Worksport Ltd Q3 FY2024 earnings call

• Three years ago, following uplisting on Nasdaq, Worksport began a strategic journey. In January 2024, early stage production ramp-up of AL3 hard folding tonneau cover started in a 150,000 square foot facility in Western New York.
• In May 2024, awarded a $2.8 million innovation and growth grant by New York. Q3 2024 revenue was approximately $3.1 million, a 581% year-over-year increase from Q3 2023.
• In September 2024, R&D facility tested COR portable energy system and launched Alpha release of COR and SOLIS products. Commenced sales to U.S. government. Initiated a $2 million strategic cost-saving program.
• IP portfolio has approximately 170 registered & pending patents and trademarks. Gross profit in Q3 was $247,000; strategic production slowdown in Q2 and early Q3 led to temporary margin erosion, but margins are projected to recover.
• Inventory is robust at $6.1 million. Sales channels are experiencing increased demand exceeding current production levels, transitioning to demand-based ordering.

Worksport’s B2C segment experienced a significant surge in online sales, jumping from $21,000 in Q3 2023 to $1.59 million in Q3 2024, accounting for 51% of total revenue for the quarter. The B2B white-label segment has shown early growth, with over 200% growth in dealer account sales of branded products in the past four months. Product margins in the B2C segment are expected to reach up to 51% and B2B white-label margins target 25% to 40%.

• Anticipate beating the upper end of the 2024 revenue guidance range of $6 million to $8 million. For 2025, current product lines alone are projected to be $20 million, with additional product lines expected to add up to $18.5 million, leading to total revenues between $25 million and $34.5 million.
• Aim to be cash flow positive in 2025, focusing on EPS and EBITA. Expect gross margins to significantly improve near-term with increased production and new high-margin product lines. Launch of AL4 tonneau cover in late Q4 is expected to bolster revenues.

• Macro-economic factors such as potential U.S. tariffs on imports from China. Competition from Chinese companies in the portable energy market. Risks associated with forward-looking statements due to uncertainties in market conditions, strategy execution, and external factors beyond control.

Q: About 2025 revenue guidance and revenue mix, especially AL3, AL4, SOLIS, COR A: Michael Johnston stated AL3 is forecasted to do $20 million in 2025, AL4 will be a larger revenue driver but take time to scale.

Q: How to achieve gross profit margin growth?

A: Michael Johnston said it's through economies of scale, perfecting processes, and reducing inefficiencies like switching from adhesives to automation.

Q: Online sales distribution?

A: Steven Rossi said almost exclusively on worksport.com to avoid sharing space with inferior imported products; focusing on driving sales to website and supporting local dealers.

Q: 2024 revenue guidance update?

A: Faran Ali stated they anticipate beating the upper end of the $8 million range, but exact number to be updated in Q1 call.

Q: B2B vs B2C mix in 2025?

A: Steven Rossi said aim for close to 50-50 mix, phasing out private label sales to focus on Worksport branded B2B and B2C.

Q: Margin improvement timeline?

A: Steven Rossi said margins to trend upwards in Q4, with significant improvement expected from Q1 2025 onwards as processes freeze and efficiencies increase.

Q: Capital expenditure for production expansion?

A: Steven Rossi said ballpark $3 million to $3.5 million for equipment, vendor financed with no interest.

Q: Investor discounts on products?

A: Steven Rossi said maintain dealer incentives, pricing is already competitive, and refer investors to local dealers for potential better prices.

Q: Analyst and institutional coverage?

A: Steven Rossi said driven by market cap growth; aiming for nine-figure valuation to attract more institutions; building relationships with analysts.

Q: NASDAQ minimum price and reverse split?

A: Steven Rossi said no intentions of reverse split; focused on building business to improve stock price.

Q: Marketing and TV commercial?

A: Steven Rossi said appearing on Truck U on MotorTrend TV on November 24; focusing on marketing to those wanting the product first, then brand awareness.