achieve some levels of revenues from that business unit.
Speaker Change: We don't want to forecast it is as it is still in late stage commercial development.
Speaker Change: And we'll be providing updates as well as exciting milestone to say as they built regarding the telecom revenues $20 million.
Speaker Change: <unk> is a pretty baseline estimate.
Speaker Change: It can push upwards toe.
Speaker Change: The upper end being up to 20 to 25.
Speaker Change: The remaining Delta as Steve said would be the solas in core.
Speaker Change: Function in late Q2 Q3.
Paul: Do you have any other questions Paul.
Speaker Change: Thank you.
Speaker Change: Mike.
Speaker Change: Your guidance also just talks about potentially hitting gross margin.
Speaker Change: By the fourth quarter, and then what would you say, 25% to 30% range.
Speaker Change: Can you give us a starting point in other words, where are you currently on your gross margins. So what's the low end if you had a range for.
Speaker Change: Gross margin for the year, what would it be.
Speaker Change: Well our Q4 late in Q4 December gross margins of about 21%.
Speaker Change: So as we start in that.
Speaker Change: Some of the older products doesn't include the <unk> four which is.
Speaker Change: Premium product.
Speaker Change: So as 2025 folks in sales more.
Speaker Change: More on <unk>, four and the higher products we've dropped.
Speaker Change: Theres a lot of dealer incentives are issued in Q4.
Speaker Change: In 2024.
Speaker Change: We.
Speaker Change: Significantly scaled back the private labels. So if we can.
Speaker Change: Take that 21%.
Speaker Change: <unk>.
Speaker Change: Earned on <unk>, III and some of our lower margin products that were looking to push out and focus on <unk> four and <unk> three in 2025 that should get us to that targeted gross margin.
Speaker Change: Steve if you want to add anything on to that as well no you hit it on the head Paul Yes in essence last year's gross margin. If you look at it yearly it was diluted heavily by a very inefficient production. We just started so the engines are always the least efficient when they first start.
Speaker Change: Metaphorically speaking and then also we were selling the L. Three which is more geared towards direct to consumer sales as opposed to the discounted <unk> private label sales. So once we you could see once we blended we got into Q4, we had already improved margins to 21% and that's before we really recognize the IL four which really takes.
Speaker Change: Things into a much deeper stride into margin. So we think that as we blend in.
Speaker Change: Our improved efficiencies and economies of scales are our balanced lines in operational efficiencies and higher margin sales I E <unk>.
Speaker Change: Branded no more private label for higher margin I think that a good baseline would be.
Speaker Change: The 20% margin and then I think that.
Speaker Change: The 30% is highly achievable as a gross margin and we're keenly focused on EBITDA this year.
Speaker Change: But that's something we're going to synchrony <unk> as the year plays out a bit deeper.
Speaker Change: Okay.
Mid twenty's as far as the full year gross margin Wouldnt would.
Speaker Change: Would you argue argue against that or do you think that's a reasonable target for <unk>.
Speaker Change: Forecasting out.
Speaker Change: A reasonable target a reasonable target in terms of gross margin.
Speaker Change: And then keeping operational efficiencies lean.
Speaker Change: Sorry, Lee keeping operational overhead lean as we have you can see that the increase year over year was not linear to the increase in sales.
Speaker Change: So we're going to try to basically make be as profitable as we can be the 25% is a good baseline.
Speaker Change: And then we're going to try to.
Speaker Change: Keep up keep lean so we see we see the cash flow positivity in between.
Speaker Change: Okay and then.
Speaker Change: You expense to R&D.
Speaker Change: That's $2 3 million.
Speaker Change: 2024 can you highlight the projects that <unk>.
Speaker Change: Drove that that increase in R&D and then also could you highlight for us potentially a targeted range for R&D in 2025 and those are good questions.
I'm not sure I've seen the specifics.
Speaker Change: Elements that comprise.
Speaker Change: I haven't committed to memory or have them in front of me, maybe for Ron or Mike Me, no, but I can speak.
Speaker Change: On broad strokes pull that last year in research and development.
Speaker Change: Was a considerable amount of investments in the prototyping of the core.
Speaker Change: So the core.
Speaker Change: Was extremely expensive in terms of getting our initial battery packs and initial PCB. So the power electronics Department.
Speaker Change: Probably consumed a huge amount of that but those are onetime non reoccurring nonexistent now because it's.
Speaker Change: It's been polishing as opposed to building mode.
Speaker Change: So.
Speaker Change: Outside of that I think that there were prototype tooling sets that were made.
Speaker Change: And in these onetime tooling costs as you know for like other metal tools are for metal production of plastic production can be.
Speaker Change: Tens if not hundreds of thousands of dollars and that's just the cost of doing business, but.
Speaker Change: Im not sure Mike if you know the specificity there, but I know that this year's R&D expenses are going to be significantly lower because we've done all the heavy lifting last year. We spent all of the machinery production money in 'twenty three.
Speaker Change: And a very little bit in 'twenty four we spent all the R&D money in 'twenty four and I think that now it's time to reap from the seeds that we've shown.
Speaker Change: Yes, you got it.
Speaker Change: Basically yes.
Speaker Change: So Steven.
Speaker Change: Heat pumps R&D is not R&D and.
Speaker Change: The development of the heat pump is not R&D.
Speaker Change: R&D intensive.
Speaker Change: Sure.
Speaker Change: Can you just.
Speaker Change: Just frame that for me sure yes.
Speaker Change: Sorry, if I sounded like I was interrupted.
Speaker Change: Lorenzo Rossi, who will start joining us on the earning calls the CEO of that company is extremely.
Speaker Change: <unk> and his abilities too.
Speaker Change: <unk> done on a shoestring.
Speaker Change: Far more than I was able to as I work developed works board.
Speaker Change: So to that extent.
Speaker Change: It's a very modest R&D budget and Theyre doing everything like are very much she'll skunkworks solar Enzo is working with our local team to him that I've known for over a decade and I've worked with for this group for a very long time and they are very skunkworks and by definition a skunk works is they get things done themselves as opposed to.
Speaker Change: As opposed to sub out prototyping and these types of things that can cost it could see significant cost. So the team is lean and the team is small.
Speaker Change: And they partnered with.
Speaker Change: Supply chain manufacturers that they found all around the world that are able to get things done.
Speaker Change: And their investment in our research and development so to define what that means is.
Speaker Change: We have a coil supplier, that's making our prototype coils in essence for free in order in order to get the larger business. When we go into production. So we're leveraging our relationships.
Speaker Change: As well in our good good.
Speaker Change: Good character of the business.
Speaker Change: Okay. If I could just ask one last question on the capital raising side.
Speaker Change: You did the warrant inducement transaction at the end of February.
Speaker Change: Can you just.
Speaker Change: Explain to me why why what the timing of that.
Speaker Change: The transaction was and then more importantly can you.
Speaker Change: We're fully it's pretty much through the quarter could you give me what I should expect for first quarter cash as far as cash on the balance sheet, where do you stand right now as far as cash.
Speaker Change: I don't have an accurate cash picture committed to memory I, usually see those every Monday, but I think our cash stands somewhere in the $6 million of holdings, and then probably closer to $2 million on our credit lines. So we have a considerable amount of cash.
Speaker Change: Warren Inducement as you know Poe and most investors think that it's very easy running.
Speaker Change: Running a public company, but the market's for micro caps has been terrible.
Speaker Change: And I think you see this in any analysts on this call can say see this.
It has been very terrible for since probably the frothy markets of 2021 at the conclusion of 2021.
Speaker Change: So.
Speaker Change: It's kind of a peak, which you can get.
While you build matter and financings from a friendly investor Thats Finance works for.
Speaker Change: Without any additional new terms or anything like that.
Speaker Change: The warrant inducement was.
Speaker Change:
Speaker Change: I think the best opportunity, we had to be able to put away capital to grow the warrant overhang us anyway. So.
Speaker Change: They were already there their five year warrants to induce and yes exchange for new warrants, but at a higher price we feel at least checked a little bit of a box and move the goalposts. Further ahead in terms of putting cash in the business, but also moving our overhang of warrants to a higher price per share.
Speaker Change: The $7 markers.
Speaker Change: <unk>.
Speaker Change: So to that extent.
Speaker Change: It's just you've seen companies probably through and through that have had very difficult times raising meaningful capital in a $6 $7 million offering from an investor we are familiar with it's been a good investor we thought at that point we.
Speaker Change: We might as well put that.
Speaker Change: We'll take that offer an opportunity.
Speaker Change: As we look ahead and this year, we are considering a regulation a offering crowd funding offering for a preferred share structure to be determined but.
Speaker Change: Sure.
Speaker Change: An interesting structure that wont result in common share dilution, but more interest bearing or like a debt offering to begin with.
Speaker Change: So we're being a little bit more clever in how we structure the company moving forward and offer and raise capital through <unk>.
Speaker Change: Dividend yields in these types of things as opposed to as opposed to straight common share transactions.
Speaker Change: Okay, if I could just squeeze one last one in.
Speaker Change: When you look at your cash burn.
Speaker Change: Just add Stephen if your cash currently has $6 million and you've raised $6 $3 million does that imply that you actually earned about.
Speaker Change: $5 million in the first quarter.
Speaker Change: I don't think so but I do know that we've been focused heavily on.
Speaker Change: We saw.
Speaker Change: Geopolitical issues the push.
Speaker Change: Not to open up or start peeling layers of an onion, but we foreshadowed.
Speaker Change: Tariff issues that were writing was on the wall tariff issues tend to when you tax imported goods you would expect that the domestic production of those goods wood wood.
Speaker Change: Be heroes and be at a more enviable price will that never happens so domestic aluminum took profits and increased their price of domestic American aluminum by the exact same amount that the Paris took effect for foreign aluminum coming in from Canada, and Asia Asia or middle Eastern countries. So we.
Speaker Change: Pre bought millions of pounds of aluminum.
Speaker Change: Or hundreds of thousands of pounds of aluminum in advance and what we've seen is at 30%.
Speaker Change: 30%.
Speaker Change: Increase in price. So we've we've deployed capital for inventory, we've deployed capital in cleaning up.
Speaker Change: Liabilities that's in payables.
Speaker Change: And at this point, we're pretty much caught up and have a good amount of cash a good amount of inventory and a very small amount of debt and in fact presently speaking I think that are or what we owe on the on the on the building for example, or 10 $11 million asset building.
Speaker Change: In New York is is less than it was like somewhere less than 20% of the value of the building itself. So very we have a pretty healthy balance sheet and assets.
Speaker Change: Thank you Steve It looks like we just touched on time here at <unk> to see you had your hand up.
Speaker Change: Understood that's fine.
Thank you and to all investors that are watching and have questions. We encourage you to email your questions to investors that works for Dot com and just add to post comment there regarding cash output in Q1.
Speaker Change: Our line of credit was paid off so we have much more on the line available. So that's some of the cash outflows related to paying up the lineup and cash availability on that front.
Speaker Change: Thank you so much for everyone attending and have a great day.
Speaker Change: Thanks, everyone. Thanks for joining.
Speaker Change: Goodbye.