Worksport Ltd. Q2 FY2025 earnings call

• Revenue growth: Q2 2025 was the highest revenue quarter in company history with net sales at $4.1 million, showing strong year-over-year and sequential growth.
• Dealer network/B2B growth: Added 2 national distributors in Q2 2025, with the U.S. dealer network expanding rapidly with over 450 new accounts year-to-date. Estimated revenue potential from distribution network at current dealer size is over $21.5 million annually.
• E-commerce: Direct online sales accounted for over 50% of total unit volumes in Q2, with record sales in April, May, and June, and an internal run rate of $19.2 million in June.
• Product launches: HD3 on track for Q3 launch, SOLIS in beta testing with select customers and on track for Q4 launch, COR nearing mass production readiness and selected by a U.S. construction agency for pilot project, AetherLux introduced in Feb 2025 with significant inbound interest.
• Production scaling: U.S. manufacturing facility targeting 200 units per day production by late Q3, with current average daily production climbing and record single-day output of 160 units in July 2025.
• Cost management: Operating expenses were $4.7 million, with sales and marketing up, general and admin down, and R&D down due to prior year development peaks.

The only revenue-generating segment is the tonneau cover division. In Q2 2025, net sales reached $4.1 million, representing 114% year-over-year growth compared to $1.92 million in Q2 2024 and an 83% sequential increase from Q1 2025. Gross profit for the quarter rose 173% to $1.08 million, with gross margin improving to 26.4%, marking the third consecutive quarter of margin expansion.

• Reaffirmed full-year 2025 gross revenue target of at least $20 million, supported by dealer adoption, production growth, and product launches in the second half.
• Gross margins expected to rise each quarter, reaching 30% target by year-end.
• Targeting operational cash flow breakeven by late Q4 2025 or early Q1 2026.
• COR, SOLIS, and AetherLux viewed as significant profitability enhancers in 2026, with $2 million to $3 million expected revenue from first batch of COR and SOLIS, and AetherLux anticipated to impact 2026 balance sheet meaningfully.
• Expect to close Regulation A crowd funding offering by end of August 2025, with full $10 million allotment expected to fund the company through 2025 and into 2026.

• Tariff-related cost pressures: Recent tariffs have contributed to a 5% to 10% inflationary increase in costs, though offset by operational efficiencies.
• Inherent uncertainties in forward-looking statements: Actual results may differ materially from forward-looking statements due to various factors outside the company's control.

Q: On gross margin, where are incremental gains coming from?

A: Incremental gains from economies of scale, mostly through efficiencies in production, such as reducing human interaction per unit from 3-5 hours to 2-4 hours, and optimizing more expensive materials like aluminum sheet and extrusion. Also, offsetting domestic inflation with operational efficiencies.

Q: On COR and SOLIS volumes, how do they fit into production?

A: HD3 will fit into production scheduling with a ceiling of about 200 covers per day, SOLIS production starting with batches of 250-500 units and potentially scaling to 1,000, and COR planning initial production of 1,000 units with battery uptake expected to be significant.

Q: On AetherLux heat pump, long-term intent?

A: Intention is to manufacture and sell under the Worksport brand, but also evaluating collaborative opportunities and potential acquisitions with large companies showing strong inbound interest.

Q: On Reg A offering structure and conversions?

A: Reg A offering is structured as preferred equity with 8% dividend and warrants priced at $4.50. There has been a mixture of conversions and investors continuing to hold, with larger investors sometimes converting.

Q: On heat pump commercialization vs SOLIS and COR?

A: AetherLux is being commercialized faster due to lessons learned from COR production, including better understanding of testing, regulations, design, supply chain, and production, leading to more efficiency in bringing the product to market.