• Revenue: Net sales of $1.92 million for Q2 2024, up 275% from Q1 2024.

• Year-End Revenue Comparison: Q2 2024 sales surpassed the entire fiscal 2023 revenue of $1.5 million.

• Gross Profit Margin: 15.4% year-to-date for Q2 2024, improved by 111% compared to Q1 2024.

• Monthly Recurring Revenue: On track to achieve approximately $1 million per month by the end of Q2 2024.

• Inventory Investment: $3.63 million invested in inventory since the beginning of the year, total balance at $6.39 million.

• Product Pricing: SOLIS and COR products expected market price between $1,200 and $1,700 each; additional COR batteries priced between $700 and $950.

• Warning! GuruFocus has detected 5 Warning Signs with WKSP.

Release Date: August 13, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Worksport Ltd (NASDAQ:WKSP) reported a significant increase in revenue for Q2 2024, with net sales of $1.92 million, up 275% from Q1 2024.

• The company achieved its best sales quarter in history, driven by the American-made tonneau cover business.

• Worksport Ltd (NASDAQ:WKSP) has a robust IP portfolio with approximately 160 registered and pending patents and trademarks globally.

• The company is set to release three new products in the second half of 2024, including the innovative SOLIS solar tonneau cover and COR modular portable energy system.

• Worksport Ltd (NASDAQ:WKSP) is strategically positioned in the $3.5 billion truck bed market and the $3.9 billion portable energy market, with plans to expand its market share.

Negative Points

• Gross profit margins for Q2 2024 were relatively low at 15.4%, although they have improved compared to Q1 2024.

• Production inefficiencies were noted, with historical production in 2024 being less efficient than the baseline efficiency of the plant.

• The company is still in the early stages of ramping up production and achieving operational cash flow positivity.

• Worksport Ltd (NASDAQ:WKSP) anticipates the need for further inventory investments and potential capital raising to support growth.

• The company faces challenges in achieving ISO certification and establishing OEM relationships, which are crucial for future growth.

Q & A Highlights

Q: Can you cover your manufacturing capability in New York? What are you manufacturing currently versus what are you importing from other countries? A: The manufacturing line in New York is set up to produce 1,000 tonneau covers per day, with the potential to expand the facility by 40%. The AL3 tonneau cover is produced in North America with most components sourced locally. Currently, soft-folding tonneau covers are imported from a contract factory in China, but there are plans to produce them domestically by 2025. - Steven Rossi, CEO

Q: How much did production inefficiency cost you in the quarter? A: Production inefficiencies are due to the newness of the AL3 product, which has required continual improvements. The production line is currently operating at a fraction of its potential efficiency. As efficiency increases, costs will be spread over more units, improving gross profit margins. - Steven Rossi, CEO & Michael Johnston, CFO

Q: What do you think the clean tech business potential is for 2025? A: The clean tech market is substantial, with competitors achieving significant sales. We aim to sell about 1,000 COR units per month at a retail price between $1,200 to $1,700. The tonneau cover business alone is expected to generate $15 million to $20 million in revenue for 2025, with the AL4 product potentially doubling sales. - Steven Rossi, CEO

Q: Can you elaborate on offering the COR portable energy storage as a direct purchase or a subscription service? A: Initially, the COR will be available for direct purchase with financing options. In the future, a subscription service will be offered, allowing customers to pay a deposit and monthly fee. This service will include benefits like discounts and will have security features to protect the asset. - Steven Rossi, CEO

Q: Will the COR system be available for retail purchase online before Christmas? A: Yes, we are targeting Christmas sales with plans to launch presales and fulfill orders in time for the holiday season. A pro version with hot swap capability will also be available, allowing uninterrupted power supply during battery changes. - Steven Rossi, CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.