Earnings Call: Q2 2021

Aug 16, 2021

Greetings, and welcome to the ToughBuilt Industries Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen only mode. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Martin Galstein, Chief Financial Officer. Thank you. You may begin. Good morning, and thank you all for joining us on our Quarterly Call to discuss Tuffield's 2nd Quarter 2021 Financial and Operating Results. My name is Martin Galstian, And I am the Chief Financial Officer of ToughBuilt. Joining me on today's call is Michael Panossian, President and Chief Executive Officer of ToughBuilt. Michael will open our call with an overview of Tufeld's journey from inception to where we are today as well as provide operational And financial highlights from the Q2. I will then review our financial performance for the quarter. Michael will conclude the discussion with our vision for the future. Before turning the call over to Michael, I would like to remind you that any forward looking statements made by management are covered under the U. S. Private Securities Litigation Reform Act of 1995 and are subject to the changes, risks and uncertainties described in the press release and in our U. S. Security filings. In addition, during the course of the call, we may refer to non GAAP Final financial measures that are not prepared in accordance with accounting principles generally accepted in the United States And that may be different from non GAAP financial measures used by other companies. Investors Are encouraged to review ToughBuilt's current report on Form 8 ks furnished with the See for TufBuild's reasons for including those non GAAP financial measures in its earnings release and presentation. The reconciliation of non GAAP financial measures to the most directly comparable GAAP financial measures are contained in our earnings press release Issued earlier today, unless otherwise noted therein. I'd now like to turn the call over to Michael. Michael? Thank you, Martin, and thank you all for joining us on our conference call to discuss TopBuild's operational and financial results. Before I discuss the quarter, I will provide a brief review of our history and where we are today. We launched ToughBuilt in 2012 As a group of industrial designers and engineers that had identified an innovation and quality gap in the home improvement industry, While the advancement of technology and design was being embraced by many other industries throughout the world, Professional builders remain stuck using tools with the same functionality that had existed for decades. Our goal then, which remains intact today, was to usher in the next generation of advanced innovation And quality first home improvement supplies, 1 product line and 1 SKU at a time. As part of our long term goal, we began building our brand, ToughBuilt, introducing products That put innovation, quality, durability and functionality above all else. As a result of these efforts, We have experienced incredible demand for our products and strong brand loyalty. Currently, TopBuild products are sold in over 13,000 stores globally with shelf placement in leading retailers In the U. S, Canada and across Europe. In terms of revenue, we have gone from $1,000,000 in 20.13 to over $39,000,000 By 2020, we are seeing a growing portion of our revenue driven by e commerce demand Indicated from record Amazon sales in the first half of twenty twenty one. Considering the tremendous growth we've experienced across our product lines, We've continued to expand and strengthen our company to support R and D, sourcing, manufacturing And to support the continued evolution of our pipeline of innovative products. For context, in the beginning of 2020, Our worldwide headcount was approximately 30. And as of June 30, 2021, our headcount totaled 121 strong. Since 2012, we have made significant progress in building ToughBuilt's business platform for the long term and a lasting brand Against that backdrop, allow me to review our operational and financial highlights for the quarter. In the Q2 of 2021, we generated revenues of approximately 15,900,000 A 132% year over year increase compared to $6,800,000 in the Q2 of 2020. The increase in revenue was driven by demand from leading retailers across all our product lines. During the Q2 alone, We expanded our footprint, adding just under 900 new storefronts, increasing our total store count to 13,000. In addition, we continue to introduce new SKUs within our existing product lines with fantastic feedback from our retail partners And customers alike. Shortly after the Q2 ended, we introduced a new product line, 1 of 3 product lines We expect to introduce in 2021. The 2 in-one scraper utility knife is a highly versatile tool for all professionals Anne represents a significant innovation in the $1,000,000,000 utility knife market. Already, we've received extremely positive feedback from Our marketing efforts with accelerating orders from retailers and customers. We believe this globally patented line will be a A significant contributor to ToughBuilt for years to come. In the Q2, we increased our market Penetration in Europe by adding several new large customers. As a result, we increased international revenue from $2,500,000 In the Q2 of 2020 to $4,300,000 in the Q2 of 2021. Additionally, we expanded our capabilities by hiring additional employees and consultants to support our engineering, Marketing and operational efforts. I will now turn the call back to Martin to cover our financial results in greater details. Martin? Thank you, Michael. Revenues for the 3 months ended June 30, 2021 were approximately 15,900,000 Compared to $6,800,000 in the same period last year, representing a year over year increase of 132%. This significant increase was primarily the result of wide acceptance of our products in the tool industry by new customers combined with follow on sell orders of metal goods and soft goods from our existing customers. Cost of goods sold for the 3 months ended June 30, 2021 were approximately $12,500,000 compared to $4,500,000 for the same period in 2020. All the goods sold increased in 2021 over 2020 by approximately $8,000,000 primarily due to industry wide supply chain disruptions, Which have led to historically high shipping costs as well as increased material costs and high labor costs. Cost of goods sold as a percentage of revenues in 2021 was 78.85% as compared to cost of goods sold As a percentage of revenues in 2020 of 65.2 percent, selling, general and administrative expenses for 3 months ended June 30, 2021, were approximately $9,200,000 compared to $4,100,000 for the same period last year. SG and A expenses increased in 2021 over 2020 by approximately $5,100,000 Primarily due to the hiring of additional employees and engaging independent contractors and consultants to grow our existing business and advance our expansion efforts. We expect SG and A expense growth to decelerate as business matures And we develop economies of scale. Research and development costs for the 3 months ended June 30, 2021 were approximately $1,400,000 Compared to $422,000 in 2020, we expect to maintain similar levels of R and D costs as the company continues to develop new tools. In the Q2 of 2021, we had a net loss attributable to common stockholders of Approximately $7,400,000 or a loss of $0.09 per diluted share compared to a net loss of approximately 2,500,000 or a loss of $0.11 per diluted share. In the Q2 of 2020, as of June 30, 2021, The company's diluted weighted average common shares outstanding totaled 81,600,000. On July 14, 2021, We completed a registered direct offering for net proceeds of approximately 36,300,000 The funds from the registered direct offering are to be used for working capital purposes, including inventory builds for product launches, Marketing and Operations. As of June 30, 2021, Tufill's cash position was $20,200,000 Based on the company's current cash balance coupled with anticipated cash flow from operating activities, we have no plans to raise additional capital for the remainder of 2021. The company continues to control its cash expenses I will now turn the call back to Michael for his final remarks. Michael? Thank you, Martin. As we look at the second half of twenty twenty one and beyond, Our goal is to deliver next generation technology enabled equipment and gear for professional and DIY builders. To reiterate, we expect to launch 2 additional product lines by the end of 2021 with a pipeline of Over 20 lines of products to be released over the course of next several years. These products will incorporate technology that saves builders time and money Throughout each step of a project, while maintaining the quality first focus of top billed products. To support the success of our product launches, we will continue to strengthen the foundation of our business with a robust manufacturing and distribution network, A best in class marketing team and the industry's best designers. I want to give a special thanks to our employees who have relentlessly executed Through the global pandemic, without whom we could not have made it this far. Thank you all for your hard work and dedication even in the hardest of times. Finally, I want to thank all of ToughBuilt's shareholders for supporting us along this journey and I can't wait to show you all the exciting developments that we have in Operator, if you would please conclude our call. Ladies and gentlemen, this does conclude today's teleconference and webcast. We thank you for your participation and you may disconnect your lines at this time.