Earnings call transcript Q2 2023

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Operator

Greetings, and welcome to the ToughBuilt Industries Second Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Martin Galstyan, Chief Financial [Operator] (ph). you. Thank begin. may you Martin,

Martin Galstyan

am afternoon, and to operating joining today and all Again, ToughBuilt. Officer thank ToughBuilt's second you I Galstyan, discuss Martin and name for Chief quarter Financial my of us is Good the XXXX results. financial

Michael today's and Officer. conclude financial will the quarter. begin me highlights Chief on ToughBuilt's then and by our growth upcoming with the and I financial discussion will is from the call Joining today's performance. review Panosian, discussion Michael President for Executive will operational Michael year our providing second plans fiscal beyond.

the covered statements Act I would our may under periodic Securities in could Litigation Actual the those uncertainties turning any and materially are today's is risks, like what forward-looking press by over to made that our filings. that results release during as U.S. statements management from Private SEC and you Before described the to and be in changes, other call in subject described of Reform call are XXXX. to statements differ Michael, and remind and forward-looking

XX-K Additionally, with conduce risk factors Form to SEC. results is the in on the most recent the available company's information differ that filed

United course the the States, In addition, generally accordance and in use that GAAP. any companies. reconciling may may the different SEC form financial non-GAAP numbers we with are prepared company in refer inadvertently a that the during from of file If are non-GAAP non-GAAP promptly to call, X-K or not mentioned measures principles financial such measures other by today's to with accepted will be used measures in call, financial the accounting

to the Michael. turn call now will I

Michael Panosian

today. all Thank for you joining thank you, Martin, us and

X.X% backdrop, the $XX.X was quarter in to increased Considering million approximately by strong for the XXXX. XXXX to compared ToughBuilt quarter as revenues same challenging of macroeconomic second

sales sales representing through period in second X% increase solid see quarter Amazon sales, gross Amazon over a $X.X in million XXXX. We in continued in the to online with same

the for was of increase XX% quarter while basis improving XXXX margin gross driven to gross margin in increased quarter primarily second mix This the select compared to product pricing XXX profit and million quarter adjustments. gross Our XXXX, the by in XX%. year-over-year by second profit by second points to $X.X improved

to ahead. We will continue margin our gross focus improving on the profit in quarters

We also operating even in our as quarter expenses grew saw operating significant revenues. expense leverage declined year-over-year as we the

focus to visible towards streamlining the accelerated During quarter, streamline come. on quarters we our These last the and in efficiencies the profitability. continued more be will path on to organization driving efforts

different We product our strong in strongly to XX lines our eight believe foundation categories continue provide growth. a

we Even far. what significant we portion additional built major of been new to completed new and reap products, begin work the a that rewards introduce believe design has as can our of we so we have

locations nationwide. line with the City of Howdens to Additionally, we to to X,XXX our that in pleased -- through in expand customers a customer significantly Electrical announce retail subsequent UK combined continuing the representing distribution to our strategy expanded Kingdom Factors, were and reach, United UK we quarter-end

Union and France Platforme recently expanded Spain. have La and professional also European combined Du announced We in customers that serve the which we distribution in Prolians, Batiment XXX,XXX-plus a through

our I to financial call now to details. back Martin Martin? will the cover in turn results greater

Martin Galstyan

Thank you, Michael.

$XX.X also period the Revenues goods XXXX industry, goods goods, of introduction XX, customers. products. to sale and same electronic goods sales soft metal of million, and new XXXX reoccurring XXXX $XX.X Amazon existing X.X%, for goods the of and the in respectively, June contributed XXXX or in increase. the wide the goods and our of ended soft for were primarily and metal through approximately customers, and to which acceptance products due our $X in million soft tools from to new months over Increased by three and orders sales second the Revenues consisted increased million quarter sold

$XX.X goods sold was quarter period a for three Cost of and XXXX sold XXXX in of respectively. year. Cost from prior the of for the revenues million, as XX%, months XXXX percentage XX, of June goods the the XX% down million $XX ended second in was same and

XX% SG&A for were expenses XX% the of for expenses compared and year. and same period the June XXXX respectively. XX, prior XXXX second percentage million million, SG&A for quarter three revenues a XXXX months ended as $XX.X of $XX.X was to

coming will We the and seek expense to continue realize quarters. to leverage in have further operating

ended The year-over-year three of costs were due $X.X and XXXX to primarily was $X.X Research months the the new construction million development for industry. and tools increase June and XXXX XX, respectively. for million, development

mentioned reduction For cost XXXX. we compared hiring. gross a sales recorded loss many months was areas the primarily as the XXXX, of for of an $X.X and previously due second dramatic improvement margins, increase June XX, improved This activities $XX.X net net loss a the to of increase, in to quarter ended million in XX% million three

used receivable $XX.X of As million, and the to position respectively. a million. was in and million, of accounts XXXX, cash period This for in XXXX used operating $X.X activities reduced the loss in net first totaled of cash net XX% June drive ToughBuilt's $X.X inventory an net $X.X cash helped XX, half improvement million and

that in our acceptance. improve and million further a offering. maintain margins June seek We capital strong our even to raised cost and market improve gain public $X.X products anticipates recognition our gross Management also to will continue company controls. resource we wider The as in

Michael? for now his will remarks. back to I turn the Michael call final

Michael Panosian

you, Thank Martin.

reiterate that on would operating capitalize are opportunities to well. the to I those built and have sound ToughBuilt infrastructure ahead we and opportunities market has tremendous like

structure with and do in operating headcount not are expense satisfied our to significant We plan add current XXXX.

continue We global us efficiency closer additional reach, we adjust selectively efforts that organization. revenue plan Moving the new to new and streams focus products, increasing move profitability. our by prices to and forward, these on our launching will us prudently, to portfolio throughout product anticipate expanding enable create categories

to team want into shareholders a high-quality and our grow ToughBuilt I a closing, bright thank brand helping our has that for In future.

over it like our would I to operator. turn that, to With

Operator

you. Thank

conducting a question first question. with We Kevin question-and-answer your H.C. with will now [Operator Wainwright. Instructions] Dede session. Our is Please from proceed be

Kevin Dede

Hi, Martin. Thanks my for Michael. question. taking Hi,

Michael Panosian

Kevin. Hello,

Kevin Dede

Happy could a if if just Understand talk over I'm to that to count us I count retail wondering you you've doors. could see got give wondering SKU good the first And of you new 'XX now door a change SKU six the change. the maybe months outlets. couple year-over-year year-end in where comparison and and growth. the the are of versus count was the you

Michael Panosian

to. of world. lot customers around happy be I'll increased a Kevin. the Sure, We've

put now will next that count But a a are announcement. I doors. over coming, we quite more roughly XX,XXX announcements got got So, we accurate a figure. so of we'll We've get of accurate doors bit service. on out couple to our

on about we for As highly ToughBuilt to the build rest have in excited XXXX, XXXX. huge opportunities year of the also and I mentioned,

lines far world As some and be distributing a to of the build new the different infrastructure the and and as to multitude to SKUs, category whole build we've The it of products, to able staff us was to also of around performing are stream present revenue one us is each push which to sales for the rest that enough rapidly. out throughout of going are customers. now world start good put we the more really well, United States

Kevin Dede

Okay.

to last just the year? talked during point, also just some remarks, about streamlining give headcount-wise headcount, some key and you of I now? Michael, us maybe But has the imagine And you could with tough costs, your where customers. costs, because you pandemic. to your more in organization. you a of with on were little Where the So, were efficiencies beginning you're sharing they I are insight prepared to the of your shipping know driving that at the do way transportation shipping

Michael Panosian

at Okay. team Globally, were we members. XXX

it XXX. to costs And towards are other we payables, Now, down contributes and at savings month-over-month cetera. accumulates paying et and this down

pushing are next profitability We for year.

are operation really we we two well We've adding over on we our beyond. other and support costs. designers staff, and because these growth now areas, staffed globally. quarters or So, or and many savings visible not more R&D be are focused the more the But costs will much to are reduced our next

my on contracts, We didn't places. pushing the on also to happy deliver get for hard company and due in save I'm prices et time. team. really And to paid we with about years many Everyone prices customers is So, raise are time, money very many raising also our cetera.

-- those on trucking and down have So gone the shipping, drastically. costs also

of north somewhere normal the $XX,XXX pandemic, negotiated instead or we've were of to below paying it $X,XXX, container down prices and $X,XXX now. we per During

So, higher as we lot are and money our a saving result that. of a of are margins

Kevin Dede

product know year that see fact next see on to to focus. your you you'll being talk later designs and be those how mix? I I coming where you talk lines you the for I key you you've you products Can is -- were you commented around. design talk I might that products the how guess were that was apparel satisfied and made into to kicking you releasing something this Can that know into a sales that expanding? team with Can investments know electronic year.

Michael Panosian

Yes, absolutely.

that we've developed, ready the of products are Some launch. they to

being of U.S. end one You'll of retailers. launched see the them in some leading of year the

those come the big goes So, to then more lot into didn't We developing big of this launch these R&D year. products and a lines year. next

better position in take next to year. are to advantage We be going

However, piece has one just lines inside. cutting one other of of line. this tools, year, It's And launched many hand hammer tools, screw numerous SKUs each and pliers, we numerous product. drivers, of not these

new globally. past towards and and new sales category every is to a big a path that categories continue revenue time generates us the for grow launch So, stream we profitability. while This lines

profitable builds sales up, next we be our As year. will

Kevin Dede

Okay.

you able You -- us us how insight difficult changing? it to some the half? for you what might be expect recommend to And more or you Can that? the spoke And environment give might on you what second maybe currently. see operating to

Michael Panosian

is around conditions cetera. economic because moment. Borrowing the borrowing the Banking The easy, et at is easy. not this rates, not not of money Sure. world is easy

of So, et that on cetera. marketing we we've on spend, typically a kind would down of lot expenses cut do the

in raise as market just to and marketplace. are focused on do get already pure the able to possible. And the be financing vehicles much to striving sold We financial as we to not place into that the new at try are delivering we products

is year What year we of this the year. expect and rest a of next little bigger bit growth the growth

statement think that's I fair a say. to

growing. still are We

strong. keep We adding We customers. are still

in are demand. We

the truly by professionals and users. is brand Our loved the end

We traction have very and a very strong future. bright

very about I'm frankly. vehicles. of to growing, I'm growing. the the What getting about versus versus raising shareholders well-being balance trying financial confident money not worried I'm is

highly there. be are easier and think it We thereon. we'll bankable will profitable, almost I be Once we are from

Kevin Dede

Is year. anything this to speak there anything can the to inventory, mean, sort end with Or the need, understand to right, do just growth does of guess? you the that market? financing I -- have Is I need point, -- modest just build your to

Michael Panosian

Yes. not Frankly, the it's market.

company size, this billion are in bring a There's a we to quite already all financial the For can that inventory need us, We our to $X company take service don't the there. have we customers easily. lot arms of demand. out to

have a our of I good of with shareholders. are money, We them. demand. raise for If a have purchase lot inventory. not purchase to inventory, is to to lot registered go But we There's I local provide local which product,

press and So, of as on sometimes, we And then, times step back gas a half grow become and take to as and prudent. faster. what's better the more it's then bankable, get good kind do

Kevin Dede

sources Last question be manufacturing since chase the Or more logistics curious the have Michael. managed how you end down understand Are economical? to especially you've in pandemic. for that that and still of supply predominantly China? other chain you the may maybe me, I'm

Michael Panosian

and Kevin. tariffs. got you, good we a of the everyone course, that, question. during all Well, just pandemic before Thank That's knows the

been other we've and get ahead to trying So, forging to countries.

not countries ready Vietnam, China now, right But Some of are like we Cambodia, are in India. was. the

some Some in are parts are -- developed products China.

Thailand, Taiwan, in as Bangladesh and comes. need also are Philippines, the We other places

who possible the we per deal, to can the if line are that us best country there. then capabilities and go So, we give source

Kevin Dede

I Mike. questions, my appreciate it. all taking really for Thanks Okay.

Michael Panosian

Kevin. Thank you,

Operator

are There like time. over would further you. to the Panosian Michael hand at any closing back Thank comments. to I for no questions this floor

Michael Panosian

Thank for you, of being everyone, a supporter ToughBuilt.

and future, news I a We especially months the of year XXXX. lot few us for and coming this good in Be excited the are to well. about forward look for truly

Operator

This concludes conference. today's

lines at for your you disconnect time. your may Thank You participation. this

ToughBuilt Industries (TBLT) 22 Aug 232023 Q2 Earnings call transcript