Q2 2026 Worksport Ltd Earnings Call and Townhall
Speaker #2: We believe June is a strong indicator of our ability to scale the business as it continues to expand both in the consumer direct and commercial reseller sales channels.
Speaker #2: This quarter, we focused on improving our operating cash burn, and we made good traction. Jenniferal will provide more insights on factors contributing to our improvements.
Speaker #2: We will also speak to how we intend to convert our strong operational progress into sustainable operating cash flow break-even. What Q2 2026 established is that the cost base and the revenue line can move in opposite directions in the same quarter.
Speaker #2: Moving forward, we intend to continue targeting increased revenue with an efficient cost basis. We continue to evolve into a diversified platform with multiple products serving multiple channels and generating multiple revenue streams as we scale. We are mindful of prioritizing our organizational strengths.
Speaker #2: Our core economic engine is the hard-folding tunnel covers we proudly make in our ISO 9001:2015 certified facility in West Seneca, New York. We launched our newest tunnel cover, Nexus, in the last quarter, Q2 of 2026.
Speaker #2: Our near-term growth levers include distribution onboarding, distribution reorders, expanding e-commerce, and conversion of inventory into working capital. We will continue making new product innovations for our products, and we will continue to pursue larger partnerships in our energy products.
Speaker #2: Our SOLUS solar tunnel cover core portable energy system is an emerging commercial option that extends the truck bed from a covered platform into a mobile power system.
Speaker #2: And really excitingly, our AetherLux heat pump system, through our subsidiary TerraVista Energy, is a very exciting strategic opportunity that is expected to be certified within the second half of this year.
Speaker #2: We prioritize and emphasize operational excellence ahead of additional growth vectors. Our core business strategy must be executed with discipline, and our results in Q2 2026 support our commitment to the success of our platform.
Speaker #2: I will address liquidity directly, and then I will go through our recent business updates. As of June 30, 2026, we held approximately $1.2 million in cash and cash equivalents.
Speaker #2: Separately, we had about 820,000 dollars of remaining availability on a revolving line of credit. Which is a borrow which is borrowing capacity, not cash.
Speaker #2: We reported an inventory balance as a strong source for additional liquidity, and we'll discuss this further below. Our Q2 Form 10-Q continues to disclose substantial doubt about our ability to continue as a going concern.
Speaker #2: While this disclosure reflects uncertainties associated with our current liquidity and capital resources, management has implemented a clear plan forward on revenue growth, margin expansion, disciplined cost management, and active analysis of additional financing opportunities.
Speaker #2: We remain focused on executing our strategy and strengthening our financial position. Our plan for closing the gap in the same period where we're executing operationally.
Speaker #2: Convert inventory into sales and cash, grow gross profit faster than reoccurring costs, cash costs, and improve marketing productivity. Our objective during the first half of this year was to strategically support growth initiatives that we believe will create value over time.
Speaker #2: Our strategy included funding working capital and operations to support scaling. And we are now well positioned to convert inventory into working capital efficiently in the second half of this year.
Speaker #2: We continue to prioritize a reduction in our reliance on dilutive capital as our gross profit expands and operating cash flow improves. Our greatest source of liquidity, inventory, of liquidity, inventory, is being managed during the balance of this year.
Speaker #2: We are strategically producing our products to function in a just-in-time environment, so that we maximize our use of raw materials while minimizing our concentration risk from inventory buildup.
Speaker #2: More on the subject to come. To further align my incentives with the stock, I elected to receive previously accrued and unpaid bonus compensation of $125,000 in stock at the market's closing prices.
Speaker #2: I continue to believe in the future of the company, one that reflects strong values. We continue to actively target cash flow positivity. With that, I will hand the call to Jennifer.
Speaker #1: Thank you, Steven. Good afternoon, everyone. Net sales for Q2 2026 were $5.2 million, compared to $4.1 million in Q2 2025 and $3.3 million in Q1 2026, representing growth of approximately 27% year over year and 58% sequentially.
Speaker #1: First half net sales were 8.5 million or about 11,574 units. The shape of the most recently completed quarter matters, as much as the total.
Speaker #1: Monthly net sales during Q2 2026 were approximately $1.4 million in April, $1.7 million in May, and $2.1 million in June, each month larger than the one before it.
Speaker #1: June 2026 was the strongest revenue month in our company's history. That progression reflected stronger production output, broader product availability, and channel execution rather than any single order.
Speaker #1: We sold 7,010 units—2,957 through B2B and 4,053 units through B2C—generating approximately $2.3 million and $2.9 million of net sales, respectively. Our mix between sales channels was consistent between Q1 and Q2 2026.
Speaker #1: The mix matters because B2B carries a lower gross margin but a materially lower marketing cost per unit. And the balance between the two is what determines both blended margin and cost efficiency.
Speaker #1: Having both channels gives us direct customer insight and wholesale reach at the same time. Gross profit was $1.6 million, compared with $1.1 million in Q2 2025 and approximately $850,000 in Q1 2026.
Speaker #1: This represents an increase of approximately 52% year over year, and approximately 93% sequentially. Gross margin was approximately 32%, compared with 26% in Q2 2025, and approximately 26% in Q1 2026.
Speaker #1: Gross profit margin rose from approximately 26% in March 2026 to 35% in June 2026. The improvement was driven by higher sales volume, efficiencies in overhead absorption, and product mix.
Speaker #1: These gains offset higher input and landed costs, including tariff pressure. That is worth emphasizing. We expanded margin by more than 5 points against a rising cost base.
Speaker #1: Sustaining gross margin at its current run rate as volume increases and the sales mix shifts is a principal objective for the back half of 2026.
Speaker #1: Moving on to operating expenses and our net loss. Total operating expenses were about $5.5 million, up approximately 16% year over year. However, operating expenses as a percentage of sales decreased by 9 percentage points year over year.
Speaker #1: In addition, operating expense decreased approximately 1.1 million or 17% from Q1 2026. Research and development expense was 214,000. AL4 and Nexus have moved out of development and into production, which is why this expense caption fell 91,000 dollars or approximately 30%.
Speaker #1: Year over year. Spend converted into product we are now selling. General and administrative expense was about 3.5 million, up approximately 15% year over year.
Speaker #1: As a percentage of net sales, G&A decreased by approximately 7 percentage points year over year. Further, this expense caption declined by approximately 690,000 or 16% from Q1 2026.
Speaker #1: Sales and marketing expense was 1.7 million, up approximately 31% year over year. However, sales and marketing expense as a percentage of net sales only increased 1% compared with net sales increase of 27%.
Speaker #1: Further, this expense caption decreased approximately 449,000 or 21% from Q1 of 2026, the first evidence of a marketing discipline we committed to during our Q1 2026 earnings call.
Speaker #1: Net loss was 3.97 million, compared with 3.73 million in Q2 2025 and 5.83 million in Q1 2026. That is a 32% sequential improvement and a 6% reduction in net loss year over year.
Speaker #1: Loss per share improved from 33 cents from 71 cents for the prior year quarter. This year over year comparison is the one that keeps our attention.
Speaker #1: Revenue growth alone has not yet outrun our recurring cost base. The sequential comparison is the one that shows the mechanism working. Our objective for the second half is straightforward.
Speaker #1: We are focusing on gross margin, which is expanding at a faster rate than operating cash requirements, creating a path to positive operating cash flow. Speaking of cash flow, net cash used in operating activities in Q2 2026 was $3.4 million, compared with $8.2 million in Q1 2026 and approximately $3.1 million in Q2 2025.
Speaker #1: A 58% sequential reduction. For the first half of 2026, operating cash used was $11.7 million, compared with $6.9 million in the prior year period.
Speaker #1: An increase of approximately 68%. The Q2 2026 bridge is straightforward. We begin with a net loss of $3.97 million. Approximately $1.1 million is related to non-cash items, principally share-based compensation and depreciation and amortization.
Speaker #1: Leaving a loss before working capital movements of approximately $2.74 million. Working capital used approximately $555,000—a substantial normalization from the roughly $3.6 million consumed in Q1 2026, and the clearest sign that the balance sheet build phase is believed to be behind us.
Speaker #1: Cash and cash equivalents were $1.2 million as of June 30, 2026, compared with $567,000 at March 31, 2026, and $5.9 million at December 31, 2025.
Speaker #1: On to inventory. Inventory consists of raw materials that have already been purchased, work in progress, and finished goods. Converting this inventory into sales represents the largest internal source of working capital available to the company without the need to raise external financing.
Speaker #1: Net inventory was $12.1 million at June 30, 2026, up $2.5 million from year-end. Inventory included approximately $6.6 million of raw materials, $4.6 million of finished goods, and $845,000 of work in progress.
Speaker #1: We are actively optimizing new production against growing sales channels and expect our materials and finished goods components to meaningfully reduce during Q3 2026. We are optimizing our inventory through the following initiatives.
Speaker #1: Number one, procurement. We are actively managing procurement requirements for our raw materials against our forecasted projections. First-half 2026 procurement of approximately $8.1 million was front-loaded to support production requirements for expanding sales channels.
Speaker #1: With approximately 1 million of those purchases still in accounts payable at June 30th, 2026. That spend, including the amounts outstanding at the end of Q2 2026, are now behind us.
Speaker #1: Number two, production. The process to manufacture our hard tunnel covers is managed against demonstrated sell-through and distribution reorder cadence, rather than launch forecasts.
Speaker #1: Number three, fulfillment. Finished goods of approximately 4.6 million or 6,800 covers is the balance most directly convertible in the near term. We manage fulfillment by product family and sales channel, with the goal to sell more than what is produced in a given month.
Speaker #1: Working capital conversion is the measure we will report against. For insight, in July we sold about 30% more covers than we made, and that continues to be the goal for the balance of Q3.
Speaker #1: We are prepared to take questions on inventory aging and the split between inventory supporting confirmed orders versus forecasted demand. Back to you, Steven.
Speaker #2: Thank you, Jennifer. Nexus entered commercial production on April 13, 2026, with sales shortly thereafter, making Q2 2026 its first quarter in our product portfolio.
Speaker #2: Its proprietary single-sided operation allows a person to secure and release the Nexus tunnel cover without making laps around the pickup truck. It's a practical solution to a real complaint.
Speaker #2: The real world utility of Nexus creates a differentiated premium product for our customers. The product launched following the product launch followed the shape you want to see, following its introduction, Nexus achieved $1 million in cumulative sales across all sales channels in just about 10 weeks, margin contributed contribution increased across both sales channels during Q2 of 2026.
Speaker #2: A product went from its first unit to contributing meaningful margin inside of a single quarter. The focus is now to maximize margin capture through manufacturing efficiencies and channel expansion, including established sales cadence.
Speaker #2: Into July, Nexus sales continued to grow, with Nexus-related sales orders commanding nearly 1.5 million dollars. Two distribution partners were added in Q2 of this year, one at the end of April and the other one in June.
Speaker #2: Both distribution partners had orders fulfilled during the quarter. Meyer Distributing joined in June of 2026 as our first multinational distribution partner, bringing a substantially larger North American wholesale network serving dealers, installers, and aftermarket resellers.
Speaker #2: That is the widest wholesale access the company has ever had. However, Tri-State Enterprises began carrying our product, including Nexus, and broadened our reach across four U.S. states.
Speaker #2: This matters because distributor-driven sales in our commercial channel, including repeat orders, expand our reach while reducing our blended market burden per unit.
Speaker #2: We plan to focus on creating distributor programs during the second half of this year that emphasize active order frequency. Our filing also describes conversations with three additional major distributors.
Speaker #2: We remain focused on achieving successful contractual arrangements to maximize our distribution network of nationwide U.S. dealers. I want to characterize those accurately. They are opportunities at present, and we will announce updates as they become available.
Speaker #2: Let's talk Solus. Solus integrates solar generation directly into a tunnel cover platform, the first of its kind. Core is a modular, portable energy system that pairs with Solus to operate on its own.
Speaker #2: Or operates on its own rather. Together they extend the truck bed from storage into a power source. Both entered Q2 2026 with launch and certification work substantially complete.
Speaker #2: Core's UL and CSA certification package removes a real commercialization barrier and expands the set of distributors, retails, fleets, and commercial customers that can evaluate the system.
Speaker #2: Solus and Core did not represent a material share of Q2 2026 revenue. Our near-term objective is product market fit and acquisition economics that do not require customer acquisition costs to rise.
Speaker #2: In step with gross profit. We continue to develop federal fleet and OEM-oriented opportunities and we assume no material revenue from them in our near-term plan.
Speaker #2: However, I can confirm that we believe we have made notable progress on that front. Let me repeat: I believe we have—and I can confirm that we believe that we have—made notable progress on this front in commercializing both Solus and Core.
Speaker #2: Moving aside into Terrabees Energy, we received U.S. patent number 12,624,872 during the quarter, covering heat pump systems architecture related to zero frost and designed to reduce or eliminate the conventional defrost cycle.
Speaker #2: Certification work is expected to continue in the second half, subject to testing and customary certification timing. Aetherlux remains pre-commercial; no procurement decision has been made, and we do not rely on Aetherlux revenue to achieve our 2026 operating plan.
Speaker #2: The next gate is third-party validation and certification. We will allocate capital to it against measurable milestones and nothing else. We believe we may hit momentary operational cash flow positivity within Q3 2026.
Speaker #2: This is huge. At this time, we are not providing guidance on specific calendar targets for sustained operating cash flow positivity, though we remain focused on reaching sustainable operating cash flow break-even in 2026.
Speaker #2: Our priority is disciplined cash generation rather than optimizing around a single quarter. Rather than focusing on a projected date, we believe investors should focus on the underlying drivers of operating cash flow.
Speaker #2: Our path to positive, earnings cash flow is straightforward: grow revenue, expand gross profit, maintain disciplined control over recurring costs, and convert working capital more efficiently.
Speaker #2: All of which we've shown that we can do in this past quarter. During Q2 2026, we made progress across all four areas simultaneously.
Speaker #2: Gross profit totaled approximately $1.7 million. Compared to $4.5 million of cash operating needs. Before working capital, resulting in an operating cash flow gap of roughly $2.9 million before working capital movements.
Speaker #2: Working capital usage accounted for an additional $0.6 million during the quarter. Viewed differently, gross profit covered approximately 32% of our recurring cash operating requirements during the quarter.
Speaker #2: Closing the remaining gap can be achieved through some combination of higher revenue, sustained or improved gross margins, disciplined reoccurring expenditures, and improved inventory conversion.
Speaker #2: At a 35% gross margin, and using our most recent run rate of $2.1 million in sales, quarterly revenue of approximately $12 million to $12.9 million would fully cover the current pre-working capital cost structure.
Speaker #2: Alternatively, if we expand our margin contribution by just 300 basis points and recognize approximately 9.3 million dollars of quarterly net sales, reoccurring costs would need to decline by approximately 1.2 million dollars per quarter for us to fully cover our reoccurring expenditures.
Speaker #2: Assuming relatively neutral working capital. We offer these figures as a sensitivity we offer these figures as sensitivity guideposts rather than revenue guidance. The key takeaway is that the gap continues to narrow and we believe the progress achieved during these quarters demonstrates a clear trajectory towards a self-sustaining cash flow positive operating business.
Speaker #2: Q2 of this year showed that Worksport can generate stronger revenues expand margin reduce operating expenses and materially improve cash efficiency in the same quarter.
Speaker #2: Against the rising input cost basis. The combination the combining results in the combination results in a business which we believe is on its way to scaling successfully.
Speaker #2: We are aware that there is still work ahead of us. We must convert our inventory and expand our commercial distribution reach, while maintaining gross profits that meaningfully contribute to our operations.
Speaker #2: This is a question of execution, and it's the right question to be judged on. So, we are committing to three things: convert inventory into cash.
Speaker #2: Turn distributor access into repeat, larger orders and grow sales volumes faster than operational cash requirements. On that note, thank you very much for your continued interest in Worksport.
Speaker #2: This concludes our prepared remarks. Operator, please open the line for analyst questions. And our investor town hall our investor town hall call will follow.
Speaker #1: Thank you. Worksport will now open the floor for Q&A. We welcome live questions from any analyst on the call, and investors may submit the questions they have through the Zoom Q&A feature or by email to investors@worksport.com.
Speaker #1: Selected investor questions may be answered live during the town hall, which immediately follows the end of this call. I see that Tate Followsin from Maxim Group has his hand up.
Speaker #3: Okay, thank you. Thank you for having the town hall. First question on inventory management: one of your slides showed in finished goods inventory you have about 6,800 covers.
Speaker #3: Can you talk about how the pricing in the current tonneau cover market will work for those to get those 6,800 covers out the door?
Speaker #3: Are there maybe—or might—pricing improvements quarter over quarter, and if so, in which channel?
Speaker #4: Sure. Yeah. So most of the inventory that we have on hand was AL3, AL4. We've been finding good success in running small promotions on AL3.
Speaker #4: June was a small trial run on direct to consumer websites sales and we ran a small promo and we liquidated a significant amount of inventory.
Speaker #4: Which is great. So, we're going to offer incentives on reseller channels and online channels. That makes sure we satisfy both sides of our business: reseller and direct-to-consumer.
Speaker #4: And then, as we burn through that inventory, we’re going to—as we said in the call—we’re going to focus on just-in-time to mitigate keeping too much inventory.
Speaker #3: Thank you. And second for me is that in the quarter, sales and marketing expenses were about $1.7 million. Can you break that down going forward?
Speaker #3: Will you have more or less sales and marketing expenses on Solar Synchro initiatives, or now that you have more distributor relationships? Will that number decline?
Speaker #3: Can you talk about that mix and outlook, please, for sales and marketing expenses?
Speaker #4: It's a difficult question because of the volatility of the underlying platforms. The biggest platforms are just really two. It's Meta or Facebook. Which owns Instagram and then Google.
Speaker #4: And those two networks are very volatile. They tend to get a little bit more expensive for us to remain competitive, especially during the winter months, like November and Black Friday. So, we're going to try to keep things we outlined in this call to make sure we're able to raise sales.
Speaker #4: I think it was the 17 or 18% while sales and marketing will increase 1%. I may have those numbers wrong. I haven't committed them to memory yet.
Speaker #4: So we think that sales and marketing will remain as flat as possible, while sales continue to increase, because we're more efficient at how we market and we're becoming much more recognized as a brand.
Speaker #4: But on the other hand, we're prepared to invest more in sales and marketing to continue to grow sales if that's what we need to do.
Speaker #4: So the answer to the question is, we're going to try to keep it sideways, so that our sales increase while sales and marketing does not.
Speaker #4: However, if it means adding significant revenues, we will invest there because it's just going to get us to that cash flow break even and positivity that we want to sustain.
Speaker #3: Okay. Thank you, Steven.
Speaker #4: Welcome.
Speaker #1: Thanks for taking that, Steve. We had some questions here from investors on the call. One of the first questions is from Robert A., speaking to terrace and aluminum raw prices.
Speaker #1: Could you comment on how that is currently impacting Worksport?
Speaker #4: Yeah. Yeah. I read that question. So Robert, great question. And one that when I look at my wristwatch, I can see my heart rate raising.
Speaker #4: Not because of you, but because of the underlying frustrations I have. Look, the number one selling vehicle in America is the F-150. The average individual buying that is our farmer.
Speaker #4: Our vets. Our serving members. The average American. And that vehicle in the past two or three years has gone from in the mid 30,000s to the high 40,000s.
Speaker #4: And why? Because that vehicle is made primarily with aluminum. I think the frame is steel. The body is completely aluminum. That's significant inflation that the American—the American individual, the population—is paying for.
Speaker #4: So the cost of aluminum has risen from approximately $1.30 a pound to double over the past few years. Directly correlated to the tariffs that have been imposed by the current administration.
Speaker #4: It's not speculatory. It's something that anyone can see through the open LME and MWA markets. You're aware of it, of course. And the raise the rise in aluminum cost is not because of demand is higher.
Speaker #4: In fact, demand for aluminum is quite weak and soft, at least within this continent. So, how it's affected things is it's reduced the nexus in the AL4, which were meant to be very profitable.
Speaker #4: They were meant to be 40%, 50%. Don't quote me on it, but we engineered them to make significant margins. Making 35%, obviously, is to us still very healthy, but bronze medal.
Speaker #4: These products should be making us 45%, 55%. So how it’s impacted us is, I don’t think it’s held us back on our sales.
Speaker #4: ... side of things, but it's impacted our ability to offer better pricing programs to our distribution partners, better incentives, and deeper discounts during our Black Friday months for dealers and distributors.
Speaker #4: The last thing I'll say is, the AL4 is something that we're not really that keen on selling through distribution because the margin isn't there.
Speaker #4: Because of the rising costs. And we don't want to raise our costs anymore—of our product—because that's just the American individual paying for inflation.
Speaker #4: So how it's impacted things is the margin is not quite as high. Although I think that our sales are close to being where they should be except for us maybe not selling the result.
Speaker #4: But it's fine because the nexus is taking that demand anyway. So we're seeing the same volume just through a different channel if that makes sense.
Speaker #1: Thanks, Steve. We do have a question here from a investor that submitted it via email. They were asking for specific clarity on item number three of the upcoming Worksport annual general meeting, AGM.
Speaker #1: To specify for all people listening, item number three was to approve, on an advisory basis, a proposal expressing shareholder support for the board of directors to consider declaring special dividends in connection with the sale of any business unit or material asset of the company, subject to applicable law and the board's fiduciary duties.
Speaker #1: Steve, could you provide some insight on why the company decided to include this for the upcoming AGM?
Speaker #4: We're working really hard to build a business. There has not been a business like ours that has done what we're able to do in as quick a time as we were able to do it.
Speaker #4: The growing Worksport to from zero from 1 million to 8 million to 16 million to a run rate of 20s and hopefully 30s before the end of the year.
Speaker #4: In the short period of time that we've been able to do, it has never been done before. As much as investors, like us, always have an appetite for more, we've broken all records that anyone in our industry has.
Speaker #4: And as a result, obviously we're going to have a significant amount of interest as we grow. The opportunity is going to be there as we grow to divest ourselves of certain business units. Terrabees Energy is a quiet subsidiary to Worksport.
Speaker #4: The public company is a is developing heat pump technology for 150 billion dollar market that is needed and does not exist. Once again, we're cheating on that business unit.
Speaker #4: What hasn't ever been done before, with a track record of execution behind us. So, as we grow, there may be an opportunity for divesting ourselves of a certain business unit, whether that's Worksport or Terrabees, or something that we haven't even done yet.
Speaker #4: And if we were to look at it, it could be significant, and then, if it is significant, there could be a special dividend to shareholders paid.
Speaker #4: What I will reference, if I can—and I'll ask for forgiveness versus permission—is that a competitor of ours, about a decade and a half ago, sold their business. Top line revenues were in the mid-$50 million range.
Speaker #4: Million EBITDA was marginal. And they sold just about a decade, a decade and a half ago privately for about 120 million dollars. So Worksport's trending towards those same revenues probably healthier margins and we trade at a what is it for on like a 16 10 million dollar mark.
Speaker #4: I haven't checked our market cap, but what I mean is the business underlying the stock is very valuable. And if we see that there's an opportunity to capture that value through a divestiture, there's an opportunity of course no guarantees that investors could receive a special dividend during that time.
Speaker #4: So that's how that would work mechanically, and that's the logic behind it—but there's no guarantees of any of it.
Speaker #1: Thanks, Steve. I have a question from Sri Arasha. He said, "Hi, big fan of Solis and Core, combination for trucking. What are your plans to expand this to more general use and increase the potential market purposes?"
Speaker #4: Good question. Solis, we're probably going to be looking at easel systems to be able to remove it from the truck and mount it anywhere—in a field, job site, campsite, these types of things.
Speaker #4: More universal mounting applications. We're still going to be focused on OEM integrations—more to come on that. And we're still going to be focused on broader applications on the vehicle side of things.
Speaker #4: With the Solis, we're going to look at universal mounting solutions, which should be pretty easy for us. And then for the Core, I can't say much about it, but we're going to look at more use cases for our battery blocks as well, so that people can integrate our batteries into other devices that consume electricity—36 and 48 volts.
Speaker #1: Thanks, Steve. You spoke about tariff costs. Since tariffs were declared illegal—in this context, this is the question from the investor. But I think they're referring to the recent government mandate from the Supreme Court talking about the legality of the tariffs.
Speaker #1: Their question is, will Worksport receive any money back like some other companies may have received?
Speaker #4: Yeah, good question. So yeah, on the aluminum side of things, it's inflation. We didn't pay tariffs on our aluminum. We paid inflation on our aluminum because of the tariffs.
Speaker #4: So there's unfortunately no one, and 350 million people are paying for it. No one's going to get any money back. And also, realistically, we were in a meeting with Toyota Corporation—don't misread this.
Speaker #4: There was a seminar by Toyota—not a business meeting, but a seminar—and even Toyota Motor Vehicles, one of the biggest car manufacturers in the world, during the seminar, was indicating that they don't believe that the reduction of tariffs will reduce the price of aluminum, because now the US economy has absorbed that extra income.
Speaker #4: So if you notice, I don't want to get into the political side of things, but on the inflation as a result of the tariffs, I'm not sure it's going to be reversed in a very short period of time.
Speaker #4: On tariffs that we did pay on imports from China, or foreign countries that are tariffed, the section 301 tariffs, yes, we can apparently get some of our some of these tariffs back, but I believe that the process is still very foggy.
Speaker #4: Or unclear. And it's also not immediate. So we're working with a consultant that will help us with some of the tariffs that we paid, but because we're significantly American, based materials, majority of our product is sourced, the materials are sourced in America.
Speaker #4: We're just paying brutal inflation for our material, not tariffs. So there's not much we can do about it, but anything that we did have to pay tariffs on, we'll look to get the credit back for them. But it probably won't be this year.
Speaker #1: Thanks, Steve. And we have a question here from Shane. See, I'm going to direct this towards Jen. Jen, the question is, as you sell down inventory for cash, do you foresee any inventory shortfalls or is that baked into the plan?
Speaker #2: Great question. In terms of our plan, we are forecasting a reduction in our finished goods inventory while we move closer to a just in time format, if you will, for the balance of the year.
Speaker #2: So, we are well positioned to be able to meet demand, as well as distribute as we receive orders and receive commitments from our customers.
Speaker #1: Thank you, Jen. Steve, we have here two questions related to AetherLuxe. I am going to combine them because they're very similar. The question is asking if there's any way to accelerate AetherLuxe revenues; they believe that it might be hard in the future.
Speaker #1: They're asking if it is. And they're wondering if Worksport's found a way to manufacture AetherLuxe products to get to the market faster. Are we working with a partner on that front?
Speaker #1: They're asking.
Speaker #4: Yeah, very good question. I'll keep the answer brief—not because I want to hide from it, but I'll keep things direct so I answer them and not with word salad.
Speaker #4: Number one is, Worksport has partnered with a very large manufacturer of heat pumps to manufacture our design. The immediacy with which we could receive finished AetherLuxe products, post-certification, is about 45 to 60 days.
Speaker #4: So I'm not worried about that. The certification process is necessary, and there are a lot of certifications: AHRI, Energy Star, UL, UTL, I think. So there are a lot of certifications.
Speaker #4: That process should conclude in the fall months of this year—so, September, October. I'd say probably October. And then after we're certified, 45 to 60 days is as early as we could see product.
Speaker #4: And I could also say that we're working feverishly on some initial orders from various public or private sector businesses. So what that means is it could be governmental or it could be private sector, but we are looking at orders to get the AetherLuxe on the balance sheet.
Speaker #4: But we feel pretty optimistic that the product is everything we've said and more—of what it's supposed to be in terms of a breakthrough product. And we think that the demand is going to be there.
Speaker #4: And then also, you tend to judge—people judge—based on history. And I understand that we've had some black eyes as a business, but one thing that you should judge us on too is that when we say we're going to execute, we do.
Speaker #4: We said we're going to do solus and core, took a little while longer, very complicated products. We executed. They're in the market. You can buy them right now.
Speaker #4: AL3, AL4, HD3, Nexus, execution, execution, execution. So don't no investor here should wonder whether we're going to execute on this product. We've shown nothing but nothing other than our ability to be able to execute on bringing products to market and then monetizing those products.
Speaker #4: So, I don't think it's a question of if now—it's just when. And my intention, our intention, is to expedite the 'when' for within, let's say, Q4 of this year to get the product out and contributing to the balance sheet.
Speaker #1: Thank you, Steve. We have a question here from Fred P. Could you walk us through the Nexus ramp-up in any more detail? Specifically, perhaps an ASC by channel, margin profile relative to L4, number of active SKUs, or a July versus August sell-through run rate.
Speaker #1: And whether Nexus is expanding the market or cannibalizing AL4 demand. I think I'm going to point this towards Shen because there's some levels of that question that we can't answer publicly.
Speaker #1: But Jen, do you understand the question, or would you like me to repeat it?
Speaker #2: I would prefer if you repeat, please.
Speaker #1: Okay. So the question is about the Nexus ramp up. Specifically, if we could comment about any of the following, ASP by channel, margin profile relative to L4, number of active SKUs for Nexus, current July/August sell-through run rate, and/or whether Nexus is expanding the market or cannibalizing the L4 demand.
Speaker #2: Okay. So our margin is moderately healthier on our Nexus versus our AL4. And with the introduction of the Nexus, we were able to achieve our first $1 million in sales on the Nexus within a single quarter.
Speaker #2: So, it took us about 10 weeks from the initial production of our Nexus product to securing that first $1 million, which is the best ramp-up rate that we've had to date on any of our product introductions.
Speaker #2: So, it's a great testament to the product itself and what it can deliver in terms of value to our end customers. That being said, the mix between Nexus and AL4—I would say, in general, they offer different opportunities to our customers.
Speaker #2: So it really depends on what our customers are looking for in terms of a product. So I think they both have benefits to them.
Speaker #2: In terms of the mix and the resulting impact of that, I would say it hasn't cannibalized. I do not believe that it will cannibalize our mix in general with the introduction of the Nexus.
Speaker #2: But in general, we have seen and continue to see a healthy contribution to margin, not only in our B2C space but also in our B2B space.
Speaker #2: It's just a product in general that is not—well, it doesn't have any natural competitors, if you will. I'm sure that Steven will be able to speak to that.
Speaker #4: Yeah, I just wanted to, Jen, answer the question brilliantly, but I also ASPs are I'm allergic to acronyms. Typically, but I think that that means average sell price.
Speaker #4: And the margin profile—margin profile is strong. Average sell price is confidential—not because I don't want to answer it, but because we really don't want to speak to what channels pay. But we are uniformed and do have UPP, which means that everyone pays the same in a certain channel. Like, a distributor pays distributor pricing, a jobber pays jobber pricing, so that we're not giving unfair advantages to anybody.
Speaker #4: In general, in generalities, we have, I think, 35 SKUs, and we're thinking about eight-foot bed applications. So that should increase SKU coverage and penetration on the products within this year.
Speaker #4: By about six, maybe a little bit less. So we're going to be in the 40s with the Nexus. So we have all the major A, B, and C movers—Ridgeline, Tacoma, Gladiator—and we're working, I think, on Colorado Canyon.
Speaker #4: So the more obscure, less popular trucks. And yeah, so we still sell thousands of AL4, thousands and thousands. So the demand is there. And it's not cannibalizing it, but it is offering something that just doesn't exist.
Speaker #4: So we think that AL4 markets—I think that the prop rod flip-up tunnel cover business is going to be challenged come the end of the year.
Speaker #4: For various reasons, but we've secured our success with the Nexus. And you know what, if we switch every sale of a prop rod tunnel cover to the Nexus, all the better, because they're more profitable and they're just a better cover anyway.
Speaker #4: But I think that the prop rod AL4-type business is going to survive for the foreseeable future and be quite healthy for us. So we're okay either way, if that makes sense.
Speaker #4: But for the rest of the sense, it's a very good question, Fred. But for the rest of the sensitive information, I'd love to answer it, but we got to keep some numbers under our hat.
Speaker #1: Thanks, Steve. And I think one aspect that we can also highlight for investors listening to this call is that we mentioned Nexus generated about $1 million in sales in just 10 weeks.
Speaker #1: And then I think Steve, right at the end, you sneaked in there that for July, Nexus amounted to a order volume of 1.5 million dollars in July.
Speaker #1: So to reiterate, $1 million for the first 10 weeks, and then $1.5 million for July. If that gives you an idea on what we're projecting for Q3, as well as the continued growth for Nexus.
Speaker #1: The last question on the call today is from Gary B., and I would like Steve to answer this. Steve, what is the avenue toward making this a million-dollar-a-week company in sales?
Speaker #4: Over $50 million a year in sales for us is not impossible. We just have to keep working on bringing the FLO and SOLUS deeper into the market without spending too much money on that.
Speaker #4: The marketing side of things, so that we're profitable on those sales. And we just landed distribution within the last quarter, just recently. So these relationships are new, and we need time to have them mature.
Speaker #4: There are 17,000—maybe even more—probably 18,000 dealers in America at this point that could sell our product. It just takes time to get them acclimated to the product, get display stands, get sales reps out there, and get them moving the Worksport product line.
Speaker #4: So I think it's just a bit of time. And you could see one million to eight million to 16 million to we're hoping to hit at least a run rate in the 30-plus million range this year.
Speaker #4: That's significant growth. So if you follow even similar growth—not even duplicative—it could be within the cards for next year, I think. And then upwards and onwards from there.
Speaker #1: Thanks, Steve. I am going to sneak in one more final question. From Ramesh D. Ramesh, as asking if you see any reason to raise new funds for the rest of the year or if you can give any profile on maybe the amount of funds that need to be raised?
Speaker #1: Jen, do you want to answer this one?
Speaker #2: Sorry, I was having trouble finding my mute button. So, in terms of our overall outlook for the remainder of the year, we are challenging ourselves, if you will, to see that we can see it through to cash flow positivity.
Speaker #2: So, our plan is, if there's opportunity out there, certainly we will explore that with a potential investor. But for the balance of the year, we really would like to see ourselves stand on our own two feet.
Speaker #2: Steven, do you have anything else to add?
Speaker #4: No, no, last year we raised I think over 20 million dollars. Last year in cash, so we needed to continue to fund the growth and a lot of it ended up in inventory.
Speaker #4: This year we've raised significantly less. So our reliance on outside investor capitals already significantly lower than it was this time last year. And it's going to continue to reduce.
Speaker #4: So I think that that's exactly how we're going to stand on our own two feet, which at that point puts Worksport in a very, very strong position that, frankly, a lot of small companies like ours on the NASDAQ don't ever get the chance to achieve.
Speaker #1: And that does mark the end of this call. We ask any investors that have any further questions to email us at investors@worksport.com. We look forward to keeping you updated on our journey, as well as sharing more news and information as it happens.
Speaker #1: Thank you very much for your time and attention today.
