CAPC - Earnings call transcript Q1 2019 | Capstone Companies, Inc.

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Operator

Greetings and welcome to the Capstone Companies First Quarter 2019 Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions].

As a reminder, this conference is being recorded. turn over to Aimee your like Gaudet. now the to conference host, I'd may you, begin. Thank you

Aimee Gaudet

Matt, good you, Thank and morning to everyone.

today and and by Financial give us On Chief outlook XXXX financial discussing followed call is update well Capstone's quarter Wallach, the as as President the Executive first Officer; session. They on Gerry a Officer. Chief an question-and-answer results McClinton, will be Stewart and the strategy

the afternoon, not do that the website it is have on yesterday you If was available release company's www.capstonecompaniesinc.com. at distributed

aware, you we factors during the www.capstonecompaniesinc.com risks cause as other in Commission, As With are documents at are future These the are make the in today's company as at presentation. we release could where Exchange that, to Securities turn are Stewart. may by events over actual and as forward-looking results found or These earnings and filed be our subject to well the you, to well that which statements uncertainties, it to as statements differ www.sec.gov. I'll apply can factors with from which outlined today. materially

Stewart Wallach

Thank Aimee, time today. with and appreciate to good us I you, everyone. your morning

review like quarter salient minutes the McClinton financial results, impacted XXXX the I'd that points Gerry introducing highlight a Before to to few a of take first to couple quarter.

in our currently of initial obtain another quarter. the backlog this is the did of of the areas an The discounts estimated first category all to Capstone quarter To we the also for weeks Capstone sales the which finalizing And of In lighting. on will include latest newly a been $X ramping comment while of stands later surfaces does time, have achievements not if connected the product million be business turn in of the in and developed branded we to our estimated at successful remainder launched product approximated any our products accomplishments and up in million and sell $XX short, by this Connected company’s $X through new of certain of shipped XXXX LED that order core with XXXX. rapidly LED marked be within the due followed net calendar growing year, Surfaces in over activity website our allowances I��ll I’ll QX LED, we million. and scheduled At to session. an innovation review above, highlights specific Concurrent have year time sales. this first bit is to to outlook in developments product comment the will which after ahead. on further Gerry presale a question-and-answer the I Moreover, financials,

Gerry McClinton

you, Thank everyone. Alright. And morning, Stewart. good

for launch in which revenues QX LED of same Let’s Capstone figure and in that net battery estimated promotional respectively. activities $X At made a go the to within promotional investment million quarter time $X revenue the ended were March XXXX. repeat of revenues generated promotion major Net direct the of $X.X the straight XXXX million and categories a for and was approximately Hoover numbers. but XXXX specifically in decrease The result XX, revenue we LED XXXX our XXXX. it powered not permanently Duracell our in an the million product into would in new lighting reduction

year. could XXXX LED new launch quarter the marketing the $XXX,XXX XXXX. in to support home should invested of retailer with $X.X QX products product, form consumer offset December $XXX,XXX products. the first XXXX approximately promote last use or new XX, And of Now on Hoover then the XX% program XXXX for also zero had of in in XXXX in uncertainty license expired of to comparison, zero the the the million the a surrounding the first quarter of company purpose In compared coming they tariff the of which either increased LED the China, compared marketing for the XXXX fund in tariff had occur increases revenues that Duracell from to revenues

to Now of first $XXX,XXX XXXX. compared this quarter the increase is

funds reflected from quarter. deducted gross in As these revenues, are in marketing reduced the are they revenue the

profit last For approximately and the Gross first XX, quarter and year. revenue March XXXX $X,XX,XXX ended of percent XXXX was $XXX,XXX for $XXX,XXX approximately the XX.X% XX% was as as three three in XX, profit ended respectively, as reduction international of $XXX,XXX. months a to XXXX months of compared were sales $XXX,XXX to XXXX. in compared XXXX Gross a March

in resulted fund in investment profit the gross $XXX,XXX period. the However the reduction of market

and purposes the ended XX.X%, The in of $XXX,XXX. sales significantly March of for areas as product XX.X% months expenses. unprecedented $XXX,XXX have were XXXX, XXXX Just decrease profit higher that three would two $X,XXX,XXX impacted an gross to fund, in marketing that's XX, the XXXX. compared impact by operating for comparison the expenses marketing development the operating been Total was we in than a expenses and excluded quarter the most

were retail $XXX,XXX. marketing months quarter and $XXX,XXX three during incurred period the $XXX,XXX $XXX,XXX zero sales But and zero we XXXX. for XXXX XX, also For were of $XX,XXX respectively. incurred in the respectively, the in ended first and setup fees XXXX in display company XXXX also ensure was from with to reduced in revenue royalty in the that's XXXX. which in $XX,XXX product, to commissions our expenses of compared timely service In a not the were XXXX, licensed paid reduced March to and total quarter Sales reduction of XXXX, XXXX representative

a reductions overall Electronics the Show However Surfaces did Consumer launch expense the with at which XXXX offset show in occur. not obviously part these categories Connected of $XXX,XXX to were trade

XX, to of For the in XXXX in $XX,XXX. product $XX,XXX decrease ended March expenses XXXX were months three compared $XXX,XXX development that’s a approximately a

to resulting started Connected to XX, compared and when expense period result This to marketing overall During were fees. to from for project overpaid of expenses period the further last hardware income of of decrease $X,XXX XX, the months months the tax three new $XX,XXX the XXXX $XXX,XXX invested other the Connected fund and increase was from of development of the three Net in of software in ended XXXX -- and $XX,XXX our compared moving reduction compared of In compared that this received XXXX. initially for into just as to not G&A the what ended $XXX,XXX, accounting quarter a in March operating landlord expense The $XX,XXX Professional a XXXX the as loss level due of in $XXX,XXX approximately $XXX,XXX, for XX, to a $XXX,XXX reduced which exactly the invested Surfaces XXXX we for quarters in insurance the happened from increase from loss XX, to I’d prototype an fees and in liability refund XX, as the was $XXX,XXX the really to new new was Rent ended $XX,XXX a first offices. March Surfaces in in in kind did ended general to was decrease compared Benefit and development website zero loss and the areas, $XX,XXX the company gross Other negatively XXXX. of premium March three company $XXX,XXX you related in the $XXX,XXX $XX,XXX in out. was $XX,XXX ended $XX,XXX a in Operating of retail project, XXXX. that's from March Despite XXXX QX an an same in was from XXXX the corporate compared claim. in as $XXX,XXX, XXXX perspective. result performance. mainly XXXX XXXX of March as three expense were year. But respectively, the $X,XXX a XXXX. $XX,XXX compensation to were months loss XXXX expenses incentives compared to compared summarized net $XX,XXX a $XXX,XXX expense impacted rent net profit $XXX,XXX months incur give Other $XX,XXX. $XXX,XXX. during higher months for three a of a approximately XXXX. a of XXXX, we developing warranty expense sample just

actually financial a to decrease $X.X XXXX, that's in were performance in $XXX,XXX. summarizing XXXX, million of XXXX of million QX compared So gross sales the $X.X

the as overall incurred in additional to revenue promote future. results to order in the objective impacted company were growth strategic However, expenses support the management’s

$XXX,XXX project, Now if we continued no online launch me spent spent spent $XXX,XXX expenses Surfaces this that and let's mirror a alluded We Connected loss were borrowing in a We we of smart in expensed software And $XXX,XXX were for funds without all done development would strategic of profit. summarize $XXX,XXX funds. those. for have marketing investments interest we any the the spent XXXX $XX,XXX show for not the but to just which sales CES in smart and incurred total were There did Stewart $XX,XXX period, turned $XXX,XXX project, money. this website any let Surfaces the Connected which of development quarter, borrowing those of note without earlier. funds. in In into the the

let So a just talk and liquidity little about capital bit resources.

touched. and December $X.X agreement and approximately had line $X.X also million million we needed if was another balance signed The availability have had XX, million the expansion $X additional it borrowing March of cash at million not XXXX under XX, which respectively. $X the Our and XXXX we for Capstone company

XX, zero. of XX, March loan continue and for balances be XXXX December Bank As periods Sterling the XXXX to both

development product operations believes December be payables in needs the expenditures we Cash operating by related provided credit cash will our With provided same next we performance from daily line to $XXX,XXX XXXX. to invest management ability ended capital compared months expectations, our in three the zero. XX, quarter on the availability was March Based least cash million believe operations and $X.X of that the XXXX flows that and a XX and our to in anticipated XXXX, with under the cash XX, and by activities XXXX hand, meet for operating current our the activities cash months. As of flows company's have XX, capitalization on approximately those approximately for further were working continue at March portfolio. adequate parties of

increase loss our Now a decrease from receivables the of at payable. additional cash was continuing the payment This revenue $XXX,XXX and activities sales really position $X.X we from channels and manufacturer million accounts The the have beneficial offset products. to cash in decrease XX, the million to The re-launch receivable, March increase a $X.X uses flow funds, negotiate in ended overseas at XXXX the $XXX,XXX from million in for $X.X introducing of with net in XXXX. company's used period net months the $XXX,XXX $XXX,XXX respectively. to the March and expenses partially XX, Cash $XXX,XXX that was allowances in reduced accrued quarter. the by XXXX approximately prepaid the a main so accounts company zero in from is March three requirements produce XXXX funding the financing was XX, for resulted resulted

As all the XXXX with of was it outstanding XXXX my zero to debt. XX, concludes terms facilities. pursuant so existing the company back had the you credit in I’ll Stewart. This On company March our report compliance pass XX, full March to

Stewart Wallach

Thank you Gerry.

Let’s turn our attention to Capstone’s future.

in that initiatives next company’s several years. growth drive putting place several are over the the will We

Towards emerging let company’s achievements in some Surfaces fuel its this highlight share to-date which security specific and of of will growth that our Connected end me category. the

subsequently industry our showcase XXXX. of CES the our XXXX CES This publication devices such choices. best first our Smart a by Mirror recognized commitments We covered powerful interviews have one was and Headlines their introduced at Firstly, electronics and been industry have in had CES that initial entry for as was Android number experience in numerous we were exhibiting made. of smart the been one,

and We continue who Media at company are tech product the Connected are we for product retail. Electronic at will social outlets them firsthand department product Surfaces Max to the launch initiate planning saw launches Surfaces have Consumer to helped consumer We the marketing samples they and its company media and we public expanded strategy. enhanced a experience social reviews. the awaiting Two, Three, currently us campaign broad eagerly the to feature in Connected CES to we media company applicable future. a Borges with both at manage a the Instagram; stay YouTube and spearhead for media the the presence Show Agency Twitter LinkedIn; platforms: us plans Pinterest; a line the Industries to expansion following as at Facebook, Capstone time. as as will launch that social with of noted and near CapstoneConnected; very in well presence engaged programming on media PR on contact

the web social CapstoneConnected media device. and on you strategic the been the facilitate is under smart sales marketing has area. follow We of Much Instagram developing term campaign adopters. urge highly Additionally potential have Facebook in company CapstoneConnected, website this progress advertising design our audience designed working our us targeted under early Pinterest Four, team team, made use and to a a been direct in of to to reach we CapstoneConnected. and pre-sale under developments short with its which sales leverage

marketing mentioned electronic site with in the main be and relevant introduce smart of As to of additionally reflective And progress full-service also product lastly web modernistic company associated the This our on design channels initial site will this and and help ahead. the support scheduled media engaged image we the to will new expected CapstoneConnected development team product us social produce in a a and be under are video website making used from create earlier has line will our to Producify be and weeks it been is website campaign. boutique which products. Five, feature we initial QX. the to products which hosted

are ahead a creating marketing support the of be efforts. number marketing in planning to months them, a our we campaign Additionally, and will with continuity videos

discuss As Mainland recently spend mitigate China, known sizeable programming, market as make I as to of our in China to note, this plans expansion of the the where history us see been well its to than opportunity returned our have an as and our well made souring. am means On in had you from that reduce Capstone Mainline is both Thailand leading that as product and and innovator as increases our because LED to opportunity any deliver will for Connected an on to pursuit additional pursued investments greater review Asia, presence establish My I increased on supply-chain be price focusing electronics is to position. to industry to Capstone a Surfaces can as has Capstone explore track our time the in tariff I certain Thailand expanding reliance a of we roadmap. and

influenced relations strong with any to in future bold we there currently be enjoy of issues, disputes, not lifestyle. new reduction address US In the and the concerns long-term the factories, for prepared XXXX shareholders will new delivery continued I’d next the our Capstone’ personally we between the you we I'd scheduling LED for or management in promotional to took OEM relationships our experiencing remain production exciting are with and trade While to for thank closing welcome need category, time, instabilities. and from line At emerging resulting chapter. like foreseeable steps strained are maturation a for product trade entirely digital to to today's that support category while your very and shareholders China future and launching this an potential Capstone by like an some

Aimee Gaudet

in to address I'd lines, phone the some up via like questions opening before email. Okay that came

and stock. of had The last to been was, status the program? the What is webcast Wilson in authorized repurchase that Davis question stated you first this

Gerry McClinton

me was I market. But to growth let is this shares been that has purchased shares purchase so that the talking program active. about this terms very on that, regulatory of have specific with place Yes, and morning, the guidelines everyday in the XXX,XXX, so forth. answer just so number as in is approximately authorized we to-date to of and program pricing But of that as conditions deal was the

Aimee Gaudet

question Thanks, with to regards Gerry. came tariff. in This

the of manufacturing as can you China? to seems As of with out an China visit the details to Stewart’s be provide and tariff moving possibility flow accelerating

Stewart Wallach

most suppliers track looking built compliance, researching record, but and at to XX to requires shift over China. limited we this we long-term to manufacturing it's potential a other at legal firstly proven HK team It including in relationships important months. supplying the finding companies the over are similar years recognized levels, Capstone has past participation in several the importantly, build those emphasize been that have Alright, to, not

will I'm outside the borne that require our few shipped be be the will say and our from a we to China. Some of have meet of companies related still bulk that the China, costs products found product to components pleased of criteria. but

product operational building to We in begin the plans are season. just accelerating

As yearend. goods I finished stated earlier receiving will be by we believe I

Aimee Gaudet

Great, thanks Stewart.

franchise? in comment you Next about Capstone the question, can please increased our business

Gerry McClinton

point that It's the important commissioned excellent to out we results have with over several licenses have the we past that years.

Additionally Capstone also Curiously Capstone partner agreed outsold channels. comparative proven the savings a such on which Capstone has strengths resumed the brand our basis in club the cost the membership. warehouse particular and translates brand for the similar Duracell the brand marketing brand of retail its products as on to enough

stating in We LED be are this brand. the not under future, marketed new meaningful that time licenses would are being Capstone our at not only however products

Aimee Gaudet

out maybe levied XX.X% can compared in increased Could Gerry goods? Gross of XX% Thanks, are on explain this the Chinese profit question to help next the the increased one. with you us you in result was being costs if tariffs QX XXXX. XXXX

Gerry McClinton

costs these Well, of true importers it sales is additional and that cost increase paid could by expense. are US

we'll in us model tariffs tariffs retail. the The participation impacted shipments our additional profit sales who and for the definitely and actually retailers reaching have for arrive be assistance to indeed than retailer The for tariffs stimulate business based gross the of States. the numbers being in such funding. to the bear it promotional on will of help not brunt out our other increase is funding goods of sales as is promotional United overseas, billed the our or However, from cost so added when the pays port

Aimee Gaudet

show the planning CES to XXXX? you the Gerry. wanted Thanks and January, in a get Number we attend that you spent know Capstone impact in I $XXX,XXX is at five, did

Stewart Wallach

showing. by that a evidenced yes, participation was is recognition simple Let media at well received me as impactful handle The the our very the this. This we followed out had we answer CES. coverage as

experience one in lead ahead. As XXXX receiving has of I to Moreover rewarding a Headlines coverage long the most which publication. the samples best CES list Android eagerly earlier additional by will stated journalists awaiting of our in media months is the award agency media

Aimee Gaudet

Thanks reduction? balance December you XXXX. million Capstone's that. next at March you $X.X compared $X.X was question, the Could million can answer XXst million Stewart, Gerry, at to cash Maybe $X.X explain XX,

Gerry McClinton

own we our the means development, with media that you'll software Yes, marketing was well, it during capital. earlier being Surfaces the all $XXX,XXX with are involvement expense, cash working investments our existing funds, talking on which made an balances I expense, show development, I quarter, The covered when website touched estimated CES zero note interest no loan totaling Connected but were agency from flow. had

the account In We to will we also when the are in the are funded summary we that highly to $X.X cash our envelops receivable million paid back management. us. increase back get being efficient

Aimee Gaudet

Thanks Gerry.

am I as shape pleased company log question, lighting that? about It long-term Smart not the great shareholder on once product open that you appears Connected light Can this Next be so on when implemented will order you see Mirror based statement abandoned any your to LED a the in category the that does plan. ship. was Surface shed ship,

Stewart Wallach

the Smart Well thanks acknowledging the on I and that business several Thanks press our the saw effort LED channels. covered recognizing product that interest performance impact the for product regarding first as release well. company can in numerous CES. by our been for the the core acknowledging, at Mirror shown retailers firstly. Smart that will much our see Moreover have interest Mirror furthered potential has our

launch tell being written. half. software direct-to-consumers at the the case year season. In calendar been And XXXX made the a prototype meet we orders requires we done the of will testing up first hardware elected to product presentations sales to able product ready had have gear complexity few time, were the can and Due XXXX been CES stages. to deadlines to in both way Following could we that and not in shipping product introduce this start on you which Christmas extensive I the for in would be

Aimee Gaudet

is this last the actually and question. Great

fit of potential driving the about is into and home Can categories smart positive the what where very are we share that. you enthusiasm? this may You

Stewart Wallach

At and the the subscriptions And broadband the Well users the that XXXX, but XXXX. of some some to is redundant, motivate of Smartphone write things. the by in only amounts Consider I'm market being penetration million importantly the several in very of expected sharing XX.X% billion I X.X% a to Household fixed recent XXXX. exceed homes. US the Smart The Home shared is stats this, comfortable in revenue XXX previous XXXX. in XXX effort. million approximately projected information webcast exciting. aXXX alone the exceed segment this this development $XX size as in in is US million most during

not Mirrors. household quite company, selling project While that consider to a result America position North dazzling. X the X% only we our reaching potential It’s broadband are would million fixed of in in today the Smart in for

So positive. we’re trends future all is extremely in. excited competing about are it, we’re relative motivated by market spending and technologies we be it will emerging the And to and this

basis the is enthusiasm. my that So for

Aimee Gaudet

Okay the Stewart. up questions. for can this time At open some thanks line we

Operator

Great you. We Instructions] do here go from a have Colin]. ahead. [Erika question thank [Operator Please

Unidentified Analyst

quarter this years, year? the down the The stock of second quarter has tremendously quarter, expect third two where be fourth stock to do and you last gone after in

Stewart Wallach

of previous marketplace saw you, can't this Erika. has all that we close resources assist that the at the cetera. et are point allocating helpful we what in I are fact so We that in the project buyback That place But program, out factors in Stewart much the why that bring -- just dilution reduction the am did -- repurchasing we that's and are revenue to a day same ratification, ramp-up stock the very and the and and buy available end levels sold of resume and will resources your Well, many you back until I revenues time the to opportunity but this for at speaking. insiders start sorry possibly outstanding the profits in tell in. to huge our dynamics start Thank program will growth. for stock stock of have as should stock put valuation I I of valuations. stocks. at doing the in here its is stock a to that not is found stock any There we think that we the will reflect stock is bottom

Our holdings remained have solid.

Gerry McClinton

Yes, acceptance morning I'd not to to with just bids going everyday like putting and add and some speaking broker the that that they it's are aren’t to this and a get stating why that’s in looking people the happened, to going we selling that aren't believe give or up on. would the that’s they're people stock, stock and it or what’s more have lot not

Unidentified Analyst

is I you of question really bottom. stock think has the what its you will at because is hit hope this the during your be? stock that comment where year, stock My do be Well think can't will that's if

Stewart Wallach

that greatly We I for a to important were stocks, for for past. us. hit LED has minimally reduced. the it category said that but the were into a the five lighting I'm growth resume three opportunities the hopeful an am offers considerably CEO for had category the levels as that and matured and in has and not demonstrating this And as moving growth to in public more company doing category in position I’ve lot us very of difficult year at company. the our been point well step stock that being think the of it's for difficult particularly The and a prior years company project. was the but will only past for than been I to

shareholder deal we're year. internally that and will the and management expansion company later some money We've our a the in moves. the took bold So hoping of very to into translate great invested value

Unidentified Analyst

I because have lot positive to company of really your the say and it's felt exciting about marketing strategy knew a there things. to that were hear Yes. very always I nobody

So marketing think that to really the about my help I I it, opinion strategy that. to hear happy will think greatly changes and in that I'm that your

Stewart Wallach

for you that Erika. Thank acknowledging

Unidentified Analyst

huge. it's huge, that's Yeah,

to big you Good back my So just got positive, call, so taking thank thank very luck. for you.

Operator

turn to This management any concludes back I'd the to the session. question-and-answer comments. like closing for floor

Stewart Wallach

conducted want disputes of technologies investment very at to think the with a to of this trade In the management in wars now part of over account with past think out I and smart litmus test than where that we almost a reduction supply a in the as smart of China, activity and year, true XXXX. competing is working I year, the and leverage will balances and remain I trade and pleased we in of management how our additional our last personally very devices emerging I'm are all opportunity. just uncertainty remains Corporation the at maximize will that we're Data overall significant. for I a more $X wearable challenges Moreover closing the good once we the are result year's from seeks Cash chain this and has say XX% that the position very, have to and be for we out in industry zero loan course funding home faced relative point well. of the spending costs and of capital this pointed for performed out worth going first has interest indicators itself in to expansion for arranged on International itself over expense million zero. that management program starts an so The take are off, products promotional

market, a XX%. category year with smart devices a home growing the importantly but we compound is substantial technology fastest about of rate five Now, are XX% more being of forecasted talk annual growth

environment into right And opportunity place, rate at even a substantial right us. we're I in the a X% the penetration indicated time. as America we're So in the represents smart for earlier home

bullish. So we're very

We way have about same have we five have am three I has are China, we at opportunities new the management to to with next explore to I And to time of shareholder to work personally future. in categories, it. have And this a support the of And great transition company positioned the to near years. relative properly our for we very to out LED to deal translate manufacturing value done the expect There's to excited penetrating continue itself. do this being conducted pleased channels.

for again soon. thanks participating So and to we'll talk you

Operator

This concludes today's teleconference.

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

Capstone Companies (CAPC) 16 May 192019 Q1 Earnings call transcript