Q4 2024 ECD Automotive Design Inc Earnings Call
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Operator: Greetings and welcome to the ECD Auto Design 4th Quarter 2024 Earnings Conference Call. At this time, all participants are in the tsunami mode. If anyone should require operator assistance, please press star zero on your telephone keypad.
Greetings and welcome to the C D Auto design fourth quarter 'twenty 'twenty four earnings conference call.
At this time, all participants are in listen only mode.
If anyone should require operator assistance. Please press star zero on your telephone keypad.
Operator: A question and answer session will follow the formal presentation. You may be placing the question in the queue at any time by pressing star 1 on your telephone keypad.
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Operator: As a reminder, this conference is being recorded.
As a reminder, this conference is being recorded and.
Quinn Callanan: It's now my pleasure to turn the call over to Quinn Callanan, Investor Relations.
Quinn: It's now my pleasure to turn the call over to Clinton County, Investor Relations Quinn. Please go ahead.
Quinn Callanan: Quinn, please go ahead. Thank you, operator.
Quinn: Thank you operator, and good afternoon, everyone welcome to the ECB auto design fourth quarter and full year 'twenty 'twenty four earnings webcast and conference call. Today's date is April 16 2025.
Quinn Callanan: Good afternoon, everyone. Welcome to the ECD auto design fourth quarter and full year 2024 earnings webcast and conference call. Today's date is April 16 2025.
Quinn Callanan: And on the call today from ECD auto design are Scott Wallace, co founder, chief executive officer and chairman, and Ben Piggott, chief financial officer. Before we begin, I'd like to remind everyone that this call may contain forward-looking statements as they are defined under the Private Securities Litigation Reform Act of 1995. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. For discussion of such risks and uncertainties, please see ECD auto designs, most recent filings with the SEC. All forward-looking statements made today reflect our current expectations only and we undertake no obligation to update any statement to reflect the events that occur after this call.
Scott Wallace: On the call today from <unk> Auto design are Scott Wallace co founder Chief Executive Officer, and Chairman and ticket Chief Financial Officer.
Quinn: Before we begin I'd like to remind everyone that this call may contain forward looking statements as they are defined under the private Securities Litigation Reform Act of 1995.
Quinn: These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in the forward looking statements for a discussion of such risks and uncertainties. Please see ECB auto designs. Most recent filings with the SEC.
Quinn: All forward looking statements made today reflect our current expectations only and we undertake no obligation to update any statement to reflect the events that occur after this call.
Quinn Callanan: Also, during the course of today's call, the company will be discussing one or more non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in the press release we issued yesterday afternoon. Copies of today's press release are acceptable on ECDA's investor website, ecdautodesign.com. In addition, ECDA's form 10-K and 10-Qs are also available on ECDA's investor relations website.
Quinn: Also during the course of today's call the company will be discussing one or more non-GAAP financial measures reconciliations of these non-GAAP financial measures to their most directly comparable GAAP measures are included in the press release, we issued yesterday afternoon.
Quinn: Today's press release, our acceptable on ECB as Investor website E C D audio design dotcom and.
Quinn: In addition, <unk> Form 10-K, and 10-Qs are also available on <unk> Investor Relations website.
Scott Wallace: Now I'd like to turn the call over to Founder and Chief Executive Officer, Scott Wallace. Scott? Thanks, Quinn. First, I'd like to thank our shareholders and those interested in E2D automotive design for joining the call. I'm certain Ben will echo that.
Speaker Change: Now I'd like to turn the call over to founder and Chief Executive Officer, Scott Wallace Scott.
Speaker Change: Thanks Quinn.
Speaker Change: I'd like to thank our shareholders and those interested in each deal to move to design for joining the call.
Speaker Change: Ben will echo this but it's been a heavy lift to get our filings up to date. After the realities about 'twenty 'twenty to 'twenty to 'twenty three and finished off 2024 due to the shutdown in about probably older Tech Folgers are regulators.
Scott Wallace: But it has been a heavy lift to get our filing up to date after the re-audit of our 2022, 2023 and first half 2024 due to the shutdown of our prior auditor, BF Borges, our regulator. I'm happy to be able to share some of the exciting things happening at ECD. This is our second go-around holding a public conference call as a company.
Speaker Change: I'm happy to be able to shed some of the exciting things happening at a C. D. This is a second go around holding a public conference call as a company, but those new ACD all smoking story, we create and we still are luxury vehicles that combined classic beauty with modern performance, we operate two facilities and manufacturing plant in Kissimmee, Florida, which we call the road.
Scott Wallace: For those new to ECD's automotive design story, we create and restore luxury vehicles that combine classic beauty with modern performance. We operate two facilities, a manufacturing plant in Kissimmee, Florida, which we call the Robodome, and a logistics and fulfillment center in the UK that we use primarily to source original plastic automotive bodies. We manufacture classic, custom classic Land Rover Defenders, Range Rovers, Jaguar E-Types, Ford Mustangs and Toyota FJs as rest of the model. One of a kind bills carry an average selling price of between 300 and $400,000.
Speaker Change: With Joe and our logistics and fulfillment center in the UK that we use primarily to source original classic automotive bodies.
Speaker Change: We manufacture classic trusting classic laundry over defenders range Rovers jaggery types Ford Mustang Toyota Chase as restaurants.
Speaker Change: One of the kind builds carry an average selling price of between 300 and $400000.
Scott Wallace: Before we delve into particulars of last year, I want to address something that is at the top of many people's minds. Tariffs and their impact on businesses, particularly manufacturers, are prominent concerns for investors in today's environment. Providing confidence to investors is difficult, as there are constant moving parts when discussing government actions. What you say today can be proven wrong tomorrow. Despite ECD's British roots, we are an American automotive manufacturer restoring classic cars, whose import has not been considered as of this date. We have spent a significant amount of time studying the tariffs issued or being considered, and have constructed an internal plan to offset the margin impacts of a whole array of potential government actions.
Speaker Change: Before we delve into the particulars of last year I want to address something that is at the top of many people's minds.
Speaker Change: And their impact on businesses, particularly manufacturers a prominent concern to investors in today's environment, providing confidence to invest in the pit.
Speaker Change: Michael is there a consistent constant moving parts when discussing government actions.
Speaker Change: You say they can be proven wrong tomorrow.
Speaker Change: Despite these pitches routes, we are an American automotive manufacturer restoring classy calls, whose import is not being considered as of this date. We have spent a significant amount of time studying the tariffs the huge or being considered and have constructed an internal plan to offset the margin impacts of a whole range of potential government actions. We believe this approach.
Scott Wallace: We believe this approach will minimize the impact tariffs might have on both customers and investors.
Speaker Change: It will minimize the impact of tariffs might have on both customers and investors.
Scott Wallace: Looking back, 2024 was a transformational year for ECD. We grew revenue roughly by 29% to 25.2 million and increased gross profit higher by 30%. Both dollar amounts are records for ECD at this time and are a testament to our improvements we've made to our customer journey while designing a new ECD vehicle. When customers decide they want an ECD vehicle, our team leads them on an engaging, immersive, 3D, pressure-free, luxury design experience where any modification is within reach. Our clients are not cash starved, they are option, time and inspiration starved. Through our customer onboarding process, we seek to satiate that hunger for inspiration and options and allow our customers to bring their imaginations to life.
Speaker Change: Looking back 2024 was a transformational year for ACD, we grew revenue roughly about 29% to $25 2 million and increased gross profit higher by 30%. Both still remains our records for <unk> at this time.
Speaker Change: Testament to our improvements we've made to our customer journey, while designing a new ACD vehicle.
Speaker Change: When customers decide they want an ACD vehicle team lead them on engaging immersive three D. Precious three luxury design experience, where any modification is within reach.
Speaker Change: Our clients are not cashed out their option time and inspiration stopped throughout customer on boarding process, we seek to satiate that hunger for inspiration and options and allow our customers to bring their imaginations to life.
Scott Wallace: A commitment to continually enhancing this customer journey, combined with our angel's pursuit of new customization innovations, has allowed us to grow revenue and margins. The power of this approach is apparent, as we have now begun fielding orders for vehicles beyond $500,000, where our average vehicle price sells in the $300,000 to $400,000 range. During the year, we were able to add our backlog and consolidate the custom defender space through our licensing agreements with Blackbridge Motors. We added vehicle models including classic Toyota FJs and classic Ford Mustangs with our Black Dog Traders and brand new Muscle Car licensing agreements.
Speaker Change: Our commitment to continually homes in this customer journey combined with the ranges pursuit of new customers customize the Asian innovations has allowed us to grow our revenue and margins. The power of this approach is apparent cause we have named <unk>.
Speaker Change: Begun fielding fielding oldest for vehicles beyond $500000, where our average vehicle price settles in the 300 to 400000 little range.
Speaker Change: During the year, we were able to add a backlog and consolidate the custom defendant space through our licensing agreements with blackberries Motors. We had these vehicle models, including classic Tokyo S. J, even classic Ford Mustangs without Black dog trade isn't brand new muscle car licensing agreements.
Scott Wallace: These additions were made in a capital-like manner, highlighting the roll-up opportunity the classic car ecosystem provides to fill our factory, optimise our fixed assets, and provide a platform to build an umbrella luxury brand akin to LVMH in the luxury car sector.
Speaker Change: These additions were made in a capital light manner, highlighting the role of opportunity. The classic car ecosystem provides to fill a factory optimize our fixed assets and provide a platform to build an umbrella luxury brand kin sylvian H in the luxury space.
Scott Wallace: Beyond business improvements, we continue to improve our manufacturing process. For example, we moved our quality control team from the end of the line to within the line itself. This change ensures build quality at each individual stage, enables a right first-time completion model, while allowing us to continue expanding our product offerings and increasing output. as we continue to iterate our process. We find we pick up dollars along the way, increasing revenue margin and customer satisfaction through improved bill quality.
Speaker Change: Beyond business improvements be continuing to improve our manufacturing processes.
Speaker Change: For example, we moved our quality control team from the end of the line to within the line itself is changing shows build quality of each individual stage enables our right first time completion model, while allowing us to continue expanding our product offerings and increasing April.
Speaker Change: As we continue to reiterate our process.
Speaker Change: We find we'd pick up dollars, along the way of increasing revenue margin and customer satisfaction through improved quality.
Scott Wallace: In October of 2024, we announced our intent to launch our retail strategy and criteria for selecting retail locations. A retail strategy is the most exciting development at ECD for me. Until recently, ECD's sales presence was limited to exclusively online sales. The launch of our retail strategy is our first foray beyond web-based sales. Our physical presence in communities allows us to bring our immersive luxury presence where our customers reside, allowing more in-depth and personal engagement. A retail location also serves as hubs for community engagement. Establishing a retail presence eliminates the need and cost of supporting a mobile outreach team towing vehicles from place to place.
Speaker Change: In October 2024, we announced our intent to launch our retail strategy and criteria for selecting retail locations.
Speaker Change: Our retail strategies is the most exciting development to ACD for me until recently he sales presence with limited to exclusively online sales.
Speaker Change: Two of our retail strategy is our first foray beyond web based sales.
Speaker Change: Physical presence in communities allows us to bring her a mesic luxury presence, where our customers reside allowing more a more in depth in person engagement.
Speaker Change: Our retail locations also serve as hopes for community engagement, establishing a retail presence eliminates the need and cost I suppose you can mobile outreach team towing vehicles from place to place.
Scott Wallace: This benefit is evident in this quarter's reduction of advertising marketing spending, driving returns higher. At Astor, the car is the hero, and where we've established ourselves, we have lined up an extensive calendar of events where potential customers will see and feel the quality and customization of our products.
Speaker Change: It is evident in this quarter's reduction of advertising and marketing spend driving returns higher.
Speaker Change: That's I suppose the car is the hero and where we've established yourselves, we have lined up and extensive calendar of events, where potential customers will see and feel the quality and customization of our products.
Scott Wallace: Our first retail location, store within a store in West Palm Beach, Florida, opened in the first quarter of 2025 and has exceeded our expectations thus far. A second location opened earlier this month in Nantucket, we will continue to open new retail locations throughout the year following a similar capital light approach as Nantucket and West Palm and we look forward to discussing each one in future calls.
Speaker Change: We to location store within a store in West Palm Beach, Florida opened in the first quarter of 2025 and has exceeded our expectations thus far.
Speaker Change: Second location opened earlier this month in Nantucket, we will continue to open new retail locations throughout the year. Following a similar capital light approach as Nantucket in West Palm and we look forward to discussing each one in future calls.
Scott Wallace: As we did our due diligence on a retail strategy, we found a potential gap in our approach. Several customers didn't want to wait a year before owning an ECD vehicle. Some were so intrigued by the custom ECD aesthetic that they were willing to pay an asking price without customizing it to their taste. The customer that, that, this customer that caused us to begin limited production of our built-to-own vehicles. These custom ECD vehicles feature all the luxurious details included in a custom series, but are designed by our team of specialists to stand out as a unique one of a kind on the road.
Speaker Change: As we did our due diligence on our retail strategy and we found a potential gap in our approach several customers didn't want to wait to Gabe for running an ACD vehicle someone's century, but the cost to meet the authentic that they were willing to pay an asking price without customizing it to their taste the customer that this customer that caused us to begin limited production of our built to obey.
Speaker Change: Of course these cars to meet the need vehicles speech, all those juries details, including in a costume series well designed by our team of specialists to standing as a unique one would be coming down the road on available to purchase on the spot.
Scott Wallace: And available to purchase on the spot. Two vehicle sales per month per location financially justifies each location, and early returns in this gateway will outperform this very low bar.
Speaker Change: Two vehicles sales per month per location financially justifies each location and early returns in this case, we will outperform this very local.
Scott Wallace: Looking at 2025 and 2024 reporting behind us, we see opportunities all around us as we build our retail presence judicially. I'm pleased to be able to focus our efforts on growth again. We believe our retail strategy is the quickest route to that growth. Our plan, as we've relayed in the past, is to open an initial four locations in the wealthiest and most influential areas of this country. Two vehicles sold per month per location resulting in 96 vehicle sales. Adding that kind of sales power to our current online channel leaves us firmly on the path to filling our factory.
Speaker Change: Looking at 2025, and 'twenty 'twenty four reporting behind US, we see opportunities all around us as we build our retail presence judiciously.
Speaker Change: I'm pleased to be able to focus our efforts on growth again.
Speaker Change: We believe our retail strategy is the quickest route to that growth plan as we relayed in the past it to open in the initial full locations in the wealthiest and most influential areas of the country.
Speaker Change: Two vehicles sold per month per location was also 96 vehicles sales, having that kind of sales Padua current online channel. It leaves us firmly on the path to filling our factory.
Ben Piggott: With that, I'll pass the call to Ben to review our financial results.
Speaker Change: With that I'll pass the call to Ben to review our financial results.
Ben Piggott: Ben. Thanks, Scott. And good morning, everyone. I'll begin with an overview of the quarter prior to discussing the four-year financial results. Revenue during the fourth quarter was $5.3 million, up from $4.8 million in the prior year. The increase in revenue year over year was a combination of increased volume of sales, average sales price driven by higher customization and increased used vehicle sales. Sales for the quarter were impacted by a delay in vehicle title transfers. Our revenue recognition process dictates that revenue be recognized when a client countersigns the title. At year end of December 24, 12 vehicles were completed and fully paid for, but the holidays delayed many from taking ownership prior to year end.
Speaker Change: Thanks, Scott and good morning, everyone I'll begin with an overview of the quarter prior to discussing our full year financial results.
Speaker Change: Revenue during the fourth quarter was $5 3 million.
Speaker Change: Up from $4 8 million in the prior year.
Speaker Change: The increase in revenue year over year was a combination of increased volume of sales average sales price driven by higher customization and increased used vehicle sales sales for the quarter were impacted by a delay in vehicle title transfers our revenue recognition process dictates that revenue will be recognized when a client counter signs the title.
Speaker Change: At year end of December 24, 12 vehicles were completed and fully paid for with the holidays delayed many from taking ownership prior to year end.
Ben Piggott: These vehicles are accrued for under a deferred revenue in the current period and will be recognized over the course of the first half of 2025. Gross profit during the quarter was $300,000 compared to $1.2 million in the prior year. The primary driver of the reduction in gross profit has to do with a non-cash $1.1 million write down of labor overhead allocation and raw materials charged to cost of goods sold. We expect our gross margins to revert back to historical levels as we move into 2025. Advertising and marketing expenses were $286,000 compared to $335,000 in the prior year-ago quarter.
Speaker Change: These vehicles are accrued for under our deferred revenue in the current period and will be recognized over the course of the first half of 2025.
Speaker Change: Gross profit during the quarter was $300000 compared to $1 $2 million in the prior year. The primary driver of the reduction in gross profit has to do with the noncash one plane $1 million write down of labor overhead allocation and raw materials charged to cost of goods sold.
Speaker Change: We expect our gross margins to revert back to historical levels as we move into 2025.
Speaker Change: Advertising and marketing expenses were $286000 compared to $335000 in prior year ago quarter.
Ben Piggott: The change in expense during the quarter was primarily due to reduced in-person marketing activity as the company looks to optimize marketing spend. General and administrative expenses were $2.4 million, compared to $1.6 million in the prior year-ago quarter. The change in expense during the quarter was due to growth of our operations, public company costs, and one-time costs of $200,000 associated with the restatement of our 2022, 2023, and first half 2024 financial statement. Income from operations was negative during the quarter, a loss of $2.4 million compared to a loss of $900,000 in the year-ago quarter. Net loss for the quarter was $3.3 million or $0.11 per diluted share compared to a loss of $700,000 or $0.03 per diluted share a year ago.
Speaker Change: Change in expense during the quarter was primarily due to reduced in person marketing activity the company looks to optimize marketing spend.
Speaker Change: General and administrative expenses were $2 4 million compared to $1 6 million in the prior year ago quarter. The.
Speaker Change: The change in expense during the quarter was due to the growth of our operations public company cost and onetime cost of $200000 associated with the restatement of our 2022 2023 and first half 2024 financial statements.
Speaker Change: Income from operations was negative during the quarter, a loss of $2 4 million compared to a loss of 900000, a year ago quarter.
Speaker Change: Net loss for the quarter was $3 3 million or 11 cents per diluted share compared to a loss of $700000 or <unk> <unk> per diluted share a year ago.
Speaker Change: Yeah.
Ben Piggott: For the year, we reported revenues of $25.2 million compared to $19.5 million in 2023, representing an increase of 29%. The increase was primarily due to increased unit sales, higher average selling price per vehicle by $25,000 per unit, and increased sales of used vehicles. gross profit increased 30% during the quarter to 5.9 million, compared to 4.5 million in the year ago 2023. 2024 gross profit margin was 23.4%. Advertising and marketing expense was $1.2 million compared to $640,000 in the prior year. This change in expense was primarily driven by increased volume of advertising and printing as the company increased its advertising promotions and social media presence in response to higher online traffic as well as an increase in the price of web advertising compared to 2023.
Speaker Change: For the year, we reported revenues of $25 2 million compared to $19 5 million in 2023, representing an increase of 29%. The increase was primarily due to increased net sales higher average selling price per vehicle by $25000 per unit and increase sales of used vehicles.
Speaker Change: Gross profit increased 30% during the quarter to $5 9 million compared to $4 5 million in the year ago 2023.
Speaker Change: <unk> 2024 gross profit margin was 23, 4%.
Speaker Change: Advertising and marketing expense was $1 2 million compared to 640000 in the prior year. This change in expense was primarily driven by increased volume of advertising and.
Speaker Change: In printing as the company increased its advertising promotions and social media presence in response to higher online traffic. This was an increase in the price of what web advertising compared to 2023 general and administrative expense was $9 1 million compared to $5 1 million in the prior year quarter. The change in expense was primarily due to quote.
Ben Piggott: General and administrative expense was $9.1 million compared to $5.1 million in the prior year quarter. The change in expense was primarily due to growth of our operations being a public company and one-time cost of $700,000 associated with the restatement of 2022-2023 in the first half of 2024. Income from operations was negative during 2024, a loss of $4.6 million compared to a loss of $1.5 million in the year 2023. Net loss for the year was $10.8 million or $0.32 per diluted share compared to a loss of $1.2 million or $0.05 per diluted share in the year-ago period.
Speaker Change: Our operations of being a public company and one time costs of $700000 associated with the restatement of 2022 2023 in the first half of 2024.
Speaker Change: Income from operations was negative during 2024, a loss of $4 6 million compared to a loss of $1 5 million.
Speaker Change: In the year 2023 net loss for the year was $10 8 million or 32 cents per diluted share compared to a loss of $1 2 million or five cents per diluted share in the year ago period.
Ben Piggott: Now turning to the balance sheet, our cash balance as of December 31st was $1.5 million compared to $8.1 million as of December 31st, 2023. Our primary source of funds are customer deposits, the collection of deferred revenue, and the sale of cars built for our retail locations. Looking into 2025, we believe that we'll be able to maintain production and sales of vehicles at our current cash levels, with an increased emphasis on turning the inventory we've invested into cash. Capital allocation priorities remain on parts and mechanics, including occasional opportunistic capital-wide acquisitions when opportunities present themselves.
Speaker Change: Now turning to the balance sheet, our cash balance as of December 31 was $1 5 million compared to $8 1 million as of December 31, 23, our primary source of funds our customer deposits the collection of deferred revenue and the sales cars built for our retail locations.
Speaker Change: Looking into 2025, we believe that we'll be able to maintain production and sales of vehicles at our current cash levels with an increased emphasis on turning the inventory we've invested into cash.
Speaker Change: Capital allocation priorities remain on parts and mechanics, including occasional opportunistic capital light acquisitions when opportunities present themselves and al I'll now pass the call back to Scott for closing remarks Scott.
Scott Wallace: I'll now pass the call back to Scott for closing remarks. Scott? Thanks, Ben.
Scott Wallace: ECD Autodesign is a labour of love for those who are involved with this company. We believe the classic car ecosystem represents a uniquely attractive opportunity for our customers and investors. I'm happy to finally be able to share our story with the broader public and look forward to the future updates. You can also stay current on ECD by visiting us at our website ecdautodesign.com.
Scott Wallace: Thanks, Ben HD Ultra design is a labor of love for those are involved with this company. We believe the classic car ecosystem represents a uniquely attractive opportunity for our customers and investors I'm happy to finally be able to share our story with a broader public can look forward to the future updates you can also say stay current on ACD by visiting our website <unk> Ultra design Doc.
Speaker Change: Com.
Scott Wallace: Thank you so much for your time today.
Speaker Change: Thank you so much for your time today, we'll now we will now open up the call to questions operator.
Operator: We will now open up the call to questions. Thank you.
Speaker Change: Thank you well now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad.
Operator: We will now be conducting a question and answer session. If you would like to be placed into question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. One moment, please, while we poll for questions.
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Theodore O'Neill: Our first question today is coming from Theodore O'Neill from Litchfield Hills Research. Your line is now live. Thanks very much. Ben, a question for you on the... Looking at the P&L, you've got, if I'm reading this right, $1.1 million in non-recurring charge in cost of goods sold and $2 million of cost for restatement in SG&A. Doesn't that mean that any kind of reasonable growth in top line, you should be able to get to income from operations?
Speaker Change: Our first question today is coming from Theodore O'neill from Litchfield Hills Research your line is that life.
Speaker Change: Oh, Thanks, very much I've been question for you on the.
Speaker Change: Looking at the P&L you've got.
Speaker Change: If I'm reading this right $1 1 million in nonrecurring charge in cost of goods sold.
Speaker Change: And <unk> 2 million of.
Speaker Change: Cost for restatement in SG&A doesn't that mean that any kind of reasonable growth in top line, you should be able to get to income from operations.
Ben Piggott: in 2025.
Speaker Change: 2025.
Ben Piggott: Yeah, CEO, thanks for the question. The kind of crossover point for Cash Flow Positive for the business is when we're doing about 10 units per month. Right now, we're doing about eight and a half units per month. And so given the backlog that we have, and the launching of the retail sites, Palm Beach already being open, and then Tuckett coming on during the summer, we think that we hit that kind of crossover point to 10 units per month in the next few months, which would then push the business into a position where it's generating operating cash flow.
Speaker Change: Yeah.
Thanks for the question the.
Speaker Change: The the kind of crossover point to for cash flow positive for the business is when we're doing about 10 units per month.
Speaker Change: Now, we're talking about eight and a half minutes per month, and so given given the backlog that we have and of our launching of the retail sites pump each already being open and then tucked it coming on during the summer we think that we hit that kind of crossover point to 10 units per month in the next few months, which will.
Speaker Change: And then push the business into a position, where it's generating operating cash flow.
Ben Piggott: And you've got 12 vehicles that were pushed from Q4 to Q1, so that ought to help too. That definitively gives a cushion into the first half of the year, correct?
Speaker Change: And you've got 12 vehicles that were pushed from Q4 into Q1, so that ought to help too right.
Speaker Change: Did that definitively gives us a cushion.
Speaker Change: Into the first types of here correct.
Scott Wallace: And Scott, can you talk about sort of how you look at the split between web-based sales versus retail locations and how you see that going forward? Yeah, good question, because we're analyzing that daily as well, Theo. So it's about to become a significant shift for us in terms of how we market and then how we generate leads. What we can't predict is the behavior of the consumer in the retail locations right now, because they have a number of choices. One is they order a new truck and send the order back to the factory. Two is that they take the vehicle home, the inventory that we've built and buy it then, as seen, like you would in a traditional luxury car dealership, and three, they kind of tap into our used available inventory.
Scott Wallace: And and Scott can you talk about.
Scott Wallace: Sort of how you look at the split between web based sales versus the retail locations and how you see that going forward.
Scott Wallace: Yeah. Good question, because we were analyzing that daily as well so it's become a significant shift in terms of how we market and then how we generate leads.
Scott Wallace: What we can't predict the behavior of the consumer and the retail locations right now because there are a number of choices. One is the older neutral can send the order back to the factory.
Scott Wallace: They.
Scott Wallace: Take the vehicle home the inventory that we built in by then it seems like you would in a traditional luxury car dealership and threes. They they come to tap into our used available inventory. So we're in the early days, but right now it's contributing about 20% of our leads and sales.
Scott Wallace: So we're in the early days, but right now it's contributing about 20% of our leads and sales. So what that's allowing us to do, as Ben indicated in some of the comments he made, is pull back from traditional marketing spending on what we did last year with outreach activity, which is an expensive way of kind of moving vehicles and people around the country to show it. So, you know, it's changing our marketing strategy and reducing some of the costs there. And currently the mix is about 80% is where it was 100% before from digital channels, 80% is digital channels, 80% is digital channels now and 20% is from the retail stores.
Scott Wallace: So well.
Speaker Change: And that's allowing us to do as Ben indicated in some of that come and see him that he's pulled back from traditional marketing spending on what we did last year, where that reach activity, which is an expensive way of kind of moving vehicles and people around the country to show. It. So you know, it's a changing our marketing strategy and reducing some of the costs. There and currently the mix is about 80% is where it was 100.
Scott Wallace: Per cent before from digital channels, 80% digital channel.
And he keeps it sounds name and 20% is from the retail stores.
Scott Wallace: and Scott, I know the tariffs are a complete moving target, but if you could talk in general terms about what you can do to mitigate some of that. Yeah, tariffs for us is, like everybody else, is a moving feast and we're kind of watching it daily, but we took a very early call on that internally. You know, we made a commitment that we weren't going to increase our base contract prices for clients, so we stuck by that and we're still standing by that. But we have made some adjustments to our upgrade pricing to offset some of it.
Scott Wallace: And Scott I know tariffs are a complete moving target, but that was if you could talk in general General terms about how about what you what you can do to mitigate some of that.
Scott Wallace: Yeah, we.
Scott Wallace: Terry is for US is like everybody else is it is a moving feast and we'd kind of what you can tell me, but we took a fairly we took a very early colon intently and you know we we made a commitment that we weren't going to increase our based contract prices for the client. So we stick by that and we were still standing by that and but.
Scott Wallace: But we have made some adjustments or up great pricing to offset some of it but we've been very not like where only you know where we were tracking where we see impacting us and that's a difficult challenging itself there, but the base because we import not subject to the tax because that classic vehicles.
Scott Wallace: But we've been fair in that, like we're only, you know, we're tracking where it's impacting us and that's a difficult challenge in itself, Theo. But the base vehicles that we import are not subject to the tax because they're classic vehicles. And then a lot of our parts come from all over the world, so there's varying impacts on it. But we've put internal controls in place to make sure that the customer isn't impacted as much as they could be, the business is protected and therefore investors as well. Yeah, I didn't realize that because it's a classic vehicle, it's exempt from tariff.
Scott Wallace: And then a lot of our parts come from all over the world. So there's varying impacts on it but we've we've put internal controls in place to make sure that the customer isn't impacted as much as they could be the business is protected in that for investors as well.
Scott Wallace: Yeah, I didn't realize it because its classic vehicle it is exempt from tariffs.
Scott Wallace: Yeah, exactly. It's the 25-year-old rule. So the tariff currently sits on new automotives.
Scott Wallace: Yeah, exactly it's 25 to 25 year old rules.
Scott Wallace: The terrorists currently sits on new ultimate she's been imported.
Theodore O'Neill: Thanks very much. Appreciate it. Thank you.
Speaker Change: Okay. Thanks, very much I appreciate it.
Speaker Change: Thank you we've reached end of our question and answer session I would like to turn the floor back over for any further or closing comments.
Operator: We've reached the end of our question and answer session.
Operator: I'd like to turn the floor back over for any further or closing comments.
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Speaker Change: Thank you.