Greystone Logistics, Inc. (PNK:GLGI) Q2 2024 Earnings Call Transcript

Greystone Logistics, Inc. (PNK:GLGI) Q2 2024 Earnings Call Transcript January 17, 2024

Greystone Logistics, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Hello everyone and welcome to the Q2 Results Call. At this time all parties are in a listen-only mode. Later you will have an opportunity to ask questions. [Operator Instructions] Please note that this call is being recorded, and I will be standing by if you need anything. I would now like to turn the conference over to Brendan Hopkins. Please begin.

Brendan Hopkins: Thank you. And we have a brief safe harbor and then we’ll get started. Except for historical information contained herein, the statements in this conference call are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results in future periods to differ materially from forecasted results. With that said, I would like to turn the call over to Warren Kruger, CEO of Greystone.

Warren Kruger: Good afternoon, everyone, and thank you so much for joining the call. I want to just report I hope everyone’s read our press release. I won’t be repetitive. Our press release, I’m going to have Curtis Crosier, our new CFO will, kind of, review the numbers for us here in a minute. But I just want to tell you about the general state of condition of our company. We are positioned very, very, very well right now. I — we have — there’s a couple of things that for me as a CEO are concerning and that’s sales, sales, sales. And I’m — two years ago we were all — we were concerned about, oh my gosh, we don’t have enough equipment, we’re worried and so forth. And now we’ve got some empty equipment, so we’re working on it.

Some of those things are self-imposed and some of them aren’t. We’ve had some barrel issues with a couple of our machines. We’ve been working with Cincinnati, Milacron on those issues. We have Walmart that has been a wonderful customer for us. We’ve probably done in excess of $15 million in revenue over the years total with them. And this year we met with them and they wanted to — for one of their import facilities, have a little different, some tweaking. So we’ve put off manufacturing any product for that particular import DC and we have a new pallet being manufactured at our mold maker in Taiwan and it’s exciting. It has some ergonomically it’s more favorable for the Walmart associates, it’s got a little lower weight and it’s got some interesting little changes we’ve made, we’ve also designed it for the future so we can drop cellular devices inside the palette and remove it we can — when the battery goes low we could remove it.

So very interesting design and I’m excited about it, but we won’t see that revenue hit for about 75 days to 90 days. We are excited Simplot is a big customer, big in the Patel Industry, and we have been producing for them. Our big customer iGPS they were also little bit, we don’t know if they will add additional volume for us like they did last year, so we’ve been — we have a great relationship with them and we’ve been discussing that and most certainly we’d like to add a little bit more volume there. Along those lines we’ve got some new products that I’ve mentioned in the past, but I will say that our 44×56 can and bottle pallet has been tested at Virginia Tech, tested out very, very well. Ball container, we’ve talked to them and so we’ll be out with Ball and some of the other bottle and can users, so that product will be hitting it.

We’ll be putting samples out across America. We have a mirror palette that will soon be done. It’s the same on the top as it is on the bottom. That’s for the peanut industry, the nut industry. It will allow super sacks to be stacked, it’s a great product. We have an automobile palette 48×45 that we’ve had, we had some issues with it in terms of not being able to stack correctly with existing 48x45s in the General Motor and Forge system. So we’ve made tweak that product and we’re actually putting the mold back together and there is demand for that 48×45, so those are some of the things we are working on right now and before we go further and I take questions. I’d just like to have Curtis, kind of, review our quarter. Curtis?

A close-up of a factory worker handling advanced plastics materials with specialized machinery.

Curtis Crosier: Thank you, Warren. Good morning, afternoon, depending on your location, and welcome. I’m going to start off by reiterating my predecessor’s comments that our balance sheet remains in strong position and can support not only current sales volume, but future growth. This diligence remains an important part of how we’re managing our finances. Moving specifically to a few things I want to highlight, working capital continues to show strength, currently at $7 million at the end of the quarter, and it strengthened over the first quarter around $4 million. So cash is a very strong source at the moment. Interest and debt payments in the last quarter remain a little under a million dollars, which is comfortable and supports the capacity we have available to the sales team.

Roughly 300 plus thousand is interest and the remaining is a reduction in debt. So we’re pushing our debt down at a comfortable rate as well. Interest rates were still high, compared to some historical time periods have not had an adverse impact on our operation. And inventory remains at $5 million in comfortable support of the current sales volume. On the income side, sales volume split slightly from Q1 offset by decreases in the cost of recycled resin, resulting in a slight degradation in sales over Q1. Margins, however, improved by about 3% over Q1, due primarily to cost of resin offset late in the quarter by reductions in sales price necessary to remain competitive with alternatives. SG&A continues to increase over Q1 related to transition costs of the new [Indiscernible] and continued support of the recently established dedicated sales resources.

These and other impacts resulted in a decrease in net income of a little less than 800,000. Over to you Warren.

Warren Kruger: Thank you very much. I did want to mention one other thing that might come up we — about three quarters ago, we purchased an extrusion line to make plastic hollow lumber this was equipment that was going up for auction. I am extremely excited about that. We’re in our lane. We’re not getting out of our lane. It is a plastic lumber. It’s for those sizes that we may not have. And it’s, Toyota has had an extreme interest in that as has Apple. So we’re excited about that also. I might mention before we go into the question-and-answer session that because of the — our confidence in our company, our Board of Directors authorized me to periodically buy back stock up to $1 million over the next year. So we are very bullish on our company.

We know that we need to grow. We’ve got to add sales. I mentioned our press release. We’ve got, in addition to people, myself, who’s always been really the sales arm, we really have added two strong, strong individuals who I’ve known. One I’ve known for 18-years, who was our General Manager, Plant Manager here, he’s unbelievable with customers, he’s out there. He works with Walmart extremely well. He works with Simplot extremely well. And we have another gentleman, Gary Morris, who came from the extrusion side, knows the pallet business, been in this industry for 20-years, and he will also manage the extruded lumber pallet that we will produce after the first calendar quarter of 2024. With that said, I’m ready for any questions we may have.

Operator: [Operator Instructions] Our first question comes from Russell Valentine.

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Q&A Session

Unidentified Analyst: Yes, good news about you being able to buy more stock. Last time I talked to you, you were involved also, and you were optimistic that it was going to move higher. We were having problems getting it over a dollar a share, but we’re there now and maybe we can get up to $2 here down the road. But my question is, what’s the chances of getting new contracts from other grocery stores besides just the Walmart?

Warren Kruger: Well, the grocery store it’s the funny industry. Actually the grocery industry doesn’t even use injected pallets. They actually use thermal form pallets. And thermal foam pallets, it’s a — if you know the difference in the process, injection, we melt the plastic and we inject it into a mold. The molds cost about $300,000 to $500,000, depending on what you buy. So you don’t change the design much. The thermal foam pallets are made of sheets of plastic and they’re put in an oven basically and pulled down over the top of a mold and either in a single sheet or twin sheet fashion. And those are used quite a bit in the grocery industry, because they stack inside one another. So really for Walmart, our pallets in the Walmart system are going into their DCs to displace the wood in the DCs. And those are three-dimensional pallets.

Those have full-picture frame bottoms, much like you would see if you go to a Costco or a Sam’s and you see the pallets that are in the shelving in there, they have a full picture frame bottom and that’s to allow them to be stacked and to go down roller systems and so forth. So I don’t think our grocery store growth can be substantial unless it’s for — in their warehouse facilities, but most certainly in the stores, they don’t use our type of pallet.

Unidentified Analyst: Okay, one more question. I don’t see too many press releases. I just see, you know, when the quarterly reports are coming out and things like that. When we get new contracts, do we put out any press releases or anything?

Warren Kruger: I would, you know, that’s a good point and I’m glad you brought it up, Russell. We are not one to put out information for information sake and we probably and most certainly you wouldn’t criticize me if I had more information news out there rather than less, so I’ll take that as a good information piece and if we have new news come out we will make it a priority to get to communicate with our shareholders a little bit better. How’s that?

Unidentified Analyst: Sounds great. Appreciate all the things you do for the company. Look forward to the future. Good luck.

Warren Kruger: Thank you. Operator [Operator Instructions] Our next question comes from Anthony Perala.

Anthony Perala: Hey, guys. Thanks for taking my questions here. And welcome, Curtis, on your inaugural call here. First off, I’d be curious, Warren, just kind of some more color on the added sales associates. Curious if maybe this takes you — takes a little bit off your plate or kind of what they’ll be targeting in their first six months on the job here, whether it’s existing relationships, new relationships. So more color on that would be helpful.

Warren Kruger: Good. Well, the first gentleman, Ron Schelhaas. Ron and I are great friends, I’ve been working together for 18-years. Ron worked in the slip sheet industry for probably another 15-years before he was in the injection industry. He knows this business backwards and forwards. He had some health issues during the last couple years and we talked about how his value was and he always excelled when he was out there with me on the road. People love him. You go into a warehouse and you sit around and you talk about warehouse things. I mean, and it’s warehouse chat. And he is the king of warehouse chat, because he’s seen it all. And so he is very, very helpful. He’s — over the years, he would go up to Miller Brewing when we’d go up there and he helped when we were putting a cake palette together from miller brewing any so he loves it he’s out on the road and he’s bringing in he’s already bringing in things he is really our Walmart point person he’s working in with one in the Mid-West, he is also working with one on the West Coast.

We also have some other opportunities within their organization for different types of products. So we love them as a customer and he’s going to work that side of it. And additionally, I mean things that come in, he’s already had one thing leads to another and he’s getting people to say, hey call Ron on that. The other gentleman I mentioned, Gary, we bought this extrusion equipment. It was probably $3 million to $4 million worth of extrusion equipment and dyes and so forth, robotics and it’s really impressive. They just ran out of cash at the wrong time. They ran out in 2020, and when everything shut down, it was a very difficult period of time for them. Gary is been in this business, he developed this product, he knows the industry, he knows — he’s worked with Toyota, he’s worked with Berry Plastics, and what he brings to the table is just that, it’s relationships.